Transpo Digests

TRANSPO DIGESTS ALS2014B ATTY.
ABAÑO
II. COMMON CARRIERS
01 - Fabre v. CA (1996)**
Facts:
Petitioners Engracio Fabre Jr. And his wife are owners and operator of a bus engaged in transporting school
children to and from St. Scholastica College, Manila. The bus service operates only within Metro Manila. The Fabre’s
employ a driver for the bus, Porfirio Cabil. Cabil was hired in 1981 after a two week assessment.
Private respondent Word for the World Christian Fellowship Inc. (WWCF) contracted the services of Petitioners
to transport 33 members of its Young Adults Ministry from Manila to La Union. The group left Manila at around8pm
instead of the planned 5pm due to late arrival of some of the passengers.
Cabil was assigned to be the driver for the trip. It was the first time Cabil was to drive to La Union. A bridge
along the usual way toward La Union was blocked so Cabil had to take the alternate road. at around 11pm, the road was
dark and it was raining. Cabil was driving at around 50kph when the usual speed for that road was 20kph. Cabil failed to
see a curve ahead causing the bus to hit a wall and crash on its left side. This accident injured several passengers including
private respondent Antonio causing her to be paralyzed waist down.
Issue:
1. W/N Cabil was negligent?
2. WN Petitioner spouses are liable for quasi delict making them guilty of breach of contract of carriage.
Held/Ratio:
1. YES. The road was dark and slippery due to the rain yet Cabil drove at 50kph when the normal speed for that road
was 20kph. Having driven the road for the first time, unfamiliar with the road, and driving the way he did, Cabil
was negligent.
2. YES. Art 2176 and 2180 raises a presumption of negligence on the part of the employees of the driver. Petitioners
miserably failed to rebut the presumption. Exerting ordinary diligence in hiring Cabil was not sufficient to
exonerate them from liability. As contractors/common carriers, extraordinary diligence is required in transporting
their passenger/goods to their destination. Being a common carrier is not required for petitioners to exert
extraordinary diligence. It is sufficient that a contract of carriage was entered into to impose upon petitioners the
obligation to observe extraordinary diligence.
ALS2014B Page 1 of 159

TRANSPO DIGESTS ALS2014B ATTY. ABAÑO
02 - Calvo v. UCPB (2002)*

Doctrines:
• A common carrier is classified as such whether the transportation of goods/persons is its principal or ancillary
business activity, and whether it offers such services regularly or occasionally, to the general public or to a
narrow segment of the population.
Facts:
Virgines Calvo, owner of Transorient Container Terminal Services, Inc., a customs broker, entered into a contract
with San Miguel Corp. to transfer 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port
Area in Manila to SMC’s warehouse in Ermita, Manila. The cargo was insured by UCPB General Insurance Co., Inc. On
July 14, 1990, the shipment, contained in 30 metal vans, arrived in Manila on board “M/V Hayakawa Maru” and, after 24
hours, were unloaded from the vessel to the custody of the arrastre operator. Transorient withdrew the cargo from the
arrastre operator and delivered it to SMC’s warehouse. Upon inspection, it was found that 15 reels of the semi-chemical
fluting paper were “wet/stained/torn” and 3 reels of kraft liner board were likewise torn. SMC collected payment from
UCPB under the insurance contract and in turn, UCPB, as subrogee, brought suit against Calvo for the value of damage
which was placed at P93,112. The RTC rendered judgment against Calvo. The CA affirmed.
Calvo contends that she is a private carrier because, as a customs broker and warehouseman, she does not
indiscriminately hold her services out to the public but only offers the same to select parties with whom she may contract
in the conduct of her business.
She likewise claims that the drive from the Port Area to SMC’s warehouse in Ermita, Manila took merely 30
minutes and as such, the damage could not have taken place while the goods were in her custody.
Issues:
1. W/N Transorient is a common carrier. [related to the topic]
2. W/N Transorient exercised extraordinary diligence in the vigilance over the goods.
Held/Ratio:
1. YES. Transorient is a common carrier.
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.
Article 1732 makes no distinction between a carrier:
a. whose principal business activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity;
b. offering transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis;
c. 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.
[The Court thinks] that Article 1732 deliberately refrained from making such distinctions.
To hold that petitioner is a private carrier would be to deprive those with whom she contracts the protection which
the law affords them notwithstanding the fact that the obligation to carry goods for her customers is part and
parcel of her business.
2. NO. Extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier
to know and to follow the required precaution for avoiding damage to, or destruction of, the goods entrusted to it
for sale, carriage, and delivery. It requires common carriers to render service with the greatest skill and foresight

and “to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as their nature requires.”
Contrary to Calvo’s assertion, the Survey Report indicates that when the shipper transferred the cargo to the
arrastre operator, they were covered by clean Equipment Interchange Reports (EIRs) and, when Calvo’s
employees withdrew the cargo from the arrastre operator, they did so without exception or protest either with
regard to the condition of the container vans or their contents.
Thus, the shipment was received in good order and condition but was delivered to the consignee damaged.
Whenever the thing is lost or damaged in the possession of the obligor, it shall be presumed that the loss or
damage was due to his fault, unless there is proof to the contrary. No proof was proffered by Calvo to rebut this
legal presumption.
With regard to the contention that the cargo could not have been damaged while in petitioner’s custody as she
immediately delivered the containers to SMC’s compound, suffice it to say that to prove the exercise of
extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be
responsible for the damage. It must prove that it used “all reasonable means to ascertain the nature and
characteristic of goods tendered for transport and that it exercised due care in the handling thereof.” Petitioner
failed to do this.
Nor is there basis to exempt Calvo from liability under Article 1734 (4). For this provision to apply, the rule is
that if the improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his
employees or apparent upon ordinary observation, but he nevertheless accepts the same without protest or
exception notwithstanding such condition, he is not relieved of liability for damage resulting therefrom. In this
case, Calvo accepted the cargo without exception despite the apparent defects in some of the container vans.
Hence, for failure to prove that she exercised extraordinary diligence in the carriage of goods in this case or that
she is exempt from liability, the presumption of negligence as provided under Art. 1735 holds.

03 - Guzman v. CA (1988)**
Doctrine:
• One may be regarded as a common carrier even if the service is only ancillary to another business activity;
occasional, episodic, or unscheduled; and only directed to a narrow segment of the general population.
Facts:
Ernesto Cendanya is a junk dealer from Pangasinan. He bought used bottles and scrap metal which he will then
bring to Manila for resale. He uses TWO (2) six-wheeler trucks which he himself owned for hauling the material to
Manila.
Then, on the return trip from Manila to Pangasinan, Cendanya would always load his two trucks with cargo which
various merchants wanted to be delivered to different establishments in Pangasinan. For that service, Cendanya charged
freight rates which were commonly lower than regular commercial rates.
One of his clients for the freight service was Pedro De Guzman who owns Liberty Filled Milk. One time, De
Guzman loaded 150 cartons of filled milk in one of the trucks, which Cendanya himself drove, and another 600 cartons in
the second truck, driven by an employee of Cendanya. These cartons of milk were to be delivered to De Guzman’s
warehouse in Pangasinan.
Unfortunately, somewhere in Paniqui, Tarlac, on the way to Pangasinan, five armed men held up the second truck
with 600 cartons of milk, and took away the truck and all the cargo and kidnapped the driver for seven days.
De Guzman sued Cendanya for damages and for the value of the undelivered goods (the 600 cartons of milk).
Issues:
1. W/N Cendanya is a common carrier
2. W/N Cendanya is liable to De Guzman
Held/Ratio:
1. Yes. First, Article 1732 Civil Code 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”).
Second, it 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.
Third, 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.
Fourth, that the fee charged by Cendanya to the freight service clients frequently fell below commercial freight
rates is not relevant, too.
A Certificate of Public Convenience or any other franchise is also irrelevant in determining one as a common
carrier. Doing so is contrary to public policy.
Also, the concept of “common carrier” under Article 1732 may be seen to coincide neatly with the notion of
“public service,” under the Public Service Act, which similarly makes no distinctions in the elements of a
common carrier in the Civil Code.
2. No. Even if Cendanya is a common carrier, he is not liable for the value of the undelivered goods and damages
because the circumstance surrounding the loss of the goods is covered by Article 1745 Paragraph 6 which says
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.

The Court noted that a criminal case for robbery in band was already filed in connection with the hijacking
incident, and the records of that case showed that indeed, the loss of the goods was attended by “grave or
irresistible threat, violence, or force.”
The occurrence of the loss of the 600 cartons of milk must reasonably be regarded as quite beyond the control of
the common carrier and properly regarded as a fortuitous event.

04 - Bascos v. CA (1993)*
Facts:
Rodolfo Cipriano of Cipriano Trading Enterprises (CIPTRADE) entered into a hauling contract with Jibfair
Shipping Agency Corporation. Based on the agreement, CIPTRADE bound itself to haul Jibfair’s tons of soya bean meal
from Manila to the warehouse of Purefoods Corporation in Laguna. CIPTRADE subcontracted with Estrellita Bascos,
owner of A.M. Bascos Trucking, to transport the sacks of soya bean meal. However, Bascos failed to deliver the said
cargo. Thus, CIPTRADE paid Jibfair the amount of lost goods and sought reimbursement from Bascos. Cipriano filed a
complaint for sum of money and damages with writ of preliminary attachment for breach of a contract of carriage. Bascos,
in her answer, asserted that there was no contract of carriage since CIPTRADE only leased her cargo truck. She also said
that the truck carrying the cargo was hijacked and the incident was immediately reported to CIPTRADE. She also argued
that since hijacking is a force majeure, she is already exculpated from any liability to CIPTRADE.
The trial court ruled that Bascos Trucking was a common carrier and ordered Bascos to pay actual damages to
Cipriano. This decision was affirmed by the Court of Appeals. Since the truck driver and the helper are employees of
Bascos Trucking and that the control of the cargo was placed in its care, both courts considered these as indicators that
Bascos Trucking is a common carrier. Bascos then filed a petition for review on certiorari with the Supreme Court.
Issues:
1. W/N A.M. Bascos Trucking is a common carrier
2. W/N Bascos is liable to pay CIPTRADE for the loss of the cargo
Held/Ratio:
1. YES. Bascos contends that the contract was only for the lease of the truck so it cannot be considered as common
carrier. She argues that she was not catering to the general public. She offers her trucks only to a few customers
who have cargo to move. The Court ruled that Article 1732 which defines a common carrier does not make a
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
the general population.
2. YES. Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported
by them. They are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed, or
deteriorated.
In this case, Bascos alleged that the hijacking is a force majeure which exculpated her from liability for the loss of
the cargo. To exculpate the carrier from liability arising from hijacking, it must be proven that the robbers or the
hijackers acted with grave or irresistible threat, violence, or force — as provided in Article 1745 of the Civil
Code:
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust,
and contrary to public policy;
...
(6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violence, or force, is dispensed with or diminished;”
Thus, a common carrier is held responsible — and will not be allowed to divest or to diminish such
responsibility — even for acts of strangers like thieves or robbers except where such thieves or robbers in
fact acted with grave or irresistible threat, violence, or force. The Court ruled that Bascos was still liable for
the loss since the affidavits she presented were not enough to establish grave and irresistible force.

06 - Planters Products v. CA (1993)

Doctrine:
• A common carrier shall remain to be one and does not become a private one even if the shipowner entered in a
time-charter agreement with a private party. The control and supervision remains with the shipowner (for those
who operate such vessel are his employees.)
Facts:
Planters Products (Planters) purchased 9k metric tons of urea fertilizer from Mitsubishi Int’l Corp which the latter
shipped abroad the cargo vessel M/V Sun Plum (owned by KKKK) from America to La Union. Prior to this, a time-
charter party was entered between Mitsubishi (shipper//charterer) and KKKK (shipowner. ) After the loading of Urea
fertilizers, the steel hatches were closed with heavy iron lids.
Upon arrival of vessel in La Union the hatches were opened and Planters unloaded the cargo from the holders into
steel bodied trucks. In order to protect the urea, the dump trucks were equipped by tarpaulin to cover urea. Upon finishing
the unloading, the private marine and cargo surveyors reported that there was a shortage in the cargo and some are
contaminated with dirt thus rendering such products unfit for commerce. Planters filed an action for damages against
KKKK.
Issues:
1. W/N a common carrier becomes a private carrier by reason of a charter-party
2. W/N KKK (owner of ship) is liable for damages
Held/Ratio
1. NO. The Court held that it shall remain to be a public carrier notwithstanding the charter of whole or
portion of a vessel by one or more person provided that charter is limited to the ship only as in the case of a
time-charter or voyage-charter.
The Court held that in ordinary course of business, the ship is operated as common carrier transporting
goods for all persons. The chartering of such vessel still leaves the captain, officers and compliment under
the employ of the shipowner (keeping its under his direct supervision and control.) In the case, the charterer still
has no direct supervision and control over the vessel and the workers. With this, charterer should not be
charged with the duty of caring for his cargo.
2. NO. The court rules that despite being a common carrier (in which he must observe extraordinary diligence) facts
of the case have shown that KKKK sufficiently . True, being a common carrier, respondent must have observe
dextraordinary diligence over the goods it carries. In the case at bar it has been proven that the respondent has
sufficiently overcome this, by clear and convincing proof, the prima facie presumption of negligence, due to the
manner of storage of the goals during the vogyage. In fact,it was pointed out that there was a risk in shipping the
urea due to its character.

07 - First Philippine Industrial Corporation (FPIC) v. CA (1998)**

Doctrine:
• An oil pipeline concessionaire is a common carrier.
Facts:
FPIC is an oil pipeline concessionaire under RA 387 to contract, install, and operate oil pipelines. They applied
for a mayor’s permit with the office of the mayor of Batangas City. Before the permit could be issued, the City Treasurer
required them to pay a local tax based on gross receipts for 1993 pursuant to the Local Government Code. In order that
their operation would not be hampered, FPIC paid the tax under protest. Thereafter, they sent a protest letter addressed to
the City Treasurer saying that they, as a pipeline operator given a government concession and engaged in the business of
transporting petroleum through the pipeline, are exempt from paying tax based on gross receipts under Section 133 of the
LGC. In addition, transportation contractors are not included in the enumeration of contractors listed in Sec. 131 of the
LGC. The City Treasurer denied the protest and contended that FPIC cannot be considered engaged in transportation
business and therefore cannot claim exception under Sec. 133 of the LGC. Subsequently, FPIC filed with the RTC of
Batangas a complaint for a tax refund. City Treasurer argued that FPIC cannot be exempt from taxes under Sec. 133 (j) of
the LGC as said exception only applies to “transportation contractors and persons engaged in the transportation for hire
and common carrier by air, land, and water.” He also asserts that the pipelines are not included in the term common
carrier which refers solely to ordinary carrier such as trains, trucks, ships, and the like and that common carrier pertains to
the mode or manner by which a product is delivered to its destination. The Trial Court dismissed the complaint and their
judgment was affirmed by the CA.
Issue:
1. W/N FPIC is a common carrier?
Held/Ratio:
1. Yes. A “common carrier” may be defined, broadly, as one who holds himself out to the public as engaged in the
business of transporting persons or property from place to place, for compensation, offering his services to the
public generally. Art. 1732 of the Civil Code defines a “common carrier” as “any person, corporation, firm, or
association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public.” The test 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.
Based on the above definitions and requirements, FPIC is a common carrier. It is engaged in the business of
transporting or carrying petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common
carrier. In addition, RA 387 or the Petroleum Act in Article 86 provides that pipeline concessionaire as common
carriers. Finally, the BIR in BIR Ruling 069-83 declared that FPIC is a common carrier.
The Court also held that the argument that the term common carrier as used in Sec. 133 (j) of the LGC refers only
to common carrier transporting goods and passengers through moving vehicles either by land, sea, or air as
erroneous. The Civil Code makes no distinction as to the means of transportation as long as it is by air, sea, or

land and does not provide that the transportation should be by motor vehicle. The Court reminded the parties that
in the US, oil pipeline operators are considered common carriers.
08 - Schmitz v. Transport Venture (2005)**
Facts:
Petitioner Shmitz Transport, together with Black Sea Shipping Corp. and Transport Venture, were held solidarily
liable for the loss of 37 hot rolled steel sheets in coil that were washed overboard a barge.
SYTCO shipped from Russia on board MV Alexander Savaliev (owned by Black Sea) 545 hot rolled steel sheets
in coil. The cargoes were to be discharged in Manila, in favor of consignee, Little Giant Steel Pipe Corporation (Little
Giant) who was insured against all risks by Industrial Insurance Co. Upon the vessel’s arrival in Manila, it was assigned a
place of berth outside breakwater at the Manila South Harbor.
Shmitz Transport was consigned to secure the requisite clearance, to receive the cargoes from shipside, and to
deliver them to Little Giant’s warehouse in Rizal. It in turn engaged the service of Transport Venture to send a barge and
tugboat at shipside.
The arrastre operator commenced to unload 37 of the 545 coils from the vessel unto the barge. However, no
tugboat pulled the barge back to the pier. Due to the approaching storm, which caused strong waves, the crew abandoned
the barge and transferred to the vessel. The barge eventually capsized and the 37 coils were lost.
Little Giant thus filed a complaint against Industrial Insurance, which paid for the former’s loss, who then
executed a subrogation receipt in favor of the latter. The insurance company then commenced a complaint against
Schmitz Transport, Transport Venture, and Black Sea before the RTC of Manila for the recovery of the amount it paid to
Little Giant (plus adjustment fees, attorney’s fees, and litigation expenses).
Issues:
1. W/N the loss of the cargoes was due to a fortuitous event,1 independent of any act of negligence on the part of
petitioner Schmitz Transport, Black Sea, and Transport Venture
2. If there was negligence, whether the liability for the loss may attach to them.
Held/Ratio:
1. NO. The proximate cause of the loss was due to the fact that the barge was left floating in open sea until the big
waves set in, causing it to sink along with the cargoes. Had the barge been towed back promptly to the pier, the
deteriorating sea conditions notwithstanding, the loss could have been avoided.
2. YES, Schmitz Transport and Transport Venture are SOLIDARILY LIABLE.
Contrary to the petitioner’s contention that it was not a common carrier, the SC affirming the appellate court’s
decision, found it to be so. It undertook to transport the cargoes from shipside to the consignee’s warehouse in
Cainta. The petitioner’s own VP/GM in his testimony stated that part of the services of the firm as a brokerage
firm includes the transportation of cargoes. It is settled that under a given set of facts, a customs broker may be
regarded as a common carrier.
Furthermore, Article 1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. It suffices that petitioner undertakes to deliver
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1. Requisites - fortuitous event:
(1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligation, must be
independent of human will;
(2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid;
(3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in any manner; and
(4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor.
the goods for pecuniary consideration.

As to the contention that it was only acting as an agent in behalf of Little Giant, the SC ruled that petitioner was
discharging its own personal obligations under a contract of carriage.
The Court held that for Schmitz to be relieved of liability, it should prove that it exercised due diligence to
prevent or minimize the loss before, during, and after the occurrence of the storm in order that it may be exempted
from liability for the loss of the goods. However, while it sent checkers and a supervisor to counter-check the
operations of Transport Venture, it failed to take all available and reasonable precautions to avoid the loss. It
should have summoned Transport Venture or some other tugboat to extend assistance to the barge.
As to Transport Venture, while it acted as a private carrier for which it was under no duty to observe
extraordinary diligence, it was still required to observe ordinary diligence to ensure the proper and careful
handling, care, and discharge of the carried goods. The Court ruled that it failed to exercise the diligence of a
good father of a family. Its failure to promptly provide a tugboat did not only increase the risk that might have
been reasonably anticipated during the shipside operation, but was the proximate cause of the loss.
As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or
unconditionally placed in its possession and received for transportation until they were delivered actually or
constructively to consignee Little Giant. The delivery of the goods to the consignee was not from “pier to pier”
but from the shipside of “M/V Alexander Saveliev” and into barges, for which reason the consignee contracted
the services of petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant, through
petitioner, it had discharged its duty. Hence, it is not liable.
The Court however, set aside the P1,000,000.00 award of attorney’s fees.

09 - Sanchez Brokerage v. CA (2004)

Oral contraceptives were delivered from Germany to Manila in favor of Wyeth-Suaco. Wyeth-Suaco insured the
shipment against all risks w/ FGU Insurance. Upon arrival at NAIA, the shipment was discharged “without exception”
and delivered to warehouses of Philippine Skylanders (PSI). Wyeth-Suaco also engaged the sevices of Sanchez Brokerage
to secure the release from the PSI and the Customs Bureau. Sanchez Brokerage acknowledged the receipt of cargoes in
good condition.The cargoes were delivered to Hizon Laboratories in Antipolo for quality check. It was then found that
some tablets were in bad order. Wyeth-Suaco then demanded from Sanchez Brokerage 191k, representing the value of the
loss. Sanchez refused so Suaco went after FGU Insurance which paid Suaco 181k. A subrogation receipt was issued in
favor of FGU. Sanchez, after demand, still disclaimed liability. The CA decided that Sanchez was a common carrier.
In the main, petitioner asserts that the CA made a reversible error when it found that petitioner is a common
carrier under Art. 1732 of the NCC. FGU insurance alleged failure to overcome presumption of negligence, it being
documented that petitioner withdrew from the warehouse of PSI the shipment in “good order and condition.”
Petition fails. CA didn’t err in finding petitioner a common carrier under Art. 1732 of the Civil Code. Art. 1732 does not
distinguish between one whose principal business activity is the carrying of goods and one who does such carrying
only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs
broker whose principal function is to prepare the correct customs declaration and proper shipping documents as
required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration. Petitioner is mandated under Art. 1733 to observe extraordinary diligence.

10 - Crisostomo v. CA (2003)** – “Jewels of Europe”

Facts:
Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc.
(Caravan) to arrange and facilitate her booking, ticketing, and accommodation in a tour (England, Holland, Germany,
Austria, Liechstenstein, Switzerland, and France) dubbed “Jewels of Europe.” Crisostomo was given a 5% discount on the
amount, which included airfare, and the booking fee was also waived because the ticketing manager, Maria Menor, was
Crisostomo’s niece. Menor went to her aunt’s residence on June 12, 1991 — a Wednesday — to deliver Crisostomo’s
travel documents and plane tickets in exchange for the full payment for the package tour. Menor then told her to be at the
Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her flight on board British Airways. Without
checking her travel documents, Crisostomo went to NAIA on Saturday, June 15, 1991, to take the flight for the first leg of
her journey from Manila to Hongkong. However, she discovered that the flight she was supposed to take had already
departed the previous day. She then called up her niece, Menor, to complain.
Menor prevailed upon Crisostomo to take another tour — the “British Pageant” — which included England,
Scotland, and Wales in its itinerary. For this tour package, Crisostomo was asked anew to pay US$785 or P20,881. A
partial payment of US$300 was made. Upon Crisostomo’s return from Europe, she demanded from Menor the
reimbursement of P61,421.70, representing the difference between the sum she paid for “Jewels of Europe” and the
amount she owed respondent for the “British Pageant” tour. Despite several demands, the travel company refused to
reimburse the amount, contending that the same was non-refundable. Crisostomo then filed a complaint for breach of
contract of carriage and damages.
Issue:
1. W/N Caravan Travel and Tours, Intl. is liable for breach of contract of carriage.
Held/Ratio:
1. No. By definition, a contract of carriage or transportation is one whereby a certain person or association of
persons obligate themselves to transport persons, things, or news from one place to another for a fixed
price. Such person or association of persons are regarded as carriers and are classified as private or special
carriers and common or public carriers. A common carrier is defined under Article 1732 of the Civil Code 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 is obvious from the above definition that Caravan is not an entity engaged in the business of transporting
either passengers or goods and is therefore, neither a private nor a common carrier. They did not
undertake to transport Crisostomo from one place to another since its covenant with its customers is simply
to make travel arrangements in their behalf. Caravan’s services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking customers for tours.
While Crisostomo concededly bought her plane ticket through the efforts of Caravan, this does not mean that the
latter ipso facto is a common carrier. At most, Caravan acted merely as an agent of the airline, with whom
Crisostomo ultimately contracted for her carriage to Europe. The object of Crisostomo’s contractual relation with
Caravan is the latter’s service of arranging and facilitating Crisostomo’s booking, ticketing, and
accommodation in the package tour. In contrast, the object of a contract of carriage is the transportation of
passengers or goods. It is in this sense that the contract between the parties in this case was an ordinary one
for services and not one of carriage.
**The contract between the parties is an ordinary one for services. The standard of care required of Menor and Caravan is
that of a good father of a family (reasonable care consistent with that which an ordinarily prudent person would have
observed when confronted with a similar situation) under Article 1173 of the Civil Code. The Court ruled that Menor’s
negligence was not sufficiently proved because the only evidence presented on this score was Crisostomo’s
uncorroborated narration of the events. On the other hand, evidence on record shows that Caravan exercised due diligence
in performing its obligations under the contract and followed standard procedure in rendering its services to Crisostomo.
Had Crisostomo exercised due diligence, there would have been no reason for her to miss her flight. After the
travel papers were delivered to Crisostomo, it became incumbent upon her to take ordinary care of her concerns.
This undoubtedly would require that she at least read the documents in order to assure herself of the important
details regarding the trip.
11 - BA Finance v. CA (1992)
Doctrine:
• The registered owner of a certificate of public convenience is liable to the public for the injuries or damages
suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been
transferred to a third person.
Facts:
Rogelio Villar y Amare was found guilty beyond reasonable doubt of reckless imprudence resulting in triple
homicide with multiple physical injuries with damage to property. Petitioner was adjudged liable for damages in as much
as the truck was registered in its name during the incident in question, following the doctrine laid down by this Court in
Perez v. Gutierrez. Moreover, the trial court applied Article 2194 of the new Civil Code on solidary accountability of join
tortfeasors insofar as the liability of the driver, herein petitioner and Rock Component Philippines was concerned.
Issue:
1. W/N petitioner can be held responsible to the victim albeit the truck was leased to Rock Component Philippines
when the incident occurred.
Held/Ratio:
1. Yes. In previous decisions, We already have held that the registered owner of a certificate of public convenience
is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation
of said vehicle, even though the same had been transferred to a third person.
With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be
allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade
responsibility and lay the same on the person actually owning the vehicle? We hold with the trial court that the
law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the
responsibility that the law fixes and places upon him as an incident or consequence of registration. The protection
that the law aims to extend to him would become illusory were the registered owner given the opportunity to
escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the
registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to
prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility
to the injured person.
We do not imply by this doctrine, however, that the registered owner may not recover whatever amount he had
paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed
the vehicle.

12 - Occidental Transport v. CA (1993)**

Facts:
The case began with the collision of a Ford Fiera and a Carina Express No. C-24 passenger bus in Bunawan,
Calamba, Misamis Occidental on November 25, 1975 at about six o’clock a.m. As a result of this, the Ford Fiera was
thrown into the canal on the right side of the road. Its driver, Pacifico Carbajosa, Sr. alias Balodoy, was pinned under the
steering wheel, while the engine was burning, causing him to be seriously burned and later die of such injuries. Trencio
Almedilla, the owner of the Fiera which was registered under Sevilla Line, and Alberto Pingkian, were likewise in the
Fiera and suffered various injuries as a result of the incident. Neither the driver nor the passengers of the Carina Express
No. C-24 stopped to assist the victims, but rather the bus proceeded towards Sapang Dalaga.
The owner of the Carina passenger bus, Occidental Land Transportation Company, filed a case for damages
against Sevilla Line and/or William Sevilla, the registered owner of the Ford Fiera (Case 1). Trencio Almedilla and
Alberto Pingkian also filed a civil suit for damages against Occidental Land Transportation Company, Inc. and the driver
of the Carina bus, Edgardo Enerio. Later the heirs of Pacifico Carbajosa filed a complaint-in-intervention (Case 2).
On July 30, 1977, Judge Rodolfo A. Ortiz of the Oroquieta court rendered a decision in Case 1 finding the driver
of the Carina passenger bus and not the driver of the Ford Fiera as negligent. On March 11, 1986, more than ten years
after the inception of the case, Judge Daniel B. Bernaldez rendered the decision in Case 2 against Occidental Land
Transportation Company, Inc. and Edgardo Enerio.
Petitioners Occidental Land Transportation Company Inc. and Edgardo Enerio appealed from the above-quoted
decision to the CA. The CA ruled that the previous decision (Case 1) involving the same vehicular accident had already
put to rest the issue as to the negligence of defendants, the court properly took cognizance of said decision as a matter of
convenience, as these facts are capable of unquestionable demonstration. Correlatively, it is well-settled that the
conclusion of facts of the trial court are entitled to great respect and shall not be generally disturbed on appeal because it
is in a better position than the appellate tribunal to examine the evidence directly and to observe the demeanor of the
witness while testifying.
Issue:
1. Whether or not the trial court can take judicial notice of the decision of another case involving a similar issue.
Held/Ratio:
1. Yes, no error was committed by the respondent court when it upheld the findings of the trial court in Case 2.
The reasons advanced by the respondent court in taking judicial notice of Case 1 are valid and not contrary to law.
As a general rule, “courts are not authorized to take judicial notice, in the adjudication of cases pending before
them, of the contents of the records of other cases, even when such cases have been tried or are pending in the
same court, and notwithstanding the fact that both cases may have been heard or are actually pending before the
same judge.” The general rule admits of exceptions. In the absence of objection, and as a matter of convenience to
all parties, a court may properly treat all or any part of the original record of a case filed in its archives as read
into the record of a case pending before it when, with the knowledge of the opposing party, reference is made to it
for that purpose, by name and number or in some other manner by which it is sufficiently designated; or when the
original record of the former case or any part of it is actually withdrawn from the archives by the court’s direction,
at the request or with the consent of the parties, and admitted as a part of the record of the case then pending.
It is clear, though, that this exception is applicable only when, ‘in the absence of objection,’ ‘with the
knowledge of the opposing party,’ or ‘at the request or with the consent of the parties,’ the case is clearly
referred to or ‘the original or part of the records of the case are actually withdrawn from the archives’ and
‘admitted as part of the record of the case then pending.’
Case 1, which the lower court in Case 2 took judicial notice of, decided the issue of negligence between the driver
of the two vehicles involved in the subject collision. It was therefore a matter of convenience to consider the
decision rendered in that case. The decision in Case 1formed part of the records of Case 2 with the knowledge of
the parties and in the absence of their objection. This fact was pointed out by the lower court, to wit:

The ... findings of the Oroquieta Court became as conclusive upon the company and its driver by
their acquiescence and silence. ... Returning to Exhibit “O,” supra (Decision, Civil Case No.
3156, CFI, Branch III, Oroquieta City), the Court hastens to add: Said exhibit has not been
objected to nor commented upon by the defendants Company and Enerio, through their counsel[.]
This being the case, petitioners were aware that Exhibit “O” had formed part of the records of the case and would
thereby be considered by the trial court in its decision. Furthermore, upon perusal of Exhibit “O,” there is no
showing of any irregularity but rather a logical discussion of the case and the evidence presented before the court.
The lower court did not merely “adopt by reference” the findings of fact of the Oroquieta court, but used it in its
discourse to obtain the conclusions pronounced in its decision.

13 - Benedicto v. IAC and Greenhills Wood (1990)* (registered owner liable; sawn lumbers)
Doctrines:
• A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by
the law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but also
in caring for goods transported by it.
• The loss or destruction or deterioration of goods turned over to the common carrier for conveyance to a
designated destination raises instantly a presumption of fault or negligence on the part of the carrier, save only
where such loss, destruction, or damage arises from extreme circumstances such as a natural disaster or calamity;
act of the public enemy in time of war; or from an act or omission of the shipper himself or from the character of
the goods or their packaging or container.
• Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transported by it by
proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate
drastically the carrier’s duty of extraordinary diligence. It would also open wide the door to collusion between the
carrier and the supposed vendee and to shifting liability from the carrier to one without financial capability to
respond for the resulting damages. In other words, the thrust of the public policy here involved is as sharp and real
in the case of carriage of goods as it is in the transporting of human beings.
Facts:
Private respondent Greenhills Wood Industries Company, Inc. (“Greenhills”), a lumber manufacturing firm with
business address at Dagupan City, bound itself to sell and deliver to Blue Star Mahogany, Inc., (“Blue Star”) a company
with business operations in Valenzuela, Bulacan, 100,000 board feet of sawn lumber. To effect its first delivery, private
respondent’s resident manager, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck bearing Plate
No. 225 GA TH to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck was
registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise
engaged in hauling freight.
On 15 May 1980, Cruz, in the presence and with the consent of driver Licuden, supervised the loading of 7,690
board feet of sawn lumber with invoice value of P16,918 aboard the cargo truck. This was evidenced by two invoices.
On 18 May 1980, Blue Star’s administrative and personnel manager, Manuel R. Bautista, formally informed
Greenhills’ president and general manager that Blue Star still had not received the sawn lumber which was supposed to
arrive on 15 May 1980 and because of this delay, “they were constrained to look for other suppliers.”
On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with
their contract, private respondent Greenhills filed a criminal case against driver Licuden for estafa. Greenhills also filed
against petitioner Benedicto a civil case for recovery of the value of the lost sawn lumber plus damages before the RTC of
Dagupan City. As to the civil case, the trial court ruled that Licuden was Benedicto’s employee. IAC affirmed in toto.
This is a petition for review to set aside the IAC ruling.
Benedicto urges that she could not be held answerable for the loss of the cargo because the doctrine which makes
the registered owner of a common carrier vehicle answerable to the public for the negligence of the driver despite the sale
of the vehicle to another person applies only to cases involving death of or injury to passengers. What applies in the
present case, according to Benedicto, is the rule that a contract of carriage requires proper delivery of the goods to and
acceptance by the carrier. Thus, petitioner contends that the delivery to a person falsely representing himself to be an
agent of the carrier prevents liability from attaching to the registered owner.
Issues:
1. W/N Benedicto, being the registered owner of the carrier, should be held liable for the value of the underlivered
or lost sawn lumber.

Held/Ratio:
1. YES. There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the
business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a common
carrier.
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.
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.
Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the freight truck
for her own benefit and convenience, that is, to secure the payment of the balance of the selling price of the truck.
She may have been unaware of the legal security device of chattel mortgage; or she, or her buyer, may have been
unwilling to absorb the expenses of registering a chattel mortgage over the truck. In either case, considerations
both of public policy and of equity require that she bear the consequences flowing from registered ownership of
the subject vehicle.
A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by
the law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but also
in caring for goods transported by it. The loss or destruction or deterioration of goods turned over to the common
carrier for conveyance to a designated destination raises instantly a presumption of fault or negligence on the part
of the carrier, save only where such loss, destruction, or damage arises from extreme circumstances such as a
natural disaster or calamity or act of the public enemy in time of war, or from an act or omission of the shipper
himself or from the character of the goods or their packaging or container.
This presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. Clearly, to
permit a common carrier to escape its responsibility for the passengers or goods transported by it by proving a
prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate drastically the
carrier’s duty of extraordinary diligence. It would also open wide the door to collusion between the carrier and the
supposed vendee and to shifting liability from the carrier to one without financial capability to respond for the
resulting damages. In other words, the thrust of the public policy here involved is as sharp and real in the case of
carriage of goods as it is in the transporting of human beings. Thus, to sustain petitioner Benedicto’s contention,
that is, to require the shipper to go behind a certificate of registration of a public utility vehicle, would be utterly
subversive of the purpose of the law and doctrine.
Driver Licuden was entrusted with possession and control of the freight truck by the registered owner (and by the
alleged secret owner, for that matter). Driver Licuden, under the circumstances, was clothed with at least implied
authority to contract to carry goods and to accept delivery of such goods for carriage to a specified destination.
That the freight to be paid may not have been fixed before loading and carriage did not prevent the contract of
carriage from arising, since the freight was at least determinable if not fixed by the tariff schedules in petitioner’s
main business office. Put in somewhat different terms, driver Licuden is in law regarded as the employee and
agent of the petitioner, for whose acts petitioner must respond. A contract of carriage of goods was shown; the
sawn lumber was loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star’s premises in
Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had exercised extraordinary
diligence to prevent such loss or non-delivery or that the loss or non-delivery was due to some casualty or force
majeure inconsistent with her liability. Petitioner’s liability to private respondent Greenhills was thus fixed and
complete, without prejudice to petitioner’s right to proceed against her putative transferee Benjamin Tee and
driver Licuden for reimbursement or contribution.

14 - Equitable v. Suyom (2002)** (Registered Owner)

Doctrine:
• The registered owner of a motor vehicle is solidarily liable for the injuries and damages caused by the negligence
of the driver, in spite of the fact that the vehicle may have already been the subject of an unregistered Deed of
Sale in favor of another person.
Facts:
A Fuso Road Tractor driven by Tutor rammed into the house cum store of Myrna Tamayo located at Tondo. A
portion of the house was destroyed. Pinned to death were Reniel Tamayo, and Felmarie Oledan. Injured were Oledan,
Enano, and the Suyoms.
Tutor was convicted of reckless imprudence resulting in multiple homicide and multiple physical injuries.
The registered owner of the tractor was Equitable Leasing Corporation/leased to Edwin Lim. Latter respondents
filed a case against Tutor, Ecatine Corp and Equitable a Complaint for damages.
Under the Lease Agreement between Equitable and Lim, ownership of the subject tractor was to be registered in
the name of Equitable, until the value of the vehicle has been fully paid. After a few months, Lim completed the payments
to cover the full price of the tractor. A Deed of Sale over the tractor was executed by in favor of Ecatine represented by
Edwin Lim. However, the Deed was not registered with the LTO.
The RTC held that Equitable was liable to respondents. CA upheld the RTC.
Issue:
1. Whether or not Equitable is liable for damages?
Held/Ratio:
1. Yes, Equitable is liable for the deaths and the injuries, because it was the registered owner of the tractor at the
time of the accident on July 17, 1994. The Court has consistently ruled that, regardless of sales made of a motor
vehicle, the registered owner is the lawful operator insofar as the public and third persons are concerned;
consequently, it is directly and primarily responsible for the consequences of its operation. In contemplation of
law, the owner/operator of record is the employer of the driver, the actual operator and employer being considered
as merely its agent. The same principle applies even if the registered owner of any vehicle does not use it for
public service.
True, the LTO Certificate of Registration, dated “qualifies the name of the registered owner as “EQUITABLE
LEASING CORPORATION/Leased to Edwin Lim.” But the lease agreement between Equitable and Lim has
been overtaken by the Deed of Sale on December 9, 1992, between petitioner and Ecatine. While this Deed does
not affect respondents in this quasi delict suit, it definitely binds petitioner because, unlike them, it is a party to it.
The failure of Equitable and/or Ecatine to register the sale with the LTO should not prejudice respondents, who
have the legal right to rely on the legal principle that the registered vehicle owner is liable for the damages caused
by the negligence of the driver. Equitable cannot hide behind its allegation that Tutor was the employee of
Ecatine.
NOTE: The case is short. There was a discussion between the difference of the FGU Insurance Case and this case.
Equitable was also liable for moral damages, because having established the liability of Equitable as the registered owner
of the vehicle, respondents have satisfactorily shown the existence of the factual basis for the award and its causal
connection. Further, no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount of
indemnity being left to the discretion of the court

III. TRANSPORTATION OF GOODS
15 - Eastern Shipping v. CA (1991)*

Doctrines:
• Common carriers are bound to observe extraordinary vigilance over goods x x x according to all circumstances of
each case.
• A common carrier is required to exercise the highest degree of care in the discharge of its business.
• Carrier who failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the
carrier applies.
Facts:
Thirteen coils of uncoated 7-wire stress relieved wire strand for prestressed concrete were shipped on board the
vessel owned by Eastern Shipping from Japan to Manila. The carrying vessel arrived in Manila and discharged the cargo
to the custody of the defendant E. Razon, Inc., from whom the consignee’s customs broker received it for delivery to the
consignee’s warehouse.
While enroute from Kobe to Manila, the carrying vessel ‘encountered very rough seas and stormy weather’ for
three days, more or less, which caused it to roll and pound heavily, moving its master to execute a marine note of protest
upon arrival at the port of Manila; that the coils wrapped in burlap cloth and cardboard paper were stored in the lower
hold of the hatch of the vessel which was flooded with water about one foot deep; that the water entered the hatch when
the vessel encountered heavy weather enroute to Manila; that upon request, a survey of bad order cargo was conducted at
the pier in the presence of the representatives of the consignee and the defendant E. Razon, Inc. and it was found that
seven coils were rusty on one side each; that upon survey conducted at the consignee’s warehouse it was found that the
‘wetting (of the cargo) was caused by fresh water’ that entered the hatch when the vessel encountered heavy weather
enroute to Manila; and that all thirteen coils were extremely rusty and totally unsuitable for the intended purpose.’
The insurer paid the owner of the goods and is now claiming from Eastern Shipping and the arrastre operator.
Eastern Shipping claims it should not be held liable as the shipment was discharged and delivered complete into the
custody of the arrastre operator under clean tally sheets.
Issue:
1. Whether Eastern Shipping should be held liable.
Held/Ratio:
1. Yes. While it is true the cargo was delivered to the arrastre operator in apparent good order condition, it is also
undisputed that while en route from Kobe to Manila, the vessel encountered “very rough seas and stormy
weather”, the coils wrapped in burlap cloth and cardboard paper were stored in the lower hatch of the vessel
which was flooded with water about one foot deep; that the water entered the hatch; that a survey of bad order
cargo which was conducted in the pier in the presence of representatives of the consignee and E. Razon, Inc.,
showed that seven coils were rusty on one side; that a survey conducted at the consignee’s warehouse also
showed that the “wetting (of the cargo) was caused by fresh water” that entered the hatch when the vessel
encountered heavy rain en route to Manila; and that all thirteen coils were extremely rusty and totally unsuitable
for the intended purpose. As the CA ruled:
Plainly, the heavy seas and rains referred to in the master’s 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.
Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe ‘extra-ordinary vigilance
over goods xx xx xx according to all circumstances of each case,’ and Article 1735 of the same Code states, to
wit:
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.
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.”
The presumption, therefore, that the cargo was in apparent good condition when it was delivered by the vessel to
the arrastre operator by the clean tally sheets has been overturned and traversed. The evidence is clear to the effect
that the damage to the cargo was suffered while aboard petitioner’s vessel.

16 - Delsan Transport v. CA (2001)**

Facts:
Caltex Philippines (Caltex) entered into a contract of affreightment with Delsan Transport Lines, Inc., for
a period of one year whereby the said common carrier agreed to transport Caltex’s industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT
Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City.
The shipment was insured with the private respondent, American Home Assurance Corporation (AHAC)
On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in
the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.
Subsequently, AHAC paid Caltex P5M+ representing the insured value of the lost cargo. Exercising its right
of subrogation under Article 2207 of the New Civil Code, AHAC demanded of Delsan Transport the same amount it
paid to Caltex.
Due to its failure to collect from the Delsan Transport despite prior demand, AHAC filed a complaint for
collection of a sum of money. The trial court found that the vessel, MT Maysun, was seaworthy to undertake the voyage
as determined by the Philippine Coast Guard per Survey Certificate Repor upon inspection during its annual dry-docking
and that the incident was caused by unexpected inclement weather condition or force majeure, thus exempting the
common carrier (herein petitioner) from liability for the loss of its cargo.
The decision of the trial court was reversed on appeal by the Court of Appeals. The CA gave credence to the
weather report issued by PAGASA which showed that from 2:00-8:00AM of August 16, 1986, the wind speed remained
at 10 to 20 knots per hour while the waves measured from .7 to two (2) meters in height only in the vicinity of the
Panay Gulf where the subject vessel sank, in contrast to herein Delsan’s allegation that the waves were twenty (20)
feet high. In the absence of any explanation as to what may have caused the sinking of the vessel coupled with the
finding that the same was improperly manned, the appellate court ruled that the Delsan is liable on its obligation
as common carrier to AHAC as subrogee of Caltex.
Issues:
1. W/N the payment made by AHAC to Caltex amounted to an admission that the vessel was seaworthy
2. Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of
money for lack of cause of action (not important)
Held/Ratio:
1. NO. The payment made by AHAC for the insured value of the lost cargo operates as waiver of its right to
enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the
same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by AHAC as to
foreclose recourse against the petitioner for any liability under its contractual obligation as a common
carrier. The fact of payment grants to AHAC the subrogatory right which enables it to exercise legal remedies
that would otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier.
From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by
them, according to all the circumstances of each case. In the event of loss, destruction or deterioration of
the insured goods, common carriers shall be responsible unless the same is brought about, among others,
by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, 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.
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, Delsan attributes the
sinking of MT Maysun to fortuitous event or force majeure. The tale of strong winds and big waves by the
Ship Captain and Chief Mate of Delsan, however, was effectively rebutted and belied by the weather report
from PAGASA. Thus, the appellate court correctly ruled that MT Maysun, sank with its entire cargo for the
reason that it was not seaworthy. There was no squall or bad weather or extremely poor sea condition in
the vicinity when the said vessel sank.
The CA also correctly opined that the ship captain and chief mate, respectively, of the said vessel, could not be
expected to testify against the interest of their employer, Delsan Transport. (common carrier)
Neither may petitioner escape liability by presenting in evidence certificates that tend to show that at the time of
dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for voyage. These
pieces of evidence do not necessarily take into account the actual condition of the vessel at the time of the
commencement of the voyage.
Additionally, the exoneration of MT Maysun’s officers and crew by the Board of Marine Inquiry merely
concerns their respective administrative liabilities. It does not in any way operate to absolve the petitioner
common carrier from its civil liability arising from its failure to observe extraordinary diligence in the
vigilance over the goods it was transporting and for the negligent acts or omissions of its employees, the
determination of which properly belongs to the courts. In the case at bar, Delsan is liable for the insured value
of the lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of fault or
negligence as common carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.
2. NO. The presentation in evidence of the marine insurance policy is not indispensable in this case before the
insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory
right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of AHAC as insurer and
Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the
insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the
insurance claim.
The presentation of the insurance policy was only necessary in the case of Home Insurance Corporation v. CA (a
case cited by Delsan) because the shipment therein (hydraulic engines) passed through several stages with
different parties involved in each stage.

17 - Phil. Charter v. Chemoil (2005)

Facts:
Samkyung Chemical Company, Ltd., shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE
(DOP) on board MT “TACHIBANA” The consignee was Plastic Group Phils., Inc. (PGP) in Manila. PGP insured the
cargo with herein petitioner Philippine Charter Insurance Corporation against all risks.
The ocean tanker MT “TACHIBANA” unloaded the cargo to Tanker Barge of respondent Chemoil Lighterage
Corporation, which shall transport the same to Del Pan Bridge in Pasig River. Tanker Barge would unload the cargo to
tanker trucks, also owned by the respondent, and haul it by land to PGP’s storage tanks in Calamba, Laguna. Upon
inspection by PGP, the samples taken from the shipment showed discoloration from yellowish to amber, demonstrating
that it was damaged, as DOP is colorless and water clear. PGP then sent a letter to the petitioner where it formally made
an insurance claim for the loss it sustained due to the contamination.
An independent insurance adjuster GIT conducted a Quantity and Condition Survey of the shipment. Report stated
that inspection of cargo tanks showed manhole covers of ballast tanks’ ceilings loosely secured. Also, the rubber gaskets
of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo
ingress to the rusty ballast tanks.
The petitioner paid PGP the amount of P5,000,000.00 as full and final payment for the loss. PGP issued a
Subrogation Receipt to the petitioner. PGP paid the respondent the amount of P301,909.50 as full payment for the latter’s
services.
An action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC. In its
answer, respondent alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard
Corporation, inspected it and found the same clean, dry, and fit for loading. The entire loading and unloading of the
shipment were also done under the control and supervision of PGP’s representative. It was also mentioned by the
respondent that the contract between it and PGP expressly stipulated that it shall be free from any and all claims arising
from contamination, loss of cargo or part thereof; that the consignee accepted the cargo without any protest or notice; and
that the cargo shall be insured by its owner sans recourse against all risks. As subrogee, the petitioner was bound by this
stipulation. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence
in handling the cargo.
After due hearing, the trial court rendered a Decision in favor of the plaintiff. Aggrieved, the respondent sought
relief with the CA where it alleged that PGP failed to file any notice, claim or protest within the period required by Article
366 of the Code of Commerce, which is a condition precedent to the accrual of a right of action against the carrier. A
telephone call, which was supposedly made by a certain Alfred Chan, an employee of PGP, to one of the Vice Presidents
of the respondent, informing the latter of the discoloration, is not the notice required by Article 366. The CA reversed the
trial court.
Issues:
1. Whether or not the notice of claim was filed within the required period.
Held/Ratio:
1. NO. The object sought to be attained by the requirement of the submission of claims in pursuance of this article is
to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages
suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of
delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the
nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties.
The petitioner contends that the notice of contamination was given by Alfredo Chan to Ms. Encarnacion
Abastillas. This was done by telephone. The supposed notice given by PGP over the telephone was denied by Ms.
Abastillas. Between the testimonies of Chan and Abastillas, the latter’s testimony is purportedly more credible
because it would be quite unbelievable and contrary to business practice for Chan to merely make a verbal notice
of claim that involves millions of pesos.

The finding of fact of the CA does not contradict the finding of fact of the trial court. Both courts held that a
telephone call was made by Chan to Abastillas, informing the latter of the contamination. However, nothing in the
trial court’s decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately
or within a period of twenty-four hours from the time the goods were received. The CA made the same finding.
Having examined the entire records of the case, we cannot find a shred of evidence that will precisely and
ultimately point to the conclusion that the notice of claim was timely relayed or filed.
The allegation of the petitioner that not only the Vice President of the respondent was informed, but also its
drivers, as testified by Alfredo Chan, during the time that the delivery was actually being made, cannot be given
great weight as no driver was presented to the witness stand to prove this. Also, the witness Alfredo Chan had no
personal knowledge that the drivers of the respondent were informed of the contamination.
The second paragraph of Article 366 of the Code of Commerce is also edifying. It is not only when the period to
make a claim has elapsed that no claim whatsoever shall be admitted, as no claim may similarly be admitted after
the transportation charges have been paid. In this case, there is no question that the transportation charges have
been paid, as admitted by the petitioner, and the corresponding official receipt duly issued. But the petitioner is of
the view that the payment for services does not invalidate its claim. It contends that under the second paragraph of
Article 366, it is clear that if notice or protest has been made prior to payment of services, claim against the bad
order condition of the cargo is allowed.

18 - Philippine American General Insurance Company (PHILAMGEN) v. PKS Shipping Company

(2003)**
Doctrine:
• A common carrier is one who holds himself/itself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering his/its services to the public generally. It does
NOT matter:
o whether the carrier does this as a principal or ancillary business activity
o whether the carrier actually serves the general public or only a limited clientele
o whether the carrier does this regularly or on an unscheduled basis only
Facts:
Davao Union Marketing Corporation (DUMC) hired PKS Shipping Company (PKS) to ship 75,000 bags of
cement worth P3,375,000 to Tacloban City. The shipment was insured by PHILAMGEN. The goods were transported
aboard PKS’s barge Limar I, but the Limar I sank off the coast of Zamboanga Del Sur while it was being towed by PKS’s
tugboat MT Iron Eagle. All 75,000 bags of cement were lost.
DUMC filed a claim with the insurer PHILAMGEN, which the latter promptly paid. PHILAMGEN then sought
reimbursement from the carrier PKS, but PKS refused to pay, prompting PHILAMGEN to sue them.
The RTC dismissed PHILAMGEN’s claim. The CA affirmed. The CA held that PKS was NOT a common
carrier, because: First, it did not carry goods for others in the regular course of business, but merely as a casual
occupation; Second; PKS carried only for a limited clientele. Thus, the appellate court held that the standard of diligence
required of PKS was merely ordinary diligence and found that the shipper had met this standard. Furthermore, the court
held that the loss was caused by fortuitous event, since the ship had been suddenly tossed by waves of extraordinary
height, and the court found that the ship had been seaworthy at start of the voyage.
Issue:
1. W/N PKS Shipping a common carrier.
2. W/N PKS Shipping should be held liable for the loss of the cement.
Held/Ratio:
1. PKS Shipping is a common carrier.
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the
public.
The Court said that:
a. Article 1732 does not distinguish between a carrier that transports persons or goods as a principal
business or as an ancillary activity (“sideline”).
b. Neither does said article differentiate between a carrier that offers its services to the general public or one
that transports only for a narrow segment of the general population, or a limited clientele.
c. Additionally, it does not matter whether the carrier offers its services regularly or on an
unscheduled/episodic basis.
The court further said that if the nature of the business were such that the contract of carriage was merely an
isolated transaction and the carrier did not hold itself out to transport goods or persons for anyone, then the the
carrier would be merely a private carrier. (The example given by the court was a “bareboat/demise charter”,
which is basically a contract of lease of the entire boat, wherein the charterer mans the boat with his own crew and
becomes the owner pro hac vice of the boat for that voyage only. This is to be distinguished from a “contract of

affreightment”, wherein the the boat remains under the ship owner’s control, and the charterer merely asks that his
goods be transported from one place to another. The former would be an example of a contract of private carriage.
The latter is an example of a contract of common carriage.)
The SC held that the factual findings of the CA would show that PKS shipping had engaged in the business of
carrying good for other for a fee, even though for a limited clientele only. It did not matter whether the company
had carried the goods merely as an ancillary activity, or whether they served only certain customers; it was still a
common carrier.
2. However, the court still absolved PKS from liability. Art. 1733 of the New Civil Code requires common carriers
to exercise extraordinary diligence over the carriage of goods, and they are presumed negligent in case of loss,
deterioration or destruction; however, under Art. 1734 (1), common carriers are exempt from liability if the same
was due to “fire, storm, earthquake, lightning, or other natural disaster or calamity.” The evidence showed that
there was nothing that the boat or the tugboat could have done to stop the waves from sinking the Limar I.
Thus, even though the SC disagreed with the CA and held that PKS is a common carrier, the SC affirmed the
decision of the RTC and the CA holding it free from liability for the loss of the cement.

19 - Saludo v. CA (1992)* (switched caskets)

Facts:
Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski and Son Funeral Home of
Chicago, made the necessary preparations and arrangements for the shipment of the remains from Chicago to the
Philippines. Pomierski brought the remains to Continental Mortuary Air Services (CMAS) at the Chicago Airport
which made the necessary arrangements such as flights, transfers, etc. CMAS booked the shipment with PAL thru the
carrier’s agent Air Care International. PAL Airway Bill Ordinary was issued wherein the requested routing was from
Chicago to San Francisco on board Trans World Airline (TWA) and from San Francisco to Manila on board PAL.
Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to inquire about her mother’s
remains. But she was told they did not know anything about it. She then called Pomierski that her mother’s remains were
not at the West Coast terminal. Pomierski immediately called CMAS which informed that the remains were on a
plane to Mexico City, that there were two bodies at the terminal, and somehow they were switched. CMAS called
and told Pomierski that they were sending the remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL for the misshipment and delay in the delay of the cargo
containing the remains of the late Crispina Saludo. Petitioners alleged that private respondents received the casketed
remains of Crispina on October 26, 1976, as evidenced by the issuance of PAL Airway Bill by Air Care and from said
date, private respondents were charged with the responsibility to exercise extraordinary diligence so much so that the
alleged switching of the caskets on October 27, 1976, or one day after the private respondents received the cargo, the
latter must necessarily be liable.
Issues:
1. Whether or not there was delivery of the cargo upon mere issuance of the airway bill
2. Whether or not the delay in the delivery of the casketed remains of petitioners’ mother was due to the fault of
respondent airline companies
Held/Ratio:
1. NO to both, but TWA (not PAL) was held to pay petitioners nominal damages of P40,000 for its violation of the
degree of diligence required by law to be exercised by every common carrier
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but,
when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. A bill of
lading (shipping receipt/forwarder’s receipt/receipt for transportation), when properly executed and delivered to a
shipper, is evidence that the carrier has received the goods described therein for shipment. Except as modified by
statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of
lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt
alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence.
In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for
PAL Flight Number PR-107 leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill was
issued, not as evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a confirmation
of the booking thus made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it
was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly
evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by
Virgilio Rosales at 7:45 P.M. on said date.
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 eo instanti.
While extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon
delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo
subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can
the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting
causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be
invoked.
There was no delivery of the cargo to the carrier on October 26, 1976. The body intended to be shipped as agreed
upon was really placed in the possession and control of PAL on October 28, 1976 and it was from that date that
private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill. So, for
the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby,
private respondents cannot be held liable.
The oft-repeated rule regarding a carrier’s liability for delay is that in the absence of a special contract, a carrier is
not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods,
the law implies a contract that they shall be delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. But where a carrier has made an express contract to
transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any
delay, no matter from what cause it may have arisen. This result logically follows from the well-settled rule
that where the law creates a duty or charge, and the party is disabled from performing it without any default in
himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a
duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by contract. Whether or not there has been such an
undertaking on the part of the carrier to be determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of contracts.
A common carrier undertaking to transport property has the implicit duty to carry and deliver it within reasonable
time, absent any particular stipulation regarding time of delivery, and to guard against delay. In case of any
unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting from such
neglect of duty. As found by the trial court, the delay in the delivery of the remains of Crispina Saludo,
undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private
respondents, a conclusion concurred in by respondent court and which we are not inclined to disturb.
At fault: CMAS (but not at issue so not delved into by the court)

20 - Compania Maritima v. Insurance Co. (1964)

Facts:
Macleod and Company contracted by telephone the services of Compania Maritima to ship hemp in from Davao
City, to Manila, to be subsequently transhipped to Boston, which oral contract was later confirmed by a formal and
written booking issued by the shipper’s branch office, Davao City, in virtue of which the carrier sent two of its lighters to
undertake the service.
Thereafter, the two loaded barges left Macleod’s wharf and proceeded to and moored at the government’s marginal wharf
in the same place to await the arrival of the S.S. Bowline Knot belonging to Compañia Maritima on which the hemp was
to be loaded. During the night one of the barges sank, resulting in the damage or loss of 1,162 bales of hemp loaded
therein.
All abaca shipments of Macleod were insured with the Insurance Company of North America against all losses
and damages. In due time, Macleod filed a claim for the loss with said insurance company. Having failed to recover from
the carrier, which is the only amount supported by receipts, the insurance company instituted the present action.
Issue:
1. Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was
loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S.
Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?
2. Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event,
storm or natural disaster that would exempt the carrier from liability?
Held/Ratio:
1. Yes. The fact that the carrier sent its lighters free of charge to take the hemp from Macleod’s wharf at Sasa
preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already
entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of
carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the
hemp delivered to the carrier’s employees, the rights and obligations of the parties attached thereby subjecting
them to the principles and usages of the maritime law. In other words, here we have a complete contract of
carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the
latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which
Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the
carrier to the full payment of its freight upon completion of the voyage.
2. No. The evidence fails to bear this out. It shows that the mishap that caused the damage or loss was due, not to
force majeure, but to lack of adequate precautions or measures taken by the carrier to prevent the loss. Aside from
the fact that, as admitted by appellant’s own witness, the ill-fated barge had cracks on its bottom which admitted
sea water in the same manner as rain entered “thru tank man-holes”, the barge was not seaworthy — it should be
noted that on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity.
Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in
Davao cannot be classified as storm. For according to Beaufort’s wind scale, a storm has wind velocities of from
64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to
74 miles per hour in order to be classified as a storm.

21 - Lorenzo Shipping v. BJ Mathel (2004)**

Doctrine:
• In determining whether time is of the essence in a contract, the ultimate criterion is the actual or apparent
intention of the parties and before time may be so regarded by a court, there must be a sufficient manifestation,
either in the contract itself or the surrounding circumstances of that intention.
Facts:
Lorenzo Shipping Corp. is a domestic corporation engaged in coastwise shipping. It used to own the cargo vessel
M/V Dadiangas Express. BJ Marthel International, Inc. is an importer and distributor of different brands of engines and
spare parts.
BJ Marthel supplied Lorenzo Shipping with parts for the latter’s marine engines. Respondent sent Lorenzo
Shipping a quotation of prices of spare parts. The quotation also stated that delivery of the parts will be within 2 months
after receipt of firm order. Lorenzo Shipping subsequently issued to BJ Marthel a purchase order for the procurement of
one set of cylinder liner to be used for M/V Dadiangas Express. A second purchase order was issued. Both purchase
orders did not state the date of the cylinder’s delivery.
BJ Marthel then placed the order for the 2 cylinder liners with its principal in Japan, Daiei Sangyo Co. Ltd., by
opening a letter of credit. Pajarillo, sales manager of BJ Marthel, delivered the cylinder liners at petitioner’s warehouse on
April 20, 1990, 6 months after the date on the quotation, instead of the 2 months stated.
BJ Marthel subsequently sent a Statement of Account to petitioner. Petitioner failed to pay for the cylinder liners.
Hence, BJ Marthel sent a demand letter. Instead of heeding the demand for the full payment, Lorenzo Shipping offered to
pay only P150,000. Lorenzo Shipping claims that the cylinders were delivered late and due to the scrapping of the M/V
Dadiangas Express, they had to sell the cylinder liners in Singapore.
Due to the failure of the parties to settle, respondent filed an action for sum of money and damages before the
RTC. Lorenzo Shipping, on the other hand, claims that time was of the essence in the delivery of the cylinder liners and
that the delivery was late as respondent committed to deliver the items within 2 months after receipt of firm order. The
RTC ruled in favor of petitioner. The CA reversed.
Issues:
1. Whether or not respondent incurred delay in performing its obligation under the contract of sale?
2. Whether or not said contract was validly rescinded by Lorenzo Shipping?
Held/Ratio:
1. NO. In the subject contracts, time was not of the essence. The delivery of the cylinder liners was made
within a reasonable period of time considering that respondent had to place the order for the cylinder
liners with its principal in Japan and that the latter was, at that time, beset by heavy volume of work.
In determining whether time is of the essence in a contract, the ultimate criterion is the actual or apparent
intention of the parties and before time may be so regarded by a court, there must be a sufficient
manifestation, either in the contract itself or the surrounding circumstances of that intention. Petitioner
insists that although the purchase orders did not specify the dates of delivery, respondent should abide by the term
of delivery found on the quotation. Petitioner claims that the quotation was an offer from respondent and that the
purchase order is the acceptance of the proposed terms of the contract of sale. The SC rejects this view. While the
quotation stated the delivery date, the purchase orders did not do so. The quotation sent by respondent merely
represented the negotiation phase of the subject contract of sale between the parties. As of that time, the parties
had not yet reached an agreement as regards the terms and conditions of the contract of sale of the cylinder
liners. Notably, petitioner was the one who caused the preparation of the purchase orders yet it utterly
failed to adduce any justification as to why said documents contained terms which are at variance with
those stated in the quotation provided by respondent. The only plausible reason for such failure on the part of
petitioner is that the parties had, in fact, renegotiated the proposed terms of the contract of sale.

The SC also said that while petitioner alleges that the cylinder liners were to be used for dry dock repair and
maintenance of its M/V Dadiangas Express, the record is bereft of any indication that respondent was aware of
such fact. The failure of petitioner to notify respondent of said date is fatal to its claim that time was of the
essence in the subject contracts of sale. If time was really of the essence, they should have stated the same in the
said purchase orders, and not merely relied on the quotation issued by the appellant considering the lapse of time
between the quotation issued by the appellant and the purchase orders of the appellee.
As an aside, “[e]ven where time is of the essence, a breach of the contract in that respect by one of the parties may
be waived by the other party’s subsequently treating the contract as still in force.” Petitioner’s receipt of the
cylinder liners when they were delivered to its warehouse clearly indicates that it considered the contract of sale to
be still subsisting up to that time. Had the contract of sale been cancelled already as claimed by petitioner, it no
longer had any business receiving the cylinder liners. By accepting the cylinder liners when these were delivered
to its warehouse, petitioner indisputably waived the claimed delay in the delivery of said items.
2. NO. There having been no failure on the part of the respondent to perform its obligation, the power to rescind the
contract is unavailing to the petitioner. In addition, the act of a party in treating a contract as cancelled or resolved
on account of infractions by the other contracting party must be made known to the other.Petitioner never
informed respondent of its intention to rescind the contract of sale.

22 - Sealoader Shipping Corporation v. GrandCement Manufacturing Corporation (2010)* (Typhoon

Bising, barge rammed into the wharf)
Doctrines:
• A common carrier is vested with the responsibility to be prepared with the conditions of the sea. They must not
rely on third parties to give them news about such conditions.
• Contributory negligence is when the damage caused to the plaintiff was caused by the negligence of the same.
Damages shall be mitigated in favor of the defendants, which are ultimately responsible for the injury or damage.
Facts:
Grand Cement Manufacturing is a domestic corporation engaged in the manufacturing of cement. It has private
wharfs in Cebu, Manila, and San Francisco. It contracted with Sealoader, a domestic shipping corporation.
Sealoader in turn, contracted with Joy Launch Corporation to tug the former’s barge in loading Grand Cement’s
goods. The loading of the goods was delayed for 4 days. This caused Sealoader’s barge and Joy Launch’s tugboat to stay
near Grand Cement’s wharf.
On April 4 Typhoon Bising hit the wharf of Grand Cement in Cebu. This caused the barge of Sealoader to smash
to the wharf causing a great amount of damage.
Sealoader claims that they are not wholly liable since Grand Cement delayed the loading of the goods. They say
that if the goods were boarded on time, the barge would have docked some place else and should have avoided the
accident.
Issues:
1. W/N Sealoader is liable for the damage caused by the barge to the wharf
Held/Ratio:
1. Yes. With the knowledge that a storm was approaching, prudence would have dictated them to tug the barge to
shelter and safety at the earliest possible time. Instead, they waited until the last minute to take action which was
already too late. Their experience would have prompted them to take precautionary measures considering that the
weather and the sea are capricious. Whether Grand Cement was late n loading the barge or not is of no moment. It
was the judgment of the vessels’ captain and patron that was crucial.

23 - Mitsui Lines v. CA (1998)

Facts:
Petioner Mutsui thru its local agent Magsaysay Agencies to transport the goods of private respondent Loungewear
Manufacturing Co. From Manila to France within 28 days from loading the goods to the vessel. Mitsui engaged Meister
Transport Shipment to transport the goods.
The goods were loaded on July 24, 1991 but arrived late on Nivember 14, 1991 due to delay of transshipment in
Taiwan. Due to the delay the consignee only paid half of the contract price to private respondent due to the delivery on the
off season. Private respondent now claims damages from petitione, however petitioner refused to pay thus a court action
was instituted.
Private respondent as plaintiff filed a complaint in the RTC on April 1992 and amended it on May 1993. Due to
the amendment petitioner filed a motion to dismiss on the grounds of prescription. Petitioner base its argument on
Carriage of Goods on the Sea which mandates a 1 year prescription of action on damages of goods transported on sea.
however the motion and subsequently the appeal to the CA was denied.
Issue:
1. WN action for damages has prescribed due to applicability of COGSA.
Held/Ratio:
1. NO. COGSA will not apply. The Civil Code is the proper law to be applied. Damages in the case at bar is not the
damages contemplated by COGSA, thus civil code applies.
Ang v. American Steamship Agencies, Inc., the question was whether an action for the value of goods which had
been delivered to a party other than the consignee is for “loss or damage” within the meaning of §3(6) of the
COGSA. It was held that there was no loss because the goods had simply been misdelivered. “Loss” refers to the
deterioration or disappearance of goods.
In the case at bar there was merely a delay of delivery, there was no actual loss or deteriration of goods. Therefore
CIVIL CODE applies not COGSA.

24 - Sulpicio Lines, Inc. v. First Lepanto-Taisho Insurance Corporation (2005)*

Facts:
Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract under
which Delbros was to transport a shipment of goods consisting of 3 wooden crates containing 136 cartons of inductors and
LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden
Singapore Pte, Ltd.
For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V
Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. During the unloading of the shipment, one
crate containing 42 cartons dropped from the cargo hatch to the pier apron. The owner of the goods examined the
dropped cargo, and upon an alleged finding that the contents of the crate were no longer usable for their intended
purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a claim with
Sulpicio Lines for the recovery of the value of the rejected cargo which was refused by the latter. Thereafter, the
owner of the goods sought payment from First Lepanto-Taisho Insurance Corporation (insurer) under a marine
insurance policy issued to the former. The insurer paid the claim less thirty-five percent (35%) salvage value or
P194, 220.31. Insurer then filed claims for reimbursement from Delbros, Inc. and Sulpicio Lines Sulpicio Lines, Inc.
which were subsequently denied. Insurer then filed a case for damages against Delbros and Sulpicio. Delbros alleged in
their answer that the crate in question was truly in bad order and that fault is with Sulpicio which was responsible for the
unloading of the crates. Sulpicio, on the other hand, alleges that it observed extraordinary diligence in the handling,
storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and
Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound
condition, except that “2 cello bags each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for
and missing as per packaging list.
Issue:
1. W/N Sulpicio Lines is liable for damages
Held/Ratio:
1. YES. The shipment sustained damage while in the custody of Sulpicio Lines. It is not disputed that one of the 3
crates did fall from the cargo hatch to the pier apron while Sulpicio Lines was unloading the cargo from its vessel.
Neither is it impugned that upon inspection, it was found that 2 cartons were torn on the side and the top flaps
were open and that 2 cello bags, each of 50 pieces ferri inductors, were missing from the cargo.
Sulpicio Lines contend that its liability, if any, is only to the extent of the cargo damage or loss and should not
include the lack of fitness of the shipment for transport to Singapore due to the damaged packing. This is
erroneous. Sulpicio Lines seems to belabor under the misapprehension that a distinction must be made between
the cargo packaging and the contents of the cargo. According to it, damage to the packaging is not tantamount to
damage to the cargo. It must be stressed that in the case at bar, the damage sustained by the packaging of the
cargo while in Sulpicio Lines’s custody resulted in its unfitness to be transported to its consignee in Singapore.
Such failure to ship the cargo to its final destination because of the ruined packaging, indeed, resulted in damages
on the part of the owner of the goods. The falling of the crate during the unloading is evidence of Sulpicio Lines’s
negligence in handling the cargo. As a common carrier, it is expected to observe extraordinary diligence in
the handling of goods placed in its possession for transport. A common carrier is bound to transport its cargo
and its passengers safely “as far as human care and foresight can provide, using the utmost diligence of a very
cautious person, with due regard to all circumstances.” The extraordinary diligence in the vigilance over the
goods tendered for shipment requires the common carrier to know and to follow the required precaution
for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery.
Sulpicio Lines miserably failed to adduce any shred of evidence of the required extraordinary diligence to
overcome the presumption that it was negligent in transporting the cargo.
Hence, Sulpicio Lines is liable to pay damages. Upon the insurer’s payment of the alleged amount of loss suffered
by the insured (the owner of the goods), the insurer is entitled to be subrogated pro tanto to any right of action
which the insured may have against the common carrier whose negligence or wrongful act caused the loss.
25 - Coastwise Lighterage Corporation v. Court of Appeals and Philippine General Insurance Company
(1995)**
Facts:
Pag-asa Sales, Inc. entered into a contract to transport molasses from Negros to Manila with Coastwise Lighterage
Corporation. For this purpose, Coastwise’s barges were used. These barges were towed by a tugboat likewise owned by
Coastwise. As the barges approached Pier 18 along Manila Bay where it was set to unload the cargo, one of the barges
struck an unknown sunken object which resulted in a hole 2-inches wide and 20-inches long. As a consequence, water
gushed through and contaminated the molasses, rendering the entire shipment unfit for use.
Pag-asa Sales rejected the shipment as a total loss and thereafter filed a claim with its insurer Philippine General
Insurance (PhilGen) and Coastwise. PhilGen paid Pag-asa the amount of Php700,000.00 representing the value of the
damaged cargo. Coastwise, on the other hand, denied the claim.
Subsequently, PhilGen filed a claim against Coastwise before the RTC of Manila, seeking to recover the amount
it paid Pag-asa. The action was grounded upon PhilGen’s right to be subrograted to all the contractual rights and claims of
the Pag-asa as consignee against Coastwise as carrier. RTC ruled in favor of PhilGen. The CA affirmed. Hence, this
petition.
Issues:
1. W/N Coastwise should be treated as a private carrier for the purposes of the contract entered into with
Pag-asa
2. W/N PhilGen was subrograted into the rights of Pag-asa against Coastwise upon payment
Held/Ratio:
1. No. Coastwise claims that the contract it entered into with Pag-asa was a charter agreement. Upon this premise,
Coastwise hoped to shield itself from liability by citing Home Insurance Company v. American Steamship
Agencies wherein the Court decreed that a common carrier undertaking to carry special cargo or chartered to a
special person only should be treated for such purposes as a private carrier.
However, the nature of the contract entered into by the parties reveals that it is not a mere charter agreement
wherein the owner of the vessel relinquishes complete possession, command and navigation to the charterer.
Rather, it is a contract of affreightment, wherein the owner of the vessel merely leases part or all of its space
to haul goods for others. The possession, command and navigation of the vessels remained with Coastwise.
Thus, the contract entered into by the parties did not convert Coastwise from a common carrier to a private one.
As a consequence, the presumption of negligence that attaches to common carriers once the goods it transports are
lost, destroyed applies to Coastwise. This presumption, which is overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted in this case. While records seem to show that the collision, which
caused damage to the cargo, was an unavoidable occurrence that should free Coastwise from liability, this is
overcome by the fact that the patron of the vessel was not licensed and therefore did not have the skill necessary
to exert the required degree of diligence called for by the circumstances.
*Note: This case is assigned under “Duration of Responsibility”. Perhaps Atty. Abaño intends to point out that
Coastwise is liable for failing to exert extraordinary responsibility at the time of the collision as required by
Article 1736. Since the mishap took place before Coastwise was able to deliver the cargo to Pag-asa, the
responsibility to exert extraordinary diligence had yet to be discharged.
2. Yes. PhilGen’s right to be subrograted into the rights of Pag-asa is explicitly provided under Article 2207 of the
Civil Code:
If the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured against the wrongdoer or the
person who violated the contract.
Undoubtedly, upon payment by respondent insurer PhilGen of the amount of P700,000.00 to Pag-asa, the
consignee of the cargo of molasses totally damaged while being transported by Coastwise Lighterage, the former
was subrogated into all the rights which Pag-asa may have had against the carrier, herein petitioner Coastwise.
26 - Phil. First Insurance v. Wallem First Shipping (2009)*

Facts:
Anhui Chemicals loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium sulphate
anhydrous (shipment) for delivery at Manila for L.G. Atkimson (consignee), covered by a Clean Bill of Lading. The Bill
of Lading reflects the gross weight of the total cargo at 500,200kg. The Owner and/or Charterer of M/V Offshore Master
is unknown while the shipper of the shipment is Shanghai Fareast Ship Business. Wallem Philippines Shipping, Inc.
(Wallem) is the local agent of the owner/charterer and Shanghai Fareast (shipper).
The shipment arrived at the port of Manila on board the vessel from which it was subsequently discharged. It was
disclosed during the discharge of the shipment from the carrier that 2,426 bags were in bad order and condition, because
of spillages and losses. This is evidenced by the Turn Over Survey of Bad Order Cargoes (turn-over survey) of the arrastre
operator, Asian Terminals, Inc. (arrastre operator). The bad state of the bags is also evidenced by the arrastre operator’s
Request for Bad Order Survey.
Asia Star Freight Services, Inc. undertook the delivery of the subject shipment from the pier to the consignee’s
warehouse in Quezon City, while the final inspection was conducted jointly by the consignee’s representative and the
cargo surveyor. During the unloading, it was found and noted that the 2,426bags had been discharged in damaged and bad
order condition.
The consignee filed a formal claim with Wallem for the value of the damaged shipment, to no avail. Since the
shipment was insured with petitioner Phil. First Insurance Co., against all risks, the consignee filed a formal claim with
Phil. First for the damage and losses. After evaluating the invoices, the turn-over survey, the bad order certificate and
other documents, Phil. First paid the consignee and the latter signed a subrogation receipt.
Phil. First Insurance, in the exercise of its right of subrogation, sent a demand letter to Wallem for the recovery of
the amount paid by petitioner to the consignee. However, Wallem did not settle nor even send a response to Phil. First’s
claim. Thus, Phil. First filed a case before the RTC for the recovery of actual damages suffered by petitioner plus legal
interest thereon.
The RTC ordered respondents to pay petitioner with interest plus attorney’s fees and costs of the suit. It attributed
the damage and losses sustained by the shipment to the arrastre operator’s mishandling in the discharge of the shipment.
The RTC held the shipping company and the arrastre operator solidarily liable since both the arrastre operator and the
carrier are charged with and obligated to deliver the goods in good condition.
The CA reversed and set aside the RTC’s decision. According to the CA, there is no solidary liability between the
carrier and the arrastre operator because it was clearly established by the trial court that the damage and losses of the
shipment were attributed to the mishandling by the arrastre operator in the discharge of the shipment. Hence, the arrastre
operator was held solely liable to the consignee.
Issues: [Relevant only]
1. Does the Common carrier’s duties extend to the obligation to safely discharge the cargo from the vessel?
2. Whether or not the carrier should be held liable for the cost of the damaged shipment.
Held/Ratio:
1. Yes, Willam (representing the shipper and owner/charterer) was ordered to pay. Respondent is a common carrier,
thus the following provisions apply.
Article 1734 of the Civil Code, provides that 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.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo
from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he
delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise. (The ship
captain’s liability is ultimately that of the shipowner by regarding the captain as the representative of the ship
owner.)
Section 3 (2) of the COGSA states that among the carriers’ responsibilities are to properly and carefully load,
handle, stow, carry, keep, care for, and discharge the goods carried.
Also, the Bill of Lading between the shipper and consignee provides that the responsibility of the carrier shall
commence from the time when the goods are loaded on board the vessel and shall cease when they are discharged
from the vessel, and that the Carrier shall not be liable of loss of or damage to the goods before loading and after
discharging from the vessel, howsoever such loss or damage arises.
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ship’s tackle. Being the custodian of the goods
discharged from a vessel, an arrastre operator’s duty is to take good care of the goods and to turn them over to the
party entitled to their possession.
Handling cargo is mainly the arrastre operator’s principal work so its drivers/operators or employees should
observe the standards and measures necessary to prevent losses and damage to shipments under its custody.
Thus, both the ARRASTRE and the CARRIER are charged with and obligated to deliver the goods in good
condition to the consignee. But the liability of the arrastre operator and the carrier are not always solidary as the
facts of a case may vary the rule.
It was found in the testimony of Mr. Talens that the stevedores, and head checker were under the supervision of
master of the vessel at the time of unloading/discharging of the shipment. Moreover, the liability of Wallem is
highlighted by Mr. Talen’s notes in the Bad Order Inspection, that the bad order torn bags, was due to
stevedores[‘] utilizing steel hooks/spikes in piling the cargo to [the] pallet board at the vessel’s cargo holds and at
the pier designated area before and after discharged that cause the bags to torn [sic].”
Evidence shows that the damage to the bags happened before and after their discharge and it was caused by the
stevedores of the arrastre operator who were then under the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody
of the carrier. In the instant case, the damage or losses were incurred during the discharge of the shipment while
under the supervision of the carrier. Consequently, the carrier is liable for the damage or losses caused to the
shipment.

27 - Delsan Transport Lines v. American Home Assurance Corporation (2006)

Facts:
Delsan Transport is a corporation which owns and operates the vessel MT Larusan. American Home, on the other
hand it an insurance corporation. Delsan entered into a contract of afreightment with Caltex whereby Delsan undertook
the shipment and delivery of 1,986 k/l of diesel oil from Bataan to Bacolod.
When the shipment of oil arrived in Bacolod city, unloading operations immediately commenced. Discharging of
the diesel oil started at around 1:30 pm. However, the discharging operations had to be stopped at around 10:30 pm when
it was discovered that the port bow mooring the vessel was cut or stolen by unknown persons. Because of this, the vessel
drifted away from shore and stretched the rubber hose attached to the riser causing the elbow to break. The rubber hose
connected to the tanker was severed completely causing the diesel to spill into the sea. The tanker signaled a “red light”
which meant stop pumping. However, the shore watcher assumed that the pumping would commence at any time and did
not close the storage tank gate valve. Because the valve remained open, the oil which was delivered into the storage tank
backflowed.
For the diesel oil which spilled and backflowed, Caltex sought to recover from Delsan. Delsan refused to pay but
American Home payed Caltex pursuant to their insurance agreement.
Both the trial court and the Court of Appeals held Delsan liable for the loss of the cargo for its negligence of its
duty as common carrier.
Issues:
1. W/N Delsan is liable for the loss of the cargo for negligene of its duty as a common carrier
Held/Ratio:
1. Yes, Delsan is liable for the loss of the cargo. The proximate cause of the spillage and backflow of the diesel oil
was the severance of the port bow mooring line of the vessel and the failure of the shore watcher to close the
storage tank gate valve. Delsan’s argument that it should not be held liable for the loss of diesel oil due to
backflow because the same had already been actually and legally delivered to Caltex at the time it entered the
shore tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan because
the discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the
cargo into the depot has not yet been completed at the time of the spillage when the backflow occurred,
there is no reason to imply that there was actual delivery of the cargo to the consignee.
The extraordinary responsibility of 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 a person who has the right to receive them.
Because the discharging of oil products has not yet been finished, Delsan still has the duty to guard and to
preserve the cargo. The carrier still has in it theresponsibility to guard and preserve the goods, a duty incident to
its having the goods transported.

28 - Wildvalley Shipping v. CA and Philippine President Lines Inc. (2000)*

Doctrine:
• In the absence of a contractual obligation, the common carrier is required only to observe the diligence required of
a good father of a family over his property.
Facts:
The Philippine Roxas is a vessel owned by Philippine President Lines (PPL). It arrived at Venezuela to load iron
ore. Upon departing from the port, Venezuelan authorities appointed an official Venezuelan pilot, Ezzar Vasquez, to
navigate the ship through the Orinoco River. When they left the port, the ship’s captain/master Colon, Vasquez, the
ship’s third mate and a helmsman were on the bridge of the ship. When the vessel was under way, the ship’s
captain/master left the bridge. Shortly thereafter, they felt vibrations but Vasquez assured the watch officer that
everything was alright. They felt another round of vibrations and the watch officer called the captain/master to the bridge.
The captain inspected the position of the vessel, confirmed that they were in the middle of a channel and asked that the
bottom tanks be checked. The Philippine Roxas apparently ran aground the Orinoco River thus obstructing the
ingress/egress of other vessels.
Wildvalley filed a complaint for unearned profits, interests, attorney’s fees and costs against Philippine President
Lines and their underwriter, Pioneer Insurance, alleging that it was through the former’s negligence that their vessel, the
Malandrinon, failed to sail out of Puerto Ordaz. Wildvalley claims that the Philippine Roxas was under the command of
its shipmaster, Capt. Colon while Philippine Pres. Lines argue that it was Vasquez who was in control of the ship.
Issues:
1. W/N the ship was under the control of the PPL Captain.
2. W/N PPL was negligent. [MAIN ISSUE]
Held/Ratio:
1. YES. BUT THE FAULT LIES WITH THE PILOT NOT WITH THE CAPTAIN. According to Philippine
Law, the master remains the overall commander of the vessel even though a pilot is on board. However, the law
also recognizes that when the ship is navigating through a pilotage district, then the ship must be under
compulsory pilotage. And although the Captain could still “veto” the decisions of the pilot, the Court recognized
the fact that the pilot appointed by the Venezuelan government was appointed because of his mastery of the
topography of the Orinoco River being a pilot for 8 years. Therefore, the Court sees it fit for the Captain to rely on
the decisions made by the pilot without further overseeing.
The doctrine of res ipsa loquitur cannot also be applied because for this to apply there is a need for the
instrumentality at fault to be under the control of the superior. As was already said temporary control of the ship
was shifted to the pilot. Therefore the captain/PPL could not be held liable under this doctrine.
2. NO, PPL WAS NOT NEGLIGENT. There being no contract of carriage between Wildvalley and PPL, PPL
was expected only to perform the necessary diligence of a good father. The Court found that PPL sufficiently
exercised this diligence when the vessel sailed only after the “main engine, machineries, and other auxiliaries”
were checked and found to be in good running condition, when the master left a competent officer, the officer on
watch on the bridge with a pilot who is experienced in navigating the Orinoco River; when the master ordered the
inspection of the vessel’s double bottom tanks when the vibrations occurred anew.
(sub-issues)
• Applicability of Venezuelan Law / Foreign Documents – inapplicable because Plaintiffs failed to prove it in
accordance with the Rule 132 of the RoC requiring certification from the embassies/person having custody.
• Seaworthiness of the Ship – The ship was seaworthy despite having several defects, as certified by a surveyor.
What is important is that the ship is able to comply with the particular requirements of the voyage.

29 - Maersk Lines v. CA (1993)**

Doctrine:
• The oft-repeated rule regarding a carrier’s liability for delay is that in the absence of a special contract, a carrier is
not an insurer against delay in transportation of goods. When a common carrier undertakes to convey goods, the
law implies a contract that they shall be delivered at destination within a reasonable time, in the absence, of any
agreement as to the time of delivery. But where a carrier has made an express contract to transport and deliver
properly within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what
cause it may have arisen.
Facts:
Efren Castillo, proprietor of Ethegal Laboratories, ordered from Eli Lilly Inc. 600,000 empty gelatin capsules for
the manufacture of his pharmaceutical products. The capsules were placed in 6 drums of 100,000 capsules each. Through
a Memorandum of Shipment, Eli Lilly advised Castillo that the drums containing the capsules were already shipped on
board Maersk Line’s vessel for shipment to the Philippines via Oakland, California. It was also specified in the
memorandum that the date of arrival would be on April 3, 1977.
However, for unknown reasons, the cargo was misshipped and diverted to Virginia, USA and then transported
back to Oakland, California. As a result, the cargo arrived in the Philippines on June 10, 1977, 2 months from the
specified date of arrival. Castillo refused to take the goods for failure to arrive on time. He filed an action for rescission
of contract with damages against both Eli Lilly and Maersk Line, alleging gross negligence and undue delay in the
delivery of the goods.
Maersk Line, in its answer, argued that the cargo was transported in accordance with the provisions in the bill of
lading and that it is only liable in case of loss, destruction or deterioration of the goods as provided for in Article 1734. Eli
Lilly filed a cross-claim against Maersk Line and alleged that the delay was solely due to the gross negligence of Maersk
Line.
The trial court dismissed the complaint against Eli Lilly since the evidence on record shows that the delay was
entirely due to the fault of Maersk Line. It also ruled that due to the delay, Maersk Line was liable for damages under
Article 1170 since there was a breach in the performance of the obligation. Maersk Line was ordered to pay actual, moral,
and exemplary damages to Castillo. This was affirmed by the CA.
Issues:
1. W/N the dismissal of the complaint against Eli Lilly would also amount to the dismissal of the complaint against
Maersk Line
2. W/N Maersk Line is liable for damages because of the delay in delivering the shipment
Held/Ratio:
1. NO. Maersk Line is an original party defendant upon whom the delayed shipment is imputed. Thus, it cannot
claim that the dismissal of the complaint against Eli Lilly inured to its benefit.
2. YES. Maersk Line argued that it could not be liable for the delay in the delivery of the cargo since it acted in good
faith and there was no special contract under which it undertook to deliver the cargo on or before a specified date.
It also said that as provided in the bill of lading covering the subject shipment, “the Carrier does not undertake
that the goods shall arrive at the port of discharge or the place of delivery at any particular time or to meet any
particular market or use, … the Carrier shall in no circumstances be liable for any direct, indirect or
consequential loss or damage caused by delay.”
A bill of lading operates both as a receipt and as contract to transport and deliver the same a therein stipulated.
Being a contract, it is the law between the parties who are bound by its terms and conditions provided that these
are not contrary to law, morals, good customs, public order and public policy. However, this only applies if the
contract will not create an absurd situation. In the present case, the quoted provision from the bill of lading has the
effect of practically leaving the date of arrival of the shipment on the sole determination and will of the carrier. It

is a contract of adhesion and therefore it should not automatically exempt Maersk Line from any liability due to
delay.
The oft-repeated rule regarding a carrier’s liability for delay is that in the absence of a special contract, a
carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes to
convey goods, the law implies a contract that they shall be delivered at destination within a reasonable
time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express
contract to transport and deliver properly within a specified time, it is bound to fulfill its contract and is
liable for any delay, no matter from what cause it may have arisen.
In the case at hand, there was no special contract entered into between the parties regarding the date of arrival of
the subject shipment. But an examination of the bill of lading shows that the subject shipment was estimated to
arrive in Manila on April 3, 1977. Therefore, even in the absence of a special contract, Maersk Line was liable
for the delay since it was aware of the specific date when the goods were expected to arrive, as indicated in
the bill of lading itself. The Court also stated that the delay in the delivery (2 months and 7 days) was beyond
the realm of reasonableness.

30 - FGU Insurance v. CA (2005)**

Facts:
Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was
engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as
common carriers. San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio several
cargo.
When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds over
the area were dark and the waves were already big. The arrastre workers unloading the cargoes of SMC on board the
barge complained about their difficulty in unloading the cargoes. SMC’s District Sales Supervisor, Fernando Macabuag,
requested ANCO’s representative to transfer the barge to a safer place but the representative did not heed the request. At
about ten to eleven o’clock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because the
barge’s rope attached to the wharf was cut off by the big waves. At around midnight, the barge run aground and was
broken and the cargoes of beer in the barge were swept away. As a result, ANCO failed to deliver to SMC’s consignee
Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza
Negra. Hence, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO amounted to
P1,346,197.00.
Issue:
1. Whether or not respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the
insurance contract considering the circumstances surrounding the loss of the cargoes; and
2. Whether or not the Court of Appeals committed an error of law in holding that the doctrine of res judicata applies
in the instant case.
Held/Ratio:
1. YES. One of the purposes for taking out insurance is to protect the insured against the consequences of his own
negligence and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of the
insured or his agents constitute no defense on the part of the insurer. However, when the evidence shows that the
insured’s negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be
exonerated.
2. YES. It is ANCO’s contention that the decision in Civil Case No. R-19341, which was decided in its favor,
constitutes res judicata with respect to the issues raised in the case at bar. The doctrine is still inapplicable due to
the absence of the last essential requisite of identity of parties, subject matter and causes of action. The parties in
Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case, SMC is the
plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as
defendants, with the latter merely impleading FGU as third-party defendant.
Moreover, the controversy in the first case involved the rights and liabilities of the shipowner vis-à-vis that of the
insurer, while the present case involves the rights and liabilities of the shipper vis-à-vis that of the shipowner.
Also, the subject matter of the third-party complaint against FGU in this case is different from that in Civil Case
No. R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the former,
the third-party complaint arose from the insurance contract covering the cargoes on board the D/B Lucio.

31 - Southern Lines v. CA (1962)

Doctrine:
• The carrier of goods in order to free itself from liability is obliged to prove that damages/ loss were due to
fortuitous event, force-majeure, inherent nature and defect of goods.
Facts:
In 1948, Iloilo City ordered rice from NARIC (Nat’l Rice and Corn Corp) in Manila. Pursuant to this, 1,726 sacks
of rice were boarded in the vessel SS Gen. Wright (owned by Southern Lines) to be transported from Manila to Iloilo City.
On Sept. 3, City of Iloilo received the shipment and paid for the 1,726 sacks. It was later found out in the bill of lading
that only 1,685 sacks were received. City of Iloilo then filed a complaint in the CFI against NARIC and Southern Lines
for the recovery of the sum of the41 sacks that were not delivered. CFI ordered Southern Lines to pay the amount.
Southern Lines, in their appeal, claims that they should be exempted from liability because the shortage
due to shrinkage, leakage, spillage of rice was brought about by the bad condition of the sacks when they were
boarded in the vessel.
Issue:
1. W/N Southern lines (carrier) liable for the loss or shortage of the rice shipped.
Held/Ratio:
1. YES. The Court held Southern lines liable for the shortage. According to the Code of Commerce, carriers shall be
liable for the losses and damages suffered by the goods except if the damages/shortage were caused by the nature
of the goods or by unavoidable accident. The carrier has the burden of proving that the losses or damages
were brought about by fortuitous event, force majeure, inherent nature and defect of goods. In this case,
Southern Lines failed to prove that the shortage was not resulted by their own negligence.
The excuse of “sacks being in bad condition even from the start” is not accepted because Southern lines should
have immediately protested or refused the goods when they saw that the packaging/sacks were already bad to
begin with. Southern Lines, however, did not do this and it still agreed to transport the goods. This act of Southern
lines is regarded by the Court as an act of negligence.

32 - DSR-Senator v. Federal (2003)**

Doctrines:
• A common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time the
articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to or until the lapse of a reasonable time for their acceptance by the person entitled
to receive them.
• When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of
its failure to observe that diligence, and there need not be an express finding of negligence to it liable.
Facts:
Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and Company, Inc. (C.F.
Sharp), the general ship agent of DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the
consignee, Al-Mohr International Group. Under the bill of lading issued by C.F. Sharp, the port of discharge for the cargo
was at Khor Fakkan port and the port of delivery was Riyadh, Saudi Arabia, via Port Dammam.
Said cargo was loaded in M/S “Arabian Senator”. Federal Phoenix Assurance Company, Inc. (Federal Phoenix
Assurance) insured the cargo against all risks. When the vessel arrived in Khor Fakkan, the cargo was reloaded on board
DSR-Senator Lines’ feeder vessel, M/V “Kapitan Sakharov” bound for Port Damman. While in transit, the vessel and
all its cargo caught fire and sank.
DSR-Senator Lines informed Berde Plants of the incident and C.F Sharp issued a certification to that effect.
Consequently, Federal Phoenix Assurance paid Berde Plants the amount of the insurance of the cargo. It then demanded
payment from C.F. Sharp on the basis of the Subrogration Receipt executed by Berde Plants in its favor. C.F. Sharp
denied any liability on the ground that such liability was extinguish when the vessel carrying the cargo caught fire.
Federal Phoenix Assurance filed with the RTC of Manila a complaint for damages against DSR-Senator Lines
and C.F. Sharp. The RTC ruled in favor of Federal Phoenix Assurance. On appeal, the CA affirmed. Thus, the petition for
review on certiorari.
Issue:
1. W/N DSR-Senator Lines and C.F. Sharp are liable for damages.
Held/Ratio:
1. Yes. Art. 1734 of the NCC provides:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether intentional or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of public authority.
Fire is not one of those enumerated under the provision which exempts a carrier from liability for loss or
destruction of the cargo.
As provided for in the case of Eastern Shipping Lines, Inc. v. IAC, since the peril of fire is not comprehended
within the exceptions in Art. 1734, then the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary diligence required by work.
Even if fire were to be considered as a natural disaster under Art. 1734, it is required under Art. 1739 that it must

have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent
or minimize the loss before, during or after the occurrence of the disaster.
Moreover, a common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time
the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to or until the lapse of a reasonable time for their acceptance by the person entitled
to receive them. When the goods shipped either are lost or arrive in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to
it liable.

33 - Philamgen v. CA (1993)*
Facts:
This case deals with the liability, if any, of a shipowner for loss of cargo due to its failure to observe the
extraordinary diligence required by Art. 1733 of the Civil Code as well as the right of the insurer to be subrogated to the
rights of the insured upon payment of the insurance claim.
FELMAN Shipping lines (FELMAN) was the owner of the ship MV Asilda which took into its cargo 7,500 cases
of coca-cola bottles owned by Coca Cola Bottlers Inc. from Zamboanga to its consignee in Cebu (Coca-Cola Bottlers
Philippines Inc.Cebu). The cargo was insured by petitioner Philippine American General Insurance Co., Inc.
(PHILAMGEN) under a Marine policy. A day after the ship left the port of Zamboanga, it capsized and sank together
with all its cargo. Consignee demanded payment of damages from FELMAN, however the shipowner denied liability,
hence it claimed from PHILMAGEN. PHILMAGEN thereafter subrogated unto the rights of consignee and claimed from
FELMAN arguing that the vessel was unseaworthy when it left the port and that it was improperly manned. FELMAN
disclaimed liability hence PHILAMGEN sued the shipowner for sum of money and damages.
FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of
PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and
ownership over ”MV Asilda” together with her freight and appurtenances for the purpose of limiting and extinguishing its
liability under Art. 587 of the Code of Commerce. The trial court found for FELMAN. PHILMAGEN appealed to the CA,
the CA set aside the dismissal and remanded the case to the lower court for trial on the merits. FELMAN filed a petition
for certiorari with the SC but it was subsequently denied.
The trial court again ruled judgment in favor of FELMAN arguing that the ship was seaworthy when it left the
port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowner’s surveyor
attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be attributed to either a
fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the
negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce should apply. The lower court
further ruled that assuming ”MV Asilda” was unseaworthy, still PHILAMGEN could not recover from FELMAN since
the assured had breached its implied warranty on the vessel’s seaworthiness. Resultantly, the payment made by
PHILAMGEN to the assured was an undue, wrong and mistaken payment. Since it was not legally owing, it did not give
PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee.
PHILMAGEN appealed to the CA, the CA found for petitioner ruling that the ship was unseaworthy for being
top- heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. That while the vessel
possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the structure of the ship
itself, it was not seaworthy with respect to the cargo. Nonetheless, the appellate court denied the claim of PHILAMGEN
on the ground that the assured’s implied warranty of seaworthiness was not complied with. PHILAMGEN was not
properly subrogated to the rights and interests of the shipper. Furthermore, respondent court held that the filing of notice
of abandonment had absolved the shipowner/agent from liability under the limited liability rule.
Issues:
1. W/N the ship was seaworthy when it left the port
2. W/N the limited liability under Art. 587 of the Code of Commerce should apply (issue relevant to topic)
3. W/N PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against
FELMAN
Held/Ratio:
1. No, the SC found this ruling based on the joint statement executed by its captain and the chief mate of its vessel as
regards the amount of cargo it stowed on its deck. Furthermore, as stated by the captain, at around four o’clock in
the morning of 7 July 1983 he was awakened by the officer on duty to inform him that the vessel had hit a floating
log and that after a few minutes, caused problems to the ship’s engine. Later, the Elite Adjusters Inc submitted a

report regarding the sinking of MV Asilda which stated that the cause was due to the hole on the ship caused by
the log it earlier hit.
2. Art. 587 of the Code of Commerce is NOT applicable to the case at bar. The ship agent is liable for the negligent
acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are
exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment,
as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to
the effect that the right of abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply
to cases where the injury or average was occasioned by the shipowner’s own fault. It must be stressed at this point
that Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain. Where the
shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions
of the Civil Code on common carrier.
It was already established at the outset that the sinking of ”MV Asilda” was due to its unseaworthiness even at the
time of its departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo was loaded
on deck. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As
such, FELMAN was equally negligent. It cannot therefore escape liability through the expedient of filing a notice
of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.
Under Art 1733 of the Civil Code, “(c)ommon 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 x x x x” In the event of loss of
goods, common carriers are presumed to have acted negligently. FELMAN, the shipowner, was not able to rebut
this presumption.
3. Due to the established facts that the vessel was unseaworthy with reference to the cargo it is therefore ruled that
there was breach of warranty of seaworthiness that rendered the assured not entitled to the payment of is claim
under the policy. Hence, when PHILAMGEN paid the claim of the bottling firm there was in effect a “voluntary
payment” and no right of subrogation accrued in its favor. In other words, when PHILAMGEN paid it did so at its
own risk.

34 - Central Shipping v. Insurance Company of North America (2004)**

Doctrine:
• A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or
deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one of the causes
enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to prevent or minimize
the loss.
• In the present case, the weather condition encountered by petitioner’s vessel was not a “storm” or a natural
disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the
manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of
the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now
disclaim any liability for the loss.
Facts:
Central Shipping Company, Inc. (“Central”) received on board its vessel, M/V “Central Bohol”, 376 pieces
of Philippine Apitong Round Logs. It undertook to transport the shipment from Puerto Princesa, Palawan to Manila for
delivery to Alaska Lumber Co., Inc. The cargo was insured for P3,000,000.00 against total loss under Insurance Company
of North America’s Marine Cargo Policy No. MCPB-00170. Upon finishing loading cargo, the vessel left Palawan and
commenced the voyage to Manila. En route to manila, the vessel listed about 10 degrees starboard side, due to the shifting
of logs in the hold. After some time, the listing of the vessel had increased to 15 degrees. The ship captain ordered his
men to abandon ship and eventually, the vessel completely sank. Due to the sinking of the vessel, the cargo was totally
lost.
Insurance Company alleged that Central and its captain’s fault and negligence led to the total loss of the shipment.
As a result, Alaska Lumber Co. suffered damages amounting to P3,000,000. Alaska Lumber Co., presented a claim for the
value of the shipment to Central but the latter failed and refused to settle the claim. As insurer, Insurance Company paid
the claim and now seeks to be subrogated to all the rights and actions of the consignee as against Central.
Central, while admitting the sinking of the vessel, claimed that the vessel was fully manned, fully equipped and in
all respects seaworthy; that all the logs were properly loaded and secured; that the vessel’s master exercised due diligence
to prevent or minimize the loss before, during and after the occurrence of the storm. Moreover, it raised as its main
defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a
tropical storm which neither Central nor the captain of its vessel could have foreseen. \
RTC held that the sinking of M/V Central Bohol was not caused by the weather. It noted that monsoons, which
were common occurrences during the months of July to December, could have been foreseen and provided for by an
ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held
Central liable for the loss of the cargo.
CA affirmed the RTC’s finding that the southwestern monsoon encountered by the vessel was not
unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the
perils of the sea. Further, the weather disturbance was not the sole and proximate cause of the sinking of the vessel. It
was also due to the concurrent shifting of the logs in the hold that could have resulted only from improper stowage.
Thus, the carrier was held responsible for the consequent loss of or damage to the cargo, because its own negligence had
contributed to it. It also held that the Certificates of Inspection and Drydocking were not conclusive proofs of the vessel’s
seaworthiness.
Issues:
1. W/N the carrier is liable for the loss of cargo
2. W/N doctrine of limited liability is applicable

Held/ Ratio:
1. YES. Common carriers are bound to observe extraordinary diligence over the goods they transport, according to
all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods,
common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration
was brought about by “flood, storm, earthquake, lightning or other natural disaster or calamity.” In all
other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence.
Here, Central disclaims responsibility for the loss of the cargo by claiming the occurrence of a “storm”. It
attributes the sinking of its vessel solely to the weather condition. It must be noted that in the Note of Marine
Protest, which the captain of the vessel issued under oath, stated that he and his crew encountered a southwestern
monsoons. Even Central admitted in its Answer that the sinking of M/V Central Bohol had been caused by the
strong southwest monsoon. Having made such factual representation, it cannot now be allowed to retreat
and claim that the southwestern monsoon was a “storm.” Moreover, Rosa S. Barba, weather specialist of the
Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA), testified that a
thunderstorm might occur in the midst of a southwest monsoon. According to her, one did occurred the time of
the sinking of the vessel.
However, it would not be sufficient to categorize the weather condition at the time as a “storm” within the
absolutory causes enumerated in the law. Significantly, no typhoon was observed within the Philippine area
of responsibility during that period. According to PAGASA, a storm has a wind force of 48 to 55 knots,
equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that
the wind was blowing around force 7 to 8 on the Beaufort Scale. Consequently, the strong winds accompanying
the southwestern monsoon could not be classified as a “storm.”
Assuming the weather encountered by the ship is to be considered a natural disaster under Article 1739, Central
failed to show that such natural disaster or calamity was the proximate and only cause of the loss. Human
agency must be entirely excluded from the cause of injury or loss. In other words, the damaging effects blamed
on the event or phenomenon must not have been caused, contributed to, or worsened by the presence of
human participation. If a common carrier fails to exercise due diligence to prevent or minimize the loss before,
during and after the occurrence of the natural disaster, the carrier shall be deemed to have been negligent.
Further, the loss of the vessel could have been caused by the shifting of the logs in the hold. Such shifting
could been due only to improper stowage. During the second monsoon, the master ‘felt’ that the logs in the hold
shifted, prompting him to order second mate to look at the bodega. He found that there was seawater in the
bodega. The sloshing of tons of water back and forth had created pressures that eventually caused the ship to sink.
Had the logs not shifted, the ship could have survived and reached at least the port of El Nido. Being clearly prone
to shifting, the round logs should not have been stowed with nothing to hold them securely in place. Each pile of
logs should have been lashed together by cable wire, and the wire fastened to the side of the hold. Considering the
strong force of the wind and the roll of the waves, the loose arrangement of the logs did not rule out the possibility
of their shifting. By force of gravity, those on top of the pile would naturally roll towards the bottom of the ship.
The evidence indicated that strong southwest monsoons were common occurrences during the month of July.
Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy rains, strong
winds and rough seas. They should then have taken extra precaution in stowing the logs in the hold, in
consonance with their duty of observing extraordinary diligence in safeguarding the goods. But the carrier
took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape
responsibility for the loss.
2. NO. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the
ship owner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused
by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of
logs.

35 - Citadel Lines v. CA (1990)*

Facts:
In this case, 90 cases of cigarettes as cargo were lost. It was found by the CA that the subject cargo which was
placed in a container van, padlocked and sealed by the representative of the CARRIER was still in its possession and
control when the loss occurred, there having been no formal turnover of the cargo to the ARRASTRE.
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 extra ordinary diligence as required in Article 1733 of
the Civil Code. The duty of the consignee is to prove merely that the goods were lost. Thereafter, the burden is
shifted to the carrier to prove that it has exercised the extraordinary diligence required by law. And, its
extraordinary responsibility 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 the right to receive them.
Considering, that the subject shipment was lost while it was still in the custody of the CARRIER, and considering
further that it failed to prove that the loss was occasioned by an excepted cause, the inescapable conclusion is that the
CARRIER was negligent and should be held liable therefor.
However, the liability of the carrier is limited as stipulated under the bill of lading. 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. Further, 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.

36 - Everett Steamship v. CA (1998)*

Facts:
Private respondent Hernandez Trading Co. Inc imported 3 crates of bus spare parts marked as MARCO C/No. 12,
MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a
foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines. Upon arrival at the port of
Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. Private respondent claim upon petitioner
for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,
552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered
to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering
bill of lading which limits the liability of petitioner. Private respondent rejected the offer and thereafter instituted a suit for
collection. The trial court rendered a decision in favour of the private respondents and this was affirmed by the Court of
Appeals. Thus, this instant petition.
Issues:
1. Is the petitioner liable for the actual value and not the maximum value recoverable under the bill of lading?
2. Is private respondent, as consignee, who is not a signatory to the bill of lading bound by the stipulations thereof?
Held/Ratio:
1. The Petitioner is only liable for the maximum value recoverable under the bill of lading. The liability of petitioner
for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill
of lading..
Clause 18 of the covering bill of lading states: “18. All claims for which the carrier 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. The carrier shall not be
liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred
thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or
customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in
writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight
is paid as required.”
Pertinent provisions that is applicable as to this case:
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 freely and fairly agreed upon.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier’s
liability for loss must be “reasonable and just under the circumstances, and has been freely and fairly agreed
upon.” The above stipulations are reasonable and just. In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, 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.
2. Private Respondents are still bound by the stipulations of the bill of lading
In Sea-Land Service, Inc. v. Intermediate Appellate Court (supra), it was held that even if the consignee was not a
signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the
contract.

37 - Cruz v. Sun Holidays (2010)**

Facts:
Petitioners, spouses Dante and Leonora Cruz lodged a Complaint against Sun Holidays, Inc. with RTC of Pasig
for damages arising from the death of their son Ruelito Cruz who perished with his wife on board the boat M/B Coco
Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco
Beach Island Resourt owned and operated by Respondent.
On. Sept. 11, 2000, as it was still windy, Matute and 25 other Resort guests including Ruelito and his wife trekked
to the other side of the coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III,
which was to ferry them to Batangas. Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto
Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to
step forard to the front, leaving the wheel to one of the crew members.
Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier
since by its tour package, the transporting of its guests is an integral part of its resort business. They inform that
another division of the appellate court in fact held respondent liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a common carrier;
that the Resort’s ferry services for guests cannot be considered as ancillary to its business as no income is derived
therefrom; that it exercised extraordinary diligence as shown by the conditions it had imposed before allowing
M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without any contributory negligence
on its part; and that the other case wherein the appellate court held it liable for damages involved different plaintiffs,
issues and evidence.
Issue:
1. W/N respondent is a common carrier
Held/Ratio:
1. YES. Article 1732 makes no distinction between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary activity (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
the general population. We think that Article 1733 deliberately refrained from making such distinctions.
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 respondent’s 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 respondent’s ferry services pay the same amount is likewise inconsequential. These guests
may only be deemed to have overpaid.
About Fortuitous Event
The elements of a “fortuitous event” are: (a) the cause of the unforeseen and unexpected occurrence, or the failure
of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted
the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must
have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor
must have been free from any participation in the aggravation of the resulting injury to the creditor.

To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only
cause of the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the fortuitous event.
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco
Beach III. As reflected above, however, the occurrence of squalls was expected under the weather condition of September
11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and sank. The
incident was, therefore, not completely free from human intervention.
Note: Many issues (Common Carrier, Fortuitous Event, Indeminity for Death with life expectancy and net earning,
exemplary damages)

38 - PAL v. CA (1992)**
Facts:
This is a petition for review of the CA decision which awarded damages and attorney’s fees to Isidro Co for the
loss of his checked-in baggage as a passenger of PAL.
On April 17, 1985, Co and his wife and son arrived at the MIA from San Francisco. Upon checking the baggage
retrieval area, he found out that one of his bags was missing. He then informed employee Willy Guevarra, and the latter
filled up the printed form acknowledging the missing property. The lost luggage was a Samsonite suitcase measuring
about 62 inches in length, worth about US$200 and containing various personal effects of Co. Co, on several occasions,
called PAL’s office to pursue his complaint about his missing luggage but to no avail. Thus, Co, through his lawyer, wrote
a demand letter to PAL. The manager replied that they were still not able to locate the baggage despite careful search.
PAL never found the luggage nor paid its corresponding value. Thus, Co filed the present complaint. The RTC of Pasay
found PAL liable, CA affirmed the decision in toto.
Issues:
1. W/N CA erred in not applying the limit of liability under the Warsaw Convention which limits the liability of an
air carrier of loss, delay or damage to checked-in baggage to US$20 based on weight
Held/Ratio:
1. The court found no merit in that contention. According to jurisprudence, the liability oof the common carrier for
the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is governed
primarily by the New Civil Code. In all matters not regulated by said Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by Special Laws.
The provisions on common carriers can be found in Articles 1733, 1735 and 17532. Since the passenger’s
destination in this case was the Philippines, Philippine law governs the liability of the carrier for the loss of the
passenger’s luggage.
In this case, PAL failed to overcome, not only the presumption, but more importantly, Co’s evidence, proving that
the carrier’s negligence was the proximate cause of the loss of his baggage. Furthermore, PAL acted in bad faith
in faking a retrieval receipt to bail itself out of having to pay Co’s claim.
About the Warsaw Convention:
As stated in the Cathay Pacific case, although the Warsaw Convention has the force and effect of law in this
country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an
exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute
limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under
certain limitations. However, it must not be construed to preclude the operation of the Civil Code and pertinent laws. It
does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under
the contract of carriage, especially if willful misconduct on the part of the carrier’s employees is found or established.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2. 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.
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. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for
their loss, destruction or deterioration.
40 - Cathay Pacific v. CA & Alcantara (1993)* ($20.00 as “inconvenience money”, “What can we do?”)
Doctrines:
• Cathay breached its contract of carriage with private respondent when it failed to deliver his luggage at the
designated place and time, it being the obligation of a common carrier to carry its passengers and their luggage
safely to their destination, which includes the duty not to delay their transportation, and the evidence shows that
petitioner acted fraudulently or in bad faith.
• Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the
mishap results in death of a passenger, or where the carrier is guilty of fraud or bad faith. Where in breaching the
contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the breach of obligation which the parties had
foreseen or could have reasonably foreseen.
• However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in
the absence of any showing that he sustained some pecuniary loss.
• As We have repeatedly held, although the Warsaw Convention has the force and effect of law in this country,
being a treaty commitment assumed by the Philippine government, said convention does not operate as an
exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an
absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable for damages in the
enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the
Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages
for violating the rights of its passengers under the contract of carriage, especially if wilfull misconduct on the part
of the carrier’s employees is found or established, which is clearly the case before Us.
Facts:
On 19 October 1975, Tomas L. Alcantara was a first class passenger of petitioner Cathay Pacific Airways, Ltd.
(CATHAY for brevity) from Manila to Hongkong and onward from Hongkong to Jakarta for a conference with the
Director General of Trade of Indonesia, Alcantara being the EVP and GM of Iligan Cement Corporation, Chairman of the
Export Committee of the Philippine Cement Corporation, and representative of the Cement Industry Authority and the
Philippine Cement Corporation. He checked in his luggage which contained not only his clothing and articles for personal
use but also papers and documents he needed for the conference.
Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he inquired about his
luggage from CATHAY’s representative in Jakarta, he was told that his luggage was left behind in Hongkong. For this,
Alcantara was offered $20.00 as “inconvenience money” to buy his immediate personal needs until the luggage could be
delivered to him.
His luggage finally reached Jakarta more than twenty four (24) hours after his arrival. However, it was not
delivered to him at his hotel but was required by petitioner to be picked up by an official of the Philippine Embassy.
On 1 March 1976, respondent filed his complaint against CATHAY with the CFI of Lanao del Norte praying for
temperate, moral and exemplary damages, plus attorney’s fees.
CATHAY argues that although it failed to transport respondent Alcantara’s luggage on time, the one-day delay
was not made in bad faith so as to justify moral, exemplary and temperate damages. CATHAY also contends that the
extent of its liability for breach of contract should be limited absolutely to that set forth in the Warsaw Convention.
Issues:
1. W/N CATHAY is liable for moral, exemplary and temperate damages as well as attorney’s fees
2. W/N the Warsaw Convention applies

Held/Ratio:
1. YES. SC ruled that CATHAY was in bad faith. All pieces of luggage on board the first aircraft bound for Jakarta
were unloaded and transferred to the second aircraft which departed an hour and a half later. Yet, as the CA noted,
CATHAY was not even aware that it left behind Alcantara’s luggage until its attention was called by the
Hongkong Customs authorities.
Also, the language and conduct of petitioner’s representative towards respondent Alcantara was discourteous or
arbitrary to justify the grant of moral damages. The CATHAY representative was not only indifferent and
impatient; he was also rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that
was not sincere because the representative knew that the passenger was limited only to $20.00 which, certainly,
was not enough to purchase comfortable clothings appropriate for an executive conference. Considering that
Alcantara was not only a revenue passenger but even paid for a first class airline accommodation and
accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in his
problem, CATHAY or its agents should have been more courteous and accommodating to private respondent,
instead of giving him a curt reply, “What can we do, the baggage is missing. I cannot do anything . . . Anyhow,
you can buy anything you need, charged to Cathay Pacific.”
However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in
the absence of any showing that he sustained some pecuniary loss. It cannot be gainsaid that respondent’s luggage
was ultimately delivered to him without serious or appreciable damage.
2. NO. For, the Warsaw Convention itself provides in Art. 25 that —
(1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or
limit his liability, if the damage is caused by his wilfull misconduct or by such default on his part as, in
accordance with the law of the court to which the case is submitted, is considered to be equivalent to
wilfull misconduct.”
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused
under the same circumstances by any agent of the carrier acting within the scope of his employment.

41 - Transasia Shipping v. CA (1996)**

Facts:
Atty. Arroyo bought a ticket from Trans-Asia Shipping for the voyage of M/V Thailand to Cagayan de Oro from
Cebu City. At 5:30 pm the plaintiff boarded the vessel and at that instance noticed that some repair works were being
undertaken on the engine. The vessel departed with only one engine running. After an hour the vessels slowed down and
dropped anchor near Kawit Island. After 30 minutes of no movement, some passengers demanded that they be allowed to
return to Cebu. The vessels’ captain acceded to their request and thus the vessel returned to Cebu. At Cebu City, those
who wanted to disembark were allowed to do so and thereafter, the vessel continued with its voyage to Cagayan de Oro.
The next day, plaintiff boarded M/V Japan for its voyage to Cagayan de Oro. Plaintiff filed an action for damage for
failure of the vessel to transport him to the place of destination and prayed to be awarded compensatory, moral and actual
damages. The trial court dismissed the complaint. The CA reversed the judgment of the trial court and awarded moral,
exemplary damages as well as awarding attorney’s fee. The CA however did not award damages for delay in the
performance of obligation of the carrier for not bringing the plaintiff to the place of destination.
Issue:
1. W/N Trans-Asia breached its contract of common carriage with the plaintiff?
2. W/N the CA erred when they did not award compensatory damages but awarded moral and exemplary damages?
Held/Ratio:
1. YES. Under 1733 the carrier was bound to observe extraordinary diligence in ensuring the safety of the plaintiff
which meant that the carrier was bound to carry the plaintiff safely as far as human care and foresight could
provide using the utmost diligence of a very cautious person with due regards of all the circumstances. Before
commencing the contracted voyage, Transasia undertook repair on the cylinder head of one of the vessel’s engine.
But even before the repairs could be finished, they allowed the vessel to leave the port with only one functioning
engine. Eventually, even the lone engine broke down and caused the vessel to drift, thus to prevent the ship from
sinking it had to drop anchor. The vessel was unseaworthy even before the voyage began. To be seaworthy the
vessel must be adequately equipped and sufficiently manned. The failure of the common carrier to maintain
seaworthy condition is its vessel is a clear breach of its contract of carriage.
2. NO. The CA did not do reversible error when they did not award compensatory damages but awarded moral and
exemplary damages. The CA did not grant actual damages because they said no delay were incurred because there
was no demand. This is not applicable in the case. This is because there was no delay in the commencement of the
voyage. If there was delay it was when the engine conked out. Any further delay to the arrival of the plaintiff at
the point of destination was because of his decision to disembark. Had he remained in the vessel he would have
arrived at noon of the day of the vessel. This meant he would have been able to report to his office in the
afternoon and would have lost only half a day’s salary. There is no evidence that he did not receive his salary not
that his absence was not excused. Actual or compensatory damages must be proved.
The Court fully agreed with the CA in the award of moral and exemplary damages. Transasia allowed the vessel
fully aware that it faced the peril of the sea. They assert that safety of the vessel and passengers were not at stake
because the sea was calm and that the plaintiff was over-reacting to the situation. The Court said that his defense
showed lack of concern. It was only providential that the sea was calm. It was not unusual for the plaintiff to react
this was at the prospect of stoppage at sea at night. More so in the light of many sea tragedies resulting in loss of
life and damage to property simply because the carrier failed in their duty to exercise extraordinary diligence in
the performance of their obligations.
The Court however deleted the award of attorney’s fees. They are only recoverable in the concept of actual
damages and must be proved. Also, this award must be prayed for. This is not present in the case.

IV. TRANSPORTATION OF PASSENGERS
42 - PAL v. CA (1997)* (Torts case!)

Facts:
Pantejo, the City Fiscal of Surigao, boarded a PAL plane in Manila and disembarked in Cebu, where he was
supposed to take his connecting flight to Surigao. Because of typhoon Osang, the Surigao flight was cancelled.
PAL gave out P100 cash assistance to its stranded passengers. Thereafter, they were given P200 for their expected
stay of 2 days in Cebu. Pantejo asked if he could be billeted in a hotel at PAL’s expense because he did not have cash with
him at the time. PAL refused. Pantejo was forced to seek and accept the generosity of a co-passenger, Engr. Dumlao, and
he shared a room with the latter at a hotel with the promise to pay his share upon reaching Surigao.
When flights were resumed, Pantejo found out that the hotel expenses of 2 of his co-passengers were paid for by
PAL. So, Pantejo complained with the Manager for Departure Services and said that he would sue the airline for
discriminating against him. The manager offered to pay Pantejo P300. Pantejo declined.
RTC ordered PAL to pay Pantejo damages. CA affirmed.
Issue:
1. W/N PAL acted in bad faith when it failed and refused to provide hotel accommodations for Pantejo or to
reimburse him for hotel expenses incurred by reason of the cancellation of its flight due to force majeure?
Held/Ratio:
1. YES. The contract of carriage generates a relation attended with a public duty. Neglect or malfeasance of the
carrier’s employees naturally could give ground for an action for damages. PAL claims that hotel
accommodations or cash assistance given in case a flight is in the nature of an amenity and is merely a privilege
that may be extended at its own discretion, but never a right that may be demanded by passengers. Assuming
arguendo that passengers have no vested right to these amenities, what makes PAL liable is its blatant refusal to
accord the so-called amenities equally to all its stranded passengers. No compelling or justifying reason was given
for such discriminatory and prejudicial conduct. Besides, it has been sufficiently established that it is PAL’s
standard company policy, whenever a flight has been cancelled, to extend to its passengers cash assistance or to
provide them accommodations in hotels with which it has existing tie-ups.

43 - Calalas v. CA (2000)**
Doctrine:
• In quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas
in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact
that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination.
• 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.
Facts:
Petitioner Calalas is the owner and operator of a passenger jeepney which took as passenger one Eliza Sunga who
was a first year student majoring in Physical Education in Siliman University. As the jeepney was already full at that time,
Sunga was made to sit on an “extension seat” which was a wooden stool placed at the rear portion of the jeepney. As one
passenger was going to alight, Sunga gave way; however, an Isuzu truck driven by Iglecerio Verena and owned by
Francisco Salva bumped the jeepney. As a result, Sunga was confined from Aug. 23 to Sept. 7, 1989 and was made to
undergo surgeries due to the accident. As attested by her attending physician, she would remain on a cast for a period of
three months and would have to ambulate in crutches during said period. Because of this, Sunga filed for complaint for
damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise the diligence
required of him as a common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva, the
owner of the Isuzu truck.
LC: Absolved Calalas from liability and held Salva liable holding that it was the driver of the Isuzu truck who
was responsible for the accident. It took cognizance of another case filed by Calalas against Salva and Verena, for quasi-
delict,which held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney.
CA: Reversed decision holding that Sunga’s cause of action was based on a contract of carriage, not quasi-delict,
and that the common carrier failed to exercise the diligence required under the Civil Code. Dismissed third-party
complaint and made Calalas liable to Sunga.
Petitioner contends that the ruling in the other civil case holding that the negligence of Verena was the proximate
cause of the accident negates his liability and that to rule otherwise would be to make the common carrier an insurer of the
safety of its passengers. He contends that the bumping of the jeepney by the truck owned by Salva was a caso fortuito.
Petitioner further assails the award of moral damages to Sunga on the ground that it is not supported by evidence.
Issue:
1. W/N Sunga is bound by the ruling in the other case cited by Calalas and therefore absolving the latter of his
liability under the contract of carriage
Held/Ratio:
1. No. The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of
the truck liable for quasi-delict ignores the fact that she was never a party to that case and, therefore, the principle
of res judicata does not apply.
The issue in Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the
damage caused to petitioner’s jeepney. On the other hand, the issue in this case is whether petitioner is liable on
his contract of carriage. The first, quasi-delict, also known as culpa aquiliana or culpa extra contractual, has as
its source the negligence of the tortfeasor. The second, breach of contract or culpa contractual, is premised upon
the negligence in the performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the
action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract
and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his
destination. 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.
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver
Verena liable for the damage to petitioner’s jeepney, should be binding on Sunga. It is immaterial that the
proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The
doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of
contract. 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 the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became
the duty of petitioner to prove that he had to observe extraordinary diligence in the care of his passengers. This
petitioner failed to rebut this based on the following facts:
1. 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 in violation of the
Land Transportation and Traffic Code.
2. Petitioner’s driver took in more passengers than the allowed seating capacity of the jeepney, again in
violation of §32(a) of the same law.
The fact that Sunga was seated in an “extension seat” placed her in a peril greater than that to which the other
passengers were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence
imposed on him for the injury sustained by Sunga, but also, the evidence shows he was actually negligent in
transporting passengers.
We find it hard to give serious thought to petitioner’s contention that Sunga’s taking an “extension seat”
amounted to an implied assumption of risk. It is akin to arguing that the injuries to the many victims of the
tragedies in our seas should not be compensated merely because those passengers assumed a greater risk of
drowning by boarding an overloaded ferry.

44 - Baritua v. Mercader (2001)

Facts:
The late Dominador Mercader, a businessman engaged in the buy and sell of dry goods in Laoang, N. Samar,
boarded the bus of herein petitioner JB Line bounded from Manila to N. Samar. However, while said bus was traversing
the Beily Bridge in N. Samar, the bus fell into the river, as a result, D. Mercader died. The heirs of Mercader sued
petitioner for breach of contract of carriage. With the heirs of Mercader attaining a favorable judgment at the lower court
and CA level, petitioner assails the said decisions rendered therein with the Supreme Court via Petition for Review under
Rule 45 on the ground of procedural flaws. Petitioner alleges, among others, that there is no statement in the complaint of
Mercader that he was issued any passenger-freight ticket.
Issue:
1. WON a contract of carriage existed between petitioners and Mercader. Or, WON petitioners are liable for the
death of Mercader.
Held/Ratio:
1. A contract of carriage exists, thus, petitioners are liable.
Petitioners failed to transport D. Mercader to his destination, because the bus fell into a river while traversing the
Bugko Bailey Bridge. Although he survived the fall, he later died of asphyxia secondary to drowning.
The Court agreed with the findings of both the RTC and the CA that fateful morning. It must be noted that a
common carrier, by the nature of its business and for reasons of public policy, is bound to carry passengers safely
as far as human care and foresight can provide. It is supposed to do so by using the utmost diligence of very
cautious persons, with due regard for all the circumstances. In case of death or injuries to passengers, it is
presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary
diligence as prescribed in Articles 1733 and 1755 of the Civil Code.

45 - Japan Airlines v. CA (1998)**

Facts:
The respondents in this case boarded a flight from California to Manila. There was to be a stopover in Narita,
Japan at the expense of the airline. However, they were not able to go home as scheduled due to the Mt. Pinatubo
eruption which made an unrelenting ashfall which blanketed NAIA, rendering it inaccessible to airline traffic. Hence,
private respondents’ trip to Manila was cancelled indefinitely.
The passengers were rebooked and an additional night’s worth of accommodation was paid by JAL. When the
flight was again cancelled, JAL informed the passengers that it would no longer provide for the accommodations of the
passengers. Thus, they were forced to shoulder their own expenses for five days.
When the passengers got home, they filed a claim for damages against JAL on the ground that it failed to live
up to its duty to provide care and comfort to its stranded passengers when it refused to pay for their hotel and
accommodation expenses from June 16 to 21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated
to shoulder their expenses as long as they were still stranded in Narita. On the other hand, JAL denied this allegation and
averred that airline passengers have no vested right to these amenities in case a flight is cancelled due to “force majeure.”
Issue:
1. Whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its stranded
passengers until they have reached their final destination, even if the delay was caused by “force majeure.”
Held/Ratio:
1. No. A contract of carriage is a relationship imbued with public interest. Failure on the part of the common carrier
to live up to the exacting standards of care and diligence renders it liable for any damages that may be sustained
by its passengers. However, this is not to say that common carriers are absolutely responsible for all injuries
or damages even if the same were caused by a fortuitous event. To rule otherwise would render the defense
of “force majeure,” as an exception from any liability, illusory and ineffective.
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.
Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel. In
this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel,
the consequences of which the passenger must assume or expect. After all, common carriers are not the insurer of
all risks.
(Another case involving PAL is contrasted against this case. In the earlier PAL case, while there was force
majeure, it was accompanied by neglect and malfeasance by the carrier’s employees which made PAL liable for
damages.)

46 - Northwest Airlines v. Catapang (2009)

Facts:
Delfin S. Catapang requested First United Travel, Inc. (FUT) to issue in his favor a ticket
that would allow rebooking or rerouting of flights within the United States. FUT informed him that Northwest Airlines,
Inc. (Northwest) was willing to accommodate his request provided that he will pay an additional US$50 for every
rebooking or rerouting of flight. Catapang agreed with the condition.
Upon Catapang’s arrival in New York, he called up Northwest’s office, which informed him that his ticket
was not ! rebookable or reroutable. He thus proceeded to Northwest’s nearest ticketing office where he was treated in a
rude manner by an employee who informed him that his ticket was not rebookable or reroutable. He was further informed
that his ticket was of a !restricted type and he could not rebook unless he pays US644.00. Catapang paid that amount for
rebooking.Catapang, upon his return, filed with RTC of Makati a complaint for damages against Northwest.
Issue:
1. Whether or not it was proper to award moral and exemplary damages and attorney’s fees to Catapang
Held/Ratio:
1. YES. Petitioner’s breach in this case was aggravated by the undenied treatment received by respondent when he
tried to rebook his ticket. Instead of civilly informing respondent that his ticket could not be rebooked, petitioner’s
agent in New York exhibited rudeness in the presence of respondent’s brother-in-law and other customers,
insulting respondent by telling him that he could not understand English.
Passengers have the right to be treated by a 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.
The award of moral and exemplary damages to respondent is thus justified.

47 - Dangwa Transportation Co. v. CA and Heirs of Pedro Cudiamat (1991)*

Doctrine:
• When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention
to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders.
• It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or
motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to
board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting
up or jerking of their conveyances while they are doing so.
• The duty which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those
alighting therefrom.
Facts:
Pedrito Cudiamat died as a result of a vehicular accident. A passenger bus driven by Theodore Lardizabal ran
over him. Instead of bringing Pedrito to the nearest hospital, Lardizabal first brought his other passengers and cargo to
their respective destinations before bringing Pedrito to the Lepanto Hospital. Heirs of Pedrito filed a complaint for
damages against Dangwa Transportation Co. and Lardizabal. In its counterclaim, Dangwa Transporation alleged that they
had observed and continued to observe the extraordinary diligence required. Moreover, they claimed that they are not
absolute insurers of the safety of the public at large. They alleged it was the victim’s own carelessness and negligence
which caused his death.
The trial court ruled in favor of Dangwa Transportation Co. They held that Pedrito Cudiamat’a negligence was
the proximate cause of his death. The Heirs of Pedrito Cudiamat appealed to the CA. The CA reversed the trial court
decision.
The CA found that the bus was at full stop when Pedrito Cudiamat boarded. Moreover, Pedrito did indicate his
intention to board the bus when he was no longer walking and made a sign to board the bus when the bus was still at a
distance from him. It was at the instance when Pedrito was closing his umbrella at the platform of the bus when the bus
made a sudden jerk movement as the driver commenced to accelerate the bus. Evidently, the incident occurred due to the
gross negligence of the driver. He prematurely stepped on the accelerator and neglected to wait for Pedrito to first secure
his seat especially so when we take into account that the platform of the bus was at the time slippery and wet because of a
drizzle. Dangwa Transportation failed to observe their duty and obligation as common carriers. They did not observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according
to the circumstances of each case.
Issue:
1. W/N Pedrito Cudiamat’s negligence caused his death
Held/ Ratio:
1. NO. Dangwa Transportation was negligent as proven by witness testimonies.
Dangwa cannot claim that the driver and the conductor had no knowledge that the victim would ride on the bus.
When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention
to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes
the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of
increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of the
bus in this case was a breach of such duty. It is the duty of common carriers of passengers, including common
carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to
afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so.
Even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered
negligent under the circumstances. As clearly explained in the testimony of the a witness, the bus had “just

started” and “was still in slow motion” at the point where the victim had boarded and was on its platform. It is not
negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. An
ordinarily prudent person would have made the attempt board the moving conveyance under the same or similar
circumstances. The fact that passengers board and alight from slowly moving vehicle is a matter of common
experience both the driver and conductor in this case could not have been unaware of such an ordinary practice.
Here, Pedrito, by stepping and standing on the platform of the bus, is already considered a passenger and is
entitled all the rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty
which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those alighting
therefrom.
Common carriers, from the nature of their business and reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported by the according to all the circumstances of
each case. A common carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence very cautious persons, with a due regard for all the circumstances.

48 - La Mallorca v. CA (1966)
Facts:
Plaintiffs husband and wife, together with their minor children, boarded a La Mallorca bus. Upon arrival at their
destination, plaintiffs and their children alighted from the bus and the father led them to a shaded spot about 5 meters from
the vehicle. The father returned to the bus to get a piece of baggage which was not unloaded. He was followed by her
daughter Raquel. While the father was still on the running board awaiting for the conductor to give his baggage, the bus
started to run so that the father had to jump. Raquel, who was near the bus, was run over and killed.
Lower court rendered judgment for the plaintiff which was affirmed by CA, holding La Mallorca liable for quasi-
delict and ordering it to pay P6,000 plus P400. La Mallorco contended that when the child was killed, she was no longer a
passenger and therefore the contract of carriage terminated.
Issue:
1. Whether or not the contractual obligation between the parties ceases the moment the passenger alighted form the
vehicle.
Held/Ratio:
1. On the question whether the liability of the carrier, as to the child who was already led a place 5 meters from the
bus under the contract of carrier, still persists, we rule in the affirmative. It is a recognized rules that the relation
between carrier and passengers does not cease at the moment the passenger alights from the carrier’s premises, to
be determined from the circumstancees. In this case, there was no utmost diligence.Firstly, the driver, although
stopping the bus, did not put off the engine. Secondly, he started to run the bus even before the bus conductor
gave him the signal and while the latter was unloading cargo. Here, the presence of said passenger near the bus
was not unreasonable and the duration of responsibility still exists. Averment of quasi-delict is permissible under
the Rules of Court, although incompatible with the contract of carriage. The Rules of Court allows the plaintiffs to
allege causes of action in the alternative, be they compatible with each other or not (Sec. 2, Rule 1). Even
assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the
negligence of its driver pursuant to Art. 2180 of NCC. Decision MODIFIED. Only question raised in the briefs
can be passed upon, and as plaintiffs did not appeals the award of P3,000.00 the increase by the CA of the award
to P6,000.00 cannot be sustained.

49 - Aboitiz Shipping v. CA (1989)**

Facts:
On May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz Shipping Corp. (Aboitiz),
at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket (No. 117392) in the sum of
P23.10. On May 12, 1975, said vessel arrived at Pier 4, North Harbor, Manila, and the passengers therein disembarked, a
gangplank having been provided connecting the side of the vessel to the pier. Instead of using said gangplank, Anacleto
Viana disembarked on the third deck which was on the level with the pier. After said vessel had landed, the Pioneer
Stevedoring Corporation (Pioneer) took over the exclusive control of the cargoes loaded on said vessel pursuant to the
Memorandum of Agreement dated July 26, 1975 between the third party Pioneer and Aboitiz.
The crane owned by Pioneer and operated by its crane operator Alejo Figueroa was placed alongside the vessel
and one (1) hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from
said vessel. While the crane was being operated, Anacleto Viana who had already disembarked from said vessel,
obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while
he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning
him between the side of the vessel and the crane. He was thereafter brought to the hospital where he died three (3) days
thereafter, on May 15, 1975. For his hospitalization, medical, burial, and other miscellaneous expenses, Anacleto’s wife,
herein plaintiff, spent a total of P9,800.00. Anacleto Viana, who was only forty (40) years old when he met said fateful
accident, was in good health. His average annual income as a farmer or a farm supervisor was 400 cavans of palay
annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his death, had been the recipients of twenty
(20) cavans of palay as support or P120.00 monthly. Because of Anacleto’s death, plaintiffs suffered mental anguish and
extreme worry or moral damages. For the filing of the instant case, they had to hire a lawyer for an agreed fee of ten
thousand (P10,000) pesos.
The Vianas filed a complaint for damages against Aboitiz for breach of contract of carriage. And in a decision
rendered by the trial court, Aboitiz was made to pay damages incurred. Upon appeal, the Court of Appeals affirmed the
trial court decision except as to the amount of damages.
Issue:
1. W/N Aboitiz is liable for damages incurred the Vianas?
Held/Ratio:
1. Yes. Aboitiz contends that since one (1) hour had already elapsed from the time Anacleto Viana disembarked
from the vessel and that he was given more than ample opportunity to unload his cargoes prior to the operation of
the crane, his presence on the vessel was no longer reasonable and he consequently ceased to be a passenger.
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. 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.
That reasonableness of time should be made to depend on the attending circumstances of the case, such as the
kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes
a consideration of the time element per se without taking into account such other factors. The primary factor to
be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the
petitioner’s vessel. We believe there exists such a justifiable cause.
Under the law, common carriers are, from the nature of their business and for reasons of public policy, 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. More particularly, 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. Thus, where a passenger dies or is injured, the common
carrier is presumed to have been at fault or to have acted negligently. This gives rise to an action for breach of
contract of carriage where all that is required of plaintiff is to prove the existence of the contract of carriage and
its non-performance by the carrier, that is, the failure of the carrier to carry the passenger safely to his destination,
which, in the instant case, necessarily includes its failure to safeguard its passenger with extraordinary diligence
while such relation subsists.

50 - Diaz v. CA and Moneño (2006)* (Sherly)

Doctrine:
• 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
Facts:
In July 1996, in Northern Mindanao, a Tamaraw FX taxi (owned by Diaz and driven by Retes), moving at an
excessive speed, rammed the rear of a Hino truck. As a result, 9 passengers of the taxi died, including Shirley Moneño.
One month after, the heirs of Shirley filed a complaint for breach of contract of carriage against Diaz and Retes. The trial
court eventually rendered a decision holding the two solidarily liable, awarding Shirley’s heirs moral damages, among
others. The two elevated the case to the CA, which promptly denied them.
Issue:
1. W/N the two are liable for breach of contract of carriage.
Held/Ratio:
1. Yes. In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger
dies or is injured. In fact, there is even no need for the court to make an express finding of fault or negligence on
the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence. In the case at bar, petitioner, as common carrier, failed to establish sufficient
evidence to rebut the presumption of negligence. The facts showed that the accident, which led to the death of
Sherly, was caused by the reckless speed and gross negligence of Diaz’s driver who demonstrated no regard for
the safety of his passengers.

51 - Pestaño v. Sumayang (2000)**

Facts:
Ananias Sumayang was riding a motorcycle along the national highway in Ilihan, Tabagon, Cebu. Riding with
him was his friend Manuel Romagos. As they were about to turn left at a junction where the highway connected with
the road leading to Tagabon, they were hit by a passenger bus driven by Petitioner Gregorio Pestaño and owned
by Metro Cebu Autobus Corporation (Metro Cebu). The bus tried to overtake them, sending the motorcycle and its
passengers hurtling upon the pavement. Both were rushed to the hospital, where Sumayang was pronounced dead on
arrival. Romagos was transferred to the Cebu Doctors’ Hospital, but he succumbed to his injuries the day after.
Apart from the criminal charges that were filed against Pestaño, Respondents Teotimo and Paz Sumayang (heirs
of Ananias Sumayang) likewise filed a civil action for damages against Pestaño as driver of the passenger bus, Metro
Cebu as owner and operator thereof, and Perla Compania de Seguros as insurer of Metro Cebu. The cases were
consolidated.
The lower court and the CA found Petitioners Pestaño and Metro Cebu guilty of negligence. (The liability of Perla
Compania, however, was limited only to the amount stipulated in the insurance policy.) Pestaño was negligent when he
tried to overtake the victim’s motorcycle at the Tabagon junction. As a professional driver operating a public transport
vehicle, he should have taken extra precaution to avoid accidents, knowing that it was perilous to overtake at a
junction, where adjoining roads had brought about merging and diverging traffic. Metro Cebu had likewise shown laxity
in the conduct of its operations and in the supervision of its employees. It allowed the bus to ply its route despite the
defective speedometer, showing its indifference towards the proper maintenance of its vehicles.
Issues:
1. Whether or not Pestaño and Metro Cebu are guilty of negligence. (important)
2. Whether or not the CA erred in increasing the civil indemnity from P30,000 to P50,000.
3. Whether or not the CA erred in using the life expectancy of the deceased instead of the life expectancies of
respondents.
Held/Ratio:
1. Yes. Petitioners contend that Pestaño was not under any obligation to slow down when he overtook the
motorcycle, because the deceased had given way to him upon hearing the bus horn. Seeing that the left side of the
road was clearly visible and free of oncoming traffic, Pestaño accelerated his speed to pass the motorcycle.
Having given way to the bus, the motorcycle driver should have slowed down until he had been overtaken.
They further contend that the motorcycle was not in the middle of the road nearest to the junction as found by the
trial and the appellate courts, but was on the inner lane. This explains why the damage on the bus was all on the
right side — the right end of the bumper and the right portion of the radiator grill were bent and dented. Hence,
they insist that it was the victim who was negligent.
The SC disagreed with these contentions and considered the findings of the CA, based on the testimony of the
witnesses, wherein it was found that as the two vehicles approached the junction, the victim raised his left
arm to signal that he was turning left to Tabagon, but that the latter and his companion were thrown off
the motorcycle after it was bumped by the overspeeding bus.
Petitioners also aver that the CA was wrong in attributing the accident to a faulty speedometer and in implying
that the accident could have been avoided had this instrument been properly functioning. This contention has no
factual basis. Under Articles 2180 and 2176 of the Civil Code, owners and managers are responsible for damages
caused by their employees. When an injury is caused by the negligence of a servant or an employee, the master or
employer is presumed to be negligent either in the selection or in the supervision of that employee. This
presumption may be overcome only by satisfactorily showing that the employer exercised the care and the
diligence of a good father of a family in the selection and the supervision of its employee.

2. No. The indemnity for death caused by a quasi-delict used to be pegged at P3,000 based on Art. 2205 of the Civil
Code. However, the amount has been gradually increased through the years because of the declining value of our
currency. At present, prevailing jurisprudence fixes the amount at P50,000.
3. No. The court has consistently computed the loss of earning capacity based on the life expectancy of the deceased
and not that of the heir. The award for loss of earning capacity is based on two factors: (1) the number of years on
which the computation of damages is based and (2) the rate at which the loss sustained by the heirs is fixed.

52 - Ludo and Luym Corporation v. CA (2001)* (Res Ipsa Loquitur)

Facts:
Ludo & Luym Corporation [Ludo] is a domestic corporation engaged in copra processing. Gabisan Shipping
Lines [Gabisan] was the registered owner of MV Miguela, while, Anselmo Olasiman [Anselmo], was its captain.
Ludo owns and operates a private wharf. Among its wharf’s facilities are fender pile clusters for docking and
mooring. While MV Miguela was docking at Ludo’s wharf, it rammed and destroyed a fender pile cluster. Ludo demanded
damages from Gabisan. The latter refused. Hence, Ludo filed a complaint for damages before the RTC.
Naval, Ludo’s employee, guided the vessel to its docking place. After the guide (small rope) was thrown from the
vessel and while the Ludo’s security guard was pulling the big rope to be tied to the bolar, MV Miguela did not slow
down. The crew did not release the vessel’s anchor. Naval shouted “Reverse” to the vessel’s crew, but it was too late
when the latter responded, for the vessel already rammed the pile cluster. Marine surveyor Carlos Degamo inspected the
damage on the pile cluster and found that one post was uprooted while two others were loosened.
Gabisan, however, denied the incident. Their witnesses claimed that the damage, must have occurred prior to their
arrival and caused by another vessel. They averred that MV Miguela started to slow down at 100 meters and the crew
stopped the engine at 50 meters from the pier; that Capt. Anselmo Olasiman did not order the anchor’s release and chief
mate Manuel Gabisan did not hear Naval shout “Reverse”.
Issue:
1. Is the doctrine of res ipsa loquitur applicable to this case? (relevant issue)
Held/Ratio:
1. YES. The doctrine of res ipsa loquitur was explained in Batiquin v. Court of Appeals, 258 SCRA 334 (1996),
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 recognizes that parties may establish prima facie negligence without direct proof and allows the
principle to substitute for specific proof of negligence. This is invoked when under the circumstances, direct
evidence is absent and not readily available.
All the requisites for recourse to this doctrine exist. First, MV Miguela was under the exclusive control of its
officers and crew. Petitioner did not have direct evidence on what transpired within as the officers and crew
maneuvered the vessel to its berthing place. Second, aside from the testimony that MV Miguela rammed the
cluster pile, Gabisan did not show persuasively other possible causes of the damage.
Applying now the above, there exists a presumption of negligence against Gabisan which we opine the latter
failed to overcome.
Additionally, petitioner presented tangible proof that demonstrated private respondents’ negligence. As testified
by Capt. Olasiman, from command of “slow ahead” to “stop engine”, the vessel will still travel 100 meters before
it finally stops. However, he ordered “stop engine” when the vessel was only 50 meters from the pier. Further, he
testified that before the vessel is put to slow astern, the engine has to be restarted. However, Olasiman can not
estimate how long it takes before the engine goes to slow astern after the engine is restarted. From these
declarations, the conclusion is that it was already too late when the captain ordered reverse. By then, the vessel
was only 4 meters from the pier, and thus rammed it.
Gabisan’s negligence consists in allowing incompetent crew to man its vessel. Both Captain Olasiman and Chief
Mate Gabisan did not have a formal training in marine navigation. The former was a mere elementary graduates
while the latter is a high school graduate. Their experience in navigation was only as a watchman and a
quartermaster, respectively.
53 - Philippine Rabbit Lines v. IAC (1990)

Facts:
Plaintiff boarded the jeepney owned by Sps. Mangume and driven by Manalo for the contracted rate of 24 pesos
to take them to Pangasinan. Upon reaching Tarlac, the tire of the jeepney was detached and driver Manalo stepped on the
break causing it to make a sudden u-turn. Consequently, a Philippine Rabbit bus driven by delos Reyes hit the rear of the
jeepney causing death and severe injuries to the passengers of the aforementioned jeepney. Driver Manalo was convicted
for his criminal liability resulting from the accident. The plaintiffs filed a civil case for damages against Sps. Mangume,
their driver Manalo, Philippine Rabbit and their driver delos Reyes. The trial court found Manalo negligent and held him
solidarily liable with Sps. Mangume for damages awarded to the plaintiff. The IAC reversed the trial court and ruled that
Philippine Rabbit is solidarily liable with Sps. Mangume and their driver Manalo. The IAC made their ruling on the
ground of last clear chance and the presumption that a vehicle that hit the rear of another vehicle is presumed negligent.
Held/Ratio:
The doctrine of last clear chance applies only to two or more vehicles who are involved in a collision. It does not
apply to contractual obligations resulting from the contract of carriage between the carrier and the passengers. It does not
apply to this case.
The presumption that the vehicle that hits the rear of another is presumed negligent also does not apply to this
case. It only applies if there are no other evidences. It the case at bar, the sudden u-turn of the jeepney was the proximate
cause of the injury. Philippine Rabbit’s driver delos Reyes could not have anticipated such an event. Because of these
facts the SC ruled that no liability could attach to Philippine Rabbit and to their driver.
In the case, Sps. Mangume and driver Manalo was found liable. The trial court held them solidary liable to the
plaintiff. The SC said this was an error. The contract of carriage is between the carrier and the passengers only. In the
event of contractual liability, the carrier assumes the exclusive liability to the passenger even if their driver is the one that
is negligent. The SC ruled that only Sps. Mangume was liable to plaintiff.

54 - Juntilla v. Fontanar (2010)**

Doctrine:
• The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover damages from a
carrier for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it appears
that the defect would have been discovered by the carrier if it had exercised the degree of care which under the
circumstances was incumbent upon it, with regard to inspection and application of the necessary tests. For the
purposes of this doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as far
as regards the work of constructing the appliance. According to this theory, the good repute of the manufacturer
will not relieve the carrier from liability.
Facts:
The plaintiff, Roberto Juntilla, was a passenger of a public utility jeepney on the course of the trip from Danao
City to Cebu City. The jeepney was driven by Berfol Camoro. It was registered under the franchise of Clemente Fontanar
but was actually owned by Fernando Banzon. Upon reaching Mandaue City, the right tire of the jeepney exploded,
causing the vehicle to turn turtle. Juntilla, who was sitting at the front seat, was thrown out of the vehicle. He lost
consciousness and when he came to his senses, he discovered a lacerated wound on his right palm. He also suffered
injuries on his left arm, thigh, and back. He went back to Danao City and proceeded to the hospital. He noticed that his
Omega wrist watch was lost, so he requested his father-in-law to look for it at the place of the accident. But the watch
could no longer be found.
Juntilla filed a case for breach of contract with damages against Fontanar, Banzon, and Camoro. They filed
their answer and alleged that the explosion of the tire was beyond their control since it was newly bought. The City Court
of Cebu rendered judgment in favor of Juntilla. The respondents were ordered to pay the value of the watch, doctor’s fees
and medicine, and the unrealized salary of Juntilla. Upon appeal, the CFI of Cebu reversed the judgment and ruled that the
accident was due to a fortuitous event.
Issues:
1. W/N the CFI was correct in ruling that it was a fortuitous event
2. W/N Juntilla can recover from the carrier even if the cause of the injury was partly due to a defect in the appliance
or equipment (tire)
Held/Ratio:
1. NO. The CFI based its ruling on another case (Rodriguez v. Red Line Transportation Co) which also involved a
tire blow-out. However, the CFI improperly applied the ruling in that case since the circumstances are not entirely
the same. A fortuitous event presents the following characteristics:
a. The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his
obligation, must be independent of the human will.
b. It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it
must be impossible to avoid.
c. The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal
manner. And
d. The obligor (debtor) must be free from any participation in the aggravation of the injury resulting to the
creditor.
In the case relied upon, there was no finding of negligence on the part of the carrier. In the case at hand, there are
actually specific acts of negligence on the part of the respondents. Evidence shows that the jeep was running at
a very fast speed before the accident. It was the reason why it jumped into a ditch immediately after the right tire
exploded. The jeep was also overloaded when the accident happened (3 passengers in front and 14 in the rear).
While it may be true that the tire that blew up was still good because the grooves of the tire were still visible, this
fact alone does not make the explosion a fortuitous event. No evidence was shown that the driver took precautions
or that the accident was due to adverse road conditions. Therefore, it was not a fortuitous event since the cause
was not independent of human will. The accident was caused either through the negligence of the driver or
because of mechanical defects in the tire.
2. YES. The passenger is entitled to recover damages from a carrier for an injury resulting from a defect in
an appliance purchased from the manufacturer, whenever it appears that the defect would have been
discovered by the carrier if it had exercised the degree of care which was incumbent upon it, with regard to
inspection and application of necessary tests. This is because the passenger has no choice or control over the
carrier’s selection and use of equipment. Having no privity whatever with the manufacturer or vendor of the
defective equipment, the passenger has no remedy against him, while the carrier usually has. It is but logical,
therefore, that the carrier, while not an insurer of the safety of his passengers, should nevertheless be held to
answer for the flaws of his equipment if such flaws were at all discoverable.
The Court also held that there was no reason to disturb the findings of facts of the City Court. It was proven that
Juntilla had a lacerated wound on his right arm and thigh, and on his back. And he also discovered that his Omega
wrist watch was lost. His entitlement to damages was proven.

55 - Ong Tiu v. CA (1967)*

Facts:
On August 26, 1967, petitioner, a lawyer, boarded a 1 pm PAL (respondent) flight from Mactan Cebu to Butuan
City to attend hearings. He checked in a blue maleta for which he was issued a claim check however upon arrival at
around 2 pm the same day, his luggage could not be found. Petitioner alleged that it was not until he reacted indignantly
that the porter clerk Maximo Gomez acted upon his lost luggage. To trace the luggage, PAL Butuan sent a message to
PAL Cebu and by 3:59pm, it was found in Manila. However, the message that the luggage would be forwarded the
next day was not received by PAL Butuan because its personnel had left since there were no more incoming flights
that afternoon.
On August 27, petitioner went to Bacansi Airport (Butuan) to inquire about his luggage but had already left by the
time the 10 am flight carrying his missing luggage arrived. Emilio Dagorro, a driver often used by petitioner while in
Butuan, volunteered to take the luggage to him but upon closer inspection of its lock, it was open. Dagorro called the
attention of Gomez who looked at the luggage’s contents but did not touch them. When the luggage was finally delivered
to petitioner, he refused to accept the same because a folder containing exhibits, transcripts and private documents for his
hearings were missing aside from 2 gifts for his parents in law. The luggage was returned to Gomez who forwarded it to
PAL Cebu.
Despite an investigation, PAL personnel were unable to determine who was responsible for the unauthorized
opening of petitioner’s maleta. Petitioner then filed a complaint for damages for breach of contract of transportation
with the CFI of Cebu who held that PAL acted in bad faith and with malice therefore awarding petitioner 80k as moral
damages, 30 k as exemplary damages, 5k as atty’s fees and costs. Both parties appealed to the CA who held that PAL was
only guilty of simple negligence reversing the grant of moral and exemplary damages but order the payment of P100 for
baggage liability under the condition of carriage printed at the back of the ticket. Hence, this petition for certiorari.
Issues:
1. W/N CA erred in holding that PAL was guilty only of simple negligence and was not in bad faith in the breach of
its contract of carriage with petitioner Ong Yiu?
2. Is petitioner Ong Yiu entitled to moral and exemplary damages?
3. W/N CA erred when it limited PAL’s carriage liability to P100?
Held/Ratio:
1. NO. Although PAL incurred delay in the delivery of the luggage, there was no gross negligence on the part of
PAL nor did it act fraudulently or in bad faith. Bad faith means a breach of a known duty through some motive of
interest or ill will. It was the duty of PAL to look for petitioner’s luggage, which had been miscarried and PAL
exerted due diligence in complying with such duty.
The trial court saw the following as evidence of bad faith:First, PAL sent a telegraphic message to Mactan only at
3pm despite petitioner’s indignation for the non-arrival of his baggage at around 2pm. However considering that
effort had to be exerted to locate the maleta, not to mention attend to other passengers, such time in not
unreasonable. Second, the failure of PAL Cebu to reply to petitioner’s rush telegram sent at 10pm of August 26
inquiring about his luggage. The PAL supervisor at Mactan was only notified of the same the next day and by that
time it was assumed that the plane carrying the maleta would arrive earlier than a reply telegram.
2. NO to both. Moral damages cannot be recovered because there was no wrongful act or omission, or fraud or bad
faith. In the case of exemplary damages, it was not proven that defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.
3. NO. The condition of carriage printed at the back of the plane ticket explicitly states that the total liability of the
carrier for lost or damages baggage in P100 for each ticket unless the passenger declares a higher valuation but
not to exceed 1k. Petitioner did not declare any higher value or pay additional transportation charged.

Even if petitioner did not sign the plane ticket, he is still bound by its provisions considering that these are held to
be a part of the contract of carriage and valid and binding regardless of the passengers’ lack of knowledge or
assent to the regulation. This is a contract of adhesion wherein one party imposes a ready-made form of contract
on another. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his
consent. And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v.
Trans World Airlines, Inc., 349 S.W. 2d 483, “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.”

56 - Servando v. Philippine Steam Navigation Co. (1982)

Doctrine:
• In cases of force majeure, a common carrier is free from any responsibility.
Facts:
Philippine Steam Navigation has a vessel that sails from Manila to Negros Occidental. In one trip, the appellees
Clara Uy Bioco and Amparo Servando around 1,500 cavans of rice and 44 cartons of colored paper respectively.
The cargo successfully reached Negros Occidental and was discharged, in good and complete order, from the ship
and thereafter stored in the Bureau of Customs warehouse in the port. On the very same day, a fire of unknown origin
razed the Customs warehouse, also damaging the goods of Uy Bioco and Servando.
These two sued Philippine Steam Navigation for the cost of the goods, contending that the common carrier is
required to exercise extraordinary diligence until the goods have been delivered to them, and discharge to the Customs
warehouse was not yet actual or constructive delivery to them.
Issue:
1. W/N the common carrier Philippine Steam is liable
Held/Ratio:
1. No. The fire was a fortuitous event. Where fortuitous event or force majeure is the immediate and proximate
cause of the loss, the obligor is exempt from liability for non-performance.
In a legal sense and, consequently, also in relation to contracts, a ‘caso fortuito’ presents the following essential
characteristics: (1) the cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to
comply with his obligation, must be independent of the human will; (2) it must be impossible to foresee the event
which constitutes the ‘caso fortuito’, or if it can be foreseen, it must be impossible to avoid; (3) the occurrence
must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (4) the
obligor must be free from any participation in the aggravation of the injury resulting to the creditor.
In the case at bar, the burning of the customs warehouse was an extraordinary event which happened
independently of the will of the appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation.

57 - Estrada v. Consolacion (1976)*

Facts:
Gregorio Estrada filed a complaint for damages against Corazon Ramirez Uy and Lucio Galaura, as owner and
driver, respectively, of an AC jeep, for breach of their obligations as a common carrier, in view of the death of Estrada’s
wife while she was a passenger of the vehicle. Uy and Galaura, as a defense, alleged that the proximate and only cause of
the accident was the negligence of the drivers of a Toyota pick-up truck and a Ford pick-up truck who were then driving
their respective vehicles at a fast rate of speed and from different directions, as a result of which said vehicles collided,
and because of that collision, the Ford pick-up truck was deviated from its lane and hit the jeep of Uy and Galaura.
A motion for summary judgment was filed by Uy and Galaura on the ground that they are not liable to Estrada
and that there is no genuine issue as to any material fact in the case except as to the amount of damages they are seeking
from Estrada by way of counterclaim. Estrada opposed the motion, relying on the presumption that in case of death of
passenger, the common carrier is presumed to have been at fault or to have acted negligently, unless the carrier proves that
he has observed extraordinary diligence with due regard to all the circumstances, which Uy and Galaura failed to do.
The trial court (presided by Judge Consolacion) granted the motion. Estrada filed a petition for certiorari with the
SC.
Issues:
1. W/N the trial court erred in granting the motion for summary judgment.
Held/Ratio:
1. NO. In proceedings for summary judgment, the burden of proof is upon the plaintiff to prove the cause of action
and to show that the defense is interposed solely for the purpose of delay. After plaintiff’s burden has been
discharged, defendant has the burden to show facts sufficient to entitle him to defend.
Under the contract of carriage, Uy and Galaura assumed the express obligation to transport the wife of Estrada to
her destination safely and to observe extraordinary diligence with due regard for all the circumstances, and that
any injury suffered by her in the course thereof, is immediately attributable to the negligence of the carrier. To
overcome such presumption, it must be shown that the carrier had observed the required extraordinary diligence,
which means that the carrier must show the “utmost diligence of very cautious persons * * * as far as human care
and foresight can provide”, or that the accident was caused by a fortuitous event. In order to constitute a caso
fortuito that would exempt a person from responsibility, it is necessary that (1) the event must be independent of
the human will; (2) the occurrence must render it impossible for the obligor to fulfill his obligation in a normal
manner; and (3) the obligor must be free of a concurrent or contributory fault or negligence.
Uy and Galaura submitted affidavits to prove that the accident was due to the fault or negligence of the drivers of
the two pickup trucks. Having, therefore, shown prima facie that the accident was due to a caso fortuito and that
Galaura, as the driver, was free of contributory fault as he stopped the jeepney to avoid the accident, but in spite
of such precaution the accident occurred, it was incumbent upon Estrada to rebut such proof. Having failed to do
so, the defense of Uy and Galaura that the proximate cause of the accident was a caso fortuito remains unrebutted.
*The Court noted that the Order is a mere interlocutory order and not a disposition on the merits. As such, the petition for
certiorari is premature. Estrada could move for the setting aside of the Order granting summary judgment by presenting
opposing affidavits showing that there is a genuine issue of fact on the carrier’s liability.

58 - Savellano v. Northeast (2003)**

Doctrine:
• When, as a result of engine malfunction, a commercial airline is unable to ferry its passengers on the original
contracted route, it nonetheless has the duty of fulfilling its responsibility of carrying them to their contracted
destination on the most convenient route possible. Failing in this, it cannot just unilaterally shuttle them, without
their consent, to other routes or stopping places outside of the contracted sectors. However, moral damages cannot
be awarded without proof of the carrier’s bad faith, ill will, malice or wanton conduct. Neither will actual
damages be granted in the absence of convincing and timely proof of loss. But nominal damages may be allowed
under the circumstances in the case herein.
Facts:
Justice Panganiban saw it proper to mention that Victorino Savellano served as mayor of the town of Cabugao in
the province of Ilocos Sur for several terms. Further, he used to be Chairman of the Commission on Elections and an RTC
judge. His wife was a businesswoman, who operated some rural banks in Ilocos Sur. Their son was, at the time of the
case, the vice governor of Ilocos Sur.
The Savellano Family procured round-trip Northwest Airlines business class tickets from the ticketing office in
Manila to travel to the United States. A little over two hours into their return flight from San Francisco, they were advised
that due to a fire that started in one of the engines the plane had to make an emergency landing in Seattle, Washington. At
the airport, the Savellanos were advised to take the flight to the Philippines the following day, October 27, 1991, and to
use the same boarding passes. From the airport they were transported to the Seattle Red Lion Hotel, where they spent the
night. They received a call at around midnight and they were told that they had to be at the airport by 7:00 am that day,
which means that they had to hurry and that they had to skip the hotel breakfast. Before leaving the hotel, they met a co-
passenger, Col. Roberto Delfin, who told the Savellanos that he and some of their other co-passengers were taking the
flight the next day, October 28, 1991. Upon hearing this, Virginia Savellano became anxious and had to take valium to
calm down. She also took some cough syrup because she had developed colds.
When the Savellanos reached the airport, they were told that, instead of a direct flight to Manila, they had to board
a plane to Los Angeles. In Los Angeles, there were no signs of any flight to Manila. There was only a makeshift board
that announced a Seoul-Bangkok flight. It was only after they complained to the personnel that Manila was added as a
destination. Moreover, they were not allowed to place their hand-carried luggage in the overhead bins by an “arrogant”
Northwest ground stewardess. The plane stopped over at Seoul and proceeded to Manila. At NAIA, they met Col. Delfin,
who teased them that they took the longer and more tiresome route back home. Later, the luggage they were supposed to
hand carry were lost. Inside the lost bags were diamond earrings, Perry Gan and Cole Haan shoes, Tag Heuer watches,
boxes of Elizabeth Arden perfumes, a camera, and a personal computer among others.
The Savellanos through their lawyer wrote Northwest Airlines and demanded P3,000,000 as damages for the
humiliation and inconvenience they suffered. Northwest failed to respond. The Savellanos filed a case for damages before
the RTC of Cabugao in Ilocos Sur. The RTC ruled in their favor and gave credence to the Savellanos’ claim that they
were maliciously “bumped off” the October 28 flight in order to accommodate some Japanese passengers. The Court of
Appeals reversed the ruling.
Issues:
1. Whether Northwest committed a breach of the contract of carriage
2. Whether the Savellanos were entitled to damages
Held/Ratio:
1. YES. There was nothing in the airline ticket that authorized Northwest to decide unilaterally when a passenger
should take a flight and where the flight taken by such a passenger, after the accident, would stop over. Northwest
failed to prove the necessity of having the Savellanos stop over LA and Seoul when originally only a stop-over at
Tokyo was agreed upon.

2. YES but only nominal damages and not moral and exemplary. The Savellanos failed to prove bad faith on the part
of Northwest. Their allegation that they were bumped off for Japanese passengers was unsubstantiated. With
regard to the lost luggage, it was found that no timely notice of the loss was given to Northwest, which could have
justified an award of damages.
To justify the award of nominal damages the Court said, “In the present case, we must consider that petitioners
suffered the inconvenience of having to wake up early after a bad night and having to miss breakfast; as well as
the fact that they were business class passengers. They paid more for better service; thus, rushing them and
making them miss their small comforts was not a trivial thing. We also consider their social and official status.
Victorino Savellano was a former mayor, regional trial court judge, and chairman of the Commission on
Elections. Virginia B. Savellano was the president of five rural banks, and Deogracias Savellano was then the
incumbent vice governor of Ilocos Sur. Hence, it will be proper to grant one hundred fifty thousand pesos
(P150,000) as nominal damages to each of them, in order to vindicate and recognize their right to be notified and
consulted before their contracted stopping place was changed.”

59 - Yobido v. CA (1997)** (Good Year Tire)

Doctrine:
• Proof that the tire was new and of good quality is not sufficient proof that it was not negligent. Petitioners should
have shown that it undertook extraordinary diligence in the care of its carrier, such as conducting daily routinary
check-ups of the vehicle’s parts.
Facts:
The spouses Tumboy and their children boarded a Yobido Liner bus. Along Picop Road, the left front tire of the
bus exploded. The bus fell into a ravine around 3 feet from the road and struck a tree. The incident resulted in the death of
Tito Tumboy and physical injuries to other passengers.
According to Leny Tumboy, the winding road the bus traversed was not cemented and was wet due to the rain; it
was rough with crushed rocks. The bus, which was full of passengers, had cargoes on top. Since it was “running fast,” she
cautioned the driver to slow down but he merely stared at her through the mirror. At around 3:30 p.m., she heard
something explode and immediately the bus fell into a ravine.
The bus conductor testified that the 42-seater bus was not full, that the bus was running at a speed of “60 to 50”
and that it was slow, that the left front tire that exploded was a “brand new tire” that he mounted on the bus only
five (5) days before the incident. The tire was a Goodyear tire.
Issue:
1. Whether or not the explosion of a newly installed tire of a passenger vehicle is a fortuitous event that exempts the
carrier from liability for the death of a passenger?
Held/Ratio:
1. No, it is not a fortuitous event. A fortuitous event is possessed of the following characteristics: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be
independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if
it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner; and (d) the obliger must be free from any participation in
the aggravation of the injury resulting to the creditor. As Article 1174 provides, no person shall be responsible for
a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. In other words, there
must be an entire exclusion of human agency from the cause of injury or loss.
Under the circumstances, the explosion of the new tire may not be considered a fortuitous event. There are human
factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from
manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought
and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode
within five days’ use. Be that as it may, it is settled that an accident caused either by defects in the automobile or
through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages.
Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone.
The common carrier must still prove that it was not negligent in causing the death or injury resulting from an
accident.
The bus conductor stated that the bus was running at within the lawful speed limit. However, they failed to rebut
the testimony of Leny that the bus was running so fast that she cautioned the driver to slow down. These
contradictory facts must, therefore, be resolved in favor of liability in view of the presumption of negligence of
the carrier in the law. Coupled with this is the established condition of the road — rough, winding, and wet due to
the rain. It was incumbent upon the defense to establish that it took precautionary measures considering the
partially dangerous condition of the road. As stated above, proof that the tire was new and of good quality is not
sufficient proof that it was not negligent. Petitioners should have shown that it undertook extraordinary diligence
in the care of its carrier, such as conducting daily routinary check-ups of the vehicle’s parts.

60 - Air France v. CA (1989)*

Facts:
In October 1977, Atty. Morales purchased an airline ticket from Aspac Management Corporation, Air France’s
General Sales Agent in Makati. The itinerary covered by the ticket included several cities, with certain segments thereof
restricted by markings of “non endorsable’ and ‘valid on Air France only’.
While in New York, Morales obtained three (3) medical certificates attesting to an ear infection which
necessitated medical treatment. From New York, he flew to Paris, Stockholm and then Copenhagen where he made
representations with Air France’s office to shorten his trip by deleting some of the cities in the itinerary. Morales was
informed that confirmation of Air France’s ticketing office in Manila must be secured first before shortening of the route
already paid for. Air France in Amsterdam telexed AF Manila requesting for rerouting of the passenger for a shorter trip.
As there was no immediate response to the telex, Morales proceeded to Hamburg where he was informed that his
request was denied. After reiterating his need to flying home on a shorter route due to his ear infection, and presentation
of supporting medical certificates, again, the airline office made the necessary request to Manila for a shorter route. Still,
the request was denied. Despite Morales’ protest and offer to pay any fare difference, Air France did not relent in its
position. Morales, therefore, had to buy an entirely new set of tickets for the homeward route with different airlines.
Upon arrival in Manila, Morales sent a letter-complaint to Air France thru Aspac. Morales was advised to
surrender the unused flight coupons for a refund of its value, but he kept the same and, instead, filed a complaint for
breach of contract of carriage and damages.
The trial court and CA found Air France liable for damages due to violation of contract of carriage and
considering the social and economic standing of Morales (as chairman of board of directors of a multi-million
corporation).
Issue:
1. Was there a breach of contract of carriage on the part of Air France?
Held/Ratio:
1. None. International Air Transportation Association (IATA) Resolution No. 275 e, 2., special note reads: “Where a
fare is restricted and such restrictions are not clearly evident from the required entries on the ticket, such
restrictions may be written, stamped or reprinted in plain language in the Endorsement/Restrictions” box of the
applicable flight coupon(s); or attached thereto by use of an appropriate notice.” Voluntary changes to tickets,
while allowable, are also covered by (IATA) Resolution No. 1013, Art. II, which provides: “1. changes to the
ticket requested by the passenger will be subject to carriers regulations.
Morales wanted a rerouting to a shorter trip going back to Manila which shortened the original itinerary on the
ticket issued by AF Manila. Considering the original restrictions on the ticket, the SC found that it was not
unreasonable for Air France to deny the request.
Also, the SC didn’t believe the contention of Morales that he is in pain because of the ear infection because he
still went to 4 different cities in 6 days before going back to Manila. He even failed to even remember his date of
arrival in Manila.
Also, mere refusal to grant the passenger’s wishes does not necessarily translate into damages in the absence of
bad faith. Morales has failed to show wanton, malevolent or reckless misconduct imputable to Air France in its
refusal to re-route.
Air France Manila acted upon the advise of ASPAC in denying Morales’ request. There was no evident bad faith
when it followed the advise not to authorize rerouting. At worst, the situation can be considered a case of
inadvertence on the part of ASPAC in not explaining the non-endorsable character of the ticket. Of importance,
however, is the fact that Morales is a lawyer, and the restriction box clearly indicated the non-endorsable
character of the ticket.

Omissions by ordinary passengers may be condoned but more is expected of members of the bar who cannot
feign ignorance of such limitations and restrictions. An award of moral and exemplary damages cannot be
sustained under the circumstances, but Air France has to refund the unused coupons in the Air France ticket to the
Morales.
61 - Bayasen v. CA (1981)**
Facts:
On the morning of August 15, 1963, Saturnino Bayasen, the Rural Health Physician in Sagada, Mountain
Province, went to barrio Ambasing to visit a patient. Two nurses from the Saint Theodore’s Hospital in Sagada, viz.,
Elena Awichen and Dolores Balcita, rode with him in the jeep assigned for the use of the Rural Health Unit as they had
requested for a ride to Ambasing. Later, at Ambasing, the girls, who wanted to gather flowers, again asked if they could
ride with him up to a certain place on the way to barrio Suyo which he intended to visit anyway. Dr. Bayasen again
allowed them to ride, Elena sitting herself between him and Dolores. On the way, at barrio Langtiw, the jeep went over a
precipice. About 8 feet below the road, it was blocked by a pine tree. The three were thrown out of the jeep. Elena was
found lying in a creek further below. Among other injuries, she suffered a skull fracture which caused her death.
The CFI found Bayasen guilty of Homicide Thru Reckless Imprudence. CA affirmed. Both courts ruled so on the
ground that the petitioner was negligent in driving at an unreasonable speed. Bayasen contends that the rulings were
contrary to the evidence presented by him.
Issue:
1. W/N Bayasen was not negligent and thus entitled to acquittal
Held/Ratio:
1. Yes, Bayasen was not negligent and is entitled to acquittal. The evidence presented by Bayasen were:
a. Dolores Balcita, the surviving passenger, testified that Bayasen was driving moderately; that there was no
ongoing conversation which could have distracted Bayasen and that he was not under the influence of
alcohol; and she did not notice anything wrong with the jeep and that the road was moist and wet and the
weather fair.
b. Bayasen himself testified that he noticed the rear wheel skidded and as a precautionary measure, he was
directing the jeep to the side of the mountain when Elena suddenly held the steering wheel and he felt her
foot step on the accelerator – which caused the jeep to swerve. Dolores provides a negative testimony,
which we all know from evidence is weaker than a positive one.
c. Then mayor of Sagada who found the jeep after the accident also testified that it was on second gear –
meaning Bayasen was not going fast.
It is obvious that the proximate cause of the tragedy was the skidding of the rear wheels of the jeep and not the
“unreasonable speed” of Bayasen because there is no evidence on record to prove or support the finding that the
petitioner was driving at “an unreasonable speed”.
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.
No negligence as a matter of law can, therefore, be charged to Bayasen. In fact, the moment he felt that the rear
wheels of the jeep skidded, he promptly drove it to the left hand side of the road, parallel to the slope of the
mountain, because as he said, he wanted to play safe and avoid the embankment.
Under the particular circumstances of the instant case, the Bayasen, who skidded could not be regarded as
negligent, the skidding being an unforeseen event, so that the petitioner had a valid excuse for his departure from
his regular course. The negligence of the petitioner not having been sufficiently established, his guilt of the crime
charged has not been proven beyond reasonable doubt. He is, therefore, entitled to acquittal.

62 - Gatchalian v. Delim (1991)

Doctrine:
• 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. To uphold a supposed waiver of any right to claim damages by an injured
passenger, under circumstances like those exhibited in this case, would be to dilute and weaken the
standard of extraordinary diligence exacted by the law from common carriers and hence to render that
standard unenforceable. We believe such a purported waiver is offensive to public policy.
• We have already noted that a duty to exercise extraordinary diligence in protecting the safety of its passengers is
imposed upon a common carrier. In case of death or injuries to passengers, a statutory presumption arises that the
common carrier was at fault or had acted negligently “unless it proves that it [had] observed extraordinary
diligence as prescribed in Articles 1733 and 1755.” In fact, because of this statutory presumption, it has been
held that a court need not even make an express finding of fault or negligence on the part of the common
carrier in order to hold it liable. To overcome this presumption, the common carrier must show to the
court that it had exercised extraordinary diligence to prevent the injuries. The standard of extraordinary
diligence imposed upon common carriers is considerably more demanding than the standard of ordinary diligence,
i.e., the diligence of a good paterfamilias established in respect of the ordinary relations between members of
society. A common carrier is bound to carry its passengers safely” as far as human care and foresight can
provide, using the utmost diligence of a very cautious person, with due regard to all the circumstances”.
Facts:
Petitioner Reynalda Gatchalian boarded, as a paying passenger, respondent’s “Thames” mini bus at a point in San
Eugenio, Aringay, La Union, bound for Bauang, of the same province. On the way, while the bus was running along the
highway in Barrio Payocpoc, Bauang, Union, “a snapping sound” was suddenly heard at one part of the bus and, shortly
thereafter, the vehicle bumped a cement flower pot on the side of the road, went off the road, turned turtle and fell into a
ditch. She sustained injuries and scar. Petitioner and respondent signed a Joint Affidavit, allegedly containing a waiver.
“That we are no longer interested to file a complaint, criminal or civil against the said driver and owner of the said
Thames, because it was an accident and the said driver and owner of the said Thames have gone to the extent of helping
us to be treated upon our injuries.” Notwithstanding this document, petitioner Gathalian filed with the then Court of First
Instance of La Union an action extra contractu to recover compensatory and moral damages.
In defense, respondent averred that the vehicular mishap was due to force majeure, and that petitioner had already
been paid and moreover had waived any right to institute any action against him (private respondent) and his driver, when
petitioner Gatchalian signed the Joint Affidavit on 14 July 1973.
Issue:
1. W/N there is a valid waiver of her cause of action (Not important)
2. W/N respondent exercised extraordinary diligence
Held/Ratio:
1. Not a valid waiver and did not exercise extraordinary diligence (check doctrines). The records before the Court
are bereft of any evidence showing that respondent had exercised the extraordinary diligence required by law.
Curiously, respondent did not even attempt, during the trial before the court a quo, to prove that he had indeed
exercised the requisite extraordinary diligence. Respondent did try to exculpate himself from liability by alleging
that the mishap was the result of force majeure. But allegation is not proof and here again, respondent utterly
failed to substantiate his defense of force majeure. To exempt a common carrier from liability for death or
physical injuries to passengers upon the ground of force majeure, the carrier must clearly show not only
that the efficient cause of the casualty was entirely independent of the human will, but also that it was
impossible to avoid. Any participation by the common carrier in the occurrence of the injury will defeat the
defense of force majeure. Upon the other hand, the record yields affirmative evidence of fault or negligence on
the part of respondent common carrier. The obvious continued failure of respondent to look after the
roadworthiness and safety of the bus, coupled with 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.
63 - Fortune Express v. CA (1999)**

Doctrine:
• A common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their
baggage.
Facts:
A bus of the Fortune express figured in an accident with a jeepney. As a result, some passengers died in the
jeepney. Generalao a volunteer field agent of the Constabulary Regional Security conducted an investigation of the
accident. He found that the owner of the jeepney was a Maranao and that certain Maranaos were planning to take revenge
on the petitioner by burning some of its buses. Upon instruction, he went to see Diosdado Bravo, operations manager of
Fortune Express. Bravo assured Generalao that the necessary precautions will be taken to insure the lives and property of
the passengers.
On November 22, 1989, three armed Maranaos pretended to be passengers, seized a bus of petitioner in Lanao del
Norte. Among the passengers of the bus was Atty. Caorong. Mananggolo, the leader of Maranaos, ordered the driver of
the bus to stop on the side of the highway. Then one of the Maranaos shot the driver on his arm causing him to stump on
the steering wheel.
While the passengers were ordered to get off the bus, one of the Maranaos poured gasoline inside the bus. Atty.
Caorong returned to the bus to retrieve something from the overhead rack. At that time, one of the armed men was
pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong
pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a
living. The armed men were, however, adamant as they repeated their warning that they were going to burn the bus along
with its driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window
of the bus and crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la
Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were
able to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he
died while undergoing operation
The private respondents brought this suit for breach of contract of carriage. The trial court dismissed the
complaint explaining: To our mind, the diligence demanded by law does not include the posting of security guards in
buses. It is an obligation that properly belongs to the State. The court also held that the death of Atty. Caorong was an an
unexpected and unforseen occurrence over which defendant had no control. His death was solely due to the willful acts of
the lawless which defendant
On appeal, however, the Court of Appeals reversed. Hence, the petition to the Supreme Court.
Issue:
1. W/N Petitioner Fortune Express was negligent and should be held liable for the death of Atty. Caorong.
Held/Ratio:
1. Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on
account of the wilful acts of other passengers, if the employees of the common carrier could have prevented the
act 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. As this Court intimated in Gacal v. Philippine Air Lines, Inc., a common carrier can be held
liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages.
From the foregoing, it is evident that petitioner’s employees failed to prevent the attack on one of petitioner’s
buses because they did not exercise the diligence of a good father of a family. Hence, petitioner should be held
liable for the death of Atty. Caorong.
It is clear that the cases of Pilapil and De Guzman do not apply to the present case. Art. 1755 of the Civil Code
provides that “a common carrier is bound to carry the passengers as far as human care and foresight can provide,
using the utmost diligence of very cautious person, with due regard for all the circumstances.” Thus, we held in
Pilapil and De Guzman that the respondents therein were not negligent in failing to take special precautions
against threats to the safety of passengers which could not be foreseen, such as tortious or criminal acts of third
persons. In the present case, this factor of unforeseeablility (the second requisite for an event to be considered
force majeure) is lacking. As already stated, despite the report of PC agent Generalao that the Maranaos were
planning to burn some of petitioner’s buses and the assurance of petitioner’s operations manager (Diosdado
Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety
of passengers.

64 - Tan v. Northwest Airlines (2000)*

Facts:
Priscilla Tan and Connie Tan boarded a Northwest Airlines flight from Chicago, bound for the Philippines. When
they arrived in the Philippines, they found out that their baggages were missing. When they recovered them, they
discovered that some of its contents were destroyed. They demanded damages for allegedly suffering “mental anguish,
sleepless nights, and great damage.” They filed a case before the RTC. According to Northwest, the bags weren’t loaded
in the same flight due to weight and balance restrictions. RTC held them liable of breach of contract of carriage and of
willful misconduct and therefore, damages including moral and exemplary. Northwest challenged the decision.
Issue:
1. Is Northwest liable for moral and exemplary damages for misconduct and breach of the contract of carriage?
Held/Ratio:
1. No. They weren’t guilty of willful misconduct. There was no malice or bad faith in loading bags to another plane
due to weight and balance concerns for safety. Bad faith does not simply connnote bad judgment or
negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a
breach of known duty through some motive or interest or ill-will that partakes of the nature of fraud.
Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently
or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of
obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability
does not include moral and exemplary damages.

65 - China Airlines v. CA (2003)*

Doctrines:
• The nature of an airline’s contract of carriage partakes of two types, namely: (1) a contract to deliver a cargo or
merchandise to its destination, and (2) a contract to transport passengers to their destination.
• When an airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a contract of
carriage arises.
Facts:
Antonio Salvador and Rolando Lao (private respondents) planned to travel to Los Angeles, California to pursue a
cable business deal involving the distribution of Filipino films and programs in Los Angeles. Initially, Morelia Travel
Agency (“Morelia”) booked private respondents’ flight with CAL. Respondents dropped the services of Morelia when
they discovered that American Express Travel Service Philippines (“Amexco”) charged cheaper rates.
Lao called Amexco claiming that he and Salvador had a confirmed booking with CAL. Lao gave to Amexco the
record locator number3 that CAL had previously issued to Morelia when Morelia booked their reservations earlier.
Amexco called up CAL to finalize private respondents’ reservation for the flight. Amexco used the record locator number
given by Lao in confirming the reservations of private respondents. CAL confirmed the booking. Amexco then issued to
private respondents the confirmed tickets for the flight of CAL. On the same day, CAL called up Morelia to reconfirm the
reservations of private respondents. Morelia cancelled the reservations of private respondents.
On the day of the flight, private respondents were not allowed to board because their names were not on the
passenger’s manifest. They had to leave the following day on a different airline (“Northwest”). Private respondents sent
demand letters to CAL and Amexco to which liability was denied by both parties. They proceeded to file a complaint for
damages at the RTC.
Issues:
1. W/N CAL is liable for damages
Held/Ratio:
1. YES. CAL is liable for damages because there was a breach of contract of carriage.
The nature of an airline’s contract of carriage partakes of two types, namely: (1) a contract to deliver a cargo or
merchandise to its destination, and (2) a contract to transport passengers to their destination. In this case, when
CAL confirmed the reservations, it bound itself to transport private respondents on its flight.
CAL does not deny its confirmation of the reservations made by Amexco. The confirmed tickets issued by
Amexco to private respondents upon CAL’s confirmation of the reservations are undeniable proof of the
contract of carriage between CAL and private respondents. In Alitalia Airways v. CA, et al., we held that when
an airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a contract of carriage
arises. The passenger then has every right to expect that he would fly on that flight and on that date. If he does
not, then the carrier opens itself to a suit for breach of contract of carriage. The court, however, ruled that CAL
was not in bad faith.
In this action for breach of contract of carriage, there needn’t be proof that the common carrier was at fault or was
negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the
carrier.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3. A combination of letters and numbers issued by an airline to a travel agency when the airline confirms the travel agency’s
booking. Industry practice prohibits a travel agency from using the record locator number of another travel agency.
66 - Singson v. CA (1997)**
Facts:
Singson and his cousin Tiongson bought two round-trip, open-dated, same route tickets for their US vacation
from Cathay Pacific. The tickets were in the form of booklets with 6 coupons each. The coupons were chronologically
arranged as follows: (1) MNL – HKG, (2) HKG – San Francisco, (3) San Francisco – LAX, (4) LAX – San Francisco, (5)
San Francisco – HKG, (6) HKG – MNL. The procedure was that Cathay Pacific attendants would tear the coupon
corresponding to that leg of the flight that is to be undertaken by the passenger. Singson and Tiongson arrived at LA and
spent their vacation. Three weeks later (June 30), they thought of going home and arranged a flight in the LA office of
Cathay. Tiongson successfully booked a flight but Singson was not as lucky. Apparently, his booklet lacked Coupon no.
5 (SanFo – HKG). What was instead on his booklet was coupon No. 3 (SanFo – LAX) which should have already
been removed from the booklet when that leg was undertaken. It was only in July 6 that Cathay was able to fly him out of
the US, despite his original booking request to be flown out in July 1.
Singson filed an action for damages against Cathay in the RTC of Vigan, alleging that the flight cost him very
urgent business engagements. Cathay allegedly shrugged of his request and even instructed him to go to San Francisco
by himself to inquire about his tickets or to just buy a new one subject to refund if they find out that his original ticket
was still actually valid. Cathay denied these allegations and interposed as its defense that there was no contract of
carriage because his ticket was “open-dated” meaning he was not booked for a specific flight, and consequently,
Cathay’s refusal to immediately book him was not a breach of contract. Cathay also alleged that they were not
negligent in booking him since it was because of the time difference between LA and Hong Kong that they were not able
to verify whether the ticket was still outstanding, and it was only after 24 hours that they received a reply from the Hong
Kong office. Unfortunately, when they received the reply, it was already a Saturday, and that the succeeding Monday was
a legal holiday (July 4 – US Independence).
The RTC ruled in favor of Singson awarding him actual, moral, and exemplary damages as well as attorney’s
fees. The CA reversed the RTC decision and found that there was no gross negligence amounting to bad faith or fraud and
deleted the award for moral and exemplary damages. According to the CA, Singson had no automatic right to fly on the
date he chose because his ticket was open dated, therefore, there was no breach of contract.
Issues:
1. W/N there was a contract of carriage
2. W/N there was a breach of such contract
3. W/N the award of moral/exemplary damages was proper
Held/Ratio:
1. YES. The round trip ticket issued by the carrier to the passenger was a complete written contract by and
between the carrier and the passenger. It had all the elements of a complete written contract: (a) the consent of
the contracting parties manifested by the fact that the passenger agreed to be transported by the carrier to and
from Los Angeles via San Francisco and Hongkong back to the Philippines, and the carrier’s acceptance to bring
him to his destination and then back home; (b) cause or consideration, which was the fare paid by the passenger
as stated in his ticket; and, (c) object, which was the transportation of the passenger from the place of
departure to the place of destination and back, which are also stated in his ticket. Only the performance of said
contract was left to be done. Moreover, the ticketing agent also testified that indeed, Singson was booked for a
flight. The problem only occurred when he revalidated Singson’s ticket and found that a coupon was lost.
2. YES. Cathay was the one responsible for the lost coupon. There can be two assumptions which may be derived
from the loss of the coupon (1) that it was mistakenly torn by the Cathay ground agent, or (2) that the agents of
Cathay really failed to issue said coupon. Regardless, it was Cathay’s negligence which was the proximate
cause of the loss. Had Cathay’s agents been diligent in double checking the coupons they were supposed to
detach from the passengers’ tickets, there would have been no reason for Cathay not to confirm petitioner’s
booking.

3. YES. Moral damages in a contract of carriage are given only when bad faith or fraud is present. However, there
are times when gross negligence could amount to bad faith, such as in this case. First, the coupon was lost due
to Cathay’s negligence. Second, the Court found it absurd that his companion Tiongson was able to fly but
Singson was not just because his tickets had to be verified. Third, the Court found that the delay in verification
was inexcusable since it should not have taken the HKG office 24-hrs to verify to the LA office whether the lost
coupon was already used since they had all the available equipments (fax, telephone etc.). The Court however
reduced the award of moral and exemplary damages because the one awarded by the RTC was too high.

67 - Manila Railroad Company v. Macaria Ballesteros (1966)

Doctrine
• ART. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the common carrier’s employees through the exercise of the
diligence of a good father of a family could have prevented or stopped the act or omission.
• SEC.48 (B). No professional chauffer shall permit any unlicensed person to drive the motor vehicle under his
control, or permit a person, sitting beside him or any other part of the car, to interfere with him in the operation of
the motor vehicle, by allowing said person to take hold of the steering wheel, or in any other manner take part in
the manipulation or control of the car.
Facts:
Ballesteros with other private respondents (Camayo, Reyes and Maimban, Jr) were passengers on Petitioner’s bus.
The driver of the bus was Anastacio. In Bayombong, Nueva Vizcaya, Anastacio stopped the bus and got off to replace a
defective spark plug. While he was thus engaged, one Abello, an auditor assigned to Defendant Company by the General
Auditing Office, took the wheel and told the driver to sit somewhere else. With Abello driving, the bus proceeded on its
way, from time to time stopping to pick up passengers. Anastacio tried twice to take the wheel back but Abello would not
relinquish it. Then in the language of the trial court, “while the bus was negotiating between Km. 328 and 329 (in
Isabela) a freight truck driven by Marcial Nocum bound for Manila, was also negotiating the same place; when
these two vehicles were about to meet at the bend of the road Nocum, in trying to evade several holes on the right
lane where his truck was running, swerved his truck towards the middle part of the road and in so doing, the left
front fender and left side of the freight truck smashed the left side of the bus resulting in extensive damages to the
body of the bus and injuries to seventeen of its passengers, including the plaintiffs herein.”
The trial court held petitioner liable for the damages cause to the respondent passengers.
Issue:
1. Whether or not petitioner Manila Railroad company is liable?
Held/Ratio:
1. YES. In rejecting petitioner’s contention that the negligence of Marcial Nocum could not be imputed to it and
relieved it from the liability, the trial court found that Dionisio Abello “was likewise reckless when he was
driving the bus at the rate of 40 to 50 kilometers per hour on a bump road the moment of collision.”
Another defense put up by petitioner is that since Abello was not its employee it should not be responsible for his
acts. This defense was correctly overruled by the trial court considering the provisions of Article 1763 of the Civil
Code and Section 48 (b) of the Motor Vehicle Law, which respectively provide as follows:
ART. 1763. A common carrier is responsible for injuries suffered by a passenger on account
of the willful acts or negligence of other passengers or of strangers, if the common carrier’s
employees through the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.
SEC.48 (B). No professional chauffer shall permit any unlicensed person to drive the motor
vehicle under his control, or permit a person, sitting beside him or any other part of the car,
to interfere with him in the operation of the motor vehicle, by allowing said person to take
hold of the steering wheel, or in any other manner take part in the manipulation or control
of the car.

68 - Bachelor Express v. CA (1990)*

Facts:
A bus owned by Bachelor Express was en route to Cagayan de Oro from Davao City. When it was in Butuan
City, the bus picked up a passenger. Around 15 minutes after, a passenger at the rear of the bus suddenly stabbed a PC
solidier. This caused commotion and panic among the passengers. When the bus stopped, two passengers, Beter and
Rautraut, were found lying on the road. Beter was dead from head injuries while Rautraut was heavily injured but died a
short while after. The passenger who stabbed the soldier ran to the bushes but was killed by the police.
The relatives of Beret and Rautraut filed a suit for collection of sum of money against Bachelor Express and the
bus driver. Bachelor Express denied liability stating that the incident was not a vehicular or traffic accident, but was an
incident caused by a third person over which they had no control over. Furthermore, they say that the driver was able to
transport the passengers to their destination except for Beret and Rautraut who jumped off the bus without the knowledge,
consent, or fault of the driver. Also that they exercised due diligence in the choice of their employees.
Issues:
1. W/N Bachelor Express is liable for damages
Held/Ratio:
1. Yes, Bachelor Express is liable for damages. Bachelor Express is undeniably a common carrier. Under the civil
code, 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. Because the two passengers died,
Bachelor Express is presumed to have been negligent. The attendant facts show that Bachelor Express was indeed
negligent.
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. Taking these facts, Bachelor Express was shown to be negligent.
Furthermore, their contention that the incident was force majeure cannot be sustained. While the act of the
passenger stabbing a soldier could not be controlled/foreseen, the negligence of Bachelor Express as stated above,
negates the application of the force majeure doctrine because for such to apply, the common carrier must have had
exercised extraordinary diligence to safeguard the lives of its passengers.

69 - Nocum v. BLTB (1969)

Facts:
Herminio L. Nocum was a passenger in appellant’s Bus No. 120 then making a trip within the barrio of Dita,
Municipality of Bay, Laguna. He was injured as a consequence of the explosion of firecrackers, contained in a box, loaded
in said bus and declared to its conductor as containing clothes and miscellaneous items by a co-passenger. Trial court
ruled in favour of the apellee thus, Laguna Tayabas Bus Co. appealed. The findings of fact of the trial court are not
assailed. The appeal is purely on legal questions.
Issue:
1. W/N Laguna Tayabas Bus Co. may be held liable for the explosion of firecrackers contained in a package, the
contents of which were misrepresented by a passenger.
Held/Ratio:
1. No. The main basis of the trial court’s decision is that appellant did not observe the extraordinary or utmost
diligence of a very cautious person required by the Civil Code, we are not convinced, however, that the exacting
criterion of said provisions has not been met by appellant in the circumstances of this particular case.
It must be considered that while it is true the passengers of appellant’s bus should not be made to suffer for
something over which they had no control, as enunciated in the decision of this Court cited by His Honour,
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 in 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. Of course, when there are
sufficient indications that the representations of the passenger regarding the nature of his baggage may not be
true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not
necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the
rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense that the mentioned
service manual issued by appellant to its conductors must be understood.
Decisions in other jurisdictions cited by appellant in its brief, evidently because of the paucity of local precedents
squarely in point, emphasize that there is need, as We hold here, for evidence of circumstances indicating cause or
causes for apprehension that the passenger’s baggage is dangerous and that it is failure of the common carrier’s
employee to act in the face of such evidence that constitutes the cornerstone of the common carrier’s liability in
cases similar to the present one.

70 - Smith Bell v. Borja (2002)**

Facts:
On September 23, 1987, Smith Bell requested Bureau of Customs to send an inspection team on vessel M/T King
Family due to arrive at the port of Manila the next day. Said vessel contained 750 metric tons of alkyl benzene and methyl
methacrylate monomer. On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan instructed Catalino
Borja to board said vessel and perform his duties as inspector until its departure. At that time, Borja was a customs
inspector receiving a salary of P31,188.25 per annum.
About 11 o’clock the next morning, while unloading chemicals unto two barges owned by ITTC, a sudden
explosion occurred setting the vessels afire. Seeing the fire and fearing for his life, Borja hurriedly jumped over board to
save himself. However, the water was likewise on fire due mainly to the spilled chemicals, but he still swam his way for
an hour until he was rescued by the people living in the squatters’ area and sent to San Juan De Dios Hospital. After
weeks of intensive care at the hospital, he was diagnosed permanently disabled due to the incident.
Borja made demands against Smith Bell and ITTC for the damages caused by the explosion. However, both
denied liabilities and attributed to each other negligence.
RTC court ruled in favor of Borja, held petitioner liable for damages and loss of income. CA affirmed upon
appeal, ruling that the RTC’s finding was supported by the testimonies of Borja and A certain Laurente (the eyewitness of
ITTC), by the investigation conducted by the Special Board of Marine Inquiry affirmed by the secretary of the
Department of National Defense.
Hence, this petition for review on certiorari under Rule 45.
Issues:
1. Whether petitioner should be the only one held liable for the injuries of Borja, and not ITTC
2. Whether Borja is entitled to the amount of damages awarded to him by the trial court.
Held/Ratio:
1. YES. The attempts of Smith Bell to shift the blame on ITTC were all for naught. First, the testimony of its alleged
eyewitness was stricken off the record for his failure to appear for cross-examination. Second, the documents
offered to prove that the fire originated from barge ITTC-101 were all denied admission for being, in effect,
hearsay Thus, there is nothing in the record to support the contention that the fire and explosion originated from
barge ITTC-101.
Petitioner’s vessel was carrying chemical cargo -- while knowing that their vessel was carrying dangerous
inflammable chemicals, its officers and crew failed to take all the necessary precautions to prevent an accident.
Petitioner was, therefore, negligent.
Negligence is conduct that creates undue risk of harm to another. It is the failure to observe that degree of care,
precaution and vigilance that the circumstances justly demand, whereby that other person suffers injury.
The elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault or negligence of the defendant,
and (c) the connection of cause and effect between the fault or negligence of the defendant and the damages
inflicted on the plaintiff.
Knowing fully well that it was carrying dangerous chemicals, petitioner was negligent in not taking all the
necessary precautions in transporting the cargo. As a result of the incident, Borja suffered the following damage
and injuries. Hence, the owner or the person in possession and control of a vessel and the vessel are liable for all
natural and proximate damage caused to persons and property by reason of negligent management or navigation.
2. Yes. The loss of earning capacity is based mainly on the number of years remaining in the person’s expected life
span. In turn, this number is the basis of the damages that shall be computed and the rate at which the loss
sustained by the heirs shall be fixed.

Petitioner avers that Respondent Borja died nine years after the incident and, hence, his life expectancy of 80
years should yield to the reality that he was only 59 when he actually died.
Respondent Borja’s demise earlier than the estimated life span is of no moment. For purposes of determining loss
of earning capacity, life expectancy remains at 80. Otherwise, the computation of loss of earning capacity will
never become final, being always subject to the eventuality of the victim’s death. The computation should not
change even if Borja lived beyond 80 years. Fair is fair.

V. RECOVERABLE DAMAGES
Phil. First Insurance v. Wallem First Shipping (2009) (see Digest #26)
71 - Regional Container Lines v. Netherlands Insurance (2009)

Doctrine:
• Upon the loss or damages to the goods, a common carrier is presumed to have been negligent if it fails to prove
that it exercised extraordinary vigilance over them. There need not be an express finding of negligence to hold it
liable. It is also not enough that common carrier merely show that some other party could be responsible for the
damage. It is therefore essential to prove that the former exercise extraordinary diligence to care for the goods .
Facts:
This case involved 405 cartons of Epoxy Molding Compound consigned to be shipped from Singapore to Manila
for Temic. For the transportation of goods, Pacific Eagle Line were contracted. It then packed, stored, sealed and placed
the cargoes in refrigerated container (the nature of goods require that temperature to remain 0º Celsius.) Pacific then
formed a charter agreement with RCL where the former boarded the container on board the M/V Piya Bhum owned by the
latter. Upon the arrival of the vessel in Manila the refrigerated container was unloaded. A few hours after, however, the
temperature fluctuated and reached up to 33º Celsius which was said to be caused by the burnt condenser fan motor of the
refrigerated container. The right to claim for damages were subrogated to the Netherlands Insurance from Temic. The
former now filed a claim for damages alleging that RCL and EDSA Shipping are liable as common carriers.
RCL and EDSA Shipping disclaim any responsibility alleging that the fluctuation of the temperature happened
after the cargo was unloaded. With this the care for the cargoes were no longer under responsibility for it was already
transferred to the arrastre operator.
Issue:
1. Whether RCL and EDSA Shipping lines are liable as common carriers under the Theory of presumption of
negligence
Held/Ratio:
1. YES. The SC held in this case that RCL and EDSA Shipping are liable for damages as common carriers because
they failed to prove that they did exercise the degree of diligence required by law over the goods transported.
Again, the Court reiterated the principle that in cases of loss or damages in the goods, common carriers are
presumed to be negligent unless they establish that they exercised extraordinary diligence.
During the trial, it may have been shown that the fluctuation of temperature in the refrigerated container van
occurred after the cargo, BUT no evidence was shown to disprove that the condenser fan (cause of such
fluctuation) was not damaged while the cargo was being unloaded from the ship. As it is according to
jurisprudence that cargoes remain under the custody of the carrier (RCL and EDSA) while they are being
unloaded.

72 - Sulpicio Lines v. Curso (2010)*

Doctrines:
• The conditions for awarding moral damages are:
(a) there must be an injury, whether physical, mental, or psychological, clearly substantiated by the claimant;
(b) there must be a culpable act or omission factually established;
(c) the wrongful act or omission of the defendant must be the proximate cause of the injury sustained by the
claimant; and
(d) the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code.
• Moral damages may be recovered in an action upon breach of contract of carriage only when:
(a) where death of a passenger results
(b) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result.
Facts:
On October 23, 1988, Dr. Curso boarded MV Doña Marilyn, a vessel owned and operated by petitioner Sulpicio
Lines bound for Tacloban City. Unfortunately, the MV Doña Marilyn sank in the afternoon of October 24, 1988 while at
sea due to the inclement sea and weather conditions brought about by Typhoon Unsang. The body of Dr. Curso was not
recovered, along with hundreds of other passengers of the vessel. At the time of his death, Dr. Curso was 48 years old, and
employed as a resident physician at the Naval District Hospital in Biliran.
On January 21, 1993, the surviving brothers and sisters of Dr. Curso, sued Sulpicio in the RTC in Naval, Biliran
to claim damages based on breach of contract of carriage by sea, averring that the petitioner had acted negligently in
transporting Dr. Curso and the other passengers. Sulpicio denied liability, insisting that the sinking was due to force
majeure which exempted a common carrier from liability. It averred that the vessel was seaworthy in all respects, and was
in fact cleared by the Philippine Coast Guard for the voyage; and that after the accident it conducted intensive search and
rescue operations and extended assistance and aid to the victims and their families.
The RTC dismissed the complaint upon finding that the sinking was due to force majeure and that indeed the
vessel was seaworthy. However, the CA found Sulpicio guilty of negligence due to the inadequate explanation why the
officer of the said vessel did not prepare for the upcoming typhoon and the faulty hydraulic system which had a power of
a signal no. 3 cyclone heading on their way. If only they monitored these properly, they could have prevented the mishap.
The CA awarded Moral damages of Php100,000 plus other damages (death indemnity, loss of earning capacity, etc.)
Sulpicio insists that the CA committed grievous errors in holding that the respondents were entitled to moral
damages as the brothers and sisters of the late Dr. Curso; that the CA thereby disregarded Article 1764 and Article 2206
of the Civil Code, and the ruling in Receiver for North Negros Sugar Co., Inc. v. Ybañez, whereby the Supreme Court
disaallowed the award of moral damages in favor of the brothers and sisters of a deceased passenger in an action upon
breach of a contract of carriage.
Issue:
1. W/N the siblings of a deceased passenger in a case of breach of contract of carriage entitled to an award of moral
damages.
Held/Ratio:
1. NO. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of
contract, unless there is fraud or bad faith. As an exception, moral damages may be awarded in case of breach of
contract of carriage that results in the death of a passenger, in accordance with Article 1764, in relation to Article
2206 (3), of the Civil Code, which provide:

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with
Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a
passenger caused by the breach of contract by a common carrier.
Article 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:
...
(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.
The omission from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the legislative
intent to exclude them from the recovery of moral damages for mental anguish by reason of the death of the
deceased. Inclusio unius est exclusio alterius. The solemn power and duty of the courts to interpret and apply the
law do not include the power to correct the law by reading into it what is not written therein. Thus, the CA erred
in awarding moral damages to the respondents.
To be entitled to moral damages, the respondents must have a right based upon law. It is true that under Article
1003 of the Civil Code they succeeded to the entire estate of the late Dr. Curso in the absence of the latter’s
descendants, ascendants, illegitimate children, and surviving spouse. However, they were not included among the
persons entitled to recover moral damages, as enumerated in Article 2219 of the Civil Code.
Therefore, the petition for review on certiorari is granted, and the award made to the respondents in the decision
dated September 16, 2002 of the Court of Appeals of moral damages amounting to P100,000.00 was deleted and
set aside.

73 - Air France v. Gillego (2010)**

Facts:
Bonifacio Gillego was the Congressman of Sorsogon and Chairman of the House of Representatives Committee
on Civil, Political, and Human Rights. He went to Budapest, Hungary and Tokyo for the 89th Inter-Parliamentary
Conference Symposium on Parliament Guardian of Human Rights to participate as a speaker.
He boarded an Air France aircraft bound for Paris. When he arrived in Paris, he waited for his connecting flight to
Budapest scheduled at 3:15pm. Upon learning that there is a 10:00am flight to Budapest, he went to the Air France
counter at the airport and asked for the change in his booking. He was given a new ticket, boarding pass, and baggage
claim stub.
When he arrived in Budapest, he was unable to find his luggage. So he went to the Air France counter where the
representative verified that he indeed had a checked-in luggage. He was told that the luggage will be sent to his hotel that
same day, but it was not delivered despite the follow-up inquiries by Gillego.
When he returned to the Philippines, his lawyer wrote to the Station Manager regarding the lost luggage and the
resulting damages Gillego suffered. He claimed that his single luggage contained all his personal belongings, including
his notes and reference needed for the conference, and that he was forced to shop for new clothes and medicine. Gillego
thus demanded from Air France P1M as compensation for his loss, inconvenience, and moral damages.
Gillego then filed a complaint for damages alleging that by reason of Air France’s negligence and breach of
obligation to transport and deliver his luggage, Gillego suffered inconvenience, serious anxiety, physical suffering, and
sleepless nights (due to the stress build up and failure to take his regular medication, he had to be taken to a medical clinic
in Tokyo). Gillego is claiming for actual damages (P40K), moral damages (P1M), exemplary damages (P500K),
attorney’s fees (P50K), and costs of suit.
Air France filed its answer admitting that it issued tickets for the flight mentioned, the subsequent request to be
transferred to another flight, and the loss of the checked-in baggage, which had not been retrieved. As special and
affirmative defense, Air France contended that its liability should be governed by the Warsaw Convention for the
Unification of Certain Rules Relating to International Carriage (liability is limited to 250 francs per kilogram or
US$20.00).
Air France claimed that it has taken all the measures to avoid the loss and that it has no intent to cause such loss.
It also claimed that the loss was due to a fortuitous event beyond the carrier’s control, and that it made diligent efforts to
locate the luggage. It also claimed that the damages sought were unconscionable
The RTC rendered a decision in favor of Gillego. It found that there was gross negligence on the part of Air
France and that it is guilty of willful misconduct as it persistently disregarded the rights of Gillego who was a high
government official. Also, the court held that the Warsaw Convention is not applicable. The CA affirmed the RTC’s
decision.
Issue:
1. Whether the amounts awarded were unconscionable
2. Whether RTC and CA erred in finding that there was gross negligence, bad faith, and willful misconduct on the
part of Air France and that it acted in wanton, fraudulent, reckless, oppressive, or malevolent manner
Held/Ratio:
1. YES. It is stressed that Air France or its agents were never rude or discourteous toward Gillego; he was not
subjected to humiliating treatments or comments. The mere fact that he was a Congressman should not result in
automatic increase in moral and exemplary damages recoverable. As held in Kierulf v. CA, the social and financial
standing of a claimant may be considered only if he or she was subjected to contemptuous conduct despite the
offender’s knowledge of his or her social and financial standing. (Also, he was able to rewrite his speech, and the
delegates did not even know that he was unprepared.)

2. A business intended to serve the travelling public primarily, a contract of carriage is imbued with public interest.
Article 1735 of the Civil Code provides that in case of lost or damaged goods, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
required by Article 1733. All that the aggrieved party has to prove is the existence of the contract and the fact of
its non-performance by the carrier.
It is not disputed that the checked-in luggage was not found upon arrival at his destination and was not returned to
him until about two years later. Upon receipt of the said luggage, Gillego did not anymore press on his claim for
actual damages and neither did he adduce evidence of the actual amount of loss and damage incurred by such
delayed delivery of his luggage. Consequently, the trial court proceeded to determine only the propriety of his
claim for moral and exemplary damages, and attorney’s fees.
In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately
injurious or the one responsible acted fraudulently or with malice or bad faith. Bad faith should be established by
clear and convincing evidence.
After a careful review by the court, it found that Air France is liable for moral damages. Reyes, the station
manager, testified that upon receiving the letter-complaint of respondent’s counsel, she immediately began
working on the Property Irregularity Report from their computerized data. Also, based on her testimony, a PIR
was given to Gillego, but Gillego alleges that the copy was not given to him despite repeated calls.
The alleged entries in the PIR deserve little consideration as these have not been properly identified or
authenticated by the airline station representative in Budapest. Furthermore, the court cannot accept the
convenient excuse given by Air France that Gillego should be faulted in allegedly not giving his hotel address and
telephone number. And even assuming arguendo that his Philippine address and contact number were the only
details respondent had provided for the PIR, still there was no explanation as to why Air France never
communicated with Gillego concerning his lost baggage long after respondent had already returned to
the Philippines.
While Gillego failed to cite any act of discourtesy, discrimination, or rudeness by Air France’s employees, this
did not make his loss and moral suffering insignificant and less deserving of compensation. In repeatedly ignoring
Gillego’s inquiries, Air France’s employees exhibited an indifferent attitude without due regard for the
inconvenience and anxiety he experienced after realizing that his luggage was missing.
But the court did not agree in the amount of the award (award reduced).
Northwest Airlines v. Catapang (2009)* (see Digest #46)

VI. TRANSPORTATION OVER LAND

74 - Maersk Line v. CA (1993)*
Respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.’s) agent in the Philippines,
Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. In a Memorandum
of shipment, Eli Lilly, Inc. specified the date of arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then
transported back Oakland, California. The goods finally arrived in the Philippines after 2 months from the date specified
in the memorandum. As a consequence, private respondent as consignee refused to take delivery of the goods on account
of its failure to arrive on time.
The shipping company maintains that it cannot be held for damages for the alleged delay in the delivery of the
600,000 empty gelatin capsules since it acted in good faith and there was no special contract under which the carrier
undertook to deliver the shipment on or before a specific date.
While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery, unless such common carriers previously assume the
obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a
reasonable time.
The shipment was estimated to arrive in Manila on April 3, 1977. While there was no special contract entered into
by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the
specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no
need to execute another contract for the purpose as it would be a mere superfluity. A delay in the delivery of the goods
spanning a period of 2 months and 7 days falls was beyond the realm of reasonableness.

75 - Lorenzo Shipping v. BJ Marthel (2004)

Facts:
Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise shipping while BJ Marthel
International, Inc. is an importer and distributor of different brands of engines and spare parts and has been supplying
Lorenzo Shipping with spare parts for marine engines.
Sometime in 1989, Lorenzo Shipping requested for a quotation of various machine parts. Lorenzo Shipping
thereafter issued to BJ Marthel Purchase Order No. 13839 for the procurement of one set of cylinder liner, valued at
P477,000, to be used for M/V Dadiangas Express, a vessel owned by Lorenzo Shipping. The purchase order was co-
signed by Jose Go, Jr., Lorenzo Shipping’s vice-president, and Henry Pajarillo, BJ Marthel’s sales manager. Instead of
paying the 25% down payment (indicated in the purchase order) for the first cylinder liner, Lorenzo Shipping issued in
favor of BJ Marthel ten postdated checks which were supposed to represent the full payment of the cylinder liners.
Subsequently, Lorenzo Shipping issued Purchase Order No. 14011, for another unit of cylinder liner. This purchase order
stated the term of payment to be “25% upon delivery, balance payable in 5 bi-monthly equal installments.” Both the
purchase orders did not state the date of the cylinder liner’s delivery.
On 26 January 1990, BJ Marthel deposited Lorenzo Shipping’s check that was postdated 18 January 1990,
however, the same was dishonored by the drawee bank due to insufficiency of funds. On 20 April 1990, Pajarillo
delivered the two cylinder liners at Lorenzo Shipping’s warehouse in Manila. The sales invoices both contain the notation
“subject to verification” under which the signature of Lorenzo Shipping’s warehouseman, appeared.
BJ Marthel sent a Statement of Account and BJ Marthel’s vice-president sent a demand letter dated to Lorenzo
Shipping requiring the latter to pay. Lorenzo Shipping sent the former a letter offering to pay only P150,000, claiming that
as the cylinder liners were delivered late and due to the scrapping of the M/V Dadiangas Express, it (Lorenzo Shipping)
would have to sell the cylinder liners in Singapore and pay the balance from the proceeds of said sale. BJ Marthel filed an
action for sum of money and damages.
Issue:
1. W/N BJ Marthel incurred delay in performing its obligation under the contract of sale
Held/Ratio:
1. No. Lorenzo Shipping maintains that its obligation to pay fully the purchase price was extinguished because the
adverted contract was validly terminated due to BJ Marthel’s failure to deliver within the two-month period. The
threshold question, then, is: Was there late delivery of the subjects of the contract of sale to justify Lorenzo
Shipping to disregard the terms of the contract considering that time was of the essence thereof?
In determining whether time is of the essence in a contract, the ultimate criterion is the actual or apparent
intention of the parties and before time may be so regarded by a court, there must be a sufficient manifestation,
either in the contract itself or the surrounding circumstances of that intention. Lorenzo Shipping insists that
although its purchase orders did not specify the dates when the cylinder liners were supposed to be delivered,
nevertheless, BJ Marthel should abide by the term of delivery appearing on the quotation it submitted to Lorenzo
Shipping. Lorenzo Shipping theorizes that the quotation embodied the offer from BJ Marthel while the purchase
order represented its (Lorenzo Shipping’s) acceptance of the proposed terms of the contract of sale. Thus, Lorenzo
Shipping is of the view that these two documents “cannot be taken separately as if there were two distinct
contracts.” The Court does not agree. While the quotation provided by BJ Marthel evidently stated that the
cylinder liners were supposed to be delivered within two months from receipt of the firm order of Lorenzo
Shipping and that the 25% down payment was due upon the cylinder liners’ delivery, the purchase orders
prepared by Lorenzo Shipping clearly omitted these significant items. The Lorenzo Shipping’s Purchase Order
No. 13839 made no mention at all of the due dates of delivery of the first cylinder liner and of the payment of
25% down payment. Its Purchase Order No. 14011 likewise did not indicate the due date of delivery of the second
cylinder liner.
The law implies that if no time is fixed, delivery shall be made within a reasonable time, in the absence of
anything to show that an immediate delivery intended. Moreover, Lorenzo Shipping’s receipt of the cylinder
liners when they were delivered to its warehouse on 20 April 1990 clearly indicates that it considered the contract
of sale to be still subsisting up to that time. Indeed, had the contract of sale been cancelled already as claimed by
Lorenzo Shipping, it no longer had any business receiving the cylinder liners even if said receipt was “subject to
verification.” By accepting the cylinder liners when these were delivered to its warehouse, Lorenzo Shipping
indisputably waived the claimed delay in the delivery of said items.
76 - Philamgen v. CA (1993)*
Facts:
In 1983, Coca Cola in Zamboanga loaded 7.500 cases of bottled softdrinks on board M/V Asilda, a vessel owned
by Felman Shipping, to be transported to Cebu. All 7,500 cases of Coke 1.5 Liter bottles were loaded on the deck. The
goods were insured by Coke with Philamgen under a marine policy. MV Asilda left Zamboanga in fine weather at 8:00pm
one day, only to sink somewhere in Zamboanga del Norte at 8:45am the next day, bringing down her entire cargo with her
including her bottles.
Issues:
1. W/N M/V Asilda was seaworthy.
2. W/N Felman Shipping is liable.
Held/Ratio:
1. No. M/V Asilda was unseaworthy when it left the port of Zamboanga. The vessel was top-heavy which is to say
that while the vessel may not have been overloaded, yet the distribution or stowage of the cargo on board was
done in such a manner that the vessel was unstable and unseaworthy for that particular voyage.
Moreover, M/V Asilda was designed as a fishing vessel only.
2. Yes. It is settled that the ship agent is liable for the negligent acts of the captain in the care of goods loaded on the
vessel. This liability however can be limited through abandonment of the vessel, its equipment and freightage as
provided in Art. 587 of the Code of Commerce. It must be stressed at this point that Art. 587 speaks only of
situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise
to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code
on common carrier.
Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, Felman
was equally negligent. It cannot therefore escape liability through the expedient of filing a notice of abandonment
of the vessel by virtue of Art. 587 of the Code of Commerce.
Then, under Art 1733 of the Civil Code, common carriers are required to exercise extraordinary diligence. In the
event of loss of goods, common carriers are presumed to have acted negligently. Felman, the shipowner, was not
able to rebut this presumption.

77 - Transasia Shipping v. CA (1996)**

Facts:
Atty. Renato Arroyo, bought a ticket from Trans-asia for the voyage of M/V Asia Thailand vessel to Cagayan de
Oro City from Cebu City. At around 5:30 in the evening (Nov 12) he boarded the vessel and noticed that some repair
works were being undertaken on the engine of the vessel. The vessel departed at around 11:00 in the evening with only
one 1 engine running. After an hour the vessel stopped near Kawit Island and dropped its anchor thereat. After half an
hour of stillness, some passengers demanded that they should be allowed to return to Cebu for they were no longer willing
to continue their voyage to CDO. The captain agreed and thus the vessel headed back to Cebu where the passengers who
wanted to were allowed to disembark. Atty. Arroyo boarded M/V Asia Japan for CDO the following day. Due to Trans-
asia’s failure to transport him to the place of destination on time, a complaint for damages arising from bad faith, breach
of contract, and from tort was filed. He asked for "1,100, "50,000, and "25,000 as compensatory, moral, and exemplary
damages, respectively. TC ruled that there was breach of contract and only awarded compensatory damages. Appellate
court held that Trans-asia did not observe the extraordinary diligence required of common carriers and awarded moral and
exemplary damages as well as attorney’s fees.
Issue:
1. Whether the court should have awarded compensatory damages due to the delay in the performance of Trans-
asia’s obligation
Held/Ratio:
1. NO. The CA was correct in not awarding actual or compensatory damages since Atty. Arroyo failed to offer
evidence to prove that his contract of carriage with the petitioner provided for liability in case of delay in
departure, or that a designation of the time of departure was the controlling motive for the establishment
of the contract. If any delay was incurred, it was after the commencement of such voyage, more specifically,
when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only
functioning engine conked out.
Although the Civil Code is silent as to the rights and duties of the parties strictly arising out of such delay, Article
698 of the Code of Commerce specifically provides that “in case a voyage already begun should be
interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without
right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but
with a right to indemnity if the interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel and a passenger should agree to await the
repairs, he may not be required to pay any increased price of passage, but his living expenses during the
stay shall be for his own account.” However, for this to be applicable in this case Atty. Arroyo should have
stayed on the vessel and was with it when it thereafter resumed its voyage, so that Trans-asia would be liable for
any pecuniary loss or loss of profits. As he and some passengers resolved not to complete the voyage, the vessel
had to return to its port of origin and allow them to disembark. Any further delay then in the private respondent’s
arrival at the port of destination was caused by his decision to disembark. Had he remained on the first vessel, he
would have reached his destination at noon (Nov 13), thus been able to report to his office in the afternoon. And
therefore would have lost only the salary for half of a day. But actual or compensatory damages must be proved,
which the private respondent failed to do.

78 - Compagnie v. Hamburg (1917)**

[Note: This is an extremely long case – about 30 pages. Even the ponente admits they had a “lack of definite and
authoritative information as to these matters.” Later the ponente writes “Recently, however, our library was furnished with
a copy of Stockton’s ‘Outlines of International Law’ which briefly and as we think authoritatively sets forth what we now
are all agreed would appear to be the present status of public international law on the subject of “days of grace” and “safe-
conducts,”.. Then, the ponente block quotes the book repeatedly. Hay. So please bear with the long digest. 30 reduced to 4
is good enough.]
Doctrines:
• The word “necessity,” when applied to mercantile affairs, where the judgment must in the nature of things be
exercised, cannot, of course, mean an irresistible compelling power. What is meant by it in such cases is the force
of circumstances which determine the course a man ought to take, Thus, where by the force of circumstances, a
man has the duty cast upon him of taking some action for another, and under that obligation adopts a course
which, to the judgment of a wise and prudent man, is apparently the best for the interest of the persons for whom
he acts in a given emergency, it may properly be said of the course so taken that it was in a mercantile sense
necessary to take it.
Facts:
This is essentially a suit for damages filed by plantiff Compagnie de Commerce et de Navigation D’Extreme
Orient, (a corporation duly organized and existing under and by virtue of the laws of the Republic of France – hereafter,
Compagnie) growing out of the “failure, refusal, and neglect of the defendant Hamburg Amerika Packetfacht Actien
Gesellschaft (a corporation duly organized under and by virtue of the laws of the Empire of Germany – hereafter,
Hamburg Amerika) to safely carry the said merchandise and cargo (full cargo of rice, rice bran, and cargo meal owned by
Compagnie) on board vessel Sambia owned by Hamburg Amerika as in said charter party (from the port of Saigon to the
port of Dunkirk and Hamburg, via Suez Canal) and bills of lading.
The Compagnie seeks to recover the full value of a certain cargo of the steamship Sambia, alleged to amount to
the sum of P266,930, and prays that certain proceeds of the sale of said cargo, amounting to P135,766.01, now on deposit
in this court, be applied on said judgment, and that judgment be rendered in favor of the Compagnie and against the
Hamburg Amerika for such sum as may represent the difference between the said amount and the value of the payment
and delivery unto Compagnie from said deposit, with legal interest and costs of suit.
Compagnie in its complaint alleged that on August 2, 1914, the said steamship Sambia sailed from the said port of
Saigon bearing on board the said cargo, and acting under and in pursuance of orders from the Hamburg Amerika, as
owners of said vessel, but without the consent or approval of Compagnie as the charterer of said vessel and the owner of
said cargo, and against the protest of Compagnie, the said vessel wholly failed, omitted, and refused to sail unto said
destinations of Dunkirk and Hamburg, or unto either of them, or unto any of the ports of call in the due course of said
stipulated voyage, but wilfully and intentionally deviated from the said stipulated voyage and sailed to the port of
Manila, Philippine Islands; that said vessel arrived at Manila on or about August 8, 1914, and has wilfully and
intentionally abandoned the said stipulated voyage and has remained at Manila continuously from the said 8th day of
August, 1914, until the present day. Upon the arrival of said vessel at Manila, the defendant wholly failed, omitted, and
refused to tranship the said cargo of the plaintiff and to forward the same unto the stipulated destinations thereof, as in
duty bound, and, in the absence of Compagnie, as owner of the said cargo, wrongfully and unlawfully detained the said
cargo and the whole thereof at said port of Manila.
Hamburg Amerika asserts in its responsive pleading that it was rumored that war had been declared between the
Empire of Germany and the Republic of France, and thereupon the master of said steamship, fearing seizure because the
said steamship was registered and sailing under the German flag and the port she was then in was a French port, desired to
leave said port of Saigon, but was required by plaintiff to complete the loading of the total cargo called for by the said
charter party, which the said master proceeded to do, and completed the loading so as to leave the said port on the 4th day
of August, 1914, which was done, and said rumors of the declaration of war having been verified, the said master and the
plaintiff’s representative at Saigon, one Ducasse, concluded that it would not be safe for said steamship to proceed on its
voyage to Dunkirk and Hamburg, nor to stay in said port of Saigon, and thereupon the master and said representative went
to the French Governor at Saigon and asked for a pass or safe-conduct to the port of Manila, but the said Governor refused
to issue such pass or safe conduct for the reason that he had not been officially notified of said declaration of war, and
thereupon plaintiff’s agent at Saigon procured from the proper authorities the necessary clearance papers for the said
steamship and its bill of health for the port of Manila, which the said master and said representative decided was the
nearest safe and neutral port of refuge, and thereupon the said master sailed the said steamship to the said port of Manila
where he arrived with said steamship on the 8th day of August, 1914, where he, with said steamship, has been obliged to
remain continuously since, because of the conditions of war existing which render the said steamship and cargo subject to
seizure anywhere outside of a neutral or German port by any hostile nation with which the Empire of Germany is at war.
Counsel for the cargo owner Compagnie insist that having in mind accepted principles of public international law,
the established practice of nations, and the express terms of the Sixth Hague Convention (1907), the master should have
confidently relied upon the French authorities at Saigon to permit him to sail to his port of destination under a laissez-
passer or safe-conduct, which would have secured both the vessel and her cargo from all danger of capture by any of the
belligerents. Counsel for the shipowner Hamburg Amerika, on the contrary, urge that in the light of the developments of
the present war, the master was fully justified in declining to leave his vessel in a situation in which it would be exposed
to danger of seizure by the French authorities, should they refuse to be bound by the alleged rule of international law laid
down by opposing counsel.
Issues:
1. W/N the master of the Sambia, when he fled from the port of Saigon and took refuge in the port of Manila, had
reasonable grounds to apprehend that his vessel was in danger of seizure or capture by the public enemies of the
flag under which he sailed.
2. W/N, even if it be held that the action of the master of the Sambia in fleeing to a port of refuge and abandoning
the prosecution of the voyage contemplated in the contract of affreightment, was justified or excused by the
exigencies of war, it was his imperative duty, nevertheless, to tranship the cargo on a neutral vessel to one of the
ports of destination designated in the contract.
3. W/N the shipowner should be held responsible, at all events, for the deterioration in the value of the cargo,
incident to its detention on board the vessel from the date of its arrival in Manila until it was sold.
4. W/N the Court acquired jurisdiction over the subject matter of the case considering that there is a contractual
stipulation for general arbitration. [Not related to transpo; properly a Conflicts of Law issue.]
Held/Ratio:
1. YES. A critical examination of the terms of the convention itself, having in mind the discussion which preceded
its adoption, satisfies us that at the outbreak of the present war, there was no such general recognition of the duty
of a belligerent to grant “days of grace” and “safe-conducts” to enemy ships in his harbors, as would sustain a
ruling that such alleged duty was prescribed by any imperative and well settled rule of public international law, of
such binding force that it was the duty of the master of the Sambia to rely confidently upon a compliance with its
terms by the French authorities in Saigon; and it seems clear from a reading of the British order in council issued
at the outbreak of the war, with its limitations, restrictions, and conditions imposed upon the exercise of the
privileges secured therein, that while that nation recognized the advantages to be anticipated from the reciprocal
adherence by all the belligerents to the practice in that regard which had been developed in recent years, in a more
or less modified from, the order in council was not published in response to any imperative rule of public
international law to which that nation felt itself bound to subscribe.
We conclude that under the circumstances surrounding the flight of the Sambia from the port of Saigon, her
master had no such assurances, under any well-settled and universally accepted rule of public international law, as
to the immunity of his vessel from seizure by the French authorities, as would justify us in holding that it was his
duty to remain in the port of Saigon in the hope that he would be allowed to sail for the port of destination
designated in the contract of affreightment with a laissez-passer or safe-conduct which would secure the safety of
his vessel and cargo en route.

It is true that soon after the outbreak of the war, the Republic of France authorized and directed the grant of safe-
conducts to enemy merchant vessels in its harbors, under certain reasonable regulations and restrictions; so that it
would appear that had the master of the Sambia awaited the issuance of such a safe-conduct, he might have been
enabled to comply with the terms of his contract of affreightment. But until such action had been taken, the
Sambia was exposed to the risk of seizure in the event that the French government should decline to conform to
the practice; and in the absence of any assurance in that regard upon which the master could confidently rely, his
duty to his owner and to his vessel’s flag justified him in fleeing from the danger of seizure in the port of an
enemy to the absolute security of a neutral port.
The danger from which the master of the Sambia fled was a real and not merely an imaginary one as counsel for
the shipper contends. Seizure at the hands of an “enemy of the King,” though not inevitable, was a possible
outcome of a failure to leave the port of Saigon; and we cannot say that under the conditions existing at the time
when the master elected to flee from that port, there were no grounds for a “reasonable apprehension of danger”
from seizure by the French authorities, and therefore no necessity for flight.
Thus, neither the vessel nor her owners are liable for the resultant damages suffered by the owner of the cargo.
2. NO. The cargo of the Sambia being a perishable one, and it having proved impracticable to secure prompt
instructions from the shipper, the master was confronted with the necessity of electing the course he should
pursue, to protect the interests of the shipper whose property has been entrusted to him under a contract of
affreightment which he found himself unable to execute upon his own vessel. He elected, after taking the advice
of a competent marine surveyor, to sell the entire cargo under judicial authority, and to that end followed
substantially the proceedings prescribed in such cases in section II, chapter III of the Commercial Code; and we
are of opinion that not only is there nothing in the record which would sustain a finding that in so doing he failed
to exercise a sound discretion in the performance of the duty resting upon him to protect the interests of the cargo
owner, but that on the whole record it affirmatively appears that this was the only course open to him under all the
circumstances existing at the time when he adopted it.
Exhibit B which set out in full in the plaintiff’s brief is a certificate dated the 7th of September, 1914, prepared by
a marine surveyor, who having been called upon to examine the cargo aboard the Sambia, reported that it
“showed signs of heating and of being infested with weevils” and recommended, “in the interests of all
concerned, that it be discharged and disposed of as soon as possible” and that it “be sold by ‘private treaty’ in
preference to ‘sale by auction,’ owing to conditions in the local market.” We are of the opinion that it
sufficiently appears that under all the circumstances his duty was to sell rather than to tranship.
3. NO. It is clear that the master could not be required to act on the very day of his arrival; or before he had a
reasonable opportunity to ascertain whether he could hope to carry out his contract and earn his freight; and that
he should not be held responsible for a reasonable delay incident to an effort to ascertain the wishes of the
freighter, and upon failure to secure prompt advices, to decide for himself as to the course which he should adopt
to secure the interests of the absent owner of the property aboard his vessel.
It appears that two cablegrams were dispatched by the local agent of the shipowner and of the master, to the duly
authorized representative of the cargo owners in Saigon, one on the very day of the arrival of the Sambia in
Manila Bay. (August 8, 1914) and other a week later, advising him of the situation; that these cables were not
delivered presumably because of the interruption of cable communications following the outbreak of war; that
later, two letters were forwarded but remained unanswered until after the master had sought and secured judicial
authority to sell the cargo — the answer when it was received being a flat refusal on the part of the Saigon
representative of the cargo owners to give any instructions or assume any responsibility.
We are of the opinion that he proceeded with all reasonable dispatch, and did all that could be required of a
prudent man to protect the interests of the owner of the cargo aboard his vessel; so that any losses which resulted
from the detention of the cargo aboard the Sambia must be attributed to the act of the “enemies of the king,”
which compelled the Sambia to flee to a port of refuge, and made necessary the retention of the cargo aboard the
vessel at anchor under a tropical sun, and without proper ventilation, until it could be ascertained that the interests
of the absent owner would be consulted by the sale of this perishable cargo in the local market.

Furthermore, under the terms of the contract of affreightment, the amount of the freight was made payable
on delivery of the cargo at the designated port of destination. It is clear then, that under the terms of that
instrument, freight never became payable. Carrying the cargo from Saigon to Manila was not even a partial
performance of a contract to carry it from Saigon to Europe; and even it if could be treated as such, the shipowner
would have no claim for freight, in the absence of any agreement, express or implied, to make payment for a
partial performance of the contract.
4. YES. This objection to the jurisdiction of the court appears for the first time in defendant’s brief on appeal. In the
court below defendant not only appeared and answered without objecting to the court’s jurisdiction, but sought
affirmative relief; and it is very clear that defendant cannot be permitted to submit the issues raised by the
pleadings for adjudication, without objection, and then, when unsuccessful, assail the court’s jurisdiction in
reliance upon a stipulation in the charter party which the parties were at entire liberty to waive if they so desired.
We do not stop therefore to rule upon the contention of opposing counsel, that a contractual stipulation, for a
general arbitration cannot be invoked to oust our courts of their jurisdiction.
[Other issues on general average in insurance were discussed and omitted in this digest. Search for the keyword “York-
Antwerp Rules” if you would like to read about it. The rule basically states that “claims for contribution in general
average must be supported by proof that sacrifices on account of which such claims are submitted were made to avert a
common imminent peril, and that extraordinary expenses for which reimbursement is sought, were incurred for the joint
benefit of ship and cargo.”]
Separate Opinions, MALCOLM, M., dissenting:
I dissent. I must confess that my mind fails to follow the three majority decisions in their discussion of
“reasonable” or “due diligence” and other interrelated questions.

79 - Mitsui Lines v. CA (1998)

Facts:
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation. It entered into a contract of carriage with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre,
France. Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioner’s
vessel loaded private respondent’s container van for carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment
arrived in Le Havre only on November 14, 1991.
Issue:
1. Whether Mitsui should be held liable under the contract of carriage and not under COGSA.
Held/Ratio:
1. Yes. Conformably with this concept of what constitutes “loss” or “damage,” this Court held in another case that
the deterioration of goods due to delay in their transportation constitutes “loss” or “damage” within the meaning
of §3(6), so that as suit was not brought within one year the action was barred: Whatever damage or injury is
suffered by the goods while in transit would result in loss or damage to either the shipper or the consignee. As
long as it is claimed, therefore, as it is done here, that the losses or damages suffered by the shipper or consignee
were due to the arrival of the goods in damaged or deteriorated condition, the action is still basically one for
damage to the goods, and must be filed within the period of one year from delivery or receipt, under the above-
quoted provision of the Carriage of Goods by Sea Act.
In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carrier’s
breach of contract. Whatever reduction there may have been in the value of the goods is not due to their
deterioration or disappearance because they had been damaged in transit.

80 - Sweet lines v. CA (1962)* (Sir got the title wrong)

The City of Iloilo bought rice from National Rice and Corn Corporation. Southern Lines is the shipper. The City
of Iloilo received the rice but noted that there was shortage in weight. Iloilo files a complaint for recovery of the amount
representing the deficiency.
Southern Lines claim exemption from liability by contending that the shortage in the shipment of rice was due to
such factors as the shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it
received the same and the negligence of the agents of respondent City of Iloilo in receiving the shipment. The contention
is untenable, for, if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary
observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury
resulting thereform.
Southern Lines further contends that respondent is precluded from filing an action for damages on account of its failure to
present a claim within 24 hours from receipt of the shipment as required by Art 366 of the Code of Commerce. However,
it is deemed waived for failure to plead in the answer.

81 - PCIC v. Chemoil Lighterage Corporation (2005)**

Facts:
Petitioner Philippine Charter Insurance Corporation (PCIC) is a domestic corporation engaged in the business of
non-life insurance. Respondent Chemoil is also a domestic corporation engaged in the transport of goods.
In January 1991, Samkyung Chemical Company based in Korea sent a total of about 498 metric tons of a liquid
chemical called Dioctyl Phtalate (DOP) under two shipments on board MT Tachibana to the Philippines. The shipments
were valued at US$90,201.57 AND 636,724.89 respectively. The consignee was Plastic Group Manila (PGP). PGP
insured the cargo against all risks with PCIC under two separate marine policies.
MT Tachibana unloaded the cargo to Chemoil’s tanker barge for transport to Del Pan Bridge in Pasig River.
Thereafter, the tanker barge would unload the cargo to Chemoil’s tanker trucks for transfer to PGP’s storage tanks in
Calamba, Laguna.
Upon examination, PGP discovered that the DOP was damaged as shown by the discoloration from its original
yellow color to amber. Thus, PGP sent PCIC a letter formally expressing its claim for the loss it sustained due to the
DOP’s contamination. Based on the report issued by PCIC’s independent adjuster, the contamination was due to the fact
that the tank covers were loosely secured. PCIC then paid PGP the amount of Php5 million in full settlement of the
loss sustained. Meanwhile, PGP paid Chemoil for services rendered.
An action for damages was then instituted by PCIC against Chemoil in order to claim actual damages and
attorney’s fees. As a defense, Chemoil argued that it could not be held liable because it exercised extraordinary diligence
in handling the cargo. To support this claim, Chemoil raised that the cargo was found to be fit for loading by its surveyor
and that the handling of such cargo was closely supervised by the latter. Further, Chemoil raised that the contract it
entered into with PGP clearly stipulated that it shall be free from any and all claims arising from contamination, loss of
cargo or part thereof; that the consignee accepted the cargo without any protest or notice; and that the cargo shall be
insured by its owner sans recourse against all risks. As PGP’s subrogee, Chemoil argued that PCIC should be bound by
such stipulation.
The trial court ruled in favor of PCIC. The CA reversed on the ground that PCIC failed to file any notice, claim,
or protest within the period required by the Code of Commerce which is a condition precedent to the accrual of a
right of action against the carrier.
Issues:
1. W/N the notice of claim was filed within the required period
2. W/N Chemoil is liable to pay PCIC
Held/Ratio:
1. NO. Art. 366 of the Code of Commerce provides:
Art. 366. Within twenty-four hours following the receipt of the merchandise a claim may be
made against the carrier on account of damage or average found upon opening the packages,
provided that the indications of the damage or average giving rise to the claim cannot be
ascertained from the exterior of said packages, in which case said claim shall only be admitted at
the time of the receipt of the packages.
After the periods mentioned have elapsed, or after the transportation charges have been
paid, no claim whatsoever shall be admitted against the carrier with regard to the condition
in which the goods transported were delivered.
Where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the
goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the
carrier’s liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a
stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has
been damaged and that it is charged with liability therefore, and to give it an opportunity to examine the
nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation
of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent
claims
In this case, PCIC admits that PGP settled all the transportation charges charged by Chemoil. Further, it claims
that the settlement of such charges does not bar its claim for reimbursement in the form of actual damages,
arguing that the second paragraph of Art. 366 makes it clear that if notice or protest has been made prior to the
payment of services, the claim should still be allowed.
PCIC contends that the notice of contamination was given by PGP’s employee (Chan) to Abastillas, the VP for
operations of Chemoil at the time of the delivery of the cargo. Such notice was given through a phone call made
by Chan to Abastillas. Both the trial court and the CA affirm that such phone call was made. However, both
courts failed to make a definitive finding as to whether the notice of contamination was timely relayed due
to lack of evidence presented. Hence, in the absence of evidence to confirm that the notice of claim was timely
filed, PCIC’s claim for reimbursement against Chemoil must fail.
2. Rendered moot.

82 - Shell Chemical v. Manila Port (1976)

Facts:
Manila Port Service, a subsidiary of the Manila Railroad Company (now PNR) is an arrestre operator. Shell
Chemical Corp (Shell) on the other hand is the consignee of fifteen drums of synthetic resin shipped by Asiatic Petroleum
Corporation of New York on board the SS Fernview. Fifteen days before the arrival of the cargo, Shell already filed a
provisional claim with the Manila Port in anticipation of any loss or damage to its cargo. Upon arrival of the cargo, it was
delivered in good condition to Manila Port. However, when Manila Port delivered the cargo to Shell, it was missing one
drum. Hence, Shell filed a claim for the value of the missing drum (P1,152.28). Manila Port refused, hence Shell filed a
complaint before the MTC. MTC rendered judgment in favour of Shell and ordered the Manila Port Service and the
Manila Railroad Company to pay solidarity to Shell Chemical Company. Respondents appealed arguing that Shell was
bound by the provision provided in its management contract with the bureau of customs which stated:
Paragraph 15: The Manila Port Service “shall be relieved and released of any all responsibility or liability
for loss, damage, misdelivery, and/or nondelivery of goods, unless suit in the court of proper jurisdiction
is brought within a period of one (1) year from the date of the discharge of the goods, or from the date
when the claim for the value of such goods have been rejected or denied by the contractor, provided that
such claim shall have been filed with the contractor within fifteen (15) days from the date of the discharge
of the last package from the carrying vessel”
Respondents further highlight that such provision is binding because it was incorporated by reference in the gate
passes and delivery permits which were used by the customs broker of Shell Chemical Company to obtain delivery of the
cargo from the Manila Port Service. That Shell did not file within the 15day period provided in the contract thereby
discharging Manila Port of any liability as to its cargos.
TC: provision NOT binding to Shell because it was not a party to said agreement
Issue:
1. W/N the provision provided in the management contract between Manila Port and the Bureau of Customs is
binding against Shell.
Held/Ratio:
1. Yes. The management contract is enforceable against the consignee because, as already noted, it was incorporated
in the gate pass and delivery permit. The consignee obtained delivery of the cargo by means of those documents.
The consignee availed itself of the arrastre operator’s services. Moreover, the consignee’s action for damages is
based on the provisions of the management contract. Paragraph 15 contains a stipulation for the liability of the
arrastre service contractor to the consignee. It is a sort of stipulation pour atrui within the meaning of article 1311
of the Civil Code. The consignee cannot be permitted to take advantage of the favourable provisions of paragraph
15 and reject those that are disadvantageous to it.
The purpose of the requirement that a claim should be filed within the fifteen-day period is to apprise the arrastre
operator of the existence of a claim and to enable it to check on the validity of the claimant’s demand while the
facts are still fresh in the recollection of the persons who took part in the undertaking and the pertinent papers are
still available. The provisional claim which Shell Chemical Company filed on July 23, 1962, fifteen days before
the vessel’s arrival at the port of Manila in anticipation of any possible shortage or damage, was premature and
speculative. It was not in compliance with paragraph 15. Even the filing of a provisional claim on the day of the
vessels arrival but one day prior to the discharge of the cargo was held to be a noncompliance with paragraph 15.
Failure to file the claim within the fifteen-day period prescribed in paragraph 15 relieves the arrastre contractor of
any liability for non-delivery of the cargo and is a bar to the court action.

83 - Esso Standard Eastern v. Manila Railroad (1979)*

Facts:
On Feb. 1, 1964, Esso Standard (Esso) filed in the City Court of Manila a complaint for the recovery of the sum
of P2,691 for loss and damage caused to 4 shipments of goods consigned to it which arrived from abroad on 4 different
occasions in the year 1962 and which were handled by Manila Railroad as arrastre operators for the port of Manila.
Almost a year later, the court dismissed the complaint. The MR was denied.
Esso appealed to the CFI-Manila on the basis of another stipulation of facts. The court reversed the previous
court.
Issues:
1. W/N Esso’s right to bring this action has already prescribed, the same having been brought beyond 1 year from
the dates of discharge of the shipments in question
2. W/N the provisional claims satisfy the condition that the “claim for value” should be filed within 15 days from the
date of discharge of the last package of the said shipments
Held/Ratio:
1. NO. The dates of discharge from the vessels “Genevieve Lykes,” “Pionee Moor” and “Pioneer Main” are May 10,
1962, May 7, 1962, and May 30, 1962, respectively; that provisional claims therefor have all been seasonably
filed but that the same have not been acted upon by Manila Railroad. Applying the above-stated rule, said claims
are then deemed constructively denied upon the expiration of one year or more exactly on May 10, 1963, May
7,1963, and May 30, 1963,
2. YES. Manila Railroad contends that the said provisional claims are not in compliance with the Management
Contract because the latter requires the filing not merely of a “provisional claim” but of a “claim for the value.”
This argument lays much stress on the terminological difference between a “provisional claim” and a “claim for
the value,” which distinction is, in our opinion, of no consequential import. The test in determining whether the
said section of the Management Contract has been complied with is whether a claim, be it called a
“Provisional claim” or a “claim for the value,” has served the purpose of giving the arrastre operator(s)
reasonable opportunity to check the validity of the claim while the facts are still fresh in the minds of the
persons who took part in the transaction and while the pertinent documents are still available. Upon perusal
of the said provisional claims, We find that they contain descriptions of the shipments in question sufficient to
have allowed Manila Railroad to make a reasonable verification.
Manila Railroad contends that the said provisional do not claim for actual and itemized goods lost or damages but,
instead, merely advise that the entire shipments stated therein have been damaged and/or short-delivered ex parte
their respective carriers. It is not necessary that the said provisional claimss should state a detailed fist of the
loss or damage suffered by the said shipments; they only have to meet the test earlier mentioned. The
determination and preparation of the specific amount of damages claimed should be done carefully and
without haste, and these can be done practically only in a formal claim which can be filed even long after a
provisional claim has been filed.

84 - GOP v. Ynchausti (1919)

Facts:
Government of the Philippine Islands (petitioner/plaintiff) engaged Ynchausti (defendant) to transport tiles from
Manila to Iloilo. Upon arrival at Iloilo the tiles were damaged hence the collection case herein P200 worth of damaged
tiles.Petitioner presented no evidence that Ynchausti was negligent on transporting the goods. Ynchausti on the other hand
presented evidence that it was not negligent by placing the tiles in a secure location and taking it into the vessel by manual
labor instead of using machineries due to the tiles delicate condition. Ynchausti further presented evidenced that the tiles
were of low quality and brittled. The tiles were not properly packed. Thus Ynchausti claims that the broken tiles were due
to the negligence of petitioner. The lower court ruled in favor of Ynchausti.
Issue:
1. Was there a presumption of negligence on the part of the carrier.
Held/Ratio:
1. NO. The tiles in question were shipped at the owner’s risk, under the law in this jurisdiction, the carrier is only
liable where the evidence shows that he was guilty of some negligence and that the damages claimed were the
result of such negligence.
The law upon that question in this jurisdiction is found in articles 361 and 362 of the Commercial Code.
Article 361 provides:
ART. 361. Merchandise shall be transported at the risk and venture of the shipper, if
the contrary be not expressly stipulated.
Therefore, all damages and impairment, suffered by the goods in transportation by
reason of accident,force majeure, or by virtue of the nature or defect of the articles,
shall be for the account and risk of the shipper. The proof of these accidents is
incumbent upon the carrier.
Article 362 provides:
ART. 362. The carrier, however, shall be liable for the losses and damages arising from the
causes mentioned in the foregoing article, if it be proved against him that they occurred on
account of his negligence or because he did not take the precautions usually adopted by careful
persons, unless the shipper committed fraud in the bill of lading stating that the goods were of a
class or quality different from what they really were. . . .
Under the provisions of article 361 the defendant, in order to free itself from liability, was only obliged to prove
that the damages suffered by the goods were “by virtue of the nature or defect of the articles.” Under the
provisions of article 362 the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages
to the goods by virtue of their nature, occurred on account of its negligence or because the defendant did not take
the precaution usually adopted by careful persons.

85 - Filipro v. Manila Railroad (1980)**

Facts:
7 shipments of goods consigned to the plaintiff were discharged at Manila Port into the Manila Port Service’s
Custody. Filpro filed a provisional claim and a formal claim for every shipment, except the 7th one. Since no action was
taken by Manila Railroad, Filpro filed a case in the CFI for the recovery of the sum of P6,885.39 representing the total
value of the losses and damages to the several shipments consigned to it, unrealized profits, and attorney’s fees.
Under the management contract of the parties, the contractor (arrastre operator) shall be relieved and released of
any and all liability for loss, damage, misdelivery, and/or non-delivery of goods, unless suit in the court of proper
jurisdiction is brought within 1 year from the date of discharge of the goods or from the date when the claim for the value
of such goods has been rejected or denied by the contractor within 15 days from the date of discharge of the last package
from the carrying vessel.
Manila Railroad claims that the period for filing the complaint should be computed solely from the date of
discharge of the goods from the vessel inasmuch as the claims made have not been expressly rejected or denied by them.
Hence, Manila Railroad claims that prescription has set in. CFI ruled in favor of Filpro.
Issue:
1. Whether Filpro had complied with the provisions of the mentioned stipulation of the management contract in the
filing of its claims?
Held/Ratio:
1. Yes. Under the contract, the plaintiff has 2 periods within which to file its action – (a) 1 year from the date of
discharge of the goods and (B) 1 year from the rejection or denial of its claim for the value thereof. Defendants
cannot, by not acting on plaintiff’s claims, deprive the plaintiff of one of these alternatives.
The last package of each of the seven shipments was discharged from its respective carrying vessel in the
following order:
1st shipment - July 27, 1962
2nd shipment - August 9,1962
3rd shipment - September 4, 1962
4th shipment - September 5, 1962
5th the shipment - September 9, 1962
6th shipment - September 9, 1962
7th shipment - October 4, 1962
Since the arrastre operator did not act on the provisional and formal claims of the plaintiff, he shall be
deemed to have denied the importer’s claim upon the expiration of 1 year from the date when the last
package was discharged from the carrying vessel. Therefore, with respect to the first shipment, the arrastre
operator is deemed to have rejected the claim of the plaintiff on July 27, 1963, the second shipment on August 9,
1963, the third shipment on September 4, 1963, the fourth shipment on September 5, 1963, the fifth shipment on
September 9, 1963, the sixth shipment on September 9, 1963, and the seventh shipment on October 4, 1963.
These dates should then be considered as the starting point in reckoning the one (1) year prescriptive
period within which the plaintiff should file the court action. Since the complaint was filed on September
14, 1963, the same should be considered to have been seasonably filed.
There is also no need for the claim to state the value of the goods, considering that the management contract did
not require such. Besides, a provisional claim may be sufficient even if the value of the goods involved were
not stated therein, provided it describes said goods sufficiently to permit its identification by the operator.

Shell Chemical v. Manila Port (1976)* (see Digest #82)
86 - Philippine Charter Insurance Corporation v. ChemOil Lighterage Corporation (2005)**

Doctrines:
• The carrier must deliver the goods in the same condition and quantity in which they were received, according to
the Bill of Lading.
• The claim period in Art. 366 of the Code of Commerce is mandatory.
• Claims not made within the period provided therein (if the defect is apparent, immediately upon receipt; if the
defect is hidden, then within 24 hours after receipt) are forever barred.
• The claim is a condition precedent to filing a case in court, which must be done within one year from the denial of
the claim (contrast this with shipments under the COGSA, wherein filing the claim is not mandatory).
Facts:
The shipper, Samkyung Chemical Company, Ltd., agreed to ship from Korea 62.02 metric tons of Dioctyl
Phthalate (DOP), a clear liquid chemical, to the consignee, Plastic Groups Philippines, Inc. (PGP). The contract involved
Samkyung’s ship, the MV Tachibana, unloading the cargo to Tanker Barge LB-1011, a ship owned by the carrier,
Chemoil Lighterage Corporation. ChemOil was then obligated to transport the cargo to the Del Pan Bridge in Pasig,
unload the same into trucks (also owned by ChemOil), and deliver the same to the storage plant of the consignee, PGP.
The cargo was insured by Philippine Charter Insurance Corporation (PCIC).
When PGP received the DOP they inspected the cargo and found that the liquid, which should have been clear,
was now a color between yellow and amber, indicating that the shipment was contaminated. Further inspection showed
that this was because the covers of the trucks had loosened. PGP filed an insurance claim with PCIC, and the latter paid
PGP the value of the shipment, P5,000,000.00.
The insurance company then filed an action against ChemOil. The respondent alleged that before the DOP was
loaded it was inspected and found the same clean, dry, and fit for loading. The entire loading and unloading of the
shipment were also done under the control and supervision of PGP’s surveyor/representative. The RTC found for the
plaintiff.
On appeal to the CA, ChemOil raised the defense that the consignee, PGP, had not filed any notice, claim or
protest as required and within the periods provided in Art. 366 of the Code of Commerce. ChemOil asserted that a
telephone call which was supposedly made by a certain Alfred Chan, an employee of PGP, to one of the Vice Presidents
of the respondent, informing the latter of the discoloration, is not the notice required by Article 366 of the Code of
Commerce. The CA reversed the RTC and exonerated ChemOil.
Issues:
1. W/N the carrier must deliver goods in the same condition as received.
2. W/N the giving of a notice of claim is a condition precedent for a right of action in court under the Code of
Commerce.
Held/Ratio:
1. In this case, it was shown that the DOP was inspected before it was loaded in ChemOil’s ship, the Tanker Barge
LB-1011. After delivery, inspection showed that the cargo was discolored. A carrier must deliver the goods in the
same condition and quantity in which they were received. ChemOil failed to do so in this case.
2. However, the SC upheld the CA and exonerated ChemOil from liability. The SC found it unnecessary to decide
whether or not the notice given by PGP’s employee to ChemOil’s Vice President was sufficient, since PCIP failed
to prove that a notice of claim was given within the periods required by Art. 366 of the Code of Commerce. There
was no showing in the RTC or the CA that PCIP had done the same.

The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent
to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee
must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can
accrue in favor of the former.
The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to
compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages
suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of
delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the
nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties.
The SC upheld the CA and exonerated ChemOil.
Sweet Lines v. CA (1962)* (see Digest #80)

87 - Loadstar Shipping v. CA (1999)

Facts:
LOADSTAR received on board its M/V “Cherokee” goods for shipment. The goods, amounting to P6M, were
insured for the same amount with MIC against various risks including “TOTAL LOSS BY TOTAL LOSS OF THE
VESSEL.” The vessel, in turn, was insured by Prudential Guarantee & Assurance, Inc. for P4M.
On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off
Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which,
however, ignored the same. As the insurer, MIC paid P6M to the insured in full settlement of its claim, and the latter
executed a subrogation receipt therefor.
MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault
and negligence of LOADSTAR and its employees. LOADSTAR denied any liability for the loss of the shipper’s goods
and claimed that the sinking of its vessel was due to force majeure.
Issues:
1. Whether the vessel was a private carrier
2. Whether Loadstar was presumed to be negligent
Held/Ratio:
1. No. The singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufficient to
convert the vessel into a private carrier.
While it is true that the vessel had on board only the cargo of wood products for delivery to one consignee, it was
also carrying passengers as part of its regular business. Moreover, the bills of lading in this case made no mention
of any charter party but only a statement that the vessel was a “general cargo carrier.” Neither was there any
“special arrangement” between LOADSTAR and the shipper regarding the shipment of the cargo.
2. Yes. The M/V “Cherokee” was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel
was not even sufficiently manned at the time. “For a vessel to be seaworthy, it must be adequately equipped for
the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier
to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear reach of its duty
prescribed in Article 1755 of the Civil Code.”
The doctrine of limited liability does not apply where there was negligence on the part of the vessel owner or
agent. LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its
vessel to sail despite knowledge of an approaching typhoon. Since it was remiss in the performance of its duties,
LOADSTAR cannot hide behind the “limited liability” doctrine to escape responsibility for the loss of the vessel
and its cargo.

88 - Philamgen v. Sweet Lines (1992)

S.C.I. Line, a foreign common carrier, took on board 2 consignments of cargoes for shipment to Manila and later
for transshipment to Davao City. It consists of bags of Low Density Polyethylene. These were insured by Tagum Plastics,
Inc. with Philamgen. The vessel arrived in Manila and the goods were transferred to the vessel owned by an interisland
carrier. However, survey showed shortages, damages and losses. Some bags were missing, torn, fully/partially emptied, or
contaminated. Philamgen and Tagum Plastics, Inc. filed a maritime suit against Sweet Lines, Inc. (SLI) and Davao
Veterans Arrastre and Port Services, Inc. (DVAPSI). They seek to recover the cost of lost or damaged shipment plus
exemplary damages, attorney’s fees, and costs due to negligence. Philamgen and Tagum Plastics failed to pinpoint
liability on any of the original defendants and in this seemingly wild goose-chase, they cannot quite put their finger down
on when, where, how and under whose responsibility the loss or damage probably occurred. Neither did nor could the trial
court, much less the Court of Appeals, precisely establish the stage in the course of the shipment when the goods were
lost, destroyed or damaged. What can only be inferred from the factual findings of the trial court is that by the time the
cargo was discharged to DVAPSI, loss or damage had already occurred and that the same could not have possibly
occurred while the same was in the custody of DVAPSI.

89 - Aboitiz Shipping v. Insurance Company of North America (2008)**

Facts:
• June 20, 1993: MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS)
procured an “all-risk” marine insurance policy from ICNA UK Limited of London for wooden work tools and
workbenches purchased by consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon
Lahug, Cebu City.
• July 26, 1993: the cargo was received by Aboitiz Shipping Corporation (Aboitiz) through its duly authorized
booking representative, Aboitiz Transport System
• August 1, 1993: container van was loaded on board MV Super Concarrier I
o The vessel left Manila en route to Cebu City
• August 3, 1993: shipment arrived in Cebu City
• August 5, 1993: Stripping Report, checker noted that the crates were slightly broken or cracked at the bottom
• August 11, 1993: cargo was withdrawn by the representative of the consignee, Science Teaching Improvement
Project (STIP) and delivered to Don Bosco Technical High School, Punta Princesa, Cebu City
• August 13, 1993: Mayo B. Perez, Head of Aboitiz, received a call from the receiver Mr. Bernhard Willig
that the cargo sustained water damage so he checked the other cargo but they were dry
In a letter dated August 15, 1993, Willig informed Aboitiz that the damage was caused by water entering through
the broken bottom parts of the crate. Consignee filed a claim against ICNA. CAC reported to ICNA that the shipment was
placed outside the warehouse when it was delivered on July 26, 1993 and it was only on July 31, 1993 when the shipment
was stuffed inside another container van for shipment to Cebu. Weather report shows that the heavy rains on July 28 and
29, 1993 caused the damages. Aboitiz refused to settle the claim.
ICNA paid the amount of P280,176.92 to consignee and a subrogation receipt was duly signed by Willig. ICNA
then advised Aboitiz of the receipt signed in its favor but received no reply so it filed for collection at the RTC.
RTC: against ICNA - subrogation Form is self-serving and has no probative value since Wellig was not presented
to the witness stand
CA: reversed RTC ruling - right of subrogation accrues simply upon payment by the insurance company of the
insurance claim even assuming that it is an unlicensed foreign corporation
Issues:
1. Is respondent ICNA the real party-in-interest that possesses the right of subrogation to claim reimbursement from
petitioner Aboitiz?
2. Was there a timely filing of the notice of claim as required under Article 366 of the Code of Commerce?
3. If so, can petitioner be held liable on the claim for damages?
Held/Ratio:
1. YES. While it was the ICNA UK Limited which issued the subject marine policy, the present suit was filed by the
said company’s authorized agent in Manila. It was the domestic corporation that brought the suit and not the
foreign company. Its authority is expressly provided for in the open policy which includes the ICNA office in the
Philippines as one of the foreign company’s agents.
2. YES. Stipulations requiring notice of loss or claim for damage as a condition precedent to the right of recovery
from a carrier must be given a reasonable and practical construction, adapted to the circumstances of the case
under adjudication, and their application is limited to cases falling fairly within their object and purpose.
Bernhard Willig, the representative of consignee who received the shipment, relayed the information that the
delivered goods were discovered to have sustained water damage to no less than the Claims Head of petitioner,
Mayo B. Perez. Immediately, Perez was able to investigate the claims himself and he confirmed that the goods
were, indeed, already corroded.
Provisions specifying a time to give notice of damage to common carriers are ordinarily to be given a reasonable
and practical, rather than a strict, construction. We give due consideration to the fact that the final destination of
the damaged cargo was a school institution where authorities are bound by rules and regulations governing their
actions. Understandably, when the goods were delivered, the necessary clearance had to be made before the
package was opened. Upon opening and discovery of the damaged condition of the goods, a report to this effect
had to pass through the proper channels before it could be finalized and endorsed by the institution to the claims
department of the shipping company.
The call to petitioner was made two days from delivery, a reasonable period considering that the goods could
not have corroded instantly overnight such that it could only have sustained the damage during transit. Moreover,
petitioner was able to immediately inspect the damage while the matter was still fresh. In so doing, the main
objective of the prescribed time period was fulfilled. Thus, there was substantial compliance with the notice
requirement in this case.
3. YES. The bill of lading issued by petitioner on July 31, 1993 contains the notation “grounded outside
warehouse,” suggesting that from July 26 to 31, the goods were kept outside the warehouse. And since evidence
showed that rain fell over Manila during the same period, We can conclude that this was when the shipment
sustained water damage.
To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that
some other party could be responsible for the damage. It must prove that it used “all reasonable means to ascertain
the nature and characteristic of the goods tendered for transport and that it exercised due care in handling them.” It
failed to show that it should be exempted from liability.

90 - Tan Pho v. Hassamal (1939)*

Facts:
Enrique Aldeguer purchased on credit from Hassamal Dalamal certain merchandise valued at P583.60. Hassamal
Dalamal, the plaintiff and herein respondent, shipped said merchandise on the ship of Tan Pho, defendant and herein
petitioner, and endorsed the bill of lading to the Chartered Bank of China, India & Australia, which, in turn, endorsed it to
the Philippines National Bank. The said bill of lading was made to order and contains the initials of Enrique Aldeguer, “E.
A.” Upon arrival of the goods in Sorsogon, the agent of the defendant-petitioner delivered the merchandise to Enrique
Aldeguer who presented the invoice and signed a receipt. The plaintiff-respondent, upon learning that Aldeguer had
received the merchandise, made him sign a forty-day draft for the value of said merchandise. The Philippine National
Bank, with the consent of the plaintiff-respondent, gave Aldeguer an extension of ten days to pay the amount of the
merchandise in question, and upon the expiration of the period, the plaintiff-respondent required Aldeguer to pay the
merchandise. Unable to get such payment, the plaintiff-respondent brought suit after the expiration of 174 days from the
delivery of the merchandise to Aldeguer.
The bill of lading signed by the parties provides in part as follows:
SECTION. 7. . . . Claim for nondelivery of shipment must be presented in writing to the carrier within
thirty days from the date of accrual. Suits based upon claims arising from shortage, damage, or
nondelivery of shipment shall be instituted within sixty days from the date of accrual of the right of
action. Failure to make claims, to institute judicial proceedings as herein provided shall constitute a
waiver of claim or right of action.
The court decided in favor of the defendant and against the plaintiff upon the theory that the delivery of the goods
to Aldeguer constitutes nondelivery, wherefore, the claim not having been filed within thirty days nor the action instituted
within sixty days, the plaintiff-respondent waived his claim or right of action against the defendant. CA reversed.
Issue:
1. Whether the delivery of certain merchandise by the carrier to an agent without presenting the bill of lading
constitutes misdelivery or nondelivery.
Held/Ratio:
1. MISDELIVERY, not nondelivery. Considering that the bill of lading covering the goods in question has been
made to order, which means that said goods cannot be delivered without previous payment of the value thereof, it
is evident that, the said goods having been delivered to Aldeguer without paying the price of the same, these facts
constitute misdelivery and not nondelivery, because there was in fact delivery of merchandise. Under the facts,
the defendant-petitioner should not have delivered the goods to Aldeguer but to the Philippine National Bank.
Having made the delivery to Aldeguer, the delivery is a case of misdelivery. If the goods have been delivered, it
cannot at the same time be said that they have not been delivered.
According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was
under a duty not to deliver the merchandise mentioned in the bill of lading except upon presentation of the bill of
lading duly endorsed by the shipper. Hence, the defendant-petitioner Tan Pho having delivered the goods to
Enrique Aldeguer without the presentation by the latter of the bill of lading duly endorsed to him by the shipper,
the said defendant made a misdelivery and violated the bill of lading, because his duty was not only to transport
the goods entrusted to him safely, but to deliver them to the person indicated in the bill of lading.
In conclusion, inasmuch as the action commenced by the plaintiff, the herein respondent, is not founded upon
nondelivery of the merchandise, but upon the misdelivery thereof to Aldeguer, the period of limitation stipulated
in section 7 of the bill of lading is without application.

91 - Arrastre Services v. Mendoza (1986)

Facts:
Invoking the constitutional rights to due process and non-impairment of contracts, these consolidated petitions
seek to permanently restrain Philippine Ports Authority from taking over the arrastre and stevedoring operations in the
port of Tacloban, Leyte.
In 1972, the government created a committee to study several problems in various ports in the Philippines, among
them the issues on inefficiency and the need for integration and intense streamlining. Acting on the eventual
recommendation of this committee, the Bureau of Customs issued a resolution providing for the merger of all existing
cargo-handlers in ports, including that in Tacloban. From the original 36 independent contractors, the same merged to
form 4 corporations. Eventually, these 4 agreed and formed just one contractor (LIPSI). Subsequently, the newly formed
PPA granted LIPSI a temporary license to operate arrastre and stevedoring services, but also imposed a 10% tax on
everything. This imposition of tax was questioned but that is not the point.
Barely a year after the license was granted; PPA revoked the same, citing a number of violations of the temporary
permit. PPA then proceeded to take over the entire arrastre and stevedoring activities in the port. A multitude of suits from
all sorts of parties (which are mostly the independent contractors who were forced to merge) followed.
Basically, what most of the contractors were alleging is that (1) the PPA cannot simply walk over them and
declare that the entire operation thing is theirs; and (2) letting the PPA take over will lead to multiple violations of existing
contracts between the contractors and their clients.
Issues:
1. W/N the takeover by the PPA over the arrastre and stevedoring operations in the port of Tacloban was a valid
exercise of police power, and does not violate the constitutional right to non-impairment of contracts.
2. W/N the takeover by the PPA constitutes a violation of due process.
Held/Ratio:
1. Yes. The State in the exercise of its police power through its agency, the PPA, has the power to revoke the
temporary permits of petitioners, assuming the existence of valid temporary permits, and take over the operations
of the port of Tacloban whenever the need to promote the public interest and welfare both if the stevedoring
industry and the workers therein justifies such take over. Neither can the contractors argue that their right to non-
impairment of contract had been violated. After all, well settled is the subservience of the contract clause in the
constitution to police power enacting public regulations intended for the general welfare of the community.
2. No. The records show that only LIPSI has a temporary permit issued by PPA. The rest of the petitioners (the
contractors) where either merely allowed or tolerated to operate in the port of Tacloban. However, even on the
assumption that tall of them were able to secure temporary permits from PPA, still, this does not vest any property
right on them and hence, petitioners cannot allege a violation of their right to non-deprivation of property without
due process of law.

92 - New Zealand v. Joy (1955)**

Facts:
The ship “Jupiter”, on her voyage No. 149, received on board at Carangian, Samar, in good order and condition,
107 bundles of first class loose weight hemp weighing 8,273 kilos, of 130.80 piculs, valued at P6,736.20, from Lee Teh &
Co., Inc., for transportation and delivery to Manila, under a bill of lading issued by the carrier to the shipper. The ship was
owned by Adriano Choa Joy, doing business under the name of South Sea Shipping Line, while the cargo was shipped by
the branch office of Lee Teh & Co., Inc. at Carangian, Samar, for transportation and delivery to its main office at Manila.
The cargo failed to arrive in Manila because the vessel ran aground while entering the Laoang Bay, Samar due to
the negligence of its captain, Jose Molina, as found out by the Marine Board of Inquiry when an investigation was
conducted. The captain was suspended from office for a period of three months. Of the cargo, only 7,590 kilos, or 120
piculs of hemp, were saved and because of their damaged condition, they were sold for the sum of P2,040, the consignor
having spent P500 for their salvage, thereby causing Lee Teh & Co., Inc. losses in the sum of P5,196.20.
The cargo was insured by New Zealand Insurance Co., Ltd., which paid the losses incurred to the shipper.
However, the carrier refused to reimburse the insurer despite demands which prompted the latter to file before the CFI of
Manila an action for the recovery of the sum of P5,196.20.
After the parties have their presented evidence, the CFI found that while the shipper had suffered damages
because of the inability of the carrier to transport the cargo as agreed upon, however, the liability of the carrier did not
attach because of the failure of the shipper or of the consignee to file its claim for damages within 24 hours from receipt of
the cargo as required by law. The case was dismissed, hence, this appeal directly to the SC.
Issue:
1. Whether or not Lee Teh & Co., Inc, of Manila, as consignee, or Lee Teh & Co., Inc. of Catarman, Samar, as
consignor, should have filed its claim for damages to the cargo with the shipping company, within twenty four
hours from the date the said cargo was salvaged by the consignor, in accordance with Article 366 of the Code of
Commerce for this action to prosper.
Held/Ratio:
1. No. Article 366 of the Code of Commerce, which was applied by the court, provides:
Within twenty-four hours following the receipt of the merchandise, the claim against the carrier
for damage or average which may be found therein upon opening the packages, may be made,
provided that the indications of the damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which case the claim shall be admitted only
at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim
shall be admitted against the carrier with regard to the condition in which the goods transported
were delivered.
The Court held that there must be delivery of the merchandise by the carrier to the consignee at the place of
destination for said article to apply. In the instant case, the consignor is the branch office of Lee Teh & Co., Inc.,
at Catarman, Samar, which placed the cargo on board the ship Jupiter, and the consignee, its main office at
Manila. The lower court found that the cargo never reached Manila, its destination, nor was it ever delivered to
the consignee, the office of the shipper in Manila. Such being the case, it follows that the aforesaid article 366
does not have application because the cargo was never received by the consignee. Moreover, under the bill of
lading issued by the carrier (Exhibit C), it was the letter’s undertaking to bring the cargo to its destination —
Manila — and deliver it to consignee, which undertaking was never complied with. The carrier, therefore,
breached its contract, and, as such, it forfeited its right to invoke in its favor the conditions required by article 366.
The SC commented:

Article 366 of the Commercial Code is limited to cases of claims for damages to goods
actually turned over by the carrier and received by the consignee, whether those damages be
apparent from an examination of the packages in which the goods are delivered, or of such
character that the nature and extend of the damage is not apparent until the packages are opened
and the contents examined. Clearly it has no application in cases wherein the goods entrusted to
the carrier are not delivered by the carrier to the consignee. In such cases there can be no question
of a claim for damages suffered by the goods while in transport, since the claim for damages
arises exclusively out of the failure to make delivery. . . .
We are of opinion, however, that the necessity for making the claim in accordance with that
article did not arise if, as it is alleged, these 1,022 packages, of sugar were recovered from the
wreck by the plaintiff, himself, in an effort, by his own activities, to save his property from total
loss. The measures to be taken under the terms of Article 367 of the Code when the parties are
unable to arrive at an amicable settlement of claims for damages set up in accordance with Article
366, quite clearly indicate that the necessity for the presentation of claims under this article arises
only in those cases wherein the carrier makes delivery and the consignee receives the goods in
pursuance of the terms of the contract.
It is true that in the instant case there is some disagreement as to whether the salvage of the portion of the cargo
that was saved was due to the efforts of the carrier itself or to the combined efforts of the latter and the shipper as
a result of which the salvaged cargo was placed in possession of the shipper who sold it and deducted its proceeds
from the liability of the carrier. But this discrepancy would seem to be immaterial because the law as well as the
contract contemplates delivery of the cargo to the consignee at its port of destination in order that the benefit of
the law may be availed of.
The Court ordered Choa Joy to pay New Zealand the sum of P5,196.20, with legal interest thereon from the filing
of the complaint.

93 - Lufthansa v. CA (1994)**
Facts:
Tirso Antiporda was an associate director of Central Bank of the Phil and a consultant of ADB, World Bank and
the UNDP. He was contracted by SGV to be its financial specialist for a project in Africa. In a letter addressed to
Antiporda from SGV, he would render his services to Malawi Bank as an independent contractor for which he would be
paid $9,167 for a 50-day period.
Lufthansa through SGV issued a ticket for Antiporda’s confirmed flights to Africa. Antiporda took the Lufthansa
flight to Singapore from where he proceeded to Bombay on board the same airline. He arrived in Bombay as scheduled
waited at the transit area for his connecting flight to Nairobi which was, per schedule given him by Lufthansa, to leave
Bombay in the morning of that day.
Gerald Matias, Lufthansa’s traffic officer, informed him that his seat in Air Kenya Flight 203 to Nairobi had been
given to a very important person of Bombay who was attending a religious function in Nairobi. Antiporda protested
stressing that he had an importante professional engagement in Malawi. However, Air Kenya 203 left without him on
board.
Antiporda arrived in Malawi after 2 days. Antiporday wrote to the General Manager of Lufthansa in Manila
demanding Php 1-M in damages.
Lufthansa allege that its liability to any passenger is limited to occurrences in its own line. Thus, its liability to
him is limited to the extent that it had transported him from Manila to Singapore and from singapore to Bombay; that
therefrom, responsibility for the performance of the contract of carriage is assumed by the succeeding carriers tasked to
transport him for the remaining leg of his trip because at that stage, its contract of carriage with Antiporda ceases, with
Lufthansa acting, no longer as the principal in the contract of carriage, but merely as a ticket-issuing agent for the other
carriers.
Issue:
1. W/N Lufthansa German Airlines which issued a confirmed Lufthansa ticket to private respondent Antiporda
covering a five-leg trip aboard different airlines should be held liable for damages occasioned by the “bumping-
off” of Antiporda by Air Kenya, one of the airlines contracted to carry him to a particular destination of the five-
leg trip.
Held/Ratio:
1. Yes, Lufthansa Airlines should be held liable for damages. Antiporda was issued a confirmed Lufthansa ticket all
throughout the five-leg trip. The fourth paragraph of the “Conditions of Contract” stipulated in the ticket
indubitably showed that the contract of carriage was considered as one of continuous air transportation from
Manila to Blantyre, Malawi, thus:
4. x x x carriage to be performed hereunder by several successive carriers is regarded as a single
operation.
In light of the stipulations expressly specified in the ticket defining the true nature of its contract of carriage with
Antiporda, Lufthansa cannot claim that its liability thereon ceased at Bombay Airport and thence, shifted to the
various carriers that assumed the the actual task of transporting Antiporda.
Lufthansa is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of
those instances when actual carriage was to be performed by various carriers. The issuance of a confirmed ticket
serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air Kenya would honor
his ticket; assure him of a space therein and transport him on a particular segment of his trip.
Moral Damages:
Bad faith attended the performance of the contract of carriage, for even while Antiporda was in Bombay,
Representatives of Lufthansa already tried to evade liability by claiming that the contract of carriage between

Lufthansa and Antiporda ceased at Bombay airport, in disregard of the fact that Antiporda was holding a
Lufthansa ticket for the entire five-leg trip.
Exemplary Damages:
Lufthansa, through its representatives in Bombay, acted in a reckless and malevolent manner in dealing with
Antiporda. Antiporda was stranded in the Bombay Airport for 32 hours. When he insisted on taking his scheduled
flight to Nairobi, Gerard Matias got angry and threw the ticket and passport on plaintiff’s lap and was ordered to
go to the basement with his heavy luggages for no reason at all. Antiporda requested accommodation but Matias
ignored it and just left. Plaintiff had to stay in the transit area and could not sleep for fear that his luggages might
be lost. Everytime he went to the toilet, he had to drag with him his luggages. Lufthansa displayed utter lack of
concern of its obligation to the Antiporda and left him alone in his misery at the Bombay airport.”

94 - China Air Lines v. CA (1990)**

Facts:
(This is a consolidation of 2 petitions; one will be called the CAL case and the other PAL case)
Plaintiff Pasibigan the VP and GM of Rentokill purchased a plane ticket from Transaire Travel Agency. The route
of the ticket was Manila-Taipei-Hong Kong-Manila. The agency contacted the Manila Hotel branch of PAL which was
then the ticketing agent of CAL. PAL thru its ticketing agent Espiritu issued a PAL ticket for the flight and the passenger
was booked in CAL airplane which was set to depart, according to the ticket, at 520pm. When the plaintiff arrived at the
airport one hour before 520pm he was told that the flight departed at 1020am of that day. PAL employees at the airport
made arrangement for the plaintiff to leave for Taipei the next day. Subsequently, plaintiff made a demand from PAL for
moral damages in the amount of 125K.
Unable to make a compromise with CAL and PAL, plaintiff filed an action for moral damages in court. PAL
alleged in its Answer that departure time indicated by their ticketing agent Espiritu was furnished and confirmed by CAL
and that the latter did not provide them with a revised schedule and made a cross claim against CAL. CAL on the other
hand said that long before the incident they already have a revised schedule and that this was approved by the Civil
Aviation Board and that PAL was duly notified. CAL also made a cross claim against PAL.
The trial court attributed the error to the employee of PAL and absolved CAL. It also deleted the prayed for moral
damages and instead awarded plaintiff exemplary damages in the amount of 20K. On appeal, the CA modified the
damages from exemplary to nominal damages in the amount of 20K. The CA said that the liability lied with ticketing
agent Espiritu and since he is an employee of PAL, PAL is liable. However, the CA added that PAL being an agent of
CAL then the latter as the principal was directly liable. On appeal to the SC, plaintiff claims in the PAL case that the
breach was based on a contract of transportation (contract of carriage) that was caused by the negligence committed by
PAL/Espritu. CAL argued that they are not liable because there was no employer-employee relationship between CAL
and PAL. In the PAL case, the plaintiff claimed that PAL as an agent was liable. PAL maintains that they were not privy
to the contract and that action should be taken against CAL alone.
Issue:
1. W/N the action was for breach of a contract of transportation (contract of carriage)?
2. W/N CAL was liable to the plaintiff?
Held/Ratio:
1. No. Careful perusal of the complaint filed by the plaintiff would show that the allegation contained therein was a
case for a quasi-delict or tort. The original complaint would show that he alleged that the cause of his not able to
leave on the original departure date was due to the negligent action of the Espiritu as representative of PAL who
acted as ticketing agent of CAL. The SC said that if the plaintiff wanted to maintain action based on breach of
contract of carriage he should have sued CAL alone since PAL was not privy to the contract. The SC pointed out
that the trial court’s factual finding that the party liable was PAL through the action of its employee Espiritu. The
SC concluded that the plaintiff sensing that he could not hold CAL liable in an action for quasi-delict changed his
theory on appeal and claimed that the action against CAL was for breach of contract of carriage. The Court said
that plaintiff would not be allowed to change his theory on appeal as it would be unfair to the defendant who
would have no more opportunity to present evidence on the new theory.
2. No. The defense of PAL and its employee Espiritu was based on the theory that since PAL was an agent of CAL,
the action should be directed at CAL alone. The Court said that the relationship between the two airlines is one of
agency. As a general rule, an agent who duly acts as such is not personally liable to 3rd persons. However there
are exceptions such as where the agent is being sued for damages arising from tort committed by one of its
employees. The Court found that Espiritu is primarily liable for his negligence in the performance of his duty.
When an employee such as Espiritu committed negligent acts, the employer is presumed negligent and solidarily
liable unless he exercises due diligence in the selection and supervision of their employee. PAL failed to
overcome the presumption. As found by the trial court, CAL had revised their schedule and this new schedule was
approved by the Civil Aviation Board and PAL was notified. In fact, records show that PAL has long been using
the revised schedule. As both PAL and Espiritu are solidarily liable, PAL can demand reimbursement from
Espiritu what they paid the plaintiff.
95 - Singapore Air v. Fernandez (2003)

VII. VESSELS AND PERSONS IN MARITIME COMMERCE
96 - Lima v. Lim Chu Kao (1928)

97 - Santiago Lighterage v. CA (2004)** “M/V Christine Gay” South Korea

Facts:
There are three parties to this case.
The first is Santiago Lighterage which is the owner of M/V Christine Gay.
The second is Manuel A. Pelaez, sole proprietor of M.A.P. Trading.
The third is C-Square Consolidated Mines or C-Square, a mining company based in Masinloc, Zambales.
Pelaez entered into a bareboat charter agreement with Santiago Lighterage for M/V Christine Gay. In other
words, Pelaez is the charterer and Santiago Lighterage is the ship owner. Then, Pelaez also entered into another agreement
with C-Square which was then looking for a ship to IMPORT its chromite ores from Zambales to South Korea. The
agreement between Pelaez and C-Square is a one-time voyage charter agreement. Pelaez and C-Square agreed that the
voyage charter agreement shall “automatically be considered rescinded and inoperative if the vessel is found not
seaworthy to undertake a safe voyage to Korea.”
Ultimately, Santiago Lighterage “turned over” the ship M/V Christine Gay to Pelaez in Manila. The new set of
crew members employed by Pelaez, the bareboat charterer, then boarded and took possession of the vessel, and proceeded
to Masinloc, Zambales where the chromite ores of C-Square for shipping to Korea shall be loaded.
During the voyage from Manila to Zambales, the crew observed that a heavy smoke was coming out of the
exhaust. The engine of the vessel was therefore NOT in a good condition. Upon reaching Zambales, the chromite ores
were loaded on the vessel while repairs were made. However, the captain of the ship found the repairs inadequate and
recommended to Pelaez that the vessel may not be able to pursue her voyage to South Korea.
It was decided that the vessel which already carried the chromite ores would just return to Manila. On her way, in
the middle of the sea, the vessel suddenly stopped because the engines stopped.
An investigation of M/V Christine Gay was conducted by the Marina which later issued a report saying that the
vessel was a “dead ship” at the time of the inspection.
Expectedly, C-Square served Pelaez a notice to rescind the voyage charter agreement and demanded damages of
around Php 3M, because the vessel was unseaworthy and C-Square had to contract with other companies to transport the
ores to Korea. A complaint was filed against Pelaez and Pelaez, in turn, filed a third-party complaint against Santiago
Lighterage.
Both the trial court and the appellate court ordered Pelaez to pay C-Square, and Santiago Lighterage to pay
Pelaez. In other words, Santiago Lighterage was adjudged ultimately liable.
Issue:
1. W/N the vessel M/V Christine Gay was seaworthy at the time of the turn over by Santiago Lighterage to Pelaez in
Manila
Held/Ratio:
1. NO. M/V Christine Gay was not seaworthy. Santiago Lighterage failed to fulfill its obligation. It is ultimately
liable to C-Square.
a. The Bareboat Charter Agreement between Santiago Lighterage and Pelaez itself was clear that the “the
OWNER Santiago Ligherage shall before and at the time of delivery exercise due diligence to make the
VESSEL seaworthy.”
Santiago Ligherage contends that the turn-over of the vessel to Pelaez already constituted a FULL
performance of its obligation under the agreement. This is not correct according to the Court.
Under their agreement, the physical transfer of a seaworthy vessel is necessary to satisfy delivery. The
agreement also expressly requires Santiago Lighterage “to make the VESSEL seaworthy” at the time of

delivery. Since Santiago Lighterage did not deliver a seaworthy vessel, it failed to perform its obligation
to Pelaez under the agreement.
b. What is SEAWORTHINESS?
Seaworthiness is a relative term. After the accident, M/V Christine Gay was still able to make voyages
within the Philippines. However, such subsequent voyages in the Philippines do not prove the vessel’s
seaworthiness to withstand a voyage to South Korea.
To be seaworthy, a vessel “must have that degree of fitness which an ordinary, careful and prudent owner
would require his vessel to have at the commencement of her voyage, having regard to all the probable
circumstances of it.” Thus the degree of seaworthiness varies in relation to the contemplated voyage.
Crossing the Atlantic calls for stronger equipment than sailing across the Visayan Sea. It is essential
to consider that once the necessary degree of seaworthiness has been ascertained, this obligation is an
absolute one, i.e. the undertaking is that the vessel actually is seaworthy. It is no excuse that the
shipowner took every possible precaution to make her so, if in fact he failed.
In examining what is meant by seaworthiness we must bear in mind the dual nature of the carrier’s
obligations under a contract of affreightment. To satisfy these duties the vessel must (a) be efficient as an
instrument of transport and (b) as a storehouse for her cargo, or is cargoworthy.
Seaworthiness
Efficient as instrument of transport Cargoworthy
if the vessel’s hull, tackle and machinery if the vessel is sufficiently strong and equipped to carry the
are in a state of good repair particular kind of cargo which she has contracted to carry
if she is sufficiently provided with fuel and and her cargo must be so loaded that it is safe for her to
ballast proceed on her voyage
and is manned by an efficient crew
A mere right given to the charterer to inspect the vessel before loading and to satisfy himself that she was
fit for the contracted cargo does not free the shipowner from his obligation to provide a cargoworthy ship.
c. Even if Santiago Lighterage was able to present a lot of certifications as to the seaworthiness of the ship,
issued by the proper government authorities, these documents are only prima facie evidence of
seaworthiness. The testimonies and reports of the ship’s captain and engineer are more convincing.
Examples of their findings were
1. The hull on deck line around the accommodations found [to have] plenty [of] holes and heavily rusted.
Seawater entered crew quarters with the possibility to the engine when sea shipping on deck.
Recommended for welding with doubler while loading chromite.
2. Water tight doors with no rubbers to prevent seawater and butterflies/locks not moving.
Reconditioned/greased while loading but no available watertight door rubbers to use.
3. No hatch battens to secure hatch covers/tarpaulins, so seawater cannot enter into the hold.
4. Atop the bridge, Captain’s and Chief Mates’ cabin are leaking when raining.
5. Found plenty of holes at the bow. Vessel not strong or capable to encounter big waves, boisterous winds
and other meteorological elements in high seas, not seaworthy.
6. Ladder steps going up to the bridge are missing and rotten. The Pilot nearly fell down
98 - Atienza v. CA, Marina, Enrico Eulogio (2006)*

Doctrine:
• No authority to operate a vessel can be granted independently of a certificate of ownership and vessel registry.
Facts:
Eduardo Atienza is the general manager of Manila Ace Shipping Lines which in turn, owns M/V Ace-1, a
passenger vessel. Atienza mortgaged M/V Ace-1 to Far East Bank and Trust Co. (FEBTC). Upon default, Enrico Eulogio
settled the loan, effectively buying the mortgaged ship.
After the ship was sold to Eulogio, Atienza still applied for a Certificate of Ownership and Certificate of
Philippine Register with the Philippine Coast Guard in Batangas, seeking to transfer the ship’s homeport from Manila to
Batangas. Later, when some of the administrative functions of the Coast Guard were ceded to the Maritime Industry
Authority (MARINA), Atienza again registered the ship under his name.
Eventually, when it was Eulogio’s turn to register the ship under his name, MARINA discovered the false
representations made by Atienza. It cancelled Atienza’s certificates and authority to operate a vessel.
Atienza appeals.
Issue:
1. W/N Marina properly cancelled Atienza’s registration papers over M/V Ace-1
Held/Ratio:
1. Yes. The findings of MARINA are to be accorded great weight since MARINA is the government agency
entrusted with the regulation of activities coming under its special and technical expertise. The exercise of
administrative discretion is a policy decision and a matter that can best be discharged by it, being the government
agency concerned.
The denial of Atienza’s motion for extension or renewal of his provisional authority to operate the vessel was
correct. It was a logical consequence of MARINA’s cancellation of the certificates of ownership and vessel
registry issued by the Batangas Maritime Regional Office and which was based on petitioner’s misrepresentation.
No authority to operate a vessel can be granted independently of a certificate of ownership and vessel registry.

99 - Aboitiz v. New India (2005)**

Facts:
Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on board a vessel
owned by Franco-Belgian Services, Inc. The cargo was consigned to General Textile, Inc., in Manila and insured by
respondent New India Assurance Company, Ltd. While in Hongkong, the cargo was transferred to M/V P. Aboitiz for
transshipment to Manila. Before departing, the vessel was advised that it was safe to travel to its destination, but while at
sea, the vessel received a report of a typhoon moving within its general path. The vessel changed its course to avoid the
typhoon but it was still at the fringe of the typhoon when its hull leaked and the vessel sank. The captain of M/V P. Aboitiz
filed his “Marine Protest”, stating that the wind force was at 10 to 15 knots at the time the ship foundered and described
the weather as “moderate breeze, small waves, becoming longer, fairly frequent white horses.”
After being informed of the total loss of the vessel and all of its cargoes, General Textile filed a claim with New
India for the amount of its loss, which was paid and the rights was subrogated to the latter. The investigation on the cause
of the sinking showed that there was a flooding of the holds brought about by the vessel’s questionable seaworthiness.
Thus a complaint for damages against Aboitiz, Franco-Belgian Services and the latter’s local agent, F.E. Zuellig, Inc. was
filed, alleging that the proximate cause of the loss of the shipment was the fault or negligence of the master and crew of
the vessel, its unseaworthiness, and the failure of defendants therein to exercise extraordinary diligence in the transport of
the goods.
Franco-Belgian Services and Zuellig claimed that they exercised extraordinary diligence in handling the shipment
while it was in their possession; its vessel was seaworthy; and the proximate cause of the loss of cargo was a fortuitous
event. Aboitiz also raised the same defense that the ship was seaworthy and that the sinking of M/V P. Aboitiz was due to
an unforeseen event and without fault or negligence on its part. It also alleged that in accordance with the real and
hypothecary nature of maritime law, the sinking of M/V P. Aboitiz extinguished its liability on the loss of the cargoes.
The Board of Marine Inquiry (BMI) conducted its own investigation to determine whether the captain and crew
were administratively liable. However, petitioner neither informed respondent nor the trial court of the investigation. The
BMI exonerated the captain and crew of any administrative liability; and declared the vessel seaworthy and concluded that
the sinking was due to the vessel’s exposure to the approaching typhoon.
Issue:
1. Whether the limited liability doctrine is applicable in this case
Held/Ratio:
1. NO. From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to all the circumstances of each case. In the event
of loss, destruction or deterioration of the insured goods, common carriers are responsible, unless they can prove
that the loss, destruction or deterioration was brought about by the causes specified in Article 1734 of the Civil
Code. In all other cases, common carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence. Moreover, where the vessel is found unseaworthy, the
shipowner is also presumed to be negligent since it is tasked with the maintenance of its vessel. An exception to
the limited liability doctrine is when the damage is due to the fault of the shipowner or to the concurrent
negligence of the shipowner and the captain. In which case, the shipowner shall be liable to the full-extent of the
damage.
In the present case, petitioner has the burden of showing that it exercised extraordinary diligence in the transport
of the goods it had on board or that the unseaworthiness of its vessel was not due to its fault or negligence in order
to invoke the limited liability doctrine, however it failed to do so. It initially attributed the sinking to the typhoon
and relied on the BMI findings that it was not at fault. However, both the trial and the appellate courts, in this
case, found that the sinking was not due to the typhoon but to its unseaworthiness and that evidence showed that
the weather was moderate when the vessel sank. It was also noted that the findings of the BMI are not deemed
always binding on the courts.

100 - Western Shipping v. NLRC (1996)*

101 - Caltex v. Sulpicio Lines (1999)**
102 - Switzerland General Insurance Company, Ltd v. Ramirez (1980)

103 - Macondray v. Provident (2004)**

Facts:
On February 16, 1991, at Vancouver, Canada, CANPOTEX SHIPPING SERVICES LIMITED INC., (SHIPPER),
shipped and loaded on board the vessel M/V Trade Carrier, 5000 metric tons of Standard Grade Muriate of Potash for
delivery at the port of Toledo City, Cebu, in favor of ATLAS FERTILIZER CORPORATION, (CONSIGNEE). The
shipments were insured with Provident against all risks.
When the shipment arrived, CONSIGNEE discovered that the shipment sustained losses/shortage of 476.140
metric tons valued at P1,657,700.95. Provident paid the losses. Formal claims were then filed with Trade & Transport (the
alleged operator of the vessel M/V Trade Carrier who transported the shipment) and Macondray but they refused and
failed to settle the same. The summons was not served to Trade & Transport because it was alleged that it was no longer
connected with Macondray.
MACONDRAY filed an Answer, denying liability over the losses, alleging that they have no absolute relation
with TRADE AND TRANSPORT; and that MACONDRAY is the local representative of the SHIPPER (the charterer of
M/V TRADE CARRIER and not a party to the case); and that it has no control over the acts of the captain and crew of the
Carrier and cannot be held responsible for any damage arising from the fault or negligence of said captain and crew;
Witness Ricardo de la Cruz testified as Supercargo of MACONDRAY, and attested that MACONDRAY was not
an agent of TRADE AND TRANSPORT; that his functions as Supercargo was to prepare a notice of readiness, statement
of facts, sailing notice and custom’s clearance in order to attend to the formalities and the need of the vessel; that
MACONDRAY is performing functions in behalf of CANPOTEX and was appointed as local agent of the vessel, which
duty includes arrangement of the entrance and clearance of the vessel.
The CA affirmed the trial court’s finding that Macondray was not the agent of Trade and Transport. The appellate
court ruled, however, that Macondray could still be held liable for the shortages of the shipment, because the latter was the
ship agent of Canpotex Shipping Services Ltd. -- the shipper and charterer of the vessel M/V Trade Carrier.
Issues:
1. Whether Macondray is a ship agent and should be held liable.
2. Whether the decision of the Court of Appeals has attained finality.
Held/Ratio:
1. Yes. The SC first said that the factual findings of the CA, when not in conflict with the findings of the TC, are not
to be disturbed and only questions of law may be raised in an appeal by certiorari. The SC then said that
Macondray was not really the agent of Trade and Transport. However, Macondray can still be the ship agent of
the vessel M/V Trade Carrier.
Article 586 of the Code of Commerce states that a ship agent is “the person entrusted with provisioning or
representing the vessel in the port in which it may be found.”
Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, Macondray will be
considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or
represents the vessel.
The trial court found that Macondray was appointed as local agent of the vessel, which duty includes arrangement
for the entrance and clearance of the vessel. Further, the CA found that Macondray represented the vessel by
preparing the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and
Custom’s Clearance. Macondray’s employees were present at the port of destination one day before the arrival of
the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo.
Moreover, Mr. de la Cruz, the representative of Macondray, also prepared for the needs of the vessel, like money,
provision, water and fuel. These acts all point to the conclusion that it was Macondray that represented the vessel
in the Port of Manila and was the ship agent within the meaning and context of Article 586 of the Code of
Commerce.

As ship agent, it may be held civilly liable in certain instances. Macondray does not dispute the liabilities of the
ship agent for the loss/shortage of 476.140 metric tons of the cargo. Hence, the SC just affirmed the CA’s
decision that Macondray, as ship agent, is liable to Provident for the losses sustained by the subject shipment.
2. Yes. Macondray claims that it picked up the February 28, 2002 Decision of the CA on May 14, 2002, after
receiving the postal notice the day before. It further attributes gross negligence to its previous counsel for not
informing the CA of his change of address. It thus contends that notice of the assailed Decision given to the
previous counsel cannot be considered as notice to petitioner. The SC ruled that the CA’s decision had become
final and unappealable since service of the said Decision was made on Macondray’s counsels of record on March
6, 2002. That copy of the Decision was, however, returned to the sender for the reason that the addressee had
moved out. If counsel moves to another address without informing the court, such omission or neglect is
inexcusable and will not stay the finality of the decision. The court cannot be expected to take judicial notice of
the new address of a lawyer who has moved or to ascertain on its own whether or not the counsel of record has
been changed and who the new counsel could possibly be or where he probably resides or holds office. The
negligence of counsel binds the client.
Aboitiz v. New India (2005) (see Digest #99)

104 - NDC v. CA (1988)*

Facts:
In accordance with a memorandum entered into between defendants National Development Company (NDC) and
Maritime Company of the Philippines (MCP), NDC as the first preferred mortgagee of three ocean-going vessels
including one the name “Doña Nati” appointed MCP as its agent to manage and operate said vessels in its behalf. E.
Phillipp Corporation loaded on board the vessel “Doña Nati” at San Francisco, California, a total of 1,200 bales of
American raw cotton consigned to Manila Banking Corporation, Manila and the People’s Bank and Trust Company acting
for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation. The vessel
figured in a collision at Ise Bay, Japan with a Japanese vessel as a result of which 550 bales of aforesaid cargo were lost
and/or destroyed. The damage and lost cargo was worth P344,977.86 which amount, the Development Insurance and
Surety Corporation as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly
endorsed. Also considered totally lost were the shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila
Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was P19,938.00 which the insurer paid to
Guilcon as holder of the duly endorsed bill of lading. Thus, the insurer has paid the total amount of P364,915.86 to the
consignees or their successors-in-interest, for the said lost or damaged cargoes. Insurer filed this complaint to recover said
amount from the defendants-NDC and MCP as owner and ship agent respectively, of the said Dona Nati vessel.
Issue:
1. Whether the law that should govern the loss or destruction of the goods due to collision of vessels outside
Philippine waters is the Carriage of Goods by Sea Act (COGSA), the Civil Code or the Code of Commerce.
2. Whether or not MCP can be held solidarily liable with NDC considering it is merely the general managing
agent or manager and operator of Dona Nati, and NOT a ship agent (Relevant Issue)
Held/Ratio:
1. The Civil Code and the Code of Commerce. In Eastern Shipping Lines Inc. v. IAC, 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.
2. MCP is a ship agent and can be held solidarily liable with NDC. As a general managing agent, MCP claims it can
only be liable if it acted in excess of its authority. But as found by both lower courts, the Memorandum of
Agreement between NDC and MCP uses terms broad enough to include the concept of ship agent in Maritime
Law. MCP was conferred all of the powers of the owner of the vessel, including the power to contract in the name
of the NDC. Consequently MCP cannot escape liability. It is well settled that both the owner and agent of the
offending vessel are liable for the damage done where both are impleaded; that in case of collision, both the
owner and the agent are civilly responsible for the acts of the captain. Although this is not expressly stated in Art.
826 of the Code of Commerce, it is nevertheless clearly deducible from the general doctrine of jurisprudence
under the Civil Code, but more specifically as regards contractual obligations in Art. 586 of the Code of
Commerce. The SC has held that both the owner and agent should be declared jointly and severally liable since
the obligation that is the subject of the action had its origin in a tortuous act, and did not arise from contract.
However the ship agent may claim against the shipowner to the extent of the value of the vessel, its equipment,
and the freight. With respect to extent of liability, MCP insists that the law on averages should determine its
liability, and not the amount stated in the bills of lading. The law on averages applies only when the cargoes are
being jettisoned to save some of the cargo and the vessel, and not when the cause of the collision is the negligence
of the captains of the colliding vessels.

105 - Central Shipping v. Insurance Company of North America (2004)**

Doctrine:
• A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or
deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one of the causes
enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to prevent or minimize
the loss.
• In the present case, the weather condition encountered by petitioner’s vessel was not a “storm” or a natural
disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the
manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of
the sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now
disclaim any liability for the loss.
Facts:
Central Shipping Company, Inc. (“Central”) received on board its vessel, M/V “Central Bohol”, 376 pieces
of Philippine Apitong Round Logs. It undertook to transport the shipment from Puerto Princesa, Palawan to Manila for
delivery to Alaska Lumber Co., Inc. The cargo was insured for P3,000,000.00 against total loss under Insurance Company
of North America’s Marine Cargo Policy No. MCPB-00170. Upon finishing loading cargo, the vessel left Palawan and
commenced the voyage to Manila. En route to manila, the vessel listed about 10 degrees starboard side, due to the shifting
of logs in the hold. After some time, the listing of the vessel had increased to 15 degrees. The ship captain ordered his
men to abandon ship and eventually, the vessel completely sank. Due to the sinking of the vessel, the cargo was totally
lost.
Insurance Company alleged that Central and its captain’s fault and negligence led to the total loss of the shipment.
As a result, Alaska Lumber Co. suffered damages amounting to P3,000,000. Alaska Lumber Co., presented a claim for the
value of the shipment to Central but the latter failed and refused to settle the claim. As insurer, Insurance Company paid
the claim and now seeks to be subrogated to all the rights and actions of the consignee as against Central.
Central, while admitting the sinking of the vessel, claimed that the vessel was fully manned, fully equipped and in
all respects seaworthy; that all the logs were properly loaded and secured; that the vessel’s master exercised due diligence
to prevent or minimize the loss before, during and after the occurrence of the storm. Moreover, it raised as its main
defense that the proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a
tropical storm which neither Central nor the captain of its vessel could have foreseen. \
RTC held that the sinking of M/V Central Bohol was not caused by the weather. It noted that monsoons, which
were common occurrences during the months of July to December, could have been foreseen and provided for by an
ocean-going vessel. Applying the rule of presumptive fault or negligence against the carrier, the trial court held
Central liable for the loss of the cargo.
CA affirmed the RTC’s finding that the southwestern monsoon encountered by the vessel was not
unforeseeable. Given the season of rains and monsoons, the ship captain and his crew should have anticipated the
perils of the sea. Further, the weather disturbance was not the sole and proximate cause of the sinking of the vessel. It
was also due to the concurrent shifting of the logs in the hold that could have resulted only from improper stowage.
Thus, the carrier was held responsible for the consequent loss of or damage to the cargo, because its own negligence had
contributed to it. It also held that the Certificates of Inspection and Drydocking were not conclusive proofs of the vessel’s
seaworthiness.
Issues:
1. W/N the carrier is liable for the loss of cargo
2. W/N doctrine of limited liability is applicable

Held/ Ratio:
1. YES. Common carriers are bound to observe extraordinary diligence over the goods they transport, according to
all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods,
common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration
was brought about by “flood, storm, earthquake, lightning or other natural disaster or calamity.” In all
other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence.
Here, Central disclaims responsibility for the loss of the cargo by claiming the occurrence of a “storm”. It
attributes the sinking of its vessel solely to the weather condition. It must be noted that in the Note of Marine
Protest, which the captain of the vessel issued under oath, stated that he and his crew encountered a southwestern
monsoons. Even Central admitted in its Answer that the sinking of M/V Central Bohol had been caused by the
strong southwest monsoon. Having made such factual representation, it cannot now be allowed to retreat
and claim that the southwestern monsoon was a “storm.” Moreover, Rosa S. Barba, weather specialist of the
Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA), testified that a
thunderstorm might occur in the midst of a southwest monsoon. According to her, one did occurred the time of
the sinking of the vessel.
However, it would not be sufficient to categorize the weather condition at the time as a “storm” within the
absolutory causes enumerated in the law. Significantly, no typhoon was observed within the Philippine area
of responsibility during that period. According to PAGASA, a storm has a wind force of 48 to 55 knots,
equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that
the wind was blowing around force 7 to 8 on the Beaufort Scale. Consequently, the strong winds accompanying
the southwestern monsoon could not be classified as a “storm.”
Assuming the weather encountered by the ship is to be considered a natural disaster under Article 1739, Central
failed to show that such natural disaster or calamity was the proximate and only cause of the loss. Human
agency must be entirely excluded from the cause of injury or loss. In other words, the damaging effects blamed
on the event or phenomenon must not have been caused, contributed to, or worsened by the presence of
human participation. If a common carrier fails to exercise due diligence to prevent or minimize the loss before,
during and after the occurrence of the natural disaster, the carrier shall be deemed to have been negligent.
Further, the loss of the vessel could have been caused by the shifting of the logs in the hold. Such shifting
could been due only to improper stowage. During the second monsoon, the master ‘felt’ that the logs in the hold
shifted, prompting him to order second mate to look at the bodega. He found that there was seawater in the
bodega. The sloshing of tons of water back and forth had created pressures that eventually caused the ship to sink.
Had the logs not shifted, the ship could have survived and reached at least the port of El Nido. Being clearly prone
to shifting, the round logs should not have been stowed with nothing to hold them securely in place. Each pile of
logs should have been lashed together by cable wire, and the wire fastened to the side of the hold. Considering the
strong force of the wind and the roll of the waves, the loose arrangement of the logs did not rule out the possibility
of their shifting. By force of gravity, those on top of the pile would naturally roll towards the bottom of the ship.
The evidence indicated that strong southwest monsoons were common occurrences during the month of July.
Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy rains, strong
winds and rough seas. They should then have taken extra precaution in stowing the logs in the hold, in
consonance with their duty of observing extraordinary diligence in safeguarding the goods. But the carrier
took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape
responsibility for the loss.
2. NO. This rule does not apply to situations in which the loss or the injury is due to the concurrent negligence of the
ship owner and the captain. It has already been established that the sinking of M/V Central Bohol had been caused
by the fault or negligence of the ship captain and the crew, as shown by the improper stowage of the cargo of
logs.

106 - Negros Navigation v. CA (1997)*

Doctrine:
• The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to passengers
notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the
shipowner. Court found Negros guilty of negligence in (1) allowing or tolerating the ship captain and crew
members in playing mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in
allowing the ship to carry more passengers than it was allowed to carry.
Facts:
Ramon Miranda purchased from Negros Navigation (Negros) 4 special cabin tickets for his wife, daughter, son,
and niece who were going to Bacolod to attend a family reunion. The tickets were for Voyage No. 457-A of the M/V Don
Juan. The ship sailed on schedule.
At about 10:30 PM, the Don Juan collided with M/T Tacloban City which was an oil tanker owned by PNOC and
PNOC/STC. As a result, the Don Juan sank. Several of her passengers died and some of the bodies were found. However,
the 4 members of Ramon’s family were never found.
Miranda filed a complaint in the RTC-Manila against Negros Navigation, PNOC, and PNOC/STC seeking
damages. In its answer, Negros, PNOC, and PNOC-STC denied that the 4 relatives of Miranda actually boarded the vessel
as shown by the fact that their bodies were never recovered. They also said that Don Juan was seaworthy and manned by a
full and competent crew, and that the collision was entirely due to the fault of M/T Tacloban City.
PNOC and Negros Navigation entered into a compromise agreement whereby Negros Navigation assumed full
responsibility for the payment and satisfaction of all claims arising out of or in connection with the collision and releasing
the PNOC and PNOC/STC from any liability to it. The trial court awarded Ramon Miranda for actual damages, moral
damages, and attorney’s fees. CA affirmed.
Issues:
1. W/N the members of Ramon’s family were actually passengers of the Don Juan – YES
2. W/N the crew members of Negros were grossly negligent in the performance of their duties - YES
3. W/N the total loss of the M/V Don Juan extinguished Negros’ liability – NO (connected with our topic)
Held/Ratio:
1. YES. Ramon Miranda testified that he personally took his family and his niece to the vessel on the day of the
voyage and stayed with them on the ship until it was time for it to leave. There is no reason he should claim
members of his family to have perished in the accident just to maintain an action. People do not normally lie
about so grave a matter as the loss of dear ones.
Miranda’s testimony was corroborated by Edgardo Ramirez. Ramirez was a seminarian and one of the survivors
of the collision. He testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked
with them. He knew Mrs. Miranda who was his teacher in the grade school. He also knew Elfreda who was his
childhood friend and townmate. Ramirez said he was with Mrs. Miranda and her children and niece from 7:00
p.m. until 10:00 p.m. when the collision happened and that he in fact had dinner with them.
2. YES. Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and
other crew members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the
ship sank within 10 to 15 minutes of its impact with the M/T Tacloban City. In addition, the Court found that the
Don Juan was overloaded.
3. NO. The rule is well-entrenched in our jurisprudence that a shipowner may be held liable for injuries to
passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed
to the shipowner. Court found Negros guilty of negligence in (1) allowing or tolerating the ship captain and crew
members in playing mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in

allowing the ship to carry more passengers than it was allowed to carry. Negros is, therefore, clearly liable for
damages to the full extent.
107 - Chua Yek Hong v. IAC (1988)*

Facts:
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private respondents are
the owners of the vessel, “M/V Luzviminda I,” a common carrier. In October 1977, petitioner loaded 1,000 sacks of
copra, valued at P101,227.40, on board the vessel “M/V Luzviminda I” for shipment from Puerta Galera, Oriental
Mindoro, to Manila. Said cargo, however, did not reach Manila because somewhere between Cape Santiago and
Calatagan, Batangas, the vessel capsized and sank with all its cargo.
The basic issue for resolution is whether or not respondent Appellate Court erred in applying the doctrine of
limited liability under Article 587 of the Code of Commerce. Article 587 of the Code of Commerce provides:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may
have earned during the voyage.
Issue:
1. Whether respondents can avail of the limited liability
Held/Ratio:
1. In sum, it will have to be held that since the ship agent’s or ship owner’s liability is merely co-extensive with his
interest in the vessel such that a total loss thereof results in its extinction (Yangco vs. Laserna), and none of the
exceptions to the rule on limited liability being present, the liability of private respondents for the loss of the
cargo of copra must be deemed to have been extinguished. There is no showing that the vessel was insured in this
case.
The primary law is the Civil Code and in default thereof, the Code of Commerce and other special laws are
applied. Since the Civil Code contains no provisions regulating liability of shipowners or agents in the event of
total loss or destruction of the vessel, it is the provisions of the Code of Commerce that govern in this case.

108 - Yangco v. Laserna (1941)*

109 - Monarch Insurance v. CA (2000)
110 - Ohta v. Steamship Pompey (1926)*

111 - Heirs of Santos v. CA (1990)**

Doctrine:
• Under the provision, a shipowner or agent has the right of abandonment and his liability is confined to that which
he has a right to abandon, which is, the vessel with all her equipments and the freight it may have earned during
the voyage. This limited liability applies not only to goods but in all cases like death or injury to passengers.
However, this article applies only where the fault or negligence is committed solely by the captain. In cases where
the shipowner is likewise to be blamed, Article 587 does not apply.
Facts:
The M/V Mindoro owned by Compania Maritima was bound for New Washington, Aklan from North Harbor,
Manila. In the wee hours of the morning, the vessel met typhoon “Welming” on the Sibuyan Sea, Aklan. The vessel sank,
as a result of which, many of the passengers drowned. In a decision of the Board of Marine Inquiry, it was found that the
captain and some members of the crew were negligent in operating the vessel. It was found that M/V Mindoro failed to
leave immediately after the inspection of the Bureau of Customs and instead left four hours later when the typhoon was
already nearing and gaining wind speed (The vessel was supposed to leave at 2pm but it left at 6pm). The Board imposed
upon the crew a penalty of suspension and/or revocation of their license. However, the decision could not be executed
against the captain who perished with the vessel.
The heirs of the passengers and some of the survivors filed an action for damages against Compania Maritima.
The RTC and CA absolved Compania from liability. The CA found that although there was a concurring negligence
on the part of the captain, Compania cannot be held liable based on the principle of limited liability of the
shipowner or ship agent under Article 587 of the Code of Commerce.
Issue:
1. Whether or not Compania Maritima is liable for damages? YES
Held/Ratio:
1. Yes. There is no dispute as to finding of the captain’s negligence. The controversy centers on the negligence of
Compania maritime and the application of the Article 587 of the Code of Commerce. Article 587 provides:
Art. 587. The ship agent shall also be civilly liable for indemnities in favor of third persons which
may arise from the conduct of the captain in the care of goods which he loaded on the vessel, but
he may exempt himself therefrom by abandoning the vessel with all her equipments and the
freight it may have earned during the voyage.
Under the provision, a shipowner or agent has the right of abandonment and his liability is confined to that
which he has a right to abandon, which is, the vessel with all her equipments and the freight it may have
earned during the voyage. This limited liability applies not only to goods but in all cases like death or
injury to passengers. However, this article applies only where the fault or negligence is committed solely by
the captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply. The situation
will instead be covered by the provisions of the Civil Code on Common Carriers. Common carriers are tasked to
observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers. Further, they
are bound to carry the persons, with due regard for all circumstances. Whenever death or injury to a passenger
occurs, 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 Art. 1756, NCC.
In this case, Compania Maritima itself was negligent, as shown by the following:
1. The captain knew of the typhoon beforehand, so it can be presumed that Compania also knew about the
typhoon advisories. In spite of the typhoon advisories, it allowed the ship to depart from Manila. In so
doing, Compania displayed lack of foresight and minimum concern for the safety of its passengers, taking
into account the surrounding circumstances. Although, Maritima claims that it did not have any
information about the typhoon “Welming” until after the boat was already at sea. Modern Technology

belie this contention. The Weather Bureau is now equipped with modern apparatus which enable it to
detect any incoming atmospheric disturbances.
2. The CA held that the captain was negligent in overloading the ship (with dump truck, 3 Toyota cars, steel
bars, 6,000 cases of beer and 241 more passengers). However, Compania shared in his negligence. A
closer supervision by Compania could have prevented the overloading of the ship. Moreover, Compania
allowed the ship to leave Manila later that its schedule. The departure was delayed for 4 hours. Maritima
could not account for the delay because it neither checked from the captain the reasons behind the delay
nor sent its representative to inquire into the cause of such delay. If it had made the ship leave earlier, the
encounter with the typhoon could have been avoided.
3. While the ship was seaworthy and had lifesaving equipment, Compania failed to show evidence that it
had installed a radar which could have allowed the vessel to navigate safely for shelter during a storm.
Consequently, the vessel was left at the mercy of “Welming” in the open sea because although it was
already in the vicinity of the Aklan river, it was unable to enter the mouth of Aklan river to get into New
Washington, Aklan due to the darkness and the Floripon lighthouse at the entrance of Aklan river was not
functioning our could not be seen at all.
Since the foregoing shows the lack of extraordinary diligence and the negligence of Compania Maritima, it is
liable for damages.

112 - Arada v. CA (1992)

Facts:
Adrada was the proprietor and operator of South Negros Enterprises, engaged in small scale shipping as a
common carrier, hauling cargoes of different corporations. South Negros entered into a contract with San Miguel
Corporation where the former undertook to transport 9,824 cases of beer empties from Negros Occidental to Mandaue
City.
The Crew Master, Vivencio Babao, applied for a clearance with the Philippine Coast Guard to leave the port. The
clearance was denied because there was a typhoon. On the following day, the vessel, M/L Maya was given clearance
because the sea was calm. The vessel left for Mandaue. However, during the voyage, a typhoon developed and the vessel
was besieged by huge waves. It’s rudder was destroyed. Eventually, the vessel sank and all the cargo was lost.
San Miguel Corp filed a complaint in the RTC for recovery of the value of the lost cargo anchored on breach of
contract of carriage.
Issues:
1. W/N South Negros is liable for the value of the lost cargo
Held/Ratio:
1. Yes, South Negros is liable for the value of the lost cargo.
It was exercising its function as a common carrier when it entered into a contract with San Miguel to carry and
transport the latter’s cargoes. A common carrier, both from the nature of its business and for insistent reasons of
public policy is burdened by law with the duty of exercising extraordinary diligence not only in ensuring the
safety of passengers, but in caring for the goods transported by it. The loss or destruction or deterioration of goods
turned over to the common carrier for the conveyance to a designated destination raises instantly a presumption of
fault or negligence.
South Negros failed to observe the extraordinary diligence over the cargo in question the master, Vivencio Babao,
was negligent previous to the sinking of the carrying vessel. Babao knew of the impending typhoon on March 24,
1982 when the Philippine Coast Guard denied M/LMaya the issuance of a clearance to sail. Less than 24 hours
elapsed since the time of the denial of said clearance and the time a clearance to sail was finally issued on March
25, 1982. Records will show that Babao did not ascertain where the typhoon was. A common carrier is obliged
to observe extraordinary diligence and the failure of Babao to ascertain the direction of the storm and the
weather condition of the path they would be traversing, constitute lack of foresight and minimum vigilance
over its cargoes taking into account the surrounding circumstances of the case

113 - Inter-Orient v. NLRC (1996)**

Facts:
Deceased seaman, Jeremias Pineda was contracted to work as Oiler on board the vessel, ‘MV Amazonia’, owned
and operated by its foreign principal, Fircroft Shipping Corporation On October 2, 1989, he met his death when he was
shot by a Thai Policeman in Bangkok, Thailand. Deceased’s mother contends that considering that the deceased seaman
was suffering from mental disorders aggravated by threats on his life by his fellow seamen, the Ship Captain should not
have allowed him to travel alone.
In its Answer/Position Paper, respondent agency averred that on December 21, 1988, deceased seaman joined the
vessel MV Amazonia and proceeded to discharge his duties as Oiler; that on September 28, 1989, he finished his
contract and was discharged from the port of Dubai for repatriation to Manila; that his flight schedule from Dubai
to the Philippines necessitated a stopover at Bangkok, Thailand, and during said stopover he disembarked on his
own free will and failed to join the connecting flight to Hongkong with final destination to Manila; that on October
5, 1990, it received a fax transmission from the Department of Foreign Affairs to the effect that Jeremias Pineda was shot
by a Thai Officer on duty on October 2, 1989 at around 4:00 P.M.; that the police report submitted to the Philippine
Embassy in Bangkok confirmed that it was Pineda who ‘approached and tried to stab the police sergeant with a knife and
that therefore he was forced to pull out his gun and shot Pineda’; that they are not liable to pay any death/burial benefits
pursuant to the provisions of Par. 6, Section C, Part II, POEA Standard Format of Employment which state(s) that ‘no
compensation shall be payable in respect of any injury, (in)capacity, disability or death resulting from a willful (sic) act on
his own life by the seaman’; that the deceased seaman died due to his own wilfull (sic) act in attacking a policeman in
Bangkok who shot him in self-defense.”
After the parties presented their respective evidence, the POEA Administrator rendered his decision holding
petitioners liable for death compensation benefits and burial expenses. Petitioners appealed the POEA decision to the
public respondent. Public respondent upheld the POEA.
Issue:
1. W/N there was direct evidence regarding Pineda’s mental state
2. (IMPORTANT) W/N the petitioners can be held liable for the death of seaman Jeremias Pineda.
3. W/N the death was work-related
Held/Ratio:
1. Yes. The circumstances prior to and surrounding his death provide substantial evidence of the existence of such
mental defect or disorder. Such mental disorder became evident when he failed to join his connecting flight to
Hongkong, having during said stopover wandered out of the Bangkok airport’s immigration area on his own. We
can perceive no sane and sufficient reason for a Pinoy overseas contract worker or seaman to want to while away
his time in a foreign land, when he is presumably unfamiliar with its native tongue, with nothing to do and no
source of income, and after having been absent from kith and kin, hearth and home for almost an entire year. Nor
can we find any plausible reason for him to be wielding a knife and scaring away passersby, and even taking a
stab at an armed policeman, unless he is no longer in full possession of his sanity. To our mind, these
circumstances are sufficient in themselves to produce a firm conviction that the deceased seaman in this case was
no longer in full control of his senses when he left his work.
2. Yes. The POEA Administrator ruled, and this Court agrees, that since Pineda attacked the Thai policeman when
he was no longer in complete control of his mental faculties, the aforequoted provision of the Standard Format
Contract of Employment exempting the employer from liability should not apply in the instant case. Firstly, the
fact that the deceased suffered from mental disorder at the time of his repatriation means that he must have been
deprived of the full use of his reason, and that thereby, his will must have been impaired, at the very least. Thus,
his attack on the policeman can in no wise characterized as a deliberate, willful or voluntary act on his part.
Secondly, and apart from that, we also agree that in light of the deceased’s mental condition, petitioners “should
have observed some precautionary measures and should not have allowed said seaman to travel home
alone”, and their failure to do so rendered them liable for the death of Pineda. Indeed, “the obligations and
liabilities of the (herein petitioners) do not end upon the expiration of the contracted period as (petitioners
are) duty bound to repatriate the seaman to the point of hire to effectively terminate the contract of
employment.”
The instant case should be distinguished from the case of Mabuhay, where the deceased, Romulo Sentina, had
been in a state of intoxication, then ran amuck and inflicted injury upon another person, so that the latter in his
own defense fought back and in the process killed Sentina. Previous to said incident, there was no proof of mental
disorder on the part of Sentina. The cause of Sentina’s death is categorized as a deliberate and willful act on his
own life directly attributable to him. But seaman Pineda was not similarly situated.
Incidentally, petitioners conjecture that the deceased could have been on drugs when he assaulted the policeman.
If this had been the case, the Thai police and the Philippine Embassy in Bangkok would most certainly have made
mention thereof in their respective reports. But they did not do so.
3. Yes. Petitioners further argue that the cause of Pineda’s death “is not one of the occupational diseases listed by
law”, and that in the case of De Jesus vs. Employees’ Compensation Commission, this Court held that “x x x for
the sickness and the resulting disability or death to be compensable, the sickness must be the result of an
occupational disease listed under Annex ‘A’ of the Rules (the Amended Rules on Employees’ Compensation)
with the conditions set therein satisfied; otherwise, proof must be shown that the risk of contracting the disease is
increased by the working conditions.”
Petitioner’s reliance on De Jesus is misplaced, as the death and burial benefits being claimed in this case are not
payable by the Employees’ Compensation Commission and chargeable against the State Insurance Fund. These
claims arose from the responsibility of the foreign employer together with the local agency for the safety of the
employee during his repatriation and until his arrival in this country, i.e., the point of hire. Though the termination
of the employment contract was duly effected in Dubai, still, the responsibility of the foreign employer to see to it
that Pineda was duly repatriated to the point of hiring subsisted. The uncaring attitude displayed by petitioners
who, knowing fully well that its employee had been suffering from some mental disorder, nevertheless still
allowed him to travel home alone, is appalling to say the least. Such attitude harks back to another time when the
landed gentry practically owned the serfs, and disposed of them when the latter had grown old, sick or otherwise
lost their usefulness.

114 - Sweet Lines v. CA (1983)**

Facts:
Atty. Leovigildo Tandog and Rogelio Tiro, a contractor by professions, bought tickets 0011736 and011737 for
Voyage 90 on 31 December 1971 at the branch office of Sweet Line, Inc., a shipping company transporting inter-island
passengers and cargoes, at Cagayan de Oro City. Tandog and Tiro were to board Sweet Line’s vessel, M/S “Sweet Hope”
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to Bohol, since many
passengers were bound for Surigao, Tandog and Tiro per advice, went to the branch office for proper relocation to M/S
“Sweet Town”. Because the said vessel was already filed to capacity, they were forced to agree “to hide at the cargo
section to avoid inspection of the officers of the Philippine Coastguard.” Tandog and Tiro alleged that they were, during
the trip,” “exposed to the scorching heat of the sun and the dust coming from the ship’s cargo of corn grits,” and that the
tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for other
tickets.
In view thereof, Tandog and Tiro sued Sweet Line for damages and for breach of contract of carriage in the
alleged sum of P110,000.00 before the CFI of Misamis Oriental. Sweet Line moved to dismiss the complaint on the
ground of improper venue. Apparently, Condition 14 printed at the back of the tickets, reads “It is hereby agreed and
understood that any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it is
issued, shall befiled in the competent courts in the City of Cebu.”
The motion was denied by the trial court. Sweet Line moved to reconsider the order of denial, but to no avail.
Hence, the petition for prohibition with preliminary injunction.
Issue:
1. Whether or not there was improper venue
Held/Ratio:
1. No. With respect to the 14 conditions printed at the back of the passage tickets, these are commonly known as
“contracts of adhesion,” the validly and/or enforceability of which will have to be determined by the peculiar
circumstances obtaining in each case and the nature of the conditions or terms sought to be enforced. For, “While
generally, stipulations in a contract come about after deliberate drafting by the parties thereto, there are certain
contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such
contracts are called contracts of adhesion, because the only participation of the party is the signing of his signature
or his ‘adhesion’ thereto. Insurance contracts, bills of lading, contracts of sale of lots on the instalment plan fall
into this category.”
Considered in the light of the foregoing norms and in the context of circumstances prevailing in the inter-island
shipping industry in the country, the Court finds and holds that Condition 14 printed at the back of the passage
tickets should be held as void and unenforceable for the reasons that (1) under circumstances obtaining 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 14 is printed in fine letters, and (2)Condition 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 in different parts of the country who, under Condition 14, will have to file suits against
Sweet Line only in the City of Cebu.
Under the circumstances, it is hardly just and proper to expect the passengers to examine their tickets received
from crowded/congested counters, more often than not during rush hours, for conditions that may be printed
thereon, much less charge them with having consented to the conditioner so printed, especially if there are a
number of such conditions in fine print.
Unlike fine prints in insurance contract, passengers do not have the same chance to examine conditions. Condition
14 was prepared solely at the instance of Sweet Line; the passengers had no say in its preparation. Neither did the
latter have the opportunity to take the same into account prior to the purchase of their tickets. For, unlike the small
print provisions of insurance contracts — the common example of contracts of adherence — which are entered
into by the insured in full awareness of said conditions, since the insured is afforded the opportunity to examine
and consider the same, passengers of inter-island vessels do not have the same chance, since their alleged
adhesion is presumed only from the fact that they purchased the passage tickets.
Public policy is “that principle of the law which holds that no subject or citizen can lawfully do that which has a
tendency to be injurious to the public or against the public good.” Under this principle “freedom of contract or
private dealing is restricted by law for the good of the public.” Herein, Condition 14, if enforced, will be
subversive of the public good or interest, since it will frustrate in meritorious cases, actions of passenger claimants
outside of Cebu City, thus placing Sweet Line at a decided advantage over said persons, who may have perfectly
legitimate claims against it. The said condition should, therefore, be declared void and unenforceable, as contrary
to public policy — to make the courts accessible to all who may have need of their services.

115 - Singa Shipping v. NLRC (1998)

116 - Remigio v. NLRC, CF Sharp, and New Commodore Cruise Line (2006)**
Facts:
In November 1997, Remigio entered into an employment contract with CF Sharp (agent) and New Commodore
(principal). The contract provided that the terms and conditions of the standard employment contract as approved by
DOLE and POEA were to be strictly observed. Under the contract, Remigio was to work as a musician (drummer) in a
vessel owned by New Commodore for 10 months. Remigio subsequently passed the medical exam and started work. In
March 1998, while the vessel was docked in Mexico, Remigio went ashore to attend to some personal matters. However,
while walking, he felt severe chest pain. He returned to the vessel and had himself checked up in the infirmary. He was
brought to and confined for 7 days in a Mexican hospital. He rejoined the vessel after he went out of confinement.
When the vessel arrived in Louisiana, he was brought to a hospital. After an examination revealed several
blockages in his arteries, Remigio underwent a triple coronary artery bypass operation. With the cardiologist finding him
“not fit for sea duty,” Remigio was sent back to Manila in April 1998. A month after arriving, Remigio sent a formal
demand to CF Sharp for payment of unpaid wages, sickness allowance, and permanent total disability benefits. This
demand was refused. He presented a letter from the company-designated physician to CF Sharp’s manager, stating “he
was unfit from April 27, 1998 to June 25, 1998” and “he can return to work as a piano player in 8 to 10 months.”
Remigio proceeded to file a complaint seeking permanent total disability benefits ($60K) and damages. CF Sharp
offered a settlement for $40K, but Remigio stood fast. No settlement was reached. The Labor Arbiter rendered a decision
granting Remigio sickness allowance, but not permanent total disability benefits, noting that (1) a heart bypass is not in
the “schedule of disability;” and (2) even assuming that it was, no medical report was presented to show permanent or
total disability.
The NLRC affirmed the decision of the Labor Arbiter. The CA also did the same, stating that there is no
substantial evidence to prove that the heart ailment incurred by Remigio during the term of his employment resulted to his
disability.
Issues:
1. W/N the heart ailment suffered by Remigio during the term of the contract is compensable under the 1996 POEA
SEC even if there is no proof of work-connection.
2. W/N the concept of permanent total disability under the Labor Code applies to a case of a seafarer’s claim for
disability benefits under the 1996 POEA SEC.
3. W/N Remigio is entitled to permanent total disability benefits.
Held/Ratio:
1. Yes. “Disability” is generally defined as “loss or impairment of a physical or mental function resulting from
injury or sickness.” Clearly, “disability” is not synonymous with “sickness” or “illness,” the former being a
potential effect of the latter. The schedule in Section 30 of the POEA SEC is a Schedule of Disability or
Impediment for Injuries Suffered and Diseases or Illness Contracted. It is not a list of compensable sicknesses.
Unlike the 2000 POEA SEC, nowhere in the 1996 POEA SEC is there a list of “Occupational Diseases.”
The unqualified phrase “during the term” in Section 20(B) of the 1996 POEA SEC covers all injury or illness
occurring in the lifetime of the contract. The injury or illness need not be shown to be work-related. Note that the
claims arose from the stipulations of the standard format contract entered into between the seafarer and the agent,
which was required to be adopted and used by all parties to the employment of any Filipino seaman on board any
ocean-going vessel. His claims are not rooted from the provisions of the New Labor Code as amended.
Significantly, under the contract, compensability of the death or illness of seamen need not be dependent upon
whether it is work connected or not. Therefore, proof that the working conditions increased the risk of contracting
a disease or illness, is not required to entitle a seaman who dies during the term thereof by reason of such disease
or illness, of the benefits stipulated thereunder which are separate and distinct from, and in addition to whatever
benefits which the seaman is entitled to under Philippine laws.

2. Yes. The standard employment contract for seafarers was formulated by the POEA to “secure the best terms and
conditions of employment of Filipino contract workers and ensure compliance therewith” and to “promote and
protect the well-being of Filipino workers overseas.” Citing numerous cases, the Court held that “disability should
not be understood more on its medical significance but on the loss of earning capacity. Permanent total disability
means disablement of an employee to earn wages in the same kind of work, or work of similar nature that he was
trained for or accustomed to perform, or any kind of work, which a person of his mentality and attainment could
do. It does not mean absolute helplessness.”
3. Yes. A total disability does not require that the employee be absolutely disabled, or totally paralyzed. What is
necessary is that the injury must be such that the employee cannot pursue her usual work and earn therefrom. On
the other hand, a total disability is considered permanent if it lasts continuously for more than 120 days.
Permanent disability is inability of a worker to perform his job for more than 120 days, regardless of whether or
not he loses the use of any part of his body.
The facts clearly prove that Remigio was unfit to work as drummer for at least 11-13 months – from the onset of
his ailment in March 1998 to 8-10 months after June 1998. This, by itself, already constitutes permanent total
disability. What is more, the agent and the principal were well aware that petitioner was working for them as a
drummer, as proven by the communication of respondent principal to respondent agency referring to petitioner as
“drummer with our enchanted isle quartet.” Thus, the certification that Remigio may go back specifically as a
piano or guitar player means that the likelihood of Remigio returning to his usual work as a drummer was
practically nil. From this, it is pristine clear that Remigio’s disability is total and permanent.

117 - Madrigal v. Ogilvie (1958)

118 - Wallem Maritime v. NLRC (1996)

119 - Yu Con v. Ipil (1916)

Facts:
Action was filed by Yu Con against Lauron (owner of the banca named Maria), Ipil (master), and Solamo
(supercargo). A contract was executed between Lauron and yu Con whereby Lauron will transport the Yu Con’s money
(P450) and merchandise from the port of Cebu to the town of Catmon. The money disappeared from the craft while it was
anchored in the port of Cebu and was not aftwerwards found. Yu Con’s action is based on the abandonment, negligence,
or voluntary breach on the part of the three defendants.
The defendants alleged that the banca was chartered by Yu Con for a fixed period of 3 days, at the price of P10
per diem, and that at the time of theft, the craft was placed at the disposal of Yu Con. They also made a counterclaim for
the payment of the freight agreed upon and for an additional amount for the deterioration of the banca.
The trial court held that the sole cause of the disappearance of the money was the negligence of the master and
supercargo, and that Lauron was also responsible for such negligence as the owner of the banca, pursuant to Articles 589,
587, and 618 of the Code of Commerce. Yu Con was absolved of the counterclaim. Defendants moved for a new trial,
which was denied, and thereafter appealed to the SC.
Issue:
1. Whether RTC erred in ruling in favor of Yu Con
Held/Ratio:
1. No. It is beyond all doubt that the loss of the money occurred through the manifest fault and negligence of Ipil
and Solamo. They failed to take the necessary precautions in order that the stateroom containing the trunk in
which they kept the money should be properly guarded by members of the crew and they also did not expressly
station some person inside the stateroom for the guarding and safekeeping of the trunk.
Ipil and Solamo were depositaries of the sum in question and, having failed to exercise the diligence required by
the nature of the obligation of safekeeping assumed by them and by the circumstances of the time and the place, it
is evident that they are liable for its loss or misplacement and must restore it.
With respect to Lauron, he is also liable in accordance with the provisions of the Code of Commerce in force
because, as the proprietor and owner of the vessel who executed a contract of carriage with Yu Con, there
occurred the loss, theft, or robbery of the P450 that belonged to Yu Con through the negligence of Ipil and
Solamo and which theft does not appear to have been committed by a person not belonging to the craft.
The old Code of Commerce absolved the shipowner from liability for the negligence of the captain and its crew
but, in the light of the principles of modern law, this doctrine on the non-liability of the shipowner for the
unlawful acts, crimes or quasi crimes, committed by the captain and the crew can no longer be maintained in its
absolute and categorical terms.
In maritime commerce, the shippers and passengers in making contracts with the captain do so through the
confidence they have in the shipowner who appointed him; they presume that the owner made a most careful
investigation before appointing him, and, above all, they themselves are unable to make such an investigation, and
even though they should do so, they could not obtain complete security, inasmuch as the shipowner can,
whenever he sees fit, appoint another captain instead.
Thus, it is only proper that the shipowner should be made liable.

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TRANSPO DIGESTS ALS2014B ATTY.

II. COMMON CARRIERS

ALS2014B Page 1 of 159

02 - Calvo v. UCPB (2002)*

ALS2014B Page 2 of 159

ALS2014B Page 3 of 159

ALS2014B Page 4 of 159

ALS2014B Page 5 of 159

ALS2014B Page 6 of 159

06 - Planters Products v. CA (1993)

ALS2014B Page 8 of 159

07 - First Philippine Industrial Corporation (FPIC) v. CA (1998)**

ALS2014B Page 9 of 159

the goods for pecuniary consideration.

ALS2014B Page 11 of 159

09 - Sanchez Brokerage v. CA (2004)

ALS2014B Page 12 of 159

10 - Crisostomo v. CA (2003)** – “Jewels of Europe”

ALS2014B Page 14 of 159

12 - Occidental Transport v. CA (1993)**

ALS2014B Page 15 of 159

ALS2014B Page 16 of 159

ALS2014B Page 17 of 159

ALS2014B Page 18 of 159

14 - Equitable v. Suyom (2002)** (Registered Owner)

ALS2014B Page 19 of 159

III. TRANSPORTATION OF GOODS

15 - Eastern Shipping v. CA (1991)*

ALS2014B Page 20 of 159

ALS2014B Page 21 of 159

16 - Delsan Transport v. CA (2001)**

ALS2014B Page 23 of 159

17 - Phil. Charter v. Chemoil (2005)

ALS2014B Page 24 of 159

ALS2014B Page 25 of 159

18 - Philippine American General Insurance Company (PHILAMGEN) v. PKS Shipping Company

ALS2014B Page 26 of 159

ALS2014B Page 27 of 159

19 - Saludo v. CA (1992)* (switched caskets)

ALS2014B Page 28 of 159

ALS2014B Page 29 of 159

20 - Compania Maritima v. Insurance Co. (1964)

ALS2014B Page 30 of 159

21 - Lorenzo Shipping v. BJ Mathel (2004)**

ALS2014B Page 31 of 159

ALS2014B Page 32 of 159

22 - Sealoader Shipping Corporation v. GrandCement Manufacturing Corporation (2010)* (Typhoon

ALS2014B Page 33 of 159

23 - Mitsui Lines v. CA (1998)

ALS2014B Page 34 of 159

24 - Sulpicio Lines, Inc. v. First Lepanto-Taisho Insurance Corporation (2005)*

26 - Phil. First Insurance v. Wallem First Shipping (2009)*

ALS2014B Page 37 of 159

ALS2014B Page 38 of 159

27 - Delsan Transport Lines v. American Home Assurance Corporation (2006)

ALS2014B Page 39 of 159

28 - Wildvalley Shipping v. CA and Philippine President Lines Inc. (2000)*

ALS2014B Page 40 of 159

29 - Maersk Lines v. CA (1993)**

ALS2014B Page 41 of 159

ALS2014B Page 42 of 159

30 - FGU Insurance v. CA (2005)**

ALS2014B Page 43 of 159