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SECTION4 exempted from liability for the loss, destruction, or deterioration of the goods.

Common Carriers (n) The same duty is incumbent upon the common carrier in case of an act of the
public enemy referred to in article 1734, No. 2.
SUBSECTION 1. General Provisions
Article 1740. If the common carrier negligently incurs in delay in transporting
the goods, a natural disaster shall not free such carrier from responsibility.
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 Article 1741. If the shipper or owner merely contributed to the loss, destruction
public. or deterioration of the goods, the proximate cause thereof being the
negligence of the common carrier, the latter shall be liable in damages, which
however, shall be equitably reduced.
Article 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 Article 1742. Even if the loss, destruction, or deterioration of the goods should
them, according to all the circumstances of each case. be caused by the character of the goods, or the faulty nature of the packing or
of the containers, the common carrier must exercise due diligence to forestall
or lessen the loss.
Such extraordinary diligence in the vigilance over the goods is further expressed
in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary
diligence for the safety of the passengers is further set forth in articles 1755 Article 1743. If through the order of public authority the goods are seized or
and 1756. destroyed, the common carrier is not responsible, provided said public
authority had power to issue the order.
SUBSECTION 2. Vigilance Over Goods
Article 1744. A stipulation between the common carrier and the shipper or
owner limiting the liability of the former for the loss, destruction, or
Article 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary diligence shall
deterioration of the goods, unless the same is due to any of the following causes
be valid, provided it be:
only:

(1) In writing, signed by the shipper or owner;


(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Supported by a valuable consideration other than the service
rendered by the common carrier; and
(2) Act of the public enemy in war, whether international or civil;

(3) Reasonable, just and not contrary to public policy.


(3) Act or omission of the shipper or owner of the goods;

Article 1745. Any of the following or similar stipulations shall be considered


(4) The character of the goods or defects in the packing or in the
unreasonable, unjust and contrary to public policy:
containers;

(1) That the goods are transported at the risk of the owner or
(5) Order or act of competent public authority.
shipper;

Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of
(2) That the common carrier will not be liable for any loss,
the preceding article, if the goods are lost, destroyed or deteriorated, common
destruction, or deterioration of the goods;
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. (3) That the common carrier need not observe any diligence in the
custody of the goods;
Article 1736. The extraordinary responsibility of the common carrier lasts from
the time the goods are unconditionally placed in the possession of, and (4) That the common carrier shall exercise a degree of diligence less
received by the carrier for transportation until the same are delivered, actually than that of a good father of a family, or of a man of ordinary
or constructively, by the carrier to the consignee, or to the person who has a prudence in the vigilance over the movables transported;
right to receive them, without prejudice to the provisions of article 1738.
(5) That the common carrier shall not be responsible for the acts or
Article 1737. The common carrier's duty to observe extraordinary diligence omission of his or its employees;
over the goods remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner has made use of the
(6) That the common carrier's liability for acts committed by thieves,
right of stoppage in transitu.
or of robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished;
Article 1738. The extraordinary liability of the common carrier continues to be
operative even during the time the goods are stored in a warehouse of the
(7) That the common carrier is not responsible for the loss,
carrier at the place of destination, until the consignee has been advised of the
destruction, or deterioration of goods on account of the defective
arrival of the goods and has had reasonable opportunity thereafter to remove
condition of the car, vehicle, ship, airplane or other equipment used
them or otherwise dispose of them.
in the contract of carriage.

Article 1739. In order that the common carrier may be exempted from
Article 1746. An agreement limiting the common carrier's liability may be
responsibility, the natural disaster must have been the proximate and only
annulled by the shipper or owner if the common carrier refused to carry the
cause of the loss. However, the common carrier must exercise due diligence to
goods unless the former agreed to such stipulation.
prevent or minimize loss before, during and after the occurrence of flood,
storm or other natural disaster in order that the common carrier may be
Article 1747. If the common carrier, without just cause, delays the Article 1760. The common carrier's responsibility prescribed in the preceding
transportation of the goods or changes the stipulated or usual route, the article cannot be eliminated or limited by stipulation, by the posting of notices,
contract limiting the common carrier's liability cannot be availed of in case of by statements on the tickets or otherwise.
the loss, destruction, or deterioration of the goods.
Article 1761. The passenger must observe the diligence of a good father of a
Article 1748. An agreement limiting the common carrier's liability for delay on family to avoid injury to himself.
account of strikes or riots is valid.
Article 1762. The contributory negligence of the passenger does not bar
Article 1749. A stipulation that the common carrier's liability is limited to the recovery of damages for his death or injuries, if the proximate cause thereof is
value of the goods appearing in the bill of lading, unless the shipper or owner the negligence of the common carrier, but the amount of damages shall be
declares a greater value, is binding. equitably reduced.

Article 1750. A contract fixing the sum that may be recovered. by the owner or Article 1763. A common carrier is responsible for injuries suffered by a
shipper for the loss, destruction, or deterioration of the goods is valid, if it is passenger on account of the wilful acts or negligence of other passengers or of
reasonable and just under the circumstances, and has been fairly and freely strangers, if the common carrier's employees through the exercise of the
agreed upon. diligence of a good father of a family could have prevented or stopped the act
or omission.
Article 1751. The fact that the common carrier has no competitor along the line
or route, or a part thereof, to which the contract refers shall be taken into
consideration on the question of whether or not a stipulation limiting the
common carrier's liability is reasonable, just and in consonance with public
policy.

Article 1752. Even when there is an agreement limiting the liability of the
common carrier in the vigilance over the goods, the common carrier is
disputably presumed to have been negligent in case of their loss, destruction
or deterioration.

Article 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.

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

SUBSECTION 3. Safety of Passengers

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

Article 1756. In case of death of or injuries to passengers, common carriers are


presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as prescribed in articles 1733 and
1755.

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

Article 1758. When a passenger is carried gratuitously, a stipulation limiting the


common carrier's liability for negligence is valid, but not for wilful acts or gross
negligence.

The reduction of fare does not justify any limitation of the common carrier's
liability.

Article 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or wilful acts of the former's employees,
although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
SET I The Court of Appeals referred to the fact that private respondent held no
- CONCEPT OF COMMON CARRIERS certificate of public convenience, and concluded he was not a common carrier.
- DISTINCTION FROM PRIVATE CARRIERS This is palpable error. A certificate of public convenience is not a requisite for
- LIABILITY OF REGISTERED OWNER the incurring of liability under the Civil Code provisions governing common
- KABIT SYSTEM carriers. That liability arises the moment a person or firm acts as a common
- NATURE OF BUSINESS AND DEGREE OF DILIGENCE REQUIRED carrier, without regard to whether or not such carrier has also complied with
the requirements of the applicable regulatory statute and implementing
Crisostomo vs. Court of Appeals regulations and has been granted a certificate of public convenience or other
409 SCRA 528, G.R. No. 138334, August 25, 2003 franchise. To exempt private respondent from the liabilities of a common
carrier because he has not secured the necessary certificate of public
By definition, a contract of carriage or transportation is one whereby a certain convenience, would be offensive to sound public policy; that would be to
person or association of persons obligate themselves to transport persons, reward private respondent precisely for failing to comply with applicable
things, or news from one place to another for a fixed price. Such person or statutory requirements. The business of a common carrier impinges directly
association of persons are regarded as carriers and are classified as private or and intimately upon the safety and well being and property of those members
special carriers and common or public carriers. A common carrier is defined of the general community who happen to deal with such carrier. The law
under Article 1732 of the Civil Code as persons, corporations, firms or imposes duties and liabilities upon common carriers for the safety and
associations engaged in the business of carrying or transporting passengers or protection of those who utilize their services and the law cannot allow a
goods or both, by lane, water or air, for compensation, offering their services common carrier to render such duties and liabilities merely facultative by
to the public. simply failing to obtain the necessary permits and authorizations.

It is obvious from the above definition that respondent is not an entity engaged Common carriers, “by the nature of their business and for reasons of public
in the business of transporting either passengers or goods and is there fore, policy,” are held to a very high degree of care and diligence (“extraordinary
neither, a private nor a common carrier. Respondent did not undertake to diligence”) in the carriage of goods as well as of passengers. The specific import
transport petitioner from one place to another since its covenant with its of extraordinary diligence in the care of goods transported by a common carrier
customers is simply to make travel arrangements in their behalf. Respondent’s is, according to Article 1733, “further expressed in Articles 1734, 1735 and
services as a travel agency include procuring tickets and facilitating travel 1745, numbers 5, 6 and 7” of the Civil Code. Article 1734 establishes the general
permits or visas as well as booking customers for tours. rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, “unless the same is due to any of
The nature of the contractual relation between petitioner and respondent is the following causes only: (1) Flood, storm, earthquake, lightning, or other
determinative of the degree of care required in the performance of the latter’s natural disaster or calamity; (2) Act of the public enemy in war, whether
obligation under the contract. For reasons of public policy, a common carrier in international or civil; (3) Act or omission of the shipper or owner of the goods;
a contract of carriage is bound by law to carry passengers as far as human care (4) The character of the goods or defects in the packing or in the containers;
and foresight can provide using the utmost diligence of very cautious persons and (5) Order or act of competent public authority.” It is important to point out
and with due regard for all the circumstances. As earlier stated, however, that the above list of causes of loss, destruction or deterioration which exempt
respondent is not a common carrier but a travel agency. It is thus not bound the common carrier for responsibility therefor, is a closed list. Causes falling
under the law to observe extraordinary diligence in the performance of its outside the foregoing list, even if they appear to constitute a species of force
obligation, as petitioner claims. majeure, fall within the scope of Article 1735.

Applying the above-quoted Articles 1734 and 1735, we note firstly that the
De Guzman vs. Court of Appeals
specific cause alleged in the instant case—the hijacking of the carrier’s truck—
168 SCRA 612, No. L-47822, December 22, 1988
does not fall within any of the five (5) categories of exempting causes listed in
Article 1734. It would follow, therefore, that the hijacking of the carrier’s
The Civil Code defines “common carriers” in the following terms: “Article 1732. vehicle must be dealt with under the provisions of Article 1735, in other words,
Common carriers are persons, corporations, firms, or associations engaged in that the private respondent as common carrier is presumed to have been at
the business of carrying or transporting passengers or goods or both, by land, fault or to have acted negligently. This presumption, however, may be
water, or air for compensation, offering their services to the public.” The above overthrown by proof of extraordinary diligence on the part of private
article makes no distinction between one whose principal business activity is respondent.
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 As noted earlier, the duty of extraordinary diligence in the vigilance over goods
avoids making any distinction between a person or enterprise offering is, under Article 1733, given additional specification not only by Articles 1734
transportation service on a regular or scheduled basis and one offering such and 1735 but also by Article 1745, numbers 4, 5 and 6. Article 1745 provides in
service on an occasional, episodic or unscheduled basis. Neither does Article relevant part: “Any of the following or similar stipulations shall be considered
1732 distinguish between a carrier offering its services to the “general public,” unreasonable, unjust and contrary to public policy: xxx xxx xxx (5) that the
i.e., the general community or population, and one who offers services or common carrier shall not be responsible for the acts or omissions of his or its
solicits business only from a narrow segment of the general population. We employees; (6) that the common carrier’s liability for acts committed by
think that Article 1733 deliberately refrained from making such distinctions. thieves, or of robbers who do not act with grave or irresistible threat, violence
or force, is dispensed with or diminished; and (7) that the common carrier shall
So understood, the concept of “common carrier” under Article 1732 may be not responsible for the loss, destruction or deterioration of goods on account
seen to coincide neatly with the notion of “public service,” under the Public of the defective condition of the car, vehicle, ship, airplane or other equipment
Service Act (Commonwealth Act No. 1416, as amended) which at least partially used in the contract of carriage.” Under Article 1745 (6) above, a common
supplements the law on common carriers set forth in the Civil Code. Under carrier is held responsible and will not be allowed to divest or to diminish such
Section 13, paragraph (b) of the Public Service Act, “public service” includes: “x responsibility—even for acts of strangers like thieves or robbers, except where
x x every person that now or hereafter may own, operate, manage, or control such thieves or robbers in fact acted “with grave or irresistible threat, violence
in the Philippines, for hire or compensation, with general or limited clientele, or force.” We believe and so hold that the limits of the duty of extraordinary
whether permanent, occasional or accidental, and done for general business diligence in the vigilance over the goods carried are reached where the goods
purposes, any common carrier, railroad, street railway, traction railway, are lost as a result of a robbery which is attended by “grave or irresistible threat,
subway motor vehicle, either for freight or passenger, or both, with or without violence or force.”
fixed route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines, ferries and In these circumstances, we hold that the occurrence of the loss must
water craft, engaged in the transportation of passengers or freight or both, reasonably be regarded as quite beyond the control of the common carrier and
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, properly regarded as a fortuitous event. It is necessary to recall that even
canal, irrigation system, gas, electric light, heat and power, water supply and common carriers are not made absolute insurers against all risks of travel and
power petroleum, sewerage system, wire or wireless communications systems, of transport of goods, and are not held liable for acts or events which cannot
wire or wireless broadcasting stations and other similar public services. x x x.”
be foreseen or are inevitable, provided that they shall have complied with the The rule is that if the improper packing or, in this case, the defect/s in the
rigorous standard of extraordinary diligence. We, therefore, agree with the container, is/are known to the carrier or his employees or apparent upon
result reached by the Court of Appeals that private respondent Cendaña is not ordinary observation, but he nevertheless accepts the same without protest or
liable for the value of the undelivered merchandise which was lost because of exception notwithstanding such condition, he is not relieved of liability for
an event entirely beyond private respondent’s control. damage resulting therefrom. In this case, petitioner accepted the cargo without
exception despite the apparent defects in some of the container vans. Hence,
First Philippine Industrial Corporation vs. Court of Appeals for failure of petitioner to prove that she exercised extraordinary diligence in
300 SCRA 661, G.R. No. 125948, December 29, 1998 the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735 holds.
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 National Steel Corporation vs. Court of Appeals
employment, and must hold himself out as ready to engage in the 283 SCRA 45, G.R. No. 112287, G.R. No. 112350, December 12, 1997
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 It has been held that the true test of a common carrier is the carriage of
business is confined; 3. He must undertake to carry by the method by which his passengers or goods, provided it has space, for all who opt to avail themselves
business is conducted and over his established roads; and 4. The transportation of its transportation service for a fee. A carrier which does not qualify under the
must be for hire. above test is deemed a private carrier. “Generally, private carriage is
undertaken by special agreement and the carrier does not hold himself out to
Based on the above definitions and requirements, there is no doubt that carry goods for the general public. The most typical, although not the only form
petitioner is a common carrier. It is engaged in the business of transporting or of private carriage, is the charter party, a maritime contract by which the
carrying goods, i.e. petroleum products, for hire as a public employment. It charterer, a party other than the shipowner, obtains the use and service of all
undertakes to carry for all persons indifferently, that is, to all persons who or some part of a ship for a period of time or a voyage or voyages.”
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 In the instant case, it is undisputed that VSI did not offer its services to the
it from the definition of a common carrier. general public. As found by the Regional Trial Court, it carried passengers or
goods only for those it chose under a “special contract of charter party.” As
As correctly pointed out by petitioner, the definition of “common carriers” in correctly concluded by the Court of Appeals, the MV Vlasons I “was not a
the Civil Code makes no distinction as to the means of transporting, as long as common but a private carrier.” Consequently, the rights and obligations of VSI
it is by land, water or air. It does not provide that the transportation of the and NSC, including their respective liability for damage to the cargo, are
passengers or goods should be by motor vehicle. In fact, in the United States, determined primarily by stipulations in their contract of private carriage or
oil pipe line operators are considered common carriers. charter party.

Calvo vs. UCPB General Insurance Co., Inc. This view finds further support in the Code of Commerce which pertinently
379 SCRA 510, G.R. No. 148496, March 19, 2002 provides: “Art. 361. Merchandise shall be transported at the risk and venture
of the shipper, if the contrary has not been expressly stipulated. Therefore, the
Petitioner contends that contrary to the findings of the trial court and the Court damage and impairment suffered by the goods during the transportation, due
of Appeals, she is not a common carrier but a private carrier because, as a to fortuitous event, force majeure, or the nature and inherent defect of the
customs broker and warehouseman, she does not indiscriminately hold her things, shall be for the account and risk of the shipper. The burden of proof of
services out to the public but only offers the same to select parties with whom these accidents is on the carrier.” “Art. 362. The carrier, however, shall be liable
she may contract in the conduct of her business. The contention has no merit. for damages arising from the cause mentioned in the preceding article if proofs
In De Guzman v. Court of Appeals, the Court dismissed a similar contention and against him show that they occurred on account of his negligence or his
held the party to be a common carrier. omission to take the precautions usually adopted by careful persons, unless the
shipper committed fraud in the bill of lading, making him to believe that the
There is greater reason for holding petitioner to be a common carrier because goods were of a class or quality different from what they really were.” Because
the transportation of goods is an integral part of her business. To uphold the MV Vlasons I was a private carrier, the shipowner’s obligations are
petitioner’s contention would be to deprive those with whom she contracts the governed by the foregoing provisions of the Code of Commerce and not by the
protection which the law affords them notwithstanding the fact that the Civil Code which, as a general rule, places the prima facie presumption of
obligation to carry goods for her customers, as already noted, is part and parcel negligence on a common carrier. It is a hornbook doctrine that: “In an action
of petitioner’s business. against a private carrier for loss of, or injury to, cargo, the burden is on the
plaintiff to prove that the carrier was negligent or unseaworthy, and the fact
As to petitioner’s liability, Art. 1733 of the Civil Code provides: Common that the goods were lost or damaged while in the carrier’s custody does not put
carriers, from the nature of their business and for reasons of public policy, are the burden of proof on the carrier.”
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 Loadstar Shipping Co., Inc. vs. Court of Appeals
circumstances of each case. . . . In Compania Maritima v. Court of Appeals, the 315 SCRA 339, G.R. No. 131621, September 28, 1999
meaning of “extraordinary diligence in the vigilance over goods” was explained
thus: The extraordinary diligence in the vigilance over the goods tendered for LOADSTAR is a common carrier. The records do not disclose that the M/V
shipment requires the common carrier to know and to follow the required “Cherokee,” on the date in question, undertook to carry a special cargo or was
precaution for avoiding damage to, or destruction of the goods entrusted to it chartered to a special person only. There was no charter party. The bills of
for sale, carriage and delivery. It requires common carriers to render service lading failed to show any special arrangement, but only a general provision to
with the greatest skill and foresight and “to use all reasonable means to the effect that the M/V “Cherokee” was a “general cargo carrier.” Further, the
ascertain the nature and characteristic of goods tendered for shipment, and to bare fact that the vessel was carrying a particular type of cargo for one shipper,
exercise due care in the handling and stowage, including such methods as their which appears to be purely coincidental, is not reason enough to convert the
nature requires.” vessel from a common to a private carrier, especially where, as in this case, it
was shown that the vessel was also carrying passengers.
Anent petitioner’s insistence that the cargo could not have been damaged
while in her custody as she immediately delivered the containers to SMC’s Moving on to the second assigned error, we find that the M/V “Cherokee” was
compound, suffice it to say that to prove the exercise of extraordinary diligence, not seaworthy when it embarked on its voyage on 19 November 1984. The
petitioner must do more than merely show the possibility that some other party vessel was not even sufficiently manned at the time. “For a vessel to be
could be responsible for the damage. It must prove that it used “all reasonable seaworthy, it must be adequately equipped for the voyage and manned with a
means to ascertain the nature and characteristic of goods tendered for sufficient number of competent officers and crew. The failure of a common
[transport] and that [it] exercise[d] due care in the handling [thereof].” carrier to maintain in seaworthy condition its vessel involved in a contract of
Petitioner failed to do this. carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.”
Neither do we agree with LOADSTAR’s argument that the “limited liability” Thus, for the safety of passengers and the public who may have been wronged
theory should be applied in this case. The doctrine of limited liability does not and deceived through the baneful kabit system, the registered owner of the
apply where there was negligence on the part of the vessel owner or agent. vehicle is not allowed to prove that another person has become the owner so
LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and that he may be thereby relieved of responsibility. Subsequent cases affirm such
in having allowed its vessel to sail despite knowledge of an approaching basic doctrine.
typhoon. In any event, it did not sink because of any storm that may be deemed
as force majeure, inasmuch as the wind condition in the area where it sank was It would seem then that the thrust of the law in enjoining the kabit system is
determined to be moderate. Since it was remiss in the performance of its not so much as to penalize the parties but to identify the person upon whom
duties, LOADSTAR cannot hide behind the “limited liability” doctrine to escape responsibility may be fixed in case of an accident with the end view of
responsibility for the loss of the vessel and its cargo. protecting the riding public. The policy, therefore, loses its force if the public at
large is not deceived, much less involved.
Neither is there merit to the contention that the claim in this case was barred
by prescription. MIC’s cause of action had not yet prescribed at the time it was In the present case it is at once apparent that the evil sought to be prevented
concerned. Inasmuch as neither the Civil Code nor the Code of Commerce in enjoining the kabit system does not exist. First, neither of the parties to the
states a specific prescriptive period on the matter, the Carriage of Goods by Sea pernicious kabit system is being held liable for damages. Second, the case arose
Act (COGSA)—which provides for a one-year period of limitation on claims for from the negligence of another vehicle in using the public road to whom no
loss of, or damage to, cargoes sustained during transit—may be applied representation, or misrepresentation, as regards the ownership and operation
suppletorily to the case at bar. This one-year prescriptive period also applies to of the passenger jeepney was made and to whom no such representation, or
the insurer of the goods. In this case, the period for filing the action for recovery misrepresentation, was necessary. Thus it cannot be said that private
has not yet elapsed. Moreover, a stipulation reducing the one-year period is respondent Gonzales and the registered owner of the jeepney were in estoppel
null and void; it must, accordingly, be struck down. for leading the public to believe that the jeepney belonged to the registered
owner. Third, the riding public was not bothered nor inconvenienced at the very
American Insurance Co. vs. Compañia Maritima least by the illegal arrangement. On the contrary, it was private respondent
21 SCRA 998, No. L-24515, November 18, 1967 himself who had been wronged and was seeking compensation for the damage
done to him. Certainly, it would be the height of inequity to deny him his right.
Plaintiff avers that the one year prescriptive period provided for in the Carriage
of Goods by Sea Act does not apply in this case, which should be governed by Lita Enterprises, Inc. vs. Second Civil Cases Div., IAC
the statute of limitations in the Civil Code. In support of this contention it is 129 SCRA 79, No. L-64693, April 27, 1984
pointed out that the cargo in question was transshipment cargo; that the
discharge thereof in Manila terminated the obligation of Macondray as carrier; Unquestionably, the parties herein operated under an arrangement, commonly
and that its obligation to transship the cargo to Cebu was merely that of a known as the “kabit system”, whereby a person who has been granted a
“forwarding agent” of the shipper. certificate of convenience allows another person who owns motor vehicles to
operate under such franchise for a fee. A certificate of public convenience is a
Held: The action is based on the contract of carriage up to the final port of special privilege conferred by the government. Abuse of this privilege by the
destination, which was Cebu City, for which the corresponding freight had been grantees thereof cannot be countenanced. The “kabit system” has been
prepaid. The transshipment of the cargo from Manila to Cebu was not a identified as one of the root causes of the prevalence of graft and corruption in
separate transaction from that originally entered into by Macondray, as general the government transportation offices. In the words of Chief Justice
agent for the “M/S TOREADOR”. It was part of Macondray’s obligation under Makalintal,1 “this is a pernicious system that cannot be too severely
the contract of carriage and the fact that the transshipment was made via an condemned. It constitutes an imposition upon the good faith of the
inter-island vessel did not operate to remove the transaction from the government.”
operation of the Carriage of Goods by Sea Act.
Although not outrightly penalized as a criminal offense, the “kabit system” is
Lim vs. Court of Appeals invariably recognized as being contrary to public policy and, therefore, void and
373 SCRA 394, G.R. No. 125817, January 16, 2002 inexistent under Article 1409 of the Civil Code. It is a fundamental principle that
the court will not aid either party to enforce an illegal contract, but will leave
Lim denied liability by contending that he exercised due diligence in the them both where it finds them. Upon this premise, it was flagrant error on the
selection and supervision of his employees. He further asserted that as the part of both the trial and appellate courts to have accorded the parties relief
jeepney was registered in Vallarta’s name, it was Vallarta and not private from their predicament.
respondent who was the real party-in-interest. It is petitioners’ contention that
the Court of Appeals erred in sustaining the decision of the trial court despite The principle of in pari delicto is well known not only in this jurisdiction but also
their opposition to the well-established doctrine that an operator of a vehicle in the United States where common law prevails. Under American jurisdiction,
continues to be its operator as long as he remains the operator of record. the doctrine is stated thus: “The proposition is universal that no action arises,
According to petitioners, to recognize an operator under the kabit system as in equity or at law, from an illegal contract; no suit can be maintained for its
the real party-in-interest and to countenance his claim for damages is utterly specific performance, or to recover the property agreed to be sold or delivered,
subversive of public policy. or damages for its violation. The rule has sometimes been laid down as though
it was equally universal, that where the parties are in pari delicto, no affirmative
The kabit system is an arrangement whereby a person who has been granted a relief of any kind will be given to one against the other.”3 Although certain
certificate of public convenience allows other persons who own motor vehicles exceptions to the rule are provided by law, We see no cogent reason why the
to operate them under his license, sometimes for a fee or percentage of the full force of the rule should not be applied in the instant case.
earnings. Although the parties to such an agreement are not outrightly
penalized by law, the kabit system is invariably recognized as being contrary to SET II
public policy and therefore void and inexistent under Art. 1409 of the Civil Code. - VIGILANCE OVER THE GOODS
- PRESUMPTION OF NEGLIGENCE
In the early case of Dizon v. Octavio, the Court explained that one of the primary - DEFENSES AVAILABLE
factors considered in the granting of a certificate of public convenience for the - DILIGENCE IN SELECTION OF EMPLOYEES
business of public transportation is the financial capacity of the holder of the
license, so that liabilities arising from accidents may be duly compensated. The Philippine American General Insurance Co. vs. MGG Marine Services
kabit system renders illusory such purpose and, worse, may still be availed of 378 SCRA 650, G.R. No. 135645 March 8, 2002
by the grantee to escape civil liability caused by a negligent use of a vehicle
owned by another and operated under his license. If a registered owner is Common carriers, from the nature of their business and for reasons of public
allowed to escape liability by proving who the supposed owner of the vehicle policy, are mandated to observe extraordinary diligence in the vigilance over
is, it would be easy for him to transfer the subject vehicle to another who the goods and for the safety of the passengers transported by them. Owing to
possesses no property with which to respond financially for the damage done. this high degree of diligence required of them, common carriers, as a general
rule, are presumed to have been at fault or negligent if the goods transported fault or privity of the carrier. Article 1680 of the Civil Code, which considers fire
by them are lost, destroyed or if the same deteriorated. as an extraordinary fortuitous event refers to leases of rural lands where a
reduction of the rent is allowed when more than one-half of the f ruits have
In order that a common carrier may be absolved from liability where the loss, been lost due to such event, considering that the law adopts a protective policy
destruction or deterioration of the goods is due to a natural disaster or towards agriculture. As the peril of fire is not comprehended within the
calamity, it must further be shown that such natural disaster or calamity was exceptions in Article 1734, supra, Article 1735 of the Civil Code provides that in
the proximate and only cause of the loss; there must be “an entire exclusion of all cases other than those mentioned in Article 1734, the common carrier shall
human agency from the cause of the injury or the loss.” Moreover, even in be presumed to have been at fault or to have acted negligently, unless it proves
cases where a natural disaster is the proximate and only cause of the loss, a that it has observed the extraordinary diligence required by law.
common carrier is still required to exercise due diligence to prevent or minimize
loss before, during and after the occurrence of the natural disaster, for it to be ln this case, the respective Insurers, as subrogees of the cargo shippers, have
exempt from liability under the law for the loss of the goods. If a common proven that the transported goods have been lost. Petitioner Carrier has also
carrier fails to exercise due diligence—or that ordinary care which the proven that the loss was caused by fire. The burden then is upon Petitioner
circumstances of the particular case demand—to preserve and protect the Carrier to prove that it has exercised the extraordinary diligence required by
goods carried by it on the occasion of a natural disaster, it will be deemed to law. In this regard, the Trial Court, concurred in by the Appellate Court, made
have been negligent, and the loss will not be considered as having been due to the following finding of fact: "The cargoes in question were, according to the
a natural disaster under Article 1734(1). witnessess for the defendant, placed in hatches No. 2 and 3 of the vessel.
Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No.
The findings of the Board of Marine Inquiry indicate that the attendance of 2 and hatch No. 3; that when the smoke was noticed, the fire was already big;
strong winds and huge waves while the M/V Peatheray Patrick-G was sailing that the fire must have started twenty-four (24) hours before the same was
through Cortes, Surigao del Norte on March 3, 1987 was indeed fortuitous. A noticed; that carbon dioxide was ordered released and the crew was ordered
fortuitous event has been defined as one which could not be foreseen, or which to open the hatch covers of No. 2 hold for commencement of fire fighting by
though foreseen, is inevitable. An event is considered fortuitous if the following sea water; that all of these efforts were not enough to control the fire. Pursuant
elements concur: x x x (a) the cause of the unforeseen and unexpected to Article 1733, common carriers are bound to observe extraordinary diligence
occurrence, or the failure of the debtor to comply with his obligations, must be in the vigilance over the goods. The evidence of the defendant did not show
independent of human will; (b) it must be impossible to foresee the event which that extraordinary vigilance was observed by the vessel to prevent the
constitutes the caso fortuito, or if it can be foreseen, it must be impossible to occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not
avoid; (c) the occurrence must be such as to render it impossible for the debtor likewise show the amount of diligence made by the crew, on orders, in the care
to fulfill his obligation in a normal manner; and (d) the obligor must be free of the cargoes. What appears is that after the cargoes were stored in the
from any participation in the aggravation of the injury resulting to the creditor. hatches, no regular inspection was made as to their condition during the
xxx voyage. Consequently, the crew could not have even explain what could have
caused the fire. The defendant, in the Court's mind, failed to satisfactorily show
Although the Board of Marine Inquiry ruled only on the administrative liability that extraordinary vigilance and care had been made by the crew to prevent
of the captain and crew of the M/V Peatheray Patrick-G, it had to conduct a the occurrence of the fire. The defendant, as a common carrier, is liable to the
thorough investigation of the circumstances surrounding the sinking of the consignees for said lack of diligence required of it under Article 1733 of the Civil
vessel and the loss of its cargo in order to determine their responsibility, if any. Code." Having failed to discharge the burden of proving that it had exercised
The results of its investigation as embodied in its decision on the administrative the extraordinary diligence required by law, Petitioner Carrier cannot escape
case clearly indicate that the loss of the cargo was due solely to the attendance liability for the loss of the cargo. And even if fire were to be considered a
of strong winds and huge waves which caused the vessel to accumulate water, "natural disaster" within the meaning of Article 1734 of the Civil Code, it is
tilt to the port side and to eventually keel over. There was thus no error on the required under Article 1739 of the same Code that the "natural disaster" must
part of the Court of Appeals in relying on the factual findings of the Board of have been the "proximate and only cause of the loss," and that the carrier has
Marine Inquiry, for such factual findings, being supported by substantial "exercised due diligence to prevent or minimize the loss before, during or after
evidence are persuasive, considering that said administrative body is an expert the occurrence of the disaster." This Petitioner Carrier has also failed to
in matters concerning marine casualties. establish satisfactorily.

Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court On the US$500 Per Package Limitation
150 SCRA 464, No. L-71478, May 29, 1987
Petitioner Carrier avers that its liability if any, should not exceed US$500 per
On the Law Applicable package as provided in section 4(5) of the COGSA, which reads:

The law of the country to which the goods are to be transported governs the "(5) Neither the carrier nor the ship shall in any event be or become liable for
liability of the common carrier in case of their loss, destruction or deterioration. any loss or damage to or in connection with the transportation of goods in an
As the cargoes in question were transported from Japan to the Philippines, the amount exceeding $500 per package lawful money of the United States, or in
liability of Petitioner Carrier is governed primarily by the Civil Code. However, case of goods not shipped in packages, per customary freight unit, or the
in all matters not regulated by said Code, the rights and obligations of common equivalent of that sum in other currency, unless the nature and value of such
carrier shall be governed by the Code of Commerce and by special laws. Thus, goods have been declared by the shipper before shipment and inserted in bill
the Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of lading. This declaration if embodied in the bill of lading shall be prima facie
of the Civil Code. evidence, but all be conclusive on the carrier.

On the Burden of Proof "By agreement between the carrier, master or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph may
Under the Civil Code, common carriers, from the nature of their business and be fixed: Provided, That such maximum shall not be less than the figure above
for reasons of public policy, are bound to observe extraordinary diligence in the named. In no event shall the carrier be liable for more than the amount of
vigilance over goods, according to all the circumstances of each 'case. Common damage actually sustained."
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, Article 1749 of the New Civil Code also allows the limitations of liability in this
earthquake, lightning or other natural disaster or calamity "x x x x x x x" wise:
Petitioner Carrier claims that the loss of the vessel by fire exempts it from
liability under the phrase "natural disaster or calamity." However, we are of the "Art. 1749. A stipulation that the common carrier's liability is limited to the
opinion that fire may not be considered a natural disaster or calamity. This must value of the goods appearing in the bill of lading, unless the shipper or owner
be so as it arises almost invariably from some act of man or by human means. declares a greater value, is binding."
It does not fall within the category of an act of God unless caused by lightning
or by other natural disaster or calamity. It may even be caused by the actual
It is to be noted that the Civil Code does not of itself limit the liability of the be near the bus, was run over and killed. In the circumstances, it cannot be
common carrier to a fixed amount per package although the Code expressly claimed that the carrier’s agent had exercised the “utmost diligence” of a “very
permits a stipulation limiting such liability. Thus, the COGSA, which is suppletory cautions person” required by Article 1755 of the Civil Code to be observed by a
to the provisions of the Civil Code, steps in and supplements the Code by common carrier in the discharge of its obligation to transport saf ely its
establishing a statutory provision limiting the carrier's liability in the absence of passengers. In the first place, the driver, although stopping the bus,
a declaration of a higher value of the goods by the shipper in the bill of lading. nevertheless did not put off the engine. Secondly, he started to run the bus
The provisions of the Carriage of Goods by Sea Act on limited liability are as even before the bus conductor gave him the signal to go and while the latter
much a part of a bill of lading as though physically in it and as much a part was still unloading part of the baggages of the passengers Mariano Beltran and
thereof as though placed therein by agreement of the parties. family. The presence of said passengers near the bus was not unreasonable and
they are, therefore, to be considered still as passengers of the carrier, entitled
In respect of the shipment of 128 cartons of garment fabrics in two (2) to the protection under their contract of carriage.
containers and insured with NISSHIN, the Appellate Court also limited
Petitioner Carrier's liability to $500 per package and affirmed the award of Belgian Overseas Chartering and Shipping vs. Philippine First Insurance Co.
$46,583 to NISSHIN. It multiplied 128 cartons (considered as COGSA packages) 383 SCRA 23, G.R. No. 143133, June 5, 2002
by $500 to arrive at the figure of $64,000, and explained that "since this amount
is more than the insured value of the goods, that is $46,583, the Trial Court was On proof of negligence
correct in awarding said amount only for the 128 cartons, which amount is less
than the maximum limitation of the carrier's liability." Mere proof of delivery of the goods in good order to a common carrier and of
their arrival in bad order at their destination constitutes a prima facie case of
We find no reversible error. The 128 cartons and not the two (2) containers fault or negligence against the carrier. If no adequate explanation is given as to
should be considered as the shipping unit. how the deterioration, the loss or the destruction of the goods happened, the
transporter shall be held responsible.
Mitsui & Co., Ltd. vs. American Export Lines, Inc. (United States decision): When
what would ordinarily be considered packages are shipped in a container True, the words “metal envelopes rust stained and slightly dented” were noted
supplied by the carrier and the number of such units is disclosed in the shipping on the Bill of Lading; however, there is no showing that petitioners exercised
documents, each of those units and not the container constitutes the 'package' due diligence to forestall or lessen the loss. Having been in the service for
referred to in liability limitation provision of Carriage of Goods by Sea Act. several years, the master of the vessel should have known at the outset that
metal envelopes in the said state would eventually deteriorate when not
SET III properly stored while in transit. Equipped with the proper knowledge of the
- DURATION OF OBLIGATION nature of steel sheets in coils and of the proper way of transporting them, the
- STIPULATIONS LIMITING LIABILITY master of the vessel and his crew should have undertaken precautionary
measures to avoid possible deterioration of the cargo. But none of these
La Mallorca vs. Court of Appeals measures was taken. Having failed to discharge the burden of proving that they
17 SCRA 739, No. L-20761, July 27, 1966 have exercised the extraordinary diligence required by law, petitioners cannot
escape liability for the damage to the four coils.
Under the facts as found by the Court of Appeals, we have to sustain the
judgment holding petitioner liable for damages for the death of the child, In their attempt to escape liability, petitioners further contend that they are
Raquel Beltran. It may be pointed out that although it is true that respondent exempted from liability under Article 1734(4) of the Civil Code. They cite the
Mariano Beltran, his wife, and their children (including the deceased child) had notation “metal envelopes rust stained and slightly dented” printed on the Bill
alighted from the bus at a place designated for disembarking or unloading of of Lading as evidence containers was the proximate cause of the damage. We
passengers, it was also established that the father had to return to the vehicle are not convinced. From the evidence on record, it cannot be reasonably
(which was still at a stop) to get one of his bags or bayong that was left under concluded that the damage to the four coils was due to the condition noted on
one of the seats of the bus. There can be no controversy that as far as the father the Bill of Lading. The aforecited exception refers to cases when goods are lost
is concerned, when he returned to the bus for his bayong which was not or damaged while in transit as a result of the natural decay of perishable goods
unloaded, the relation of passenger and carrier between him and the petitioner or the fermentation or evaporation of substances liable therefor, the necessary
remained subsisting. For, the relation of carrier and passenger does not and natural wear of goods in transport, defects in packages in which they are
necessarily cease where the latter, after alighting from the car, aids the carrier’s shipped, or the natural propensities of animals. None of these is present in the
servant or employee in removing his baggage from the car.1 The issue to be instant case.
determined here is whether as to the child, who was already led by the father
to a place about 5 meters away from the bus, the liability of the carrier for her Further, even if the fact of improper packing was known to the carrier or its
safety under the contract of carriage also persisted. crew or was apparent upon ordinary observation, it is not relieved of liability
for loss or injury resulting therefrom, once it accepts the goods notwithstanding
It has been recognized as a rule that the relation of carrier and passenger does such condition. Thus, petitioners have not successfully proven the application
not cease at the moment the passenger alights from the carrier’s vehicle at a of any of the aforecited exceptions in the present case.
place selected by the carrier at the point of destination, but continues until the
passenger has had a reasonable time or a reasonable opportunity to leave the On package limitation
carrier’s premises. And, what is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances, Thus, a person who, Petitioners contend that their liability should be limited to US$500 per package
after alighting from a train, walks along the station platform is considered still as provided in the Bill of Lading and by Section 4(5) of COGSA. On the other
a passenger.2 So also, where a passenger has alighted at his destination and is hand, respondent argues that Section 4(5) of COGSA is inapplicable, because
proceeding by the usual way to leave the company’s premises, but before the value of the subject shipment was declared by petitioners beforehand, as
actually doing so is halted by the report that his brother, a fellow passenger, evidenced by the reference to and the insertion of the Letter of Credit or “L/C
has been shot, and he in good faith and without intent of engaging in the No. 90/02447” in the said Bill of Lading.
difficulty, returns to relieve his brother, he is deemed reasonably and
necessarily delayed and thus continues to be a passenger entitled as such to A bill of lading serves two functions. First, it is a receipt for the goods shipped.
the protection of the railroad and company and its agents.3 Second, it is a contract by which three parties—namely, the shipper, the carrier,
and the consignee—undertake specific responsibilities and assume stipulated
In the present case, the father returned to the bus to get one of his baggages obligations. In a nutshell, the acceptance of the bill of lading by the shipper and
which was not unloaded when they alighted from the bus. Raquel, the child the consignee, with full knowledge of its contents, gives rise to the presumption
that’ she was, must have followed the father. However, although the father was that it constituted a perfected and binding contract.
still on the running board of the bus awaiting for the conductor to hand him the
bag or bayong, the bus started to run, so that even he (the father) had to jump Further, a stipulation in the bill of lading limiting to a certain sum the common
down from the moving vehicle. It was at this instance that the child, who must carrier’s liability for loss or destruction of a cargo—unless the shipper or owner
declares a greater value—is sanctioned by law. There are, however, two lading," it nonetheless ruled that the consignee was bound thereby on the
conditions to be satisfied: (1) the contract is reasonable and just under the strength of authority holding that such provisions on liability limitation are as
circumstances, and (2) it has been fairly and freely agreed upon by the parties. much a part of a bill of lading as though physically in it and as though placed
The rationale for, this rule is to bind the shippers by their agreement to the therein by agreement of the parties.
value (maximum valuation) of their goods.
Edgar Cokaliong Shipping Lines vs. UCPB General Insurance Company, Inc.
It is to be noted, however, that the Civil Code does not limit the liability of the 404 SCRA 706, G.R. No. 146018, June 25, 2003
common carrier to a fixed amount per package. In all matters not regulated by
the Civil Code, the right and the obligations of common carriers shall be The liability of a common carrier for the loss of goods may, by stipulation in the
governed by the Code of Commerce and special laws. Thus, the COGSA, which bill of lading, be limited to the value declared by the shipper. On the other hand,
is suppletory to the provisions of the Civil Code, supplements the latter by the liability of the insurer is determined by the actual value covered by the
establishing a statutory provision limiting the carrier’s liability in the absence of insurance policy and the insurance premiums paid therefor, and not necessarily
a shipper’s declaration of a higher value in the bill of lading. The provisions on by the value declared in the bill of lading.
limited liability are as much a part of the bill of lading as though physically in it
and as though placed there by agreement of the parties. In the present case, the stipulation limiting petitioner’s liability is not contrary
to public policy. In fact, its just and reasonable character is evident. The
In the case before us, there was no stipulation in the Bill of Lading limiting the shippers/consignees may recover the full value of the goods by the simple
carrier’s liability. Neither did the shipper declare a higher valuation of the goods expedient of declaring the true value of the shipment in the Bill of Lading. Other
to be shipped. This fact notwithstanding, the insertion of the words “L/C No. than the payment of a higher freight, there was nothing to stop them from
90/02447 cannot be the basis for petitioners’ liability. First, a notation in the placing the actual value of the goods therein. In fact, they committed fraud
Bill of Lading which indicated the amount of the Letter of Credit obtained by against the common carrier by deliberately undervaluing the goods in their Bill
the shipper for the importation of steel sheets did not effect a declaration of of Lading, thus depriving the carrier of its proper and just transport fare.
the value of the goods as required by the bill. That notation was made only for
the convenience of the shipper and the bank processing the Letter of Credit. Concededly, the purpose of the limiting stipulation in the Bill of Lading is to
Second, in Keng Hua Paper Products v. Court of Appeals, we held that a bill of protect the common carrier. Such stipulation obliges the shipper/consignee to
lading was separate from the Other Letter of Credit arrangements. notify the common carrier of the amount that the latter may be liable for in
case of loss of the goods. The common carrier can then take appropriate
In the light of the foregoing, petitioners’ liability should be computed based on measures—getting insurance, if needed, to cover or protect itself. This
US$500 per package and not on the per metric ton price declared in the Letter precaution on the part of the carrier is reasonable and prudent. Hence, a
of Credit. In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, we shipper/consignee that undervalues the real worth of the goods it seeks to
explained the meaning of package: “When what would ordinarily be considered transport does not only violate a valid contractual stipulation, but commits a
packages are shipped in a container supplied by the carrier and the number of fraudulent act when it seeks to make the common carrier liable for more than
such units is disclosed in the shipping documents, each of those units and not the amount it declared in the bill of lading.
the container constitutes the ‘package’ referred to in the liability limitation
provision of Carriage of Goods by Sea Act.” Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing
the goods in their respective Bills of Lading. Hence, petitioner was exposed to
Sea-Land Service, Inc. vs. Intermediate Appellate Court a risk that was deliberately hidden from it, and from which it could not protect
153 SCRA 552, No. L-75118, August 31, 1987 itself.

Since the liability of a common carrier for loss of or damage to goods It is well to point out that, for assuming a higher risk (the alleged actual value
transported by it under a contract of carriage is governed by the laws of the of the goods) the insurance company was paid the correct higher premium by
country of destination and the goods in question were shipped from the United Feliciana Legaspi; while petitioner was paid a fee lower than what it was
States to the Philippines, the liability of petitioner Sea-Land to the respondent entitled to for transporting the goods that had been deliberately undervalued
consignee is governed primarily by the Civil Code, and as ordained by the said by the shippers in the Bill of Lading. Between the two of them, the insurer
Code, suppletorily, in all matters not determined thereby, by the Code of should bear the loss in excess of the value declared in the Bills of Lading. This is
Commerce and special laws. One of these suppletory special laws is the the just and equitable solution.
Carriage of Goods by Sea Act, U.S. Public Act No. 521 which was made
applicable to all contracts for the carriage of goods by sea to and from Everett Steamship Corporation vs. Court of Appeals
Philippine ports in foreign trade by Commonwealth Act No. 65, approved on 297 SCRA 469, G.R. No. 122191, G.R. No. 122494, October 8, 1998
October 22, 1936.
A stipulation in the bill of lading limiting the common carrier’s liability for loss
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already or destruction of a cargo to a certain sum, unless the shipper or owner declares
quoted is repugnant to or inconsistent with any of the just-cited provisions of a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the
the Civil Code. Said section merely gives more flesh and greater specificity to Civil Code.
the rather general terms of Article 1749 (without doing any violence to the plain
intent thereof) and of Article 1750, to give effect to just agreements limiting The above stipulations are, to our mind, reasonable and just. In the bill of lading,
carriers' liability for loss or damages which are freely and fairly entered into. the carrier made it clear that its liability would only be up to One Hundred
Thousand (¥100,000.00) Yen. However, the shipper, Maruman Trading, had the
The private respondent had no direct part or intervention in the execution of option to declare a higher valuation if the value of its cargo was higher than the
the contract of carriage between the shipper and the carrier as set forth in the limited liability of the carrier. Considering that the shipper did not declare a
bill of lading in question. As pointed out in Mendoza vs. PAL, supra, the right of higher valuation, it had itself to blame for not complying with the stipulations.
a party in the same situation as respondent here, to recover for loss of a
shipment consigned to him under a bill of lading drawn up only by and between The trial court’s ratiocination that private respondent could not have ‘‘fairly and
the shipper and the carrier, springs from either a relation of agency that may freely’’ agreed to the limited liability clause in the bill of lading because the said
exist between him and the shipper or consignor, or his status as a stranger in conditions were printed in small letters does not make the bill of lading invalid.
whose favor some stipulation is made in said contract, and who becomes a
party thereto when he demands fulfillment of that stipulation, in this case the We ruled in PAL, Inc. vs. Court of Appeals 5 that the “jurisprudence on the
delivery of the goods or cargo shipped. In neither capacity can he assert matter reveals the consistent holding of the court that contracts of adhesion
personally, in bar to any provision of the bill of lading, the alleged circumstance are not invalid per se and that it has on numerous occasions upheld the binding
that fair and free agreement to such provision was vitiated by its being in such effect thereof.”
fine print as to be hardly readable. Parenthetically, it may be observed that in
one comparatively recent case16 where this Court found that a similar package
limitation clause was "(printed in the smallest type on the back of the bill of
American Home Assurance, Company vs. Court of Appeals It was precisely because of the legal presumption that once a passenger in the
208 SCRA 343, G.R. No. 94149, May 5, 1992 course of travel is injured or does not reach his destination safely, the carrier
and the driver are presumed to be at fault, that private respondents submitted
Petitioner avers that respondent court failed to consider that respondent affidavits to prove that the accident which resulted in the death of petitioner’s
National Marine Corporation being a common carrier, in conducting its wife was due to the fault or negligence of the drivers of the two pickup trucks
business is regulated by the Civil Code primarily and suppletorily by the Code of over whom the carrier had no supervision or control. Having, therefore, shown
Commerce; and that respondent court refused to consider the Bill of Lading as prima facie that the accident was due to a caso fortuito and that the driver of
the law governing the parties. the respondent was free of concurrent or contributory fault or negligence, it
was incumbent upon petitioner to rebut such proof. Having failed to do so, the
Private respondent countered that in all matters not covered by the Civil Code, defense of the carrier that the proximate cause of the accident was a caso
the rights and obligations of the parties shall be governed by the Code of fortuito remains unrebutted. We are not unmindful that the issue as to whether
Commerce and by special laws as provided for in Article 1766 of the Civil Code; a carrier used such reasonable precautions to avoid the accident as would
that Articles 806, 809 and 848 of the Code of Commerce should be applied ordinarily be used by careful, prudent persons under like circumstances is a
suppletorily as they provide for the extent of the common carriers’ liability. question essentially one of fact and, therefore, ordinarily such issue must be
decided at the trial. But where, as in the case at bar, petitioner has not
But more importantly, the Court ruled that common carriers cannot limit their submitted opposing affidavits to controvert private respondents’ evidence that
liability for injury or loss of goods where such injury or loss was caused by its the driver of the passenger jeepney was free of contributory fault as he stopped
own negligence. Otherwise stated, the law on averages under the Code of the jeepney to avoid the accident, but in spite of such precaution the accident
Commerce cannot be applied in determining liability where there is negligence. occurred, respondent Judge did not, therefore, act arbitrarily in declaring in his
Order of May 20, 1975, that “there is no genuine issue to any material fact and
Under the foregoing principle and in line with the Civil Code’s mandatory no controversial question of fact to be submitted to the trial court.”
requirement of extraordinary diligence on common carriers in the care of goods
placed in their stead, it is but reasonable to conclude that the issue of California Lines, Inc. vs. De los Santos
negligence must first be addressed before the proper provisions of the Code of 3 SCRA 787, No. L-13254, December 30, 1961
Commerce on the extent of liability may be applied.
Moreover, the third-party complaint already referred to was, in reality, a cross-
SET IV claim because it sought to obtain judgment ordering Amparo de los Santos
- CARRIAGE OF PASSENGERS principally, as owner of the Ricalinda Bus vehicle that collided with the one
owned by the California Lines, Inc., to pay to the latter whatever damages it
Nocum vs. Laguna Tayabas Bus Co. may be sentenced to pay its passenger Josephine W. Regalado. As stated
30 SCRA 69, No. L-23733, October 31, 1969 hereinbefore, when the California Lines, Inc. discovered that the Ricalinda Bus
was a mere trade-name and had no juridical personality, it obtained leave of
Article 1733 of the Civil Code reasonably qualifies the extraordinary diligence court to file and actually filed a third-party complaint against Amparo de los
required of common carriers for the safety of the passengers transported by Santos, her husband and their driver. These third-party defendants settled the
them to be "according to all the circumstances of each case." In fact, Article claim of Regalado for damages, thus leaving nothing in this respect to the
1755 repeats this same qualification. California Lines, Inc. to recover from them. But whether it was properly a cross-
claim or a third-party complaint is of little moment in the decision of this appeal.
A passenger was injured as a consequence of the explosion of firecrackers, The fact is that the claim asserted therein was for reimbursement of whatever
contained in a box, loaded in the passenger bus and declared to its conductor damages the California Lines, Inc. might be sentenced to pay its passenger, as
as containing clothes and miscellaneous items by a co-passenger. Held: Fairness just stated, and it is obvious that said claim is entirely different from, and does
demands that in measuring a common carrier's duty towards its passengers, not cover nor is it covered by the claim subject matter of Civil Case No. 32298,
allowance must be given to the reliance that should be reposed on the sense namely, recovery of the damages suffered by the California Lines, Inc. as alleged
of responsibility of all the passengers in regard to their common safety. It is to in paragraphs VII to IX of its complaint (supra). It is obvious, therefore, that the
be presumed that a passenger will not take with him anything dangerous to the lower court erred in dismissing the latter case on the ground that there was
lives and limbs of his co-passengers, not to speak of his own. Not to be lightly already another action pending between the same parties upon the same or
considered must be the right to privacy to which each passenger is entitled, He similar causes of action.
cannot be subjected to any unusual search, when he protests the
innocuousness of his baggage and nothing appears to indicate the contrary, as Japan Airlines vs. Court of Appeals
in the case at bar. There is need for evidence of circumstances indicating cause 294 SCRA 19, G.R. No. 118664, August 7, 1998
or causes for apprehension that the ressenger's baggage is dangerous and that
it is failure of the common carrier's employee to act in the face of such evidence Accordingly, there is no question that when a party is unable to fulfill his
that constitutes the cornerstone of the common carrier's liability. obligation because of “force majeure,” the general rule is that he cannot be
held liable for damages for non-performance. Corollarily, when JAL was
Estrada vs. Consolacion prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo
71 SCRA 523, No. L-40948, June 29, 1976 eruption, whatever losses or damages in the form of hotel and meal expenses
the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable
Under the contract of carriage, private respondents assumed the express that JAL assumed the hotel expenses of respondents for their unexpected
obligation to transport the wife of petitioner to her destination safely and to overnight stay on June 15, 1991.
observe extra ordinary diligence with due regard for all the circumstances, and
that any injury suffered by her in the course thereof, is immediately attributable Admittedly, to be stranded for almost a week in a foreign land was an
to the negligence of the carrier. To overcome such presumption, it must be exasperating experience for the private respondents. To be sure, they
shown that the carrier had observed the required extraordinary diligence, underwent distress and anxiety during their unanticipated stay in Narita, but
which means that the carrier must show the “utmost diligence of very cautious their predicament was not due to the fault or negligence of JAL but the closure
persons * * * as far as human care and foresight can provide”, or that the of NAIA to international flights. Indeed, to hold JAL, in the absence of bad faith
accident was caused by a fortuitous event.17 In order to constitute a caso or negligence, liable for the amenities of its stranded passengers by reason of
fortuito that would exempt a person from responsibility, it is necessary that (1) a fortuitous event is too much of a burden to assume.
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; Furthermore, it has been held that airline passengers must take such risks
and (3) the obligor must be free of a concurrent or contributory fault or incident to the mode of travel. In this regard, adverse weather conditions or
negligence. 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.
The factual background of the PAL case is different from the instant petition. In The petitioner claims that the lower court erred in not ruling that Art. 28(1) of
that case there was indeed a fortuitous event resulting in the diversion of the the Warsaw Convention is inapplicable because of a fundamental change in the
PAL flight. However, the unforeseen diversion was worsened when “private circumstances that served as its basis.
respondents (passenger) was left at the airport and could not even hitch a ride
in a Ford Fiera loaded with PAL personnel,” not to mention the apparent apathy The petitioner goes at great lengths to show that the provisions in the
of the PAL station manager as to the predicament of the stranded passengers. Convention were intended to protect airline companies under “the conditions
In light of these circumstances, we held that if the fortuitous event was prevailing then and which have long ceased to exist.” He argues that in view of
accompanied by neglect and malfeasance by the carrier’s employees, an action the significant developments in the airline industry through the years, the
for damages against the carrier is permissible. Unfortunately, for private treaty has become irrelevant. Hence, to the extent that it has lost its basis for
respondents, none of these conditions are present in the instant petition. approval, it has become unconstitutional.

Maranan vs. Perez The petitioner is invoking the doctrine of rebus sic stantibus. According to
20 SCRA 412, No. L-22272, June 26, 1967 Jessup, “this doctrine constitutes an attempt to formulate a legal principle
which would justify non-performance of a treaty obligation if the conditions
The Civil Code provisions on the subject of Common Carriers1 are new and were with relation to which the parties contracted have changed so materially and
taken from Anglo-American Law.2 There, the basis of the carrier's liability for so unexpectedly as to create a situation in which the exaction of performance
assaults on passengers committed by its drivers rests either on (1) the doctrine would be unreasonable.” The key element of this doctrine is the vital change in
of respondeat superior or (2) the principle that it is the carrier's implied duty to the condition of the contracting parties that they could not have foreseen at
transport the passenger safely.3 the time the treaty was concluded.

Under the first, which is the minority view, the carrier is liable only when the It is true that at the time the Warsaw Convention was drafted, the airline
act of the employee is within the scope of his authority and duty. It is not industry was still in its infancy. However, that circumstance alone is not
sufficient that the act be within the course of employment only.4 sufficient justification for the rejection of the treaty at this time. The changes
recited by the petitioner were, realistically, not entirely unforeseen although
Under the second view, upheld by the majority and also by the later cases, it is they were expected in a general sense only.
enough that the assault happens within the course of the employee's duty. It is
no defense for the carrier that the act was done in excess of authority or in But the more important consideration is that the treaty has not been rejected
disobedience of the carrier's orders.5 The carrier's liability here is absolute in by the Philippine government. The doctrine of rebus sic stantibus does not
the sense that it practically secures the passengers f rom assaults committed operate automatically to render the treaty inoperative. There is a necessity for
by its own employees.6 a formal act of rejection, usually made by the head of State, with a statement
of the reasons why compliance with the treaty is no longer required.
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently
follows the rule based on the second view. At least three very cogent reasons The petitioner claims that the lower court erred in ruling that the plaintiff must
underlie this rule. As explained in Texas Midland R.R. v, Monroe, 110 Tex. 97, sue in the United States, because this would deny him the right to access to our
216 S.W. 388, 389-390, and Haver v. Central Railroad Co,, 43 LRA 84, 85: (1) the courts.
special undertaking of the carrier' requires that it furnish its passenger that full
measure of protection afforded by the exercise of the high degree of care The petitioner alleges that the expenses and difficulties he will incur in filing a
prescribed by the law, inter alia from violence and insults at the hands of suit in the United States would constitute a constructive denial of his right to
strangers and other passengers, but above all, from the acts of the carrier's own access to our courts for the protection of his rights. He would consequently be
servants charged with the passenger's safety; (2) said liability of the carrier for deprived of this vital guaranty as embodied in the Bill of Rights.
the servant's violation of duty to passengers, is the result of the former's
confiding in the servant's hands the performance of his contract to safely Obviously, the constitutional guaranty of access to courts refers only to courts
transport the passenger, delegating therewith the duty of protecting the with appropriate jurisdiction as defined by law. It does not mean that a person
passenger with the utmost care prescribed by law; and (3) as between the can go to any court for redress of his grievances regardless of the nature or
carrier and the passenger, the former must bear the risk of wrongful acts or value of his claim. If the petitioner is barred from filing his complaint before our
negligence of the carrier's employees against passengers, since it, and not the courts, it is because they are not vested with the appropriate jurisdiction under
passengers, has power to select and remove them. the Warsaw Convention, which is part of the law of our land.

Accordingly, it is the carrier's strict obligation to select its drivers and similar The petitioner claims that the lower court erred in not ruling that under Article
employees with due regard not only to their technical competence and physical 28(1) of the Warsaw Convention, this case was properly filed in the Philippines,
ability, but also, no less important, to their total personality, including their because Manila was the destination of the plaintiff.
patterns of behavior, moral fibers, and social attitude.
The place of destination, within the meaning of the Warsaw Convention, is
Applying this stringent norm to the facts in this case, therefore, the lower court determined by the terms of the contract of carriage or, specifically in this case,
rightly. adjudged the defendant carrier liable pursuant to Art. 1759 of the Civil the ticket between the passenger and the carrier. Examination of the
Code. The dismissal of the claim against the defendant driver was also correct. petitioner’s ticket shows that his ultimate destination is San Francisco. Although
Plaintiff's action was predicated on breach of contract of carriage7 and the cab the date of the return flight was left open, the contract of carriage between the
driver was not a party thereto. His civil liability is covered in the criminal case parties indicates that NOA was bound to transport the petitioner to San
wherein he was convicted by final judgment. Francisco from Manila. Manila should therefore be considered merely an
agreed stopping place and not the destination.
Santos III vs. Northwest Orient Airlines
Article 1(2) also draws a distinction between a “destination” and an “agreed
210 SCRA 256, G.R. No. 101538, June 23, 1992
stopping place.” It is the “destination” and not an “agreed stopping place” that
controls for purposes of ascertaining jurisdiction under the Convention.
This case involves the proper interpretation of Article 28(1) of the Warsaw
Convention, reading as follows: The contract is a single undivided operation, beginning with the place of
departure and ending with the ultimate destination. The use of the singular in
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, this expression indicates the understanding of the parties to the Convention
in the territory of one of the High Contracting Parties, either before the court that every contract of carriage has one place of departure and one place of
of the domicile of the carrier or of his principal place of business, or where he destination. An intermediate place where the carriage may be broken is not
has a place of business through which the contract has been made, or before regarded as a “place of destination.”
the court at the place of destination.
Mapa vs. Court of Appeals appellate court, given all the facts before it, sustained the trial court in finding
275 SCRA 286, G.R. No. 122308, July 8, 1997 petitioner ultimately guilty of “gross negligence” in the handling of private
respondent’s luggage. The “loss of said baggage not only once but twice,” said
The petitioners insist that the Warsaw Convention is not applicable to their case the appellate court, “underscores the wanton negligence and lack of care” on
because the contracts they had with TWA did not involve an international the part of the carrier.
transportation. Whether the contracts were of international transportation is
to be solely determined from the TWA tickets issued to them in Bangkok, The above findings, which certainly cannot be said to be without basis,
Thailand, which showed that their itinerary was Los Angeles-New York-Boston- foreclose whatever rights petitioner might have had to the possible limitation
St. Louis-Chicago. Accordingly, since the place of departure (Los Angeles) and of liabilities enjoyed by international air carriers under the Warsaw Convention
the place of destination (Chicago) are both within the territory of one High (Convention for the Unification of Certain Rules Relating to International
Contracting Party, with no agreed stopping place in a territory subject to the Carriage by Air, as amended by the Hague Protocol of 1955, the Montreal
sovereignty, mandate, suzerainty or authority of another Power, the contracts Agreement of 1966, the Guatemala Protocol of 1971 and the Montreal
did not constitute ‘international transportation’ as defined by the convention. Protocols of 1975). In Alitalia vs. Intermediate Appellate Court, now Chief
Besides, it is a fact that petitioners Purita and Carmina Mapa traveled from Justice Andres R. Narvasa, speaking for the Court, has explained it well; he said:
Manila to Los Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued “The Warsaw Convention however denies to the carrier availment ‘of the
independently of the TWA tickets. provisions which exclude or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as, in accordance with the law
There are then two categories of international transportation, viz., (1) that of the court seized of the case, is considered to be equivalent to wilful
where the place of departure and the place of destination are situated within misconduct,’ or ‘if the damage is (similarly) caused x x by any agent of the
the territories of two High Contracting Parties regardless of whether or not carrier acting within the scope of his employment.’ The Hague Protocol
there be a break in the transportation or a transshipment; and (2) that where amended the Warsaw Convention by removing the provision that if the airline
the place of departure and the place of destination are within the territory of a took all necessary steps to avoid the damage, it could exculpate itself
single High Contracting Party if there is an agreed stopping place within a completely, and declaring the stated limits of liability not applicable ‘if it is
territory subject to the sovereignty, mandate, or authority of another power, proved that the damage resulted from an act or omission of the carrier, its
even though the power is not a party to the Convention. servants or agents, done with intent to cause damage or recklessly and with
knowledge that damage would probably result.’ The same deletion was
(Note: The High Contracting Parties referred to in the Convention are the effected by the Montreal Agreement of 1966, with the result that a passenger
signatories thereto and those which subsequently adhered to it.) could recover unlimited damages upon proof of wilful misconduct.

The contracts of transportation in this case are evidenced by the two TWA The Court thus sees no error in the preponderant application to the instant case
tickets, No. 015:9475:153:304 and No. 015:9475:153:305, both purchased and by the appellate court, as well as by the trial court, of the usual rules on the
issued in Bangkok, Thailand. On the basis alone of the provisions therein, it is extent of recoverable damages beyond the Warsaw limitations. Under
obvious that the place of departure and the place of destination are all in the domestic law and jurisprudence (the Philippines being the country of
territory of the United States, or of a single High Contracting Party. The destination), the attendance of gross negligence (given the equivalent of fraud
contracts, therefore, cannot come within the purview of the first category of or bad faith) holds the common carrier liable for all damages which can be
international transportation. Neither can it be under the second category since reasonably attributed, although unforeseen, to the non-performance of the
there was NO agreed stopping place within a territory subject to the obligation, including moral and exemplary damages.
sovereignty, mandate, or authority of another power.
Lufthansa German Airlines vs. Intermediate Appellate Court
The only way to bring the contracts between Purita and Carmina Mapa, on the 207 SCRA 350, G.R. No. 71238, March 19, 1992
one hand, and TWA, on the other, within the first category of “international
transportation” is to link them with, or to make them an integral part of, the The main issue in this case is whether or not the private respondents are
Manila-Los Angeles travel of Purita and Carmina through PAL aircraft. entitled to an award of damages beyond the liability set forth in the Warsaw
Convention and in the Airwaybill of Lading.
TWA relies on Article I(3) of the Convention, which provides as follows:
The petitioner contends that since the contract between the petitioner and
3. A carriage to be performed by several successive air carriers is deemed, for respondent Henry H. Alcantara embodied in Airwaybill No. 220-9776-2733 is
the purposes of this Convention, to be one undivided carriage, if it has been one of international carriage by air, it is subject to the Warsaw Convention,
regarded by the parties as a single operation, whether it had been agreed upon which in Article 22 limits the liability of the carrier with respect to checked
under the form of a single contract or of a series of contracts, and it shall not baggage to a sum of 250 French francs per kilo (equivalent to US$20.00/kilo)
lose its international character merely because one contract or a series of unless a higher value has been declared in advance and additional charges are
contracts is to be performed entirely within a territory subject to the paid by the passenger. Respondent Henry H. Alcantara having admitted that he
sovereignty, suzerainty, mandate, or authority of the same High Contracting did not declare the value or contents of the missing luggage, the liability of the
Party. petitioner is therefore limited by the Warsaw Convention and the Airwaybill to
US$20.00 per kilo.
The flaw of respondents’ position is the presumption that the parties have
“regarded” as an “undivided carriage” or as a “single operation” the carriage The loss of one luggage belonging to the private respondents while the same
from Manila to Los Angeles through PAL then to New York-Boston-St. Louis- was in the custody of the petitioner is not disputed. The contract of air carriage
Chicago through TWA. generates a relation attended with a public duty. Neglect or malfeasance of the
carrier’s employees could give ground for an action for damages (Zulueta v. Pan
Sabena Belgian World Airlines vs. Court of Appeals American World Airways, Inc., 43 SCRA 37 [1972]). Common carriers are liable
255 SCRA 38, G.R. No. 104685, March 14, 1996 for the missing goods for failure to comply with its duty (American Insurance
Co., Inc. v. Macondray & Co., Inc., 39 SCRA 494 [1971]). In Alitalia vs.
It remained undisputed that private respondent’s luggage was lost while it was Intermediate Appellate Court (192 SCRA 9 [1990]) where petitioner Alitalia as
in the custody of petitioner. It was supposed to arrive on the same flight that carrier failed to deliver a passenger’s (Dr. Felipa Pablo’s) baggage containing
private respondent took in returning to Manila on 02 September 1987. When the papers she was scheduled to read and the materials which would have
she discovered that the luggage was missing, she promptly accomplished and enabled her to make scientific presentation (consisting of slides,
filed a Property Irregularity Report. She followed up her claim on 14 September autoradiograms or films, tables and tabulations) in a prestigious international
1987, and filed, on the following day, a formal letter-complaint with petitioner. conference in Rome where she was invited to participate in the conference,
She felt relieved when, on 23 October 1987, she was advised that her luggage extended by the Joint FAO/IAEA Division of Atomic Energy in Food and
had finally been found, with its contents intact when examined, and that she Agriculture of the United Nations, as a consequence of which she failed to
could expect it to arrive on 27 October 1987. She then waited anxiously only to participate in the conference, this Court held that the Warsaw Convention does
be told later that her luggage had been lost for the second time. Thus, the not exclude liability for other breaches of contract by the carrier. Thus: “The
Convention does not thus operate as an exclusive enumeration of the instances
of an airline’s liability, or as an absolute limit of the extent of that liability. Such
a proposition is not borne out by the language of the Convention, as this Court
has now, and at an earlier time, pointed out. Moreover, slight reflection readily
leads to the conclusion that it should be deemed a limit of liability only in those
cases where the cause of the death or injury to person, or destruction, loss or
damage to property or delay in its transport is not attributable to or attended
by any wilful misconduct, bad faith, recklessness, or otherwise improper
conduct on the part of any official or employee for which the carrier is
responsible, and there is otherwise no special or extraordinary form of resulting
injury.

In the case at bar, the trial court found that: (a) petitioner airline has not
successfully refuted the presumption established by Article 1735 of the Civil
Code that the loss of the luggage in question was due to the negligence or fault
of its employees; (b) the contents of the missing luggage of private respondents
could not be replaced and were assessed at P200,000.00 by the latter; (c)
respondent Henry Alcantara spent about $15,000.00 in trying to locate said
luggage in Frankfurt, Germany, London, United Kingdom and Hongkong; (d)
there being no evidence to the contrary, the foregoing assessments made by
private respondents were fair and reasonable; and (3) private respondents
were unable to present ample evidence to prove fraud and bad faith and are
therefore not entitled to moral damages under Article 2220 of the Civil Code.

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