gG.R. No. 80447. January 31, 1989
vs.
BALIWAG TRANSIT, INC. petitioner,
vs.
HON. COURT OF APPEALS and SPS. SOTERO
CAILIPAN, JR. and ZENAIDA LOPEZ and
GEORGE L. CAILIPAN, respondents.
Facts:
On December 1984, George Calilipan was thrown
off a bus driven in a careless and negligent manner
by Leonardo Cruz, the authorized driver of the bus
owned by Baliwag Transit. Due to this, George
suffered multiple serious physical injuries and was
confined in the hospital.
Baliwag Transit alleged that the injuries suffered by
George are due to his own voluntary act. During
the pendency of the case, George signed a
Release of Claims in favor of Baliwag Transit, he
acquits and forever discharges Fortune Insurance
and Baliwag Transit for any liability. George’s
parents contend that George is a student, living
with his parents and totally dependent on them for
support. Thus, the Release of Claims signed by
George has no legal effect.
Issue: Whether the “Release of Claims” signed by
George has the effect of dismissing the case
Held: Yes. the release of claims executed by the
injured party discharging the insurance and
transportation companies from any and all liability
is valid.
The contract of carriage was actually between
George, as the paying passenger, and Baliwag
Transit, as the common carrier. Since a contract
may be violated only by the parties thereto, the real
parties in interest must be parties to said contract.
In the absence of any contract of carriage between
Baliwag and George’s parents, the latter are not
real parties-in-interest in an action for breach of
that contract.
G.R. No. 122494. October 8, 1998
EVERETT STEAMSHIP CORPORATION,
petitioner,
SHIN YANG BROKERAGE CORPORATION
COURT OF APPEALS and HERNANDEZ
TRADING CO., INC., respondents.
Facts:
Hernandez Trading Co., Inc imported three crates
of bus spare parts marked from its supplier,
Maruman Trading Company. The crates were
shipped from Nagoya, Japan to Manila on board a
vessel owned by Everett Steamship’s principal,
Everett Orient Lines. The said crates were covered
by Bill of Lading No. NGO53MN.
Upon arrival, it was discovered that the crate
marked was missing. Hernandez Trading made a
formal claim for the value of the lost cargo.
However, Everett Steamship only offered to pay
the maximum amount stipulated in the bill of lading
which limits the liability of Everett Steamship.
Issue:
(1) Whether the limited liability clause in the
bill of lading is valid
(2) Whether Hernandez Trading, who is not a
signatory to the bill of lading is bound by the
stipulations thereof
Held:
(1) Yes. In this case, it was provided that the
carrier made it clear in the bill of lading that its
liability would only be up to One Hundred
Thousand Yen. However, Maruman Trading, had
the option to declare a higher valuation,
considering that the shipper did not declare a
higher valuation, it had itself to blame for not
complying with the stipulations pursuant to Articles
1749 and 1750 of the Civil Code.
(2) Yes, when Hernadez Trading formally
claimed reimbursement for the missing goods from
Everett Steamship and subsequently filed a case
against the latter based on the very same bill of
lading, it had accepted the provisions of the
contract and thereby made itself a party thereto, or
at least has come to court to enforce it.
G.R. NO. 172822 : December18, 2009
MOF COMPANY, INC., Petitioner,
v.
Respondent.
Facts:
Halla Trading Co., shipped to Manila
second hand cars and other articles on board the
vessel Hanjin Busan. The bill of lading covering the
shipment, prepared by the carrier Hanjin, named
respondent Shin Yang Brokerage Corp. as the
consignee and indicated that payment was on a
"Freight Collect" basis.
The shipment arrived in Manila.
Thereafter, petitioner MOF, demanded the
payment from Shin Yang. The latter refused to pay
contending that it did not cause the importation of
the goods, that it is only the Consolidator of the
said shipment. MOF argued that Shin Yang, as the
named consignee in the bill of lading, entered itself
as a party to the contract and bound itself to the
"Freight Collect" arrangement.
Issue:
Whether or not the consignee Shin Yang
can be bound by stipulations of bill of lading
Held:
No. While the bill of lading is oftentimes
drawn up by the shipper/ consignor and the carrier
without the intervention of the consignee, however,
the latter can be bound by the stipulations of the
bill of lading, however, in the instant case, MOF
failed to meet the required quantum of proof. Other
than presenting the bill of lading, which, at most,
proves that the carrier acknowledged receipt of the
subject cargo from the shipper and that the
consignee named is to shoulder the freightage,
MOF has not adduced any other credible evidence
to strengthen its cause of action.
G.R. No. 114061. August 3, 1994.
KOREAN AIRLINES CO., LTD., petitioner,
vs.
COURT OF APPEALS and JUANITO C. LAPUZ,
respondents.
Facts:
 Juanito C. Lapuz, an automotive
electrician, was contracted for employment in
Saudi Arabia. Lapuz was supposed to leave on
November 8, 1980, via Korean Airlines. Initially, he
was “wait-listed.” When two of such passengers
did not appear, Lapuz and another person by the
name of Perico were given the two unclaimed
seats. Lapuz was allowed to check in. He passed
through the customs and immigration sections for
routine check-up and was cleared for departure.
However, a KAL officer pointed to him and was
thus barred from taking the flight. When he later
asked for another booking, his ticket was canceled
by KAL. Consequently, he was unable to report for
his work in Saudi Arabia within the stipulated 2-
week period and so lost his employment.
Issue:
Whether or not the contract of air carriage
has already been perfected
Held:
Yes. The evidence presented by Lapuz
shows that he had indeed checked in at the
departure counter, passed through customs and
immigration, boarded the shuttle bus and
proceeded to the ramp of KAL’s aircraft. The
contract of air carriage between him and KAL had
already been perfected when he was summarily
and insolently prevented from boarding the aircraft.
The Supreme Court has held that the
contract of air carriage generates a relation
attended with a public duty. Passengers are
entitled to be protected against personal
misconduct, injurious language, indignities and
abuses from such employees.
G.R. No. 92288 February 9, 1993
BRITISH AIRWAYS, INC., petitioner,
vs.
THE HON. COURT OF APPEALS, Twelfth
Division, and FIRST INTERNATIONAL TRADING
AND GENERAL SERVICES, respondents.
Facts: First International, a licensed domestic
recruitment and placement agency, received a
telex message from its principal ROLACO in Saudi
Arabia to recruit Filipino contract workers in its
behalf. Thereafter, First Int'l instructed its travel
agent, ADB Travel and Tours. Inc.,to book the 93
workers with BA but the latter failed to fly said
workers.
Thereafter, First Int'l was again informed by BA
that it had received a prepaid ticket for the
transportation of 27 contract workers. Immediately,
First Int'l instructed its ADB to book the 27 contract
workers with the BA but only 16 seats were
confirmed and booked.
As a result of these incidents, First Int'l sent a letter
to BA demanding compensation for the damages it
had incurred by the repeated failure to transport its
contract workers despite confirmed bookings and
payment of the corresponding travel taxes.
Issue: Whether or not there was a contract of
carriage between the petitioner and private
respondent?
Held: Yes. the petitioner's repeated failures to
transport private respondent's workers in its flight
despite confirmed booking of said workers clearly
constitutes breach of contract and bad faith on its
part.
In dealing with the contract of common carriage of
passengers for purpose of accuracy, there are two
(2) aspects of the same, namely: (a) the contract
"to carry and (b) the contract "of carriage" In the
instant case, the contract "to carry" is the one
involved which is consensual and is perfected by
the mere consent of the parties.
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E.
TUMAMBING, respondents.
Facts: Gelacio Tumambing contracted the
services of Mauro B. Ganzon to haul 305 tons of
scrap iron from Bataan, to the port of Manila.
Pursuant to that agreement, Mauro sent his lighter
"Batman" to Mariveles where it docked.
Gelacio Tumambing delivered the scrap iron to
defendant Filomeno Niza, for loading. When about
half of the scrap iron was already loaded, Mayor
Jose Advincula of Bataan, arrived and demanded
P5,000.00 from Gelacio Tumambing. The latter
resisted and had a heated argument.
Acting Mayor Basilio Rub, accompanied by three
policemen, ordered captain Filomeno Niza and his
crew to dump the scrap iron where the lighter was
docked. Later on Acting Mayor Rub issued a
receipt stating that the Municipality of Mariveles
had taken custody of the scrap iron.
Issue: Whether or not there has been a breach of
a contract of carriage?
Held: Yes. By the said act of delivery, the scraps
were unconditionally placed in the possession and
control of the common carrier, and upon their
receipt by the carrier for transportation, the
contract of carriage was deemed perfected.
Consequently, the petitioner-carrier's extraordinary
responsibility for the loss, destruction or
deterioration of the goods commenced
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and
THEODORE LARDIZABAL y MALECDAN,
petitioners, vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT,
EMILIA CUDIAMAT BANDOY, FERNANDO
CUDLAMAT, MARRIETA CUDIAMAT, NORMA
CUDIAMAT, DANTE CUDIAMAT, SAMUEL
CUDIAMAT and LIGAYA CUDIAMAT, all Heirs
of the late Pedrito Cudiamat represented by
Inocencia Cudiamat, respondents.
FACTS:
Private respondents filed a complaint for damages
against petitioners for the death of Pedrito
Cudiamat as a result of a vehicular accident. On
the said accident, while petitioner Theodore M.
Lardizabal was driving a passenger bus belonging
to petitioner corporation in a reckless and
imprudent manner, ran over its passenger, Pedrito
Cudiamat. However, instead of bringing Pedrito
immediately to the nearest hospital, the driver, first
brought his other passengers and cargo to their
respective destinations before bringing the victim
to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that it was
the victim's own carelessness and negligence
which gave rise to the subject incident.
ISSUE:
Whether or not petitioners are negligent and liable
for the damages claimed
HELD:
Yes, by contract of carriage, the carrier assumes
the express obligation to transport the passenger
to his destination safely and observe extraordinary
diligence with a due regard for all the
circumstances, and any injury that might be
suffered by the passenger is right away attributable
to the fault or negligence of the carrier. This is an
exception to the general rule that negligence must
be proved, and it is therefore incumbent upon the
carrier to prove that it has exercised extraordinary
diligence as prescribed in Articles 1733 and 1755
of the Civil Code.
VDA. DE NUECA v. MANILA RAILROAD CO.
FACTS:
Fermin Nueca brought 7 sacks of palay to Manila
Railroad station, to be shipped. Before the train
reached the turnoff switch, its passenger coach fell
on its side. The wagon pinned Nueca, killing him
instantly. Nueca’s widow and children bring this
claim for damages, alleging that Nueca was a
passenger and his death was caused by MRC’s
negligence.
MRC presented evidence showing there was no
mechanical defect. The lower court absolved MRC
of liability and held that Nueca was a trespasser
since he did not buy any ticket, and in any case,
was not in a proper place for passengers.
ISSUES:
1. W/N Nueca was a passenger?
HELD:
No, Nueca was not a passenger thus, MRC did not
owe him extraordinary diligence.
A passenger is one who travels in a public
conveyance by virtue of a contract, express or
implied, with the carrier as to the payment of the
fare, or that which is accepted as an equivalent.
The relation of passenger and carrier commences
when one puts himself in the care of the carrier, or
directly under its control, with the bona fide
intention of becoming a passenger, and is
accepted as such by the carrier – as where he
makes a contract for transportation and presents
himself at the proper place and in a proper manner
to be transported.
Even disregarding the matter of tickets, and
assuming Nueca intended to be a passenger, he
was never accepted as such by MRC as he did not
present himself at the proper place and in a proper
manner to be transported.
Carrier (Tests)
LIGHT RAIL TRANSIT AUTHORITY vs.
MARJORIE NAVIDAD
G.R. No. 145804
February 6, 2003
VITUG, J.
Facts:
While Navidad was standing on the platform near
the LRT tracks, Junelito Escartin, the security
guard assigned approached Navidad. A
misunderstanding between the two apparently
ensued that led to a fist fight. At the exact moment
that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad
was struck by the moving train, and he was killed
instantaneously.
On 08 December 1994, the widow of Nicanor,
herein respondent Marjorie Navidad, along with her
children, filed a complaint for damages against
Junelito Escartin, Rodolfo Roman, the LRTA, the
Metro Transit, and Prudent for the death of her
husband.
Issue:
Whether LRTA and Roman are liable for the death
of Nicanor Navidad Jr?
Ruling:
Yes, the law requires common carriers to carry
passengers safely using the utmost diligence of
very cautious persons with due regard for all
circumstances. Such duty of a common carrier to
provide safety to its passengers so obligates it not
only during the course of the trip but for so long as
the passengers are within its premises and where
they ought to be in pursuance to the contract of
carriage. The foundation of LRTA’s liability is the
contract of carriage and its obligation to indemnify
the victim arises from the breach of that contract by
reason of its failure to exercise the high diligence
required of the common carrier.
PEDRO DE GUZMAN vs. COURT OF APPEALS
G.R No. L-47822.
December 22, 1988.
FELICIANO, J.
Facts:
Ernesto Cendaña, a junk dealer, was engaged in
buying and reselling of used bottles and scrap.
Pedro de Guzman contracted with Cendaña for the
hauling of 750 cartons of Liberty filled milk. Only
150 boxes of Liberty filled milk were delivered to
petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these
boxes was hijacked somewhere by armed men
who took with them the truck, its driver, his helper
and the cargo.
Petitioner filed a case against Cendaña, petitioner
argued that having failed to exercise the
extraordinary diligence required of him by the law,
should be held liable for the value of the
undelivered goods. Cedaña denied that he was a
common carrier and argued that he could not be
held responsible for the value of the lost goods,
such loss having been due to force majeure.
Issue:
1. Whether the respondent is a common carrier
Ruling:
1. Yes, private respondent is properly
characterized as a common carrier even though he
merely “back-hauled” goods for other merchants
from Manila to Pangasinan, although such
backhauling was done on a periodic or occasional
rather than regular or scheduled manner, and even
though private respondent’s principal occupation
was not the carriage of goods for others.
FIRST PHILIPPINE INDUSTRIAL
CORPORATION vs. COURT OF APPEALS
FACTS:
Petitioner is a grantee of a pipeline
concession under Republic Act No. 387. Sometime
in January 1995, petitioner applied for mayor’s
permit in Batangas. However, the Treasurer
required petitioner to pay a local tax. FPIC claims
that they are exempted from paying local tax since
it is engaged in transportation business under
Section 133 of the Local Government Code. The
respondent City Treasurer denied the protest.
In order not to hamper its operations,
petitioner paid the tax under protest then filed a
complaint for tax refund. Respondents assert that
pipelines are not included in the term “common
carrier” which refers solely to ordinary carriers or
motor vehicles.
ISSUE:
Whether a pipeline business is included in the term
“common carrier” so as to entitle the petitioner to
the exemption.
RULING:
YES.
A "common carrier" may be defined,
broadly, as one who holds himself out to the public
as engaged in the business of transporting persons
or property from place to place, for compensation,
offering his services to the public generally.
Based on the above definitions and
requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It
undertakes to carry for all persons indifferently,
that is, to all persons who choose to employ its
services, and transports the goods by land and for
compensation.
NATIONAL STEEL CORPORATION, petitioner,
vs. COURT OF APPEALS AND VLASONS
SHIPPING, INC., respondents.
G.R. No. 112287. December 12, 1997
FACTS:
Vlasons Shipping, Inc, entered into a contract of
affreightment or contract of voyage charter hire
with National Steel Corporation (NSC) whereby the
MV ‘VLASONS I’ to make 1 voyage to load steel
products at Iligan City and discharge them at North
Harbor, Manila
The following day, when the vessel’s 3 hatches
containing the shipment were opened by NSC’s
agents, nearly all the skids of tinplates and hot
rolled sheets were allegedly found to be wet and
rusty.
On 6 September 1974 NSC filed with VSI its claim
for damages suffered due to the downgrading of
the damaged tinplates.
ISSUE:
1. Was M/V Vlasons I seaworthy?
RULING:
2.) Yes. Records reveal that VSI exercised due
diligence to make the ship seaworthy and fit for the
carriage of NSCs cargo of steel and tinplates. This
is shown by the fact that it was drydocked and
inspected by the Philippine Coast Guard before it
proceeded to Iligan City for its voyage to Manila
under the contract of voyage charter hire. The
vessels voyage from Iligan to Manila was the
vessels first voyage after drydocking. The
Philippine Coast Guard Station in Cebu cleared it
as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel.
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A.
CIPRIANO, respondents.
CAMPOS, JR., J
Facts: Rodolfo A. Cipriano representing Cipriano
Trading Enterprise (CIPTRADE for short) entered
into a hauling contract 2 with Jibfair Shipping
Agency Corporation whereby the former bound
itself to haul the latter's soya bean meal. To carry
out its obligation, CIPTRADE, through Rodolfo
Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of
soya bean meal worth P156,404.00 from the
Manila Port Area to Calamba, Laguna. Petitioner
failed to deliver the said cargo. As a consequence
of that failure, Cipriano paid Jibfair Shipping
Agency the amount of the lost goods in
accordance with the contract. Cipriano asked for
reimbursement but his demands went unheeded.
Issue: Is Bascos considered a common carrier?
Ruling: Yes.
Article 1732 of the Civil Code defines a common
carrier as "(a) person, corporation or firm, or
association engaged in the business of carrying or
transporting passengers or goods or both, by land,
water or air, for compensation, offering their
services to the public." The test to determine a
common carrier is "whether the given undertaking
is a part of the business engaged in by the carrier
which he has held out to the general public as his
occupation rather than the quantity or extent of the
business transacted." In this case, petitioner
herself has made the admission that she was in
the trucking business, offering her trucks to those
with cargo to move.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ vs.
SUN HOLIDAYS, INC.,
CARPIO MORALES, J.:
Facts: Spouses Dante and Leonora Cruz lodged a
Complaint against Sun Holidays, Inc. for
damages arising from the death of their son Ruelito
who perished with his wife on board the boat M/B
Coco Beach III that capsized en route to Batangas
from Puerto Galera. The newly weds were enjoying
a tour package when they perished after their boat
capsized on their way back to the city. The events
were narrated by a diver who was also a
passenger when the accident happened.
Issue: Is respondent a common carrier guilty of
negligence?
Ruling: Yes, respondent is a common carrier.
Respondent is a common carrier. Its contention
that it only ferry its customers and not the public
does not stand. Its ferry services are so intertwined
with its main business as to be properly considered
ancillary thereto. The constancy of respondent’s
ferry services in its resort operations is
underscored by its having its own Coco Beach
boats. And the tour packages it offers, which
include the ferry services, may be availed of by
anyone who can afford to pay the same. These
services are thus available to the public.
G.R. No. 200289 November 25, 2013
WESTWIND SHIPPING CORPORATION vs.
UCPB
FACTS: Kinsho-Mataichi
Corporation shipped from the port of Japan, 197
metal containers/skids of tin-free steel for delivery
to the consignee, San Miguel Corporation. The
shipment was loaded and received on a vessel
owned and operated by Westwind Shipping
Corporation. SMC insured the cargoes against all
risks with UCPB General Insurance Co., Inc. The
shipment arrived in Manila, Philippines and was
discharged in the custody of the arrastre operator,
Asian Terminals, Inc. (ATI). During the unloading
operation, six containers/skids sustained dents and
punctures from the forklift used by the stevedores
of Ocean Terminal Services, Inc. Upon discharge
that additional nine containers/skids were also
damaged due to the forklift operations; thus,
making the total number of 15 containers/skids in
bad order.
2.) Is Westwind liable for the
six damaged containers/skids at the time of its
unloading?
2.) Yes, Westwind is liable for the damaged
containers. It is settled in maritime law
jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier.
The extraordinary responsibility of the common
carrier lasts until the time the goods are actually or
constructively delivered by the carrier to the
consignee or to the person who has a right to
receive them. There is actual delivery in contracts
for the transport of goods when possession has
been turned over to the consignee or to his duly
authorized agent and a reasonable time is given
him to remove the goods.
G.R. No. 148496 March 19, 2002
VIRGINES CALVO vs. UCPB
FACTS: Petitioner entered into a contract
with San Miguel Corporation (SMC) for the transfer
of 114 reels of semi-chemical fluting paper and 124
reels of kraft liner board from the Port Area in
Manila to SMC's warehouse.
Petitioner, pursuant to her contract with
SMC, withdrew the cargo from the arrastre
operator and delivered it to SMC's warehouse.
When the goods were inspected, it was found out
that 15 reels of the semi-chemical fluting paper
were "wet/stained/torn" and 3 reels of kraft liner
board were likewise torn.
SMC collected payment from respondent
UCPB under its insurance contract for the amount
of the damage. In turn, respondent, as subrogee of
SMC, brought suit against petitioner.
ISSUE: Is petitioner a common carrier?
RULING: Yes, petitioner is a common
carrier. Article 1732, the article makes no
distinction between one whose principal business
activity is the carrying of persons or goods or both,
and one who does such carrying only as an
ancillary activity. Neither does Article 1732
distinguish between a carrier offering its services to
the "general public," i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the
general population. We think that Article 1732
deliberately refrained from making such
distinctions.
G.R. No. 149038. April 9, 2003
PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, petitioner,
vs.
PKS SHIPPING COMPANY, respondent.
Facts:
Davao Union Marketing Corporation contracted the
services of PKS Shipping Company for the
shipment of bags of cement. The goods were
loaded aboard the barge owned by PKS Shipping.
Wgghile the barge was being towed, it sank a
couple of miles off the coast of Dumagasa Point.
DUMC filed a formal claim with Philamgen for the
full amount of the insurance. Philamgen promptly
made payment; it then sought reimbursement from
PKS Shipping of the sum paid to DUMC but the
shipping company refused to pay.
Issue:
Whether Philamgen is a common carrier and is
thus liable for the loss of the cargo
Ruling:
Yes, here, factual findings indicate that PKS
Shipping has engaged itself in the business of
carrying goods for others, although for a limited
clientele, undertaking to carry such goods for a fee.
The regularity of its activities in this area indicates
more than just a casual activity on its part. Neither
can the concept of a common carrier change
merely because individual contracts are executed
or entered into with patrons of the carrier. Such
restrictive interpretation would make it easy for a
common carrier to escape liability by the simple
expedient of entering into those distinct
agreements with clients.
G.R. No. 147246. August 19, 2003
ASIA LIGHTERAGE vs. COURT OF APPEALS
Facts:
Shipment of White Wheat in bulk on board the
vessel M/V NEO CYMBIDIUM V-26 for delivery to
the consignee, General Milling Corporation in
Manila. The shipment was insured by Prudential
Guarantee and Assurance, Inc. against loss or
damage.
On July 25, 1990, the carrying vessel arrived in
Manila and the cargo was transferred to the
custody of the Asia Lighterage and Shipping to
which it was contracted by the consignee as
carrier.
A few days after, the barge developed a list
because of a hole it sustained after hitting an
unseen protuberance underneath the water.
Issue: Whether Asia Lighterage is a common
carrier
Ruling: Yes. Asia Lighterage is a common carrier.
In the case at bar, the principal business of the
petitioner is that of lighterage and drayage and it
offers its barges to the public for carrying or
transporting goods by water for compensation.
Thus, Asia Lighterage is clearly a common carrier,
even though its carrying of goods is done on an
irregular manner and with only limited clientele. A
common carrier need not have fixed and publicly
known routes. Neither does it have to maintain
terminals or issue tickets.
G.R. No. L-5458. September 16, 1953
LUZON STEVEDORING CO., v. THE PUBLIC
SERVICE COMMISSION
Facts:
Respondents are regularly engaged in the
hauling business serving a limited portion of the
public. Respondent Luzon Stevedoring Company,
Inc., which has among its regular customers the
San Miguel, charged for the transportation of
fertilizer.
Philippine Shipowners’ Association
complained to Public Service Commission that the
respondents were engaged in the transportation of
cargo in the Philippines for hire or compensation
without authority or approval of the Commission,
and collected freight charges which said rates
resulted in ruinous competition with complainant.
Issue:
Whether respondents, who only cater
limited clientele are subjects to regulation of Public
Service Commission
Held:
Yes. In this case, the transportation service,
which was the subject of complaint, was not casual
or incidental. It had been carried on regularly for
years at almost uniform rates of charges. Although
the number of the petitioners’ customers was
limited, the value of goods transported was not
inconsiderable. Petitioners did not have the same
customers all the time embraced in the complaint,
and there was no reason to believe that they would
not accept, and there was nothing to prevent them
from accepting, new customers that might be
willing to avail of their service to the extent of their
capacity.
G.R. No. 131166 September 30, 1999
CALTEX (PHILIPPINES), INC.,
vs.
SULPICIO LINES, INC.,
Facts: On December 20, 1987, motor tanker MV
Vector, carrying petroleum products of Caltex,
collided in the open sea with passenger ship MV
Doña Paz, causing the death of all but 25 of the
latter’s passengers. MV Doña Paz carried an
estimated 4,000 passengers most were not in the
passenger manifest.
Issue (1): Whether the charterer Caltex is liable?
Held (1): No. Petitioner Caltex and Vector entered
into a contract of affreightment, also known as a
voyage charter.
A contract of affreightment is one by which the owner
of a ship or other vessel lets the whole or part of her to a
merchant or other person for the conveyance of goods,
on a particular voyage, in consideration of the payment
of freight. It may be either time charter, wherein the
leased vessel is leased to the charterer for a fixed period
of time, or voyage charter, wherein the ship is leased
for a single voyage.
Coastwise Lighterage Corporation v. CA
Facts: Pag-asa Sales Inc. entered into a
contract to transport molasses with Coastwise
Lighterage Corporation, using the latter's
dumb barges. Upon reaching Manila Bay, one
of the barges, "Coastwise 9", struck an
unknown sunken object. The forward
buoyancy compartment was damaged. As a
consequence, the molasses at the cargo tanks
were contaminated.
Philgen then filed an action against Coastwise
to recover the money it paid, claiming to be
subrogated to the claims which the consignee
may have against the carrier.
Issues:
(1) Whether Coastwise was
transformed into a private carrier?
Held:
(1) Lighterage, by the contract of
affreightment, was not converted into a private
carrier, but remained a common carrier and
was still liable as such. The law and
jurisprudence on common carriers both hold
that the mere proof of delivery of goods in
good order to a carrier and the subsequent
arrival of the same goods at the place of
destination in bad order makes for a prima
facie case against the carrier. It follows then
that the presumption of negligence that
attaches to common carriers, once the goods
it is sports are lost, destroyed or deteriorated,
applies to the petitioner. This presumption,
which is overcome only by proof of the
exercise of extraordinary diligence, remained
unrebutted in this case.
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., vs.
COURT OF APPEALS
FACTS:
Prior to its voyage, a time charter-party on the
vessel M/V "Sun Plum" was entered into between
Mitsubishi and KKKK. g
It took eleven (11) days for PPI to unload the
cargo. A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired
by PPI to determine the "outturn" of the cargo
shipped. The survey report submitted by CSCI to
the consignee (PPI) revealed a shortage in the
cargo and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt.
ISSUE:
Whether a common carrier becomes a private
carrier by reason of a charter-party
HELD:
No. A common or public carrier is defined in Article
1732 of the Civil Code. The definition extends to
carriers either by land, air or water which hold
themselves out as ready to engage in carrying
goods or transporting passengers or both for
compensation as a public employment and not as
a casual occupation.
It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise
that a common carrier becomes private, at least
insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a
shipowner in a time or voyage charter retains
possession and control of the ship, although her
holds may, for the moment, be the property of the
charterer.
G.R. No. L-37661 November 16, 1932
LUZON BROKERAGE CO., INC., petitioner,
vs.
THE PUBLIC SERVICE COMMISSION and A.
D. WILLIAMS, Director of the Bureau of
Public Works,respondents.
FACTS:
For approximately twenty years last past, the
petitioner has been and still is conducting the
business of customs broker and that in connection
therewith, the petitioner conducts business of
receiving, storing, forwarding and delivering
cargoes of all kinds. It has been and is maintaining
and operating a fleet of trucks designed and
utilized exclusively for the carriage of goods or
cargo of its particular customers, which from time
to time are landed and received from vessels and
delivered to the consignees or owners thereof, or
are forwarded and delivered to such vessels for
shipment.
Petitioner does not solicit nor accept nor hold itself
out as ready or willing to accept from the public
indiscriminately goods or cargo for transportation
on its aforesaid trucks, and has no intention of
doing so; and that all the transporting, carrying,
and delivering business conducted by the
petitioner is limited and confined to the articles,
goods, and wares of its patrons as customs broker.
For brokerage services, it makes and collect
charges, the amount of which is determined in
each instance upon the basis of previous or
existing special contract had with the particular
patron or customer for whom such services are
rendered, petitioner receives compensation for its
transportation and delivery services in addition to
its customary customs brokerage fees.
ISSUE:
Did Section 6 of Act No, 3316 convert petitioner as
a common carrier?
HELD:
No. The law in question (section 6 of Act No. 3316)
does not convert it (the petitioner) into a common
carrier. It simply declares the operation and
maintenance of its fleet of trucks a public service
and as such it merely requires it to secure a
certificate of public convenience and pay the
corresponding fee."
This means that under the new law it is not
necessary that the petitioner herein maintains and
operates its trucks 'for public use' in order that the
respondent Public Service Commission can
assume jurisdiction and control over them. It is
enough that it maintains and operates them "for
hire or compensation" in whatever manner or form.
Public use or use by the public is no longer a
requisite under the new law. "Hire or
compensation" is all that is necessary. That, we
submit, is the intention of the Legislature by
amending section 13 of Act No. 3108 by section 6
of Act No. 3316.
MR. & MRS. ENGRACIO FABRE, JR. and **
PORFIRIO CABIL vs. COURT OF APPEALS, and
THE WORD FOR THE WORLD CHRISTIAN
FELLOWSHIP, INC et. al
G.R. No. 111127. July 26, 1996.
MENDOZA, J.
Digested by: Vina Cagampang
Facts:
Petitioners Engracio Fabre, Jr. and his wife were
owners of a minibus which they are using in their
bus service business. The couple had a driver,
Porfirio J. Cabil, whom they hired in 1981, after
trying him out for two weeks. His job was to take
school children to and from the St. Scholastica’s
College in Malate, Manila. On November 2, 1984
private respondent Word for the World Christian
Fellowship Inc. (WWCF) arranged with petitioners
for the transportation of 33 members of its Young
Adults Ministry from Manila to La Union and back.
The group was scheduled to leave on November 2,
1984, at 5:00 o’clock in the afternoon but the bus
only left by 8:00 o’clock in the evening. Petitioner
Porfirio Cabil drove the minibus. At 11:30 that
night, petitioner Cabil came upon a sharp curve on
the highway. The road was slippery because it was
raining, causing the bus, which was running at the
speed of 50 km per hour, to skid to the left road
shoulder. The bus hit the left traffic steel brace and
sign along the road and rammed the fence of one
Jesus Escano, then turned over and landed on its
left side, coming to a full stop only after a series of
impacts. A coconut tree which it had hit fell on it
and smashed its front portion. Several passengers
were injured. Private respondent Amyline Antonio
was thrown on the floor of the bus and pinned
down by a wooden seat which came off after being
unscrewed. Cabil, claimed he did not see the curve
until it was too late. He said he was not familiar
with the area and he could not have seen the curve
despite the care he took in driving the bus,
because it was dark and there was no sign on the
road. He said that he saw the curve when he was
already within 15 to 30 meters of it. He allegedly
slowed down to 30 kilometers per hour, but it was
too late. Amyline Antonio, who was seriously
injured, brought this case. As a result of the
accident, she is now suffering from paraplegia and
is permanently paralyzed from the waist down.
Issue:
1. Whether the bus driver, petitioner Porfirio
Cabil, was negligent.
2. Whether there was negligence on the part of
Sps. Fabre
Ruling:
1. Yes. The bus driver was negligent. The
finding that Cabil drove his bus negligently, while
his employer, the Fabres, who owned the bus,
failed to exercise the diligence of a good father of
the family in the selection and supervision of their
employee is fully supported by the evidence on
record. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and, as a
consequence, the road was slippery, and it was
dark. He averred these facts to justify his failure to
see that there lay a sharp curve ahead. However, it
is undisputed that Cabil drove his bus at the speed
of 50 kilometers per hour and only slowed down
when he noticed the curve some 15 to 30 meters
ahead. By then it was too late for him to avoid
falling off the road. Given the conditions of the road
and considering that the trip was Cabil’s first one
outside of Manila, Cabil should have driven his
vehicle at a moderate speed. There is testimony
that the vehicles passing on that portion of the road
should only be running 20 km per hour, so that at
50 kilometers per hour, Cabil was running at a very
high speed. Considering the foregoing the fact that
it was raining and the road was slippery, that it was
dark, that he drove his bus at 50 km an hour when
even on a good day the normal speed was only 20
km an hour, and that he was unfamiliar with the
terrain, Cabil was grossly negligent and should be
held liable for the injuries suffered by private
respondent Amyline Antonio.
2. Yes. There was negligence on the part of
Sps. Fabre. Pursuant to Arts. 2176 and 2180 of the
Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were
themselves negligent in the selection and
supervision of their employee. Due diligence in
selection of employees is not satisfied by finding
that the applicant possessed a professional driver’s
license. The employer should also examine the
applicant for his qualifications, experience and
record of service. Due diligence in supervision, on
the other hand, requires the formulation of rules
and regulations for the guidance of employees and
the issuance of proper instructions as well as
actual implementation and monitoring of consistent
compliance with the rules.
In the case at bar, the Fabres, in allowing Cabil to
drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for
school children only, from their homes to the St.
Scholasticas College in Metro Manila. They had
hired him only after a two-week apprenticeship.
They had tested him for certain matters, such as
whether he could remember the names of the
children he would be taking to school, which were
irrelevant to his qualification to drive on a long
distance travel, especially considering that the trip
to La Union was his first. The existence of hiring
procedures and supervisory policies cannot be
casually invoked to overturn the presumption of
negligence on the part of an employer.
As already stated, this case actually involves a
contract of carriage. Petitioners, the Fabres, did
not have to be engaged in the business of public
transportation for the provisions of the Civil Code
on common carriers to apply to them. As this Court
has held:
Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between
one whose principal business activity is the
carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in
local idiom, as a sideline). Article 1732 also
carefully avoids making any distinction between a
person or enterprise offering transportation service
on a regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to
the general public, i.e., the general community or
population, and one who offers services or solicits
business only from a narrow segment of the
general population. We think that Article 1732
deliberately refrained from making such
distinctions.
As common carriers, the Fabres were bound to
exercise extraordinary diligence for the safe
transportation of the passengers to their
destination. This duty of care is not excused by
proof that they exercised the diligence of a good
father of the family in the selection and supervision
of their employee. As Art. 1759 of the Code
provides:
Common carriers are liable for the death of or injuries
to passengers through the negligence or wilful acts of
the formers 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.
ESTELA L. CRISOSTOMO vs. CA and
CARAVAN TRAVEL & TOURS
INTERNATIONAL, INC.
GR NO. 138334, August 25, 2005
YNARES-SANTIAGO, J.:
Digested by: Vina Cagampang
Doctrines:
A contract of carriage or transportation is one
whereby a certain person or association of persons
obligate themselves to transport persons, things, or
news from one place to another for a fixed price.
Such person or association of persons are
regarded as carriers and are classified as private
or special carriers and common or public carriers.
A common carrier is defined under Article 1732 of
the Civil Code as persons, corporations, firms or
associations engaged in the business of carrying
or transporting passengers or goods or both, by
lane, water or air, for compensation, offering their
services to the public.
The negligence of the obligor in the performance of
the obligation renders him liable for damages for
the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to
exercise due care and prudence in the
performance of the obligation as the nature of the
obligation so demands. There is no fixed standard
of diligence applicable to each and every
contractual obligation and each case must be
determined upon its particular facts. The degree of
diligence required depends on the circumstances
of the specific obligation and whether one has
been negligent is a question of fact that is to be
determined after taking into account the particulars
of each case.
Facts:
In May 1991, Estela L. Crisostomo contracted the
services of Caravan Travel and Tours
International, Inc., through her niece, Meriam
Menor, respondent company’s ticketing manager,
to arrange and facilitate her booking, ticketing and
accommodation in a tour, Jewels of Europe. On
June 12, 1991, her travel documents and plane
tickets were delivered to her by Menor. Menor then
told her to be at the NAIA on Saturday, two hours
before her flight. Without checking her travel
documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight. To her dismay,
she discovered that the flight she was supposed to
take had already departed the previous day. She
learned that her plane ticket was for the flight
scheduled on June 14, 1991. She thus called up
Menor to complain. Subsequently, Menor prevailed
upon petitioner to take another tour the British
Pageant. For this tour package, petitioner was
asked anew to pay US$785.00 or P20,881.00 (at
the then prevailing exchange rate of P26.60). She
gave respondent US$300 or P7,980.00 as partial
payment and commenced the trip in July 1991.
Upon petitioner’s return from Europe, she
demanded from respondent the reimbursement of
P61,421.70, representing the difference between
the sum she paid for Jewels of Europe and the
amount she owed respondent for the British
Pageant tour. Respondent company refused to
reimburse the amount, contending that the same
was non-refundable. Petitioner filed a complaint
against respondent for breach of contract of
carriage and damages. Petitioner alleged that her
failure to join Jewels of Europe was due to
respondent’s fault since it did not clearly indicate
the departure date on the plane ticket. Respondent
was also negligent in informing her of the wrong
flight schedule through its employee Menor. She
insisted that the British Pageant was merely a
substitute for the Jewels of Europe tour, such that
the cost of the former should be properly set-off
against the sum paid for the latter.
Respondent company, Concepcion Chipeco,
denied responsibility for petitioner’s failure to join
the first tour. Chipeco insisted that petitioner was
informed of the correct departure date, which was
clearly and legibly printed on the plane ticket. The
travel documents were given to petitioner two days
ahead of the scheduled trip. Petitioner had only
herself to blame for missing the flight, as she did
not bother to read or confirm her flight schedule as
printed on the ticket. Respondent explained that it
can no longer reimburse the amount paid for
Jewels of Europe, considering that the same had
already been remitted to its principal in Singapore,
Lotus Travel Ltd., which had already billed the
same even if petitioner did not join the tour. Lastly,
respondent maintained that the British Pageant
was not a substitute for the package tour that
petitioner missed. This tour was independently
procured by petitioner after realizing that she made
a mistake in missing her flight for Jewels of
Europe. Petitioner was allowed to make a partial
payment of only US$300.00 for the second tour
because her niece was then an employee of the
travel agency. Consequently, respondent prayed
that petitioner be ordered to pay the balance of
P12,901.00 for the British Pageant package tour.
Issue:
1. Whether the travel agency liable for breach of
contract of carriage
2. Whether the travel agency is negligent in
performing its duty thus committed contractual
breach
Ruling:
1. No. The travel agency is not liable for breach
of contract of carriage. A contract of carriage or
transportation is one whereby a certain person or
association of persons obligate themselves to
transport persons, things, or news from one place
to another for a fixed price. Such person or
association of persons are regarded as carriers
and are classified as private or special carriers and
common or public carriers. A common carrier is
defined under Article 1732 of the Civil Code as
persons, corporations, firms or associations
engaged in the business of carrying or transporting
passengers or goods or both, by land, water or air,
for compensation, offering their services to the
public. From said definition, respondent is not an
entity engaged in the business of transporting
either passengers or goods and is therefore,
neither a private nor a common carrier.
Respondent did not undertake to transport
petitioner from one place to another since its
covenant with its customers is simply to make
travel arrangements in their behalf. Respondent’s
services as a travel agency include procuring
tickets and facilitating travel permits or visas as
well as booking customers for tours.

While petitioner concededly bought her plane ticket
through the efforts of respondent company, this
does not mean that the latter ipso facto is a
common carrier. At most, respondent acted merely
as an agent of the airline, with whom petitioner
ultimately contracted for her carriage to Europe.
Respondent’s obligation to petitioner in this regard
was simply to see to it that petitioner was properly
booked with the airline for the appointed date and
time. Her transport to the place of destination,
meanwhile, pertained directly to the airline.
2. No. Respondent company performed its duty
diligently and did not commit any contractual
breach.
In the case at bar, the evidence on record shows
that respondent company performed its duty
diligently and did not commit any contractual
breach. Hence, petitioner cannot recover and must
bear her own damage. The object of petitioner’s
contractual relation with respondent is the latter’s
service of arranging and facilitating petitioners
booking, ticketing and accommodation in the
package tour. In contrast, the object of a contract
of carriage is the transportation of passengers or
goods. It is in this sense that the contract between
the parties in this case was an ordinary one for
services and not one of carriage. Since the
contract between the parties is an ordinary one for
services, the standard of care required of
respondent is that of a good father of a family
under Article 1173 of the Civil Code. This connotes
reasonable care consistent with that which an
ordinarily prudent person would have observed
when confronted with a similar situation. The test
to determine whether negligence attended the
performance of an obligation is: did the defendant
in doing the alleged negligent act use that
reasonable care and caution which an ordinarily
prudent person would have used in the same
situation? If not, then he is guilty of negligence.
The evidence on record shows that respondent
exercised due diligence in performing its
obligations under the contract and followed
standard procedure in rendering its services to
petitioner. The plane ticket issued to petitioner
clearly reflected the departure date and time,
contrary to petitioner’s contention. The travel
documents, consisting of the tour itinerary,
vouchers and instructions, were likewise delivered
to petitioner two days prior to the trip. Respondent
also properly booked petitioner for the tour,
prepared the necessary documents and procured
the plane tickets. It arranged petitioner’s hotel
accommodation as well as food, land transfers and
sightseeing excursions, in accordance with its
avowed undertaking. Therefore, it is clear that
respondent performed its prestation under the
contract as well as everything else that was
essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of
her affairs, there would have been no reason for
her to miss the flight. Needless to say, after the
travel papers were delivered to petitioner, it
became incumbent upon her to take ordinary care
of her concerns. This undoubtedly would require
that she at least read the documents in order to
assure herself of the important details regarding
the trip.
The negligence of the obligor in the performance of the
obligation renders him liable for damages for the resulting loss
suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so
demands. There is no fixed standard of diligence applicable to
each and every contractual obligation and each case must be
determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific
obligation and whether one has been negligent is a question of
fact that is to be determined after taking into account the
particulars of each case.
Distinguish from private carriers
Delgado Bro Inc. v Home Insurance Inc, 1 SCRA
854
DELGADO BROTHERS, INC. vs. HOME
INSURANCE COMPANY and CA
G.R. No. L-16567 March 27, 1961
FACTS:
On March 7, 1956, respondent Home
Insurance Company filed a complaint against
petitioner Delgado Brothers, Inc. alleging that
Victor Bijou & Co. of New York, U.S.A., shipped for
Manila aboard S.S. Leoville and consigned to the
Judy Philippines, Inc. of Manila, a shipment of 1
case Linen Handkerchiefs and 2 cases cotton
piece goods, for which, the Barber Steamship
Lines, Inc., issued Bill of Lading No. 119 and
insured with Home Insurance Co. by the shipper
and/or consignee. That said vessel arrived at the
Port of Manila and was unloaded complete and in
good order from said vessel by petitioner, but the
latter delivered the same to the consignee with 1
case of Linen Handkerchiefs in bad order, with a
shortage of 503 yards of Linen Print
Handkerchiefs, to the prejudice, loss and damage
of shipper and or consignee so they filed a claim
with the Insurance. Home Insurance Inc. filed
against contractor Delgado Brothers Inc. RTC
dismissed the case and absolving petitioner from
liability.
ISSUE:
Is petitioner’s function related to the trade and
business of navigation or to the trade and business
of navigation or to the use and operation of
vessels?
RULING:
Delgado Brothers, Inc. has nothing to do
with the loading or unloading of cargoes to and
from the ships. Its operation on and its
responsibility for the merchandise and goods
begins from the time they are placed upon the
wharves or piers or delivered along sides of ships
Petitioner's functions as arrastre operator
are (1) to receive, handle, care for, and deliver all
merchandise imported and exported, upon or
passing over Government-owned wharves and
piers in the Port of Manila, (2) as well as to record
or check all merchandise which may be delivered
to said port at shipside, and in general, (3) to
furnish light and water services and other
incidental services in order to undertake its arrastre
service.
Note that there is nothing in those
functions which relate to the trade and business of
navigation nor to the use or operation of vessels.
Both as to the nature of the functions and the place
of their performance (upon wharves and piers
shipside), petitioner's services are clearly not
maritime.
As we held in the Macondray case, they
are no different from those of a depositary or
warehouseman. Granting, arguendo, that
petitioner's arrastre service depends on, assists, or
furthers maritime transportation, it may be deemed
merely incidental to its aforementioned functions
as arrastre operator and does not, thereby, make
petitioner's arrastre service maritime in character.
To give admiralty jurisdiction over a
contract as maritime, such contract must relate to
the trade and business of the sea; it must be
essentially and fully maritime in its character; it
must provide for maritime services, maritime
transactions, or maritime casualties.
Cebu Arrastre Services v. CIR, GR No. L-
7444 VIENNA
CEBU ARRASTRE SERVICE vs. COLLECTOR
OF INTERNAL REVENUE
G.R. No. L-7444. May 30, 1956
FACTS:
In 1952 the Cebu Arrastre, an association
of persons engaged in the handling of cargoes
carried by coastwise vessels stopping at the port of
Cebu, thru its counsel Atty. Jose Muaña petitioned
the Collector of Internal Revenue for the exemption
and the refund based on the following grounds:
(1) That they were a group of laborers
who had recently organized themselves into an
arrastre service association.
(2) That the work of the men of the said
arrastre group is under the direct supervision and
control of the officers of the ships.
(3) That the Cebu Arrastre Service is
engaged solely in the loading and unloading of
cargoes to and from the boats and is not
engaged in the transportation business.”
The Collector(CIR) referred the matter to
his agent in Cebu for investigation. Mr. Ignacio
Quijano, the Assistant Agent, conducted the
investigation and filed his report, that:
“6. The ‘Cebu Arrastre Service Co., Inc.’
is not engaged in the transportation of the
cargoes from the wharf to the bodegas of the
shippers. The shippers have their own trucks
or provide for the transportation of their
cargoes from the wharf to their bodegas.
“7. The laborers of the ‘Cebu Arrastre
Service Co., Inc.’ help only in the loading of the
cargoes from the wharf to the shippers’ trucks,
for the shippers’ trucks are provided with their own
‘journales’.”
On the basis of said report the Collector
denied the petition, holding that inasmuch as the
Cebu Arrastre was engaged in the loading and
unloading of vessels in port, it may be considered
a stevedore within the meaning of section 191 of
the Tax Code.
ISSUE:
What is the exact nature of the work of the laborers
working under the contracts entered into by the
Cebu Arrastre Co. Inc. with Cebu shipowners.
RULING:
The nature of work is stevedoring.
Though it is noteworthy that in the agreement
entered into by the shipowners and the
corporation mention is twice made of the
‘arrastre service on the vessels’ (but never on
the piers) to be done by the laborers of the
Cebu Arrastre Service Inc. Another
circumstance which may help in obtaining a
clear picture of the situation is that nowhere in
these papers is it contended that the
stevedores actually performing the stowing
work belong to an organization not related to
the Petitioner.
Cebu Arrastre admittedly engaged in the
work of loading and unloading coastwise vessels
calling at the port of Cebu, should be regarded as
a stevedore and therefore subject to the
percentage tax under section 191 of the Tax Code.
But even if we applied the narrower and more
specific concept of stevedore used by the Tax
Board, namely, that a stevedore is one who places
cargoes in the holds of ships in such a way that the
boat would maintain an even keel, and that even
with the movement of the boat, especially in rough
weather, the cargoes would not be displaced from
their original position, still, under the finding of fact
made by the Tax Board that the Cebu Arrastre is
engaged in this work of towing cargo either in the
hold or even on the deck, Appellant would be
subject to the tax.
Definitions of Stevedores (as quoted in the
case from different sources and
jurisprudence):
Stevedores is “one who works at, or one
who is responsible for, the unloading and loading
of a vessel in port.
A stevedore is a person employed in
loading and unloading a vessel.
Stevedores are class of laborers at the
ports whose business it is to load and unload
vessels.
“Stevedore” is defined as “one whose
occupation is to load and unload vessels in port”;
other words, a contractor or a jobber for special
business ready to be employed by anybody at his
line of work.
“Stevedore” and “longshoreman”, are
synonymous terms when interpreted in the light of
the work they perform, namely loading and
unloading of vessels.
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and
DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE
CO., and DOWA FIRE & MARINE INSURANCE
CO., LTD., respondents.
MELENCIO-HERRERA, J.:
Digested by: Terry Louise P. Boligor
Facts: In G.R. No. 69044, sometime in or prior to
June, 1977, the M/S ASIATICA, a vessel operated
by petitioner Eastern Shipping Lines, Inc., (referred
to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of
calorized lance pipes in 28 packages valued at
P256,039.00 consigned to Philippine Blooming
Mills Co., Inc., and 7 cases of spare parts valued at
P92,361.75, consigned to Central Textile Mills, Inc.
Both sets of goods were insured against marine
risk for their stated value with respondent
Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the
same vessel took on board 128 cartons of garment
fabrics and accessories, in two (2) containers,
consigned to Mariveles Apparel Corporation, and
two cases of surveying instruments consigned to
Aman Enterprises and General Merchandise. The
128 cartons were insured for their stated value by
respondent Nisshin Fire & Marine Insurance Co.,
for US $46,583.00, and the 2 cases by respondent
Dowa Fire & Marine Insurance Co., Ltd., for US
$11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel
caught fire and sank, resulting in the total loss of
ship and cargo. The respective respondent
Insurers paid the corresponding marine insurance
values to the consignees concerned and were thus
subrogated unto the rights of the latter as the
insured. In this case, Development Insurance filed
suit to recover the amounts they paid to the
insured. The carrier denied liability invoking
fortuitous event. Then Nisshin and Dowa also filed
for recovery of amounts from the carrier. They
contend that the carrier was sea unworthy and that
there was no diligence in the carriage of goods.
Issue: Which law should govern, Philippines or
Japan?
Ruling: The laws on the Philippines apply.
The law of the country to which the goods are to be
transported governs the liability of the common
carrier in case of their loss, destruction or
deterioration. As the cargoes in question were
transported from Japan to the Philippines, the
liability of Petitioner Carrier is governed primarily
by the Civil Code. However, in all matters not
regulated by said Code, the rights and obligations
of common carrier shall be governed by the Code
of Commerce and by special laws. Thus, the
Carriage of Goods by Sea Act, a special law, is
suppletory to the provisions of the Civil Code.
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY,
petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION,
respondents-appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES,
petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION,
respondents-
Digested by: Terry Louise P. Boligor
Facts: E. Phillip Company of California loaded on
a Phillipine vessel “Dona Nati” raw cotton
consigned for Manila Banking Corp and PBTC. It
also loaded sodium sulfate and aluminum foil in
Japan where it collided with “Yasushima Maru”
resulting to the loss and damage of the cargo raw
cotton. The total loss was P19,938.00 which the
plaintiff as insurer paid to Guilcon as holder of the
duly endorsed bill of lading. Thus, the plaintiff had
paid as insurer the total amount of P364,915.86 to
the consignees or their successors-in-interest, for
the said lost or damaged cargoes. Hence, plaintiff
filed this complaint to recover said amount from the
defendants- National Development Company and
Maritime Company of the Phil. as owner and ship
agent respectively, of the said 'Dofia Nati' vessel.
Issue: Which laws govern loss or destruction of
goods due to collision of vessels outside Philippine
waters, and the extent of liability as well as the
rules of prescription provided thereunder.
Ruling: The laws of the Philippines will apply, and
it is immaterial that the collision actually occurred
in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common
carriers from the nature of their business and for
reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the
goods and for the safety of the passengers
transported by them according to all circumstances
of each case. Accordingly, under Article 1735 of
the same Code, in all other than those mentioned
is Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted
negligently, unless it proves that it has observed
the extraordinary diligence required by law.
It appears, however, that collision falls among
matters not specifically regulated by the Civil Code,
so that no reversible error can be found in
respondent courses application to the case at bar
of Articles 826 to 839, Book Three of the Code of
Commerce, which deal exclusively with collision of
vessels.
More specifically, Article 826 of the Code of
Commerce provides that where collision is
imputable to the personnel of a vessel, the owner
of the vessel at fault, shall indemnify the losses
and damages incurred after an expert appraisal.
But more in point to the instant case is Article 827
of the same Code, which provides that if the
collision is imputable to both vessels, each one
shall suffer its own damages and both shall be
solidarily responsible for the losses and damages
suffered by their cargoes.
Significantly, under the provisions of the Code of
Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for
damages arising from collision due to the fault or
negligence of the captain. Primary liability is
imposed on the shipowner or carrier in recognition
of the universally accepted doctrine that the
shipmaster or captain is merely the representative
of the owner who has the actual or constructive
control over the conduct of the voyage.
Governing Laws
Alitalia v. IAC, 192 SCRA 9
Carriage from Philippine Ports to Foreign ports
NDC v. CA,164 SCRA 593
G.R. No. 71929 : December 4, 1990
ALITALIA vs. INTERMEDIATE APPELLATE
COURT and FELIPA E. PABLO
FACTS: Dr. Felipa Pablo is an
associate professor in the University of the
Philippines, and a research grantee of the
Philippine Atomic Energy Agency. She was invited
to take part at a meeting of the Department of
Research and Isotopes of the Joint FAO-IAEA
Division of Atomic Energy in Food and Agriculture
of the United Nations in Ispra, Italy. She would be
the second speaker on the first day of the meeting.
She booked passage on petitioner airline,
ALITALIA. She arrived in Milan on the day before
the meeting. However, she was told by the
ALITALIA personnel there at Milan that her
luggage was delayed. When the other flights
arrived from Rome, they did not have the baggage
of Dr. Pablo on board. Dr. Pablo then went to
Rome to try to locate her bags herself. However,
her baggage could not be found. As a result, she misconduct, bad faith, recklessness, or otherwise
returned to Manila without attending the meeting in improper conduct on the part of any official or
Ispra, Italy because her scientific papers, slides employee for which the carrier is responsible, and
and other research material were in her bags. there is otherwise no special or extraordinary form
of resulting injury. The Hague Protocol amended
Dr. Pablo demanded that ALITALIA make
the Warsaw Convention by removing the provision
reparation for the damages she suffered. She then
that if the airline took all necessary steps to avoid
commenced an action against ALITALIA. It turned
the damage, it could exculpate itself completely,
out that Dr. Pablo’s suitcases were located and
and declaring the stated limits of liability not
forwarded to Ispra , Italy, but only on the day after
applicable "if it is proved that the damage resulted
her scheduled appearance and participation at the
from an act or omission of the carrier, its servants
U.N. meeting. She was no longer there to accept
or agents, done with intent to cause damage or
delivery as she was already on her way home to
recklessly and with knowledge that damage would
Manila. The suitcases were not actually restored to
probably result." The same deletion was effected
Prof. Pablo by ALITALIA until eleven (11) months
by the Montreal Agreement of 1966, with the result
later, and four (4) months after institution of her
that a passenger could recover unlimited damages
action. The Court of First Instance rendered
upon proof of willful misconduct.
judgment in Dr. Pablo's favor, and was affirmed by
the Court of Appeals. The petitioner now contends The Convention does not thus operate as
that the Warsaw Convention should have been an exclusive enumeration of the instances of an
applied to limit ALITALIA'S liability. airline's liability, or as an absolute limit of the extent
of that liability. It should be deemed a limit of
ISSUE: Is the Warsaw Convention
liability only in those cases where the cause of the
applicable in Kareen’s
this case?digests:
death or injury to person, or destruction, loss or
RULING: Under the Under the Warsaw damage to property or delay in its transport is not
Convention, an air carrier is made liable for attributable to or attended by any willful
damages for: misconduct, bad faith, recklessness, or otherwise
improper conduct on the part of any official or
1) the death, wounding or other bodily injury of a
employee for which the carrier is responsible, and
passenger if the accident causing it took place on
there is otherwise no special or extraordinary form
board the aircraft or in the course of its operations of resulting injury. On the other hand, the Warsaw
of embarking or disembarking; 2) the destruction Convention has invariably been held inapplicable,
or loss of, or damage to, any registered luggage or
or as not restrictive of the carrier's liability, where
goods, if the occurrence causing it took place
there was satisfactory evidence of malice or bad
during the carriage by air;" and 3) delay in the
faith attributable to its officers and employees.
transportation by air of passengers, luggage or
goods. In the case at bar, no bad faith or
otherwise improper conduct may be ascribed to the
The convention however denies to the employees of petitioner airline. The luggage of Dr.
carrier availment of the provisions which exclude or
Pablo was eventually returned to her, although
limit his liability, if the damage is caused by his
belatedly, but without appreciable damage.
willful misconduct, or by such default on his part as
However, the compensation for the injury suffered
is considered to be equivalent to willful misconduct. by Dr. Pablo cannot under the circumstances be
The Convention does not thus operate as an restricted to that prescribed by the Warsaw
exclusive enumeration of the instances of an Convention for delay in the transport of baggage.
airline's liability, or as an absolute limit of the extent
of that liability. 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 willful
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY vs. THE
COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION
Doctrine:
 The law of the country to which the goods
are to be transported governs the liability
of the common carrier in case of their loss,
destruction or deterioration.
 The Carriage of Goods by Sea Act, a
special law, is merely suppletory to the
provision of the Civil Code.
FACTS: The National Development
Company (NDC) appointed Maritime Company of
the Philippines (MPC) as its agent to manage and
operate one of its vessel known as the Dona Nati
for and in its behalf and account. The E. Philipp
Corporation of New York loaded on board the
vessel "Dona Nati" at San Francisco, California, a
total of 1,200 bales of American raw cotton. Also
loaded on the same vessel at Tokyo, Japan, were
the cargo of Kyokuto Boekui, Kaisa, Ltd. consisting
of 200 cartons of sodium lauryl sulfate and 10
cases of aluminum foil. En route to Manila the
vessel Dofia Nati figured in a collision at Ise Bay,
Japan with a Japanese vessel 'SS Yasushima
Maru'. As a result of the incident, most of the
goods were lost and damaged. The Development
Insurance & Surety Corporation, as insurer, paid
for the damages. Hence, Development Insurance
filed a complaint to recover said amount from NDC
and MCP as owner and ship agent respectively, of
the said 'Dofia Nati' vessel.
The trial court rendered a decision
ordering MCP and NDC to pay Development
Insurance. The Court of Appeals affirmed said
decision. The main contention of NDC is that the
Carriage of Goods by Sea Act should apply to the
case at bar and not the Civil Code or the Code of
Commerce. Under Section 4 (2) of said Act, the
carrier is not responsible for the loss or damage
resulting from the "act, neglect or default of the
master, mariner, pilot or the servants of the carrier
in the navigation or in the management of the
ship." Thus, NDC insists that based on the findings
of both courts, both pilots of the colliding vessels
were at fault and negligent, NDC would have been
relieved of liability under the Carriage of Goods by
Sea Act.
ISSUE: Which laws govern loss or
destruction of goods due to collision of vessels
outside Philippine waters?
HELD: The law of the country to which the
goods are to be transported governs the liability of
the common carrier in case of their loss,
destruction or deterioration" (Article 1753, Civil
Code). Thus, the rule was specifically laid down
that for cargoes transported from Japan to the
Philippines, the liability of the carrier is governed
primarily by the Civil Code and in all matters not
regulated by said Code, the rights and obligations
of common carrier shall be governed by the Code
of commerce and by laws (Article 1766, Civil
Code). Hence, the Carriage of Goods by Sea Act,
a special law, is merely suppletory to the provision
of the Civil Code.
In the case at bar, it has been established
that the goods in question are transported from
San Francisco, California and Tokyo, Japan to the
Philippines and that they were lost or due to a
collision which was found to have been caused by
the negligence or fault of both captains of the
colliding vessels. Under the above ruling, it is
evident that the laws of the Philippines will apply,
and it is immaterial that the collision actually
occurred in foreign waters, such as Ise Bay, Japan.
Digested by Eunice
The Warsaw Convention
 Alitalia v. IAC G.R. No. 71929
The Nature of Business
 Fisher v. Yangco Steamship Co. GR
G.R. No. 71929. December 4, 1990
ALITALIA, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and
FELIPA E. PABLO, respondents.
Doctrine:
The Warsaw Convention does not operate as an
absolute limit of the extent of an airline's liability; it
does not regulate or exclude liability for other
breaches of contract by the carrier, or misconduct
of its employees, or for some particular or
exceptional type of damage.
Facts:
Dr. Felipa Pablo—an associate professor in the
University of the Philippines, and a research
grantee of the Philippine Atomic Energy Agency—
was invited to take part at a meeting of the
Department of Research and Isotopes of the Joint
FAO-IAEA Division of Atomic Energy in Food and
Agriculture of the United Nations in Ispra, Italy. She
was programmed as the second speaker on the
first day of the meeting. She booked passage at
Alitalia Airlines.
She arrived in Milan on the day before the meeting,
however, she was told by the Alitalia personnel at
Milan that her luggage was "delayed inasmuch as
the same in one of the succeeding flights from
Rome to Milan." Among the items in her luggage
was her scientific papers, slides and other
research materials. But the other flights arriving
from Rome did not have her baggage on board.
Desperate, she went to Rome to tried to locate her
bags herself, inquired about her suitcases in the
"domestic and international airports, and filled out
the forms prescribed by Alitalia for people in her
predicament. However, her baggage could not be
found. Completely distraught and discouraged, she
returned to Manila without attending the meeting in
Ispra, Italy. Upon her return, she demanded that
Alitalia should make reparation for the damages
she had suffered.
The suitcases were actually forwarded to Ispra,
Italy but only after the day of her scheduled
appearance and participation at the U.N. Meeting.
Issue:
Whether the Warsaw Convention should be
applied to limit Alitalia’s liability
Ruling: No.
Under the Warsaw Convention, an air carrier is
made liable for damages for:
1) the death, wounding or other bodily
injury of a passenger if the accident causing it took
place on board the aircraft or in the course of its
operations of embarking or disembarking;
2) the destruction or loss of, or damage to,
any registered luggage or goods, if the occurrence
causing it took place during the carriage by air;"
and
3) delay in the transportation by air of
passengers, luggage or goods.
The Warsaw Convention however denies to the
carrier availment "of the provisions which exclude
or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as,
in accordance with the law of the court seized of
the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused
x x by any agent of the carrier acting within the
scope of his employment."
The Supreme Court has pointed out that the
Convention does not operate as an exclusive
enumeration of the instances of an airline's
liability, or as an absolute limit of the extent of
that liability. The provisions do not regulate or
exclude liability for other breaches of contract by
the carrier or misconduct of its officers and
employees, or for some particular or exceptional
type of damage. Otherwise, an air carrier would be
exempt from any liability for damages in the event
of its absolute refusal, in bad faith, to comply with a
contract of carriage, which is absurd. Nor may it for
a moment be supposed that if a member of the
aircraft complement should inflict some physical
injury on a passenger, or maliciously destroy or
damage the latter's property, the Convention might
successfully be pleaded as the sole gauge to
determine the carrier's liability to the passenger.
Neither may the Convention be invoked to justify
the disregard of some extraordinary sort of
damage resulting to a passenger and preclude
recovery therefor beyond the limits set by said
Convention.
In the case at bar, no bad faith or improper conduct
may be ascribed to the employees of Alitalia and
Dr. Pablo's luggage was eventually returned to her.
However, an injury was caused to Dr. Pablo
because Alitalia misplaced her baggage and failed
to deliver it to her at the time appointed—a breach
of its contract of carriage — with the result that she
was unable to read the paper and make the
scientific presentation that she had painstakingly
labored over, at the prestigious international
conference, to attend which she had traveled
hundreds of miles, to her chagrin and
embarrassment and the disappointment and
annoyance of the organizers. Further, as the
invitation to participate in the conference was an
honor not only to her, but to the University of the
Philippines and the country as well – the
opportunity to claim this honor or distinction was
irretrievably lost to her because of Alitalia's breach
of its contract.
Thus, the compensation for the injury suffered by
Dr. Pablo cannot under the circumstances be
restricted to that prescribed by the Warsaw
Convention for delay in the transport of baggage.
G.R. No. 8095. November 5, 1914, and March
31, 1915
F C. FISHER, plaintiff,
vs.
YANGCO STEAMSHIP COMPANY, J. S.
STANLEY, as Acting Collector of Customs of the
Philippine Islands, IGNACIO VILLAMOR, as
Attorney General of the Philippine Islands, and W.
H. BISHOP, as prosecuting attorney of the city of
Manila, respondents.
Doctrine:
 Common carriers in the Philippines cannot
lawfully decline to accept a particular class
of goods for carriage to the prejudice of the
traffic in those goods unless there is a
sufficient, reasonable and necessary
reason to do so. Mere prejudice or whim
will not suffice.
 The nature of the business of a common
carrier as a public employment is such that
it is clearly within the power of the state to
impose just and reasonable regulations
thereon in the interest of the public.
Facts:
FC Fisher is a stockholder in the Yangco
Steamship Company, the owner of a large number
of steam vessels, duly licensed to engage in the
coastwise trade of the Philippine Islands.
The company adopted a resolution which
expressly declaring and providing that the classes
of merchandise to be carried by the company in its
business as a common carrier do not include
dynamite, powder or other explosives, and
expressly prohibiting the officers, agents and
servants of the company from offering to carry,
accepting for carriage or carrying said items.
JS Stanley, the Acting Collector of Customs
demanded and required of the company the
acceptance and carriage of such explosives.
Stanley refused and suspended the issuance of
the necessary clearance documents of the vessels
of the company unless and until the company
consents to accept such explosives for carriage.
The Attorney-General of the Philippine Islands and
the prosecuting attorney of the City of Manila
intend to institute proceedings against the
company, its managers, agents and servants, to
enforce the requirements of the Acting Collector of
Customs as to the acceptance of such explosives
for carriage.
Issue:
Whether the refusal of the owners and officers of a
steam vessel to accept for carriage dynamite,
powder and other explosives is valid
Ruling: No.
While the statute provides a person liberty in
engaging and managing his business, this does
not preclude the state from exercising control on its
conduct of its business by imposing just and
reasonable regulations thereon.
The self-imposed limitations by the carrier upon his
business, do not involve unreasonable or
unnecessary discrimination that the statute would
not control his action in any manner. It operates
only in cases involving such unreasonable or
unnecessary preferences or discriminations.
In a like manner, a common carrier of passengers,
would not be permitted to absolve himself from
liability for a refusal to carry a Chinaman, a
Spaniard, an American, a Filipino, or a mestizo by
proof that from "mere whim or caprice or personal
scruple," or to suit his own convenience, or in the
hope of increasing his business and thus making
larger profits, he had publicly announced his
intention not to carry one or other of these classes
of passengers.
Common carriers exercise a sort of public office,
and have duties to perform in which the public is
interested. Their business is, therefore, affected
with a public interest, and is subject of public
regulation.
The right to enter the public employment as a
common carrier and to offer one's services to the
public for hire does not carry with it the right to
conduct that business as one pleases, without
regard to the interests of the public and free from
such reasonable and just regulations as may be
prescribed for the protection of the public from the
reckless or careless indifference of the carrier as to
the public welfare and for the prevention of unjust
and unreasonable discrimination of any kind
whatsoever in the performance of the carrier's
duties as a servant of the public.
In the present case, the refusal of the steamship
company to receive for carriage any explosives
would subject the traffic of such to a manifest
prejudice and discrimination. However, the
question is whether such prejudice or
discrimination is undue, unnecessary or
unreasonable. The findings of fact alleged in the
complaint, however, are not sufficient to sustain a
finding in favor of the contentions of FC Fisher.
Fisher’s complaint failed to allege that "dynamite,
gunpowder and other explosives" can in no event
be transported with reasonable safety on board
steam vessels engaged in the business of common
carriers. It is not alleged that all that any of the
steamship company's vessels are unsuited for the
carriage of such explosives.
As construed in the Philippine statute, the mere
fact that violent and destructive explosions can be
obtained by the use of dynamite under certain
conditions would not be sufficient in itself to justify
the refusal of a vessel, duly licensed as a common
carrier of merchandise, to accept it for carriage, if it
can be proven that in the condition in which it is
offered for carriage there is no real danger to the
carrier, nor reasonable ground to fear that his
vessel or those on board his vessel will be
exposed to unnecessary and unreasonable risk in
transporting it, having in mind the nature of his
business as a common carrier engaged in the
coastwise trade in the Philippine Islands, and his
duty as a servant of the public engaged in a public
employment.
Therefore, the refusal by a particular vessel,
engaged as a common carrier of merchandise in
the coastwise trade of the Philippine Islands, to
accept any or all of these explosives for carriage
would constitute a violation of the prohibitions
against discriminations penalized under the
statute, unless it can be shown by affirmative
evidence that there is real and substantial danger
of disaster necessarily involved in the carriage of
any or all of these articles of merchandise as to
render such refusal a due or a necessary or a
reasonable exercise of prudence and discretion on
the part of the shipowner.
G.R. No. L-9605 September 30, 1957
GAUDIOSO EREZO, ET AL., plaintiff-appellee,
vs.
AGUEDO JEPTE, defendant-appellant.
Digested by: Dave Alano
Facts: Defendant-appellant is the registered owner
of a six by six truck bearing. On August, 9, 1949,
while the same was being driven by Rodolfo
Espino y Garcia, it collided with a taxicab at the
intersection of San Andres and Dakota Streets,
Manila. As the truck went off the street, it hit
Ernesto Erezo and another, and the former
suffered injuries, as a result of which he died.
The driver was prosecuted for homicide through
reckless negligence. The accused pleaded guilty
and was sentenced to suffer imprisonment and to
pay the heirs of Ernesto Erezo the sum of P3,000.
As the amount of the judgment could not be
enforced against him, plaintiff brought this action
against the registered owner of the truck, the
defendant-appellant.
The defendant does not deny at the time of the
fatal accident the cargo truck driven by Rodolfo
Espino y Garcia was registered in his name. He,
however, claims that the vehicle belonged to the
Port Brokerage, of which he was the broker at the
time of the accident. He explained, and his
explanation was corroborated by Policarpio
Franco, the manager of the corporation, that the
trucks of the corporation were registered in his
name as a convenient arrangement so as to
enable the corporation to pay the registration fee
with his backpay as a pre-war government
employee. Franco, however, admitted that the
arrangement was not known to the Motor Vehicle
Office.
The trial court held that as the defendant-appellant
represented himself to be the owner of the truck
and the Motor Vehicle Office, relying on his
representation, registered the vehicles in his name,
the Government and all persons affected by the
representation had the right to rely on his
declaration of ownership and registration. It,
therefore, held that the defendant-appellant is
liable because he cannot be permitted to repudiate
his own declaration
Issue: Whether or not Jepte should be held liable?
Held: Yes. The registered owner, the defendant-
appellant herein, is primarily responsible for the
damage caused to the vehicle of the plaintiff-
appellee, but he (defendant-appellant) has a right
to be indemnified by the real or actual owner of the
amount that he may be required to pay as damage
for the injury caused to the plaintiff-appellant.
The Revised Motor Vehicle Law provides that no
vehicle may be used or operated upon any public
highway unless the same is properly registered.
Not only are vehicles to be registered and that no
motor vehicles are to be used or operated without
being properly registered for the current year, but
that dealers in motor vehicles shall furnish the
Motor Vehicles Office a report showing the name
and address of each purchaser of motor vehicle
during the previous month and the manufacturer's
serial number and motor number.
Registration is required not to make said
registration the operative act by which ownership in
vehicles is transferred, as in land registration
cases, because the administrative proceeding of
registration does not bear any essential relation to
the contract of sale between the parties, but to
permit the use and operation of the vehicle upon
any public
The main aim of motor vehicle registration is to
identify the owner so that if any accident happens,
or that any damage or injury is caused by the
vehicles on the public highways, responsibility
therefore can be fixed on a definite individual, the
registered owner.
A registered owner who has already sold or
transferred a vehicle has the recourse to a third-
party complaint, in the same action brought against
him to recover for the damage or injury done,
against the vendee or transferee of the vehicle.
[G.R. No. 143360. September 5, 2002]
EQUITABLE LEASING CORPORATION,
petitioner, vs. LUCITA SUYOM, MARISSA
ENANO, MYRNA TAMAYO and FELIX OLEDAN,
respondents.
Facts: On July 17, 1994, a Fuso Road Tractor
driven by Raul Tutor rammed into the house cum
store of Myrna Tamayo in Tondo, Manila. A portion
of the house was destroyed which caused death
and injury. Tutor was charged with and later
convicted of reckless imprudence resulting in
multiple homicide and multiple physical injuries.
Upon verification with the Land Transportation
Office, it was known that the registered owner of
the tractor was Equitable Leasing
Corporation/leased to Edwin Lim. On April 15,
1995, respondents filed against Raul Tutor,
Ecatine Corporation (Ecatine) and Equitable
Leasing Corporation (Equitable) a Complaint for
damages.
The petitioner alleged that the vehicle had already
been sold to Ecatine and that the former was no
longer in possession and control thereof at the time
of the incident. It also claimed that Tutor was an
employee, not of Equitable, but of Ecatine.
Issue: Whether or not the petitioner was liable for
damages based on quasi delict for the negligent
acts.
Held:
The Lease Agreement between petitioner and
Edwin Lim stipulated that it is the intention of the
parties to enter into a finance lease agreement.
Ownership of the subject tractor was to be
registered in the name of petitioner, until the value
of the vehicle has been fully paid by Edwin Lim.
Lim completed the payments to cover the full price
of the tractor. Thus, a Deed of Sale over the tractor
was executed by petitioner in favor of Ecatine
represented by Edwin Lim. However, the Deed
was not registered with the LTO.
Petitioner is liable for the deaths and the injuries
complained of, because it was the registered
owner of the tractor at the time of the accident. The
Court has consistently ruled that, regardless of
sales made of a motor vehicle, the registered
owner is the lawful operator insofar as the public
and third persons are concerned.
Since Equitable remained the registered owner of
the tractor, it could not escape primary liability for
the deaths and the injuries arising from the
negligence of the driver.
GRETCHEN’S DIGEST
8.3 BA Finance v. CA 215 SCRA 715
8.4 Duavit v. CA 173 SCRA 490, 496
G.R. No. 98275 November 13, 1992
BA FINANCE CORPORATION, petitioner, vs.
HON. COURT OF APPEALS, REGIONAL TRIAL
COURT OF ANGELES CITY, BRANCH LVI,
CARLOS OCAMPO, INOCENCIO TURLA,
SPOUSES MOISES AGAPITO and SOCORRO
M. AGAPITO and NICOLAS CRUZ, respondents.
FACTS:
On March 6, 1983, an accident occurred involving
petitioner's Isuzu ten-wheeler truck then driven by
an employee of Lino Castro. After due
trial, Rogelio Villar y Amare, the driver of the Isuzu
truck, was at fault when the mishap occurred in as
much as he was found guilty beyond reasonable
doubt of reckless imprudence resulting in triple
homicide with multiple physical injuries with
damage to property. Petitioner was adjudged liable
for damages in as much as the truck was
registered in its name during the incident in
question. In the same breadth, Rock Component
Philippines, Inc. was ordered to reimburse
petitioner for any amount that the latter may be
adjudged liable to pay herein private respondents
as expressly stipulated in the contract of lease
between petitioner and Rock Component
Philippines, Inc.
Moreover, the trial court applied Article 2194 of the
new Civil Code on solidary accountability of join
tortfeasors insofar as the liability of the driver,
herein petitioner and Rock Component Philippines
was concerned. Petitioner asseverates that it
should not have been hailed to court and ordered
to respond for the damage in the manner arrived at
by both the trial and appellate courts since
paragraph 5 of the complaint lodged by the
plaintiffs below would indicate that petitioner was
not the employer of the negligent driver who was
under the control and supervision of Lino Castro at
the time of the accident, apart from the fact that the
Isuzu truck was in the physical possession of Rock
Component Philippines by virtue of the lease
agreement.
ISSUE:
Whether petitioner can be held responsible to the
victim albeit the truck was leased to Rock
Component Philippines when the incident occurred
HELD:
Yes. As held in the Perez and Erezo cases the
Supreme Court held that the registered owner of a
certificate of public convenience is liable to the
public for the injuries or damages suffered by
passengers or third persons caused by the
operation of said vehicle, even though the same
had been transferred to a third person.
The principle upon which this doctrine is based is
that in dealing with vehicles registered under the
Public Service Law, the public has the right to
assume or presumed that the registered owner is
the actual owner thereof, for it would be difficult
with the public to enforce the actions that they may
have for injuries caused to them by the vehicles
being negligently operated if the public should be
required to prove who actual the owner is. How
would the public or third persons know against
whom to enforce their rights in case of subsequent
transfer of the vehicles? The court does not imply
by this doctrine, however, that the registered owner
may not recover whatever amount he had paid by
virtue of his liability to third persons from the
person to whom he had actually sold, assigned or
conveyed the vehicle.
Moreover, under the same principle the registered
owner of any vehicle, even if not used for a public
service, should primarily responsible to the public
or to the third persons for injuries caused the latter
while the vehicle is being driven on the highways
or streets. Thus, if the foregoing words of wisdom
were applied in solving the circumstance whereof
the vehicle had been alienated or sold to another,
there certainly can be no serious exception against
utilizing the same rationale to the antecedents of
this case where the subject vehicle was merely
leased by petitioner to Rock Component
Philippines, Inc., with petitioner retaining ownership
over the vehicle.
Will the registered owner be allowed to prove
real ownership?
No. The law does not allow him to do so; the law,
with its aim and policy in mind, does not relieve
him directly of the responsibility that the law fixes
and places upon him as an incident or
consequence of registration. Were a registered
owner allowed to evade responsibility by proving
who the supposed transferee or owner is, it would
be easy for him, by collusion with others or
otherwise, to escape said responsibility and
transfer the same to an indefinite person, or to one
who possesses no property with which to respond
financially for the damage or injury done.
A victim of recklessness on the public highways is
usually without means to discover or identify the
person actually causing the injury or damage. He
has no means other than by recourse to the
registration in the Motor Vehicles Office to
determine who the owner is. The protection that
the law aims to extend to him would become
illusory were the registered owner given the
opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced
and carried out, the registered owner should not be
allowed to prove the contrary to the prejudice of
the person injured, that is, to prove that a third
person or another has become the owner, so that
he may thereby be relieved of the responsibility to
the injured person.
G.R. No. 82318 May 18, 1989
GILBERTO M. DUAVIT, petitioner, vs.
THE HON. COURT OF APPEALS, Acting
through the Third Division, as Public
Respondent, and ANTONIO SARMIENTO, SR. &
VIRGILIO CATUAR respondents.
FACTS:
On July 28, 1971 plaintiffs Antonio Sarmiento, Sr.
and Virgilio Catuar were aboard a jeep driven by
Ruperto Catuar. While approaching Roosevelt
Avenue, another jeep with plate number 99-97-F-J
Manila 1971 driven by defendant Oscar Sabiniano
hit and bumped Catuar’s jeep on the portion near
the left rear wheel. As a result of the impact
plaintiff's jeep fell on its right and skidded by about
30 yards. The jeep was damaged, particularly the
windshield, the differential, the part near the left
rear wheel and the top cover of the jeep. Moreover,
Virgilio Catuar was thrown to the middle of the road
and his wrist was broken. He likewise sustained
contusions on the head while Antonio Sarmiento,
Sr. was trapped inside the fallen jeep, and one of
his legs was fractured.
The plaintiffs have filed this case both against
Oscar Sabiniano as driver, and against Gualberto
Duavit as owner of the jeep. Defendant Gualberto
Duavit, while admitting ownership of the other jeep,
denied that the other defendant (Oscar Sabiniano)
was his employee. Duavit claimed that he has not
been an employer of defendant Oscar Sabiniano at
any time up to the present. On the other hand
documentary and testimonial evidence show that
defendant Oscar Sabiniano was an employee of
the Board of Liquidators.
Defendant Sabiniano, in his testimony,
categorically admitted that he took the jeep from
the garage of defendant Duavit without the consent
or authority of the latter. He testified that Duavit
even filed charges against him for theft of the jeep,
but which Duavit did not push through as his
(Sabiniano's) parents apologized to Duavit on his
behalf.
ISSUE:
Whether or not the owner of a private vehicle
which figured in an accident can be held liable
under Article 2180 of the Civil Code when the said
vehicle was neither driven by an employee of the
owner nor taken with the consent of the latter
HELD:
No. While the trial court found Oscar Sabiniano
negligent in driving the vehicle but found no
employer-employee relationship between him and
the petitioner because the latter was then a
government employee and he took the vehicle
without the authority and consent of the owner.
The petitioner was, thus, absolved from liability
under Article 2180 of the Civil Code.
As early as in 1939, we have ruled that an owner
of a vehicle cannot be held liable for an accident
involving the said vehicle if the same was driven
without his consent or knowledge and by a person
not employed by him. Thus, in Duquillo v. Bayot
(67 Phil. 131-133-134) [1939] we said:
Under the facts established, the defendant
cannot be held liable for anything. At the
time of the accident, James McGurk was
driving the truck, and he was not an
employee of the defendant, nor did he have
anything to do with the latter's business;
neither the defendant nor Father Ayson,
who was in charge of her business,
consented to have any of her trucks driven
on the day of the accident, as it was a holy
day, and much less by a chauffeur who
was not in charge of driving it; the use of
the defendant's truck in the circumstances
indicated was done without her consent or
knowledge; it may, therefore, be said, that
there was not the remotest contractual
relation between the deceased Pio Duquillo
and the defendant. It necessarily follows
from all this that articles 1101 and following
of the Civil Code, cited by the appellant,
have no application in this case, and,
therefore, the errors attributed to the
inferior court are without basis.
The Court upholds the above ruling as still relevant
and better applicable to present day
circumstances.
Kareen’s digests:
Kabit system:
 Abelardo v. CA, GR 125817
 Lita Enterprises v. IAC, 129 SCRA 79
G.R. No. 125817 January 16, 2002
ABELARDO LIM and ESMADITO GUNNABAN,
petitioners, vs. COURT OF APPEALS and
DONATO H. GONZALES, respondents.
Doctrines:
· The kabit system is an arrangement
whereby a person who has been granted a
certificate of public convenience allows
other persons who own motor vehicles to
operate them under his license, sometimes
for a fee or percentage of the earnings.
Although the parties to such an agreement
are not outrightly penalized by law, the
kabit system is invariably recognized as
being contrary to public policy and
therefore void and inexistent under Art.
1409 of the Civil Code.
· The thrust of the law in enjoining the kabit
system is not so much as to penalize the
parties but to identify the person upon
whom responsibility may be fixed in
case of an accident with the end view of
protecting the riding public.
FACTS: Private respondent Donato
Gonzales purchased an Isuzu passenger jeepney
from Gomercino Vallarta, holder of a certificate of
public convenience for the operation of public utility
vehicles plying the Monumento-Bulacan route.
While private respondent Gonzales continued
offering the jeepney for public transport services,
he did not have the registration of the vehicle
transferred in his name nor did he secure for
himself a certificate of public convenience for its
operation. Thus, Vallarta remained on record as its
registered owner and operator. Years later, the
jeepney collided with a ten-wheeler-truck owned by
petitioner Abelardo Lim and driven by his co-
petitioner Esmadito Gunnaban. Gunnaban owned
responsibility for the accident, explaining that the
truck suddenly lost its brakes. The impact caused
severe damage to the passenger jeepney and left
one passenger dead and many others
wounded. Petitioner Lim negotiated with private
respondent and offered to have the passenger
jeepney repaired at his shop. Private respondent
however did not accept the offer and demanded
instead a brand-new jeep or the amount of
₱236,000.00. The parties did not reach an
agreement. Hence, the filing of the complaint for
damages by private respondent against petitioners.
Lim asserted that as the jeepney was registered in
Vallarta’s name, it was Vallarta and not private
respondent who was the real party in interest.
The trial court ruled in favor of private
respondent. The Court of Appeals affirmed the
decision of the trial court and concluded that while
an operator under the kabit system could not sue
without joining the registered owner of the vehicle
as his principal, equity demanded that the present
case be made an exception. Petitioners contend
that an operator of a vehicle continues to be its
operator as long as he remains the operator of
record. According to petitioners, to recognize an
operator under the kabit system as the real party in
interest and to countenance his claim for damages
is utterly subversive of public policy.
ISSUE: Does private respondent have the
right to proceed against petitioners for the damage
caused on his passenger jeepney?
RULING: Yes, private respondent has the
right to proceed against petitioners for the damage
caused on his passenger jeepney as well as on his
business.
The kabit system is an arrangement
whereby a person who has been granted a
certificate of public convenience allows other
persons who own motor vehicles to operate them
under his license, sometimes for a fee or
percentage of the earnings. Although the parties to
such an agreement are not outrightly penalized by
law, the kabit system is invariably recognized as
being contrary to public policy and therefore void
and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio the
Court explained that one of the primary factors
considered in the granting of a certificate of public
convenience for the 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 kabit
system renders illusory such purpose and, worse,
may still be availed of 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 allowed to escape liability
by proving who the supposed owner of the vehicle
is, it would be easy for him to transfer the subject
vehicle to another who possesses no property with
which to respond financially for the damage done.
Thus, for the safety of passengers and the public
who may have been wronged and deceived
through the baneful kabit system, the registered
owner of the vehicle is not allowed to prove that
another person has become the owner so that he
may be thereby relieved of responsibility.
Subsequent cases affirm such basic doctrine.
It would seem then that the thrust of the
law in enjoining the kabit system is not so much as
to penalize the parties but to identify the person
upon whom responsibility may be fixed in case of
an accident with the end view of protecting the
riding public. The policy therefore loses its force if
the public at large is not deceived, much less
involved.
In the present case it is at once apparent
that the evil sought to be prevented in enjoining the
kabit system does not exist. First, neither of the
parties to the pernicious kabit system is being held
liable for damages. Second, the case arose from
the negligence of another vehicle in using the
public road to whom no representation, or
misrepresentation, as regards the ownership and
operation of the passenger jeepney was made and
to whom no such representation, or
misrepresentation, was necessary. Thus it cannot
be said that private respondent Gonzales and the
registered owner of the jeepney were in estoppel
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 least by the illegal arrangement. On the
contrary, it was private respondent 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.
In light of the foregoing, it is evident that
private respondent has the right to proceed against
petitioners for the damage caused on his
passenger jeepney as well as on his business. Any
effort then to frustrate his claim of damages by the
ingenuity with which petitioners framed the issue
should be discouraged, if not repelled.
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC. vs. SECOND CIVIL
CASES DIVISION, INTERMEDIATE APPELLATE
COURT, NICASIO M. OCAMPO and FRANCISCA
P. GARCIA
Doctrines:
· "Ex pacto illicito non oritur actio" [No action
arises out of an illicit bargain] is the tune-
honored maxim that must be applied to the
parties in the case at bar. Having entered
into an illegal contract, neither can seek
relief from the courts, and each must bear
the consequences of his acts.
· Although not outrightly penalized as a
criminal offense, the "kabit system" is
invariably recognized as being contrary to
public policy and, therefore, void and
inexistent under Article 1409 of the Civil
Code.
FACTS: The spouses Nicasio M. Ocampo
and Francisca Garcia, herein private respondents,
purchased five (5) Toyota Corona Standard cars to
be used as taxicabs. Since they had no franchise
to operate taxicabs, they contracted with petitioner
Lita Enterprises, Inc. for the use of the latter's
certificate of public convenience in consideration of
an initial payment of P1,000.00 and a monthly
rental of P200.00 per taxicab unit. The aforesaid
cars were registered in the name of petitioner Lita
Enterprises, Inc, Possession, however, remained
with the spouses Ocampo who operated and
maintained the same under the name Acme Taxi,
petitioner's trade name. About a year later, one of
said taxicabs collided with a motorcycle whose
driver died from the head injuries sustained
therefrom. A civil case for damages was instituted
by the heir of the victim against Lita Enterprises,
Inc., as registered owner of the taxicab. Petitioner
Lita Enterprises, Inc. was adjudged liable for
damages. As a result, a writ of execution was
issued and two of the vehicles of respondent
spouses were levied upon and sold at public
auction.
Thereafter, respondent Nicasio Ocampo
decided to register his taxicabs in his name. He
requested the manager of petitioner Lita
Enterprises, Inc. to turn over the registration
papers to him, but the latter allegedly refused.
Hence, he and his wife filed a complaint against
Lita Enterprises, Inc. The trial court ruled in favor of
respondent spouses and ordered petitioner Lita
Enterprises, Inc. to to transfer the registration
certificate of the three Toyota cars not levied upon
by executing a deed of conveyance in favor of the
private respondent. Such decision was affirmed by
the Court of Appeals. Petitioner now wants
respondents to pay whatever amount the former
has paid to the heir of the victim who died as a
result of the gross negligence of private
respondents' driver while driving one of their
taxicabs.
ISSUE: Can petitioner recover from private
respondent the amount it paid to the heir of the
deceased victim, knowing they are in an
arrangement known as “kabit system”
RULING: No. Unquestionably, the parties
herein operated under an arrangement, commonly
known as the "kabit system", whereby a person
who has been granted a certificate of convenience
allows another person who owns motors vehicles
to operate under such franchise for a fee. A
certificate of public convenience is a special
privilege conferred by the government. Abuse of
this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been
Identified as one of the root causes of the
prevalence of graft and corruption in the
government transportation offices.
Although not outrightly penalized as a
criminal offense, the "kabit system" is invariably
recognized as being contrary to public policy and,
therefore, void and inexistent under Article 1409 of
the Civil Code. It is a fundamental principle that the
court will not aid either party to enforce an illegal
contract, but will leave them both where it finds
them. Upon this premise, it was flagrant error on
the part of both the trial and appellate courts to
have accorded the parties relief from their
predicament. Article 1412 of the Civil Code denies
them such aid. It provides:
ART. 1412. if the act in which the unlawful
or forbidden cause consists does not constitute a
criminal offense, the following rules shall be
observed;
(1) when the fault, is on the part of both
contracting parties, neither may recover what he
has given by virtue of the contract, or demand the
performance of the other's undertaking.
The defect of inexistence of a contract is
permanent and incurable, and cannot be cured by
ratification or by prescription. The mere lapse of
time cannot give efficacy to contracts that are null
void."
Under the principle of in pari delicto, no
action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific
performance, or to recover the property agreed to
be sold or delivered, or damages for its property
agreed to be sold or delivered, or damages for its
violation. Where the parties are in pari delicto, no
affirmative relief of any kind will be given to one
against the other."
G.R. No. L-65510 March 9, 1987
TEJA MARKETING AND/OR ANGEL JAUCIAN,
petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE
COURT * AND PEDRO N. NALE, respondents.
PARAS, J.:
Digested by: Terry Louise P. Boligor
Facts: On May 9, 1975 Pedro Nale bought a
motorcycle for his transportation business for 8,000
php. A chattel mortgage was constituted on the
motorcycle in favor of Teja Marketing and/or Angel
Jaucian. The registration papers were not given to
Nale. He only paid 1,700 php as partial and
stopped paying on January 1976 urging plaintiff to
file a case for the collection of sum of money.
Defendant had no franchise of his own and he
attached the unit to Teja. The agreement also of
the parties here was for the plaintiff to undertake
the yearly registration of the motorcycle with the
Land Transportation Commission. Pursuant to this
agreement the defendant on February 22, 1976
gave the plaintiff P90.00, the P8.00 would be for
the mortgage fee and the P82.00 for the
registration fee of the motorcycle. The plaintiff,
however failed to register the motorcycle on that
year on the ground that the defendant failed to
comply with some requirements such as the
payment of the insurance premiums and the
bringing of the motorcycle to the LTC for stenciling,
the plaintiff saying that the defendant was hiding
the motorcycle from him. Lastly, the plaintiff
explained also that though the ownership of the
motorcycle was already transferred to the
defendant the vehicle was still mortgaged with the
consent of the defendant to the Rural Bank of
Camaligan for the reason that all motorcycle
purchased from the plaintiff on credit was
rediscounted with the bank. But Nale claims that
he was not hiding the vehicle but was using it for
his transportation business.
The City court and the CFI of Camarines Norte
favored the plaintiff.
Issue: Who is the rightful owner of the vehicle?
Ruling: Nale is the owner of the vehicle.
As the purchase of the motorcycle for operation as
a trimobile under the franchise of the private
respondent Jaucian, pursuant to what is commonly
known as the "kabit system", without the prior
approval of the Board of Transportation (formerly
the Public Service Commission) was an illegal
transaction involving the fictitious registration of
the motor vehicle in the name of the private
respondent so that he may traffic with the
privileges of his franchise, or certificate of public
convenience, to operate a tricycle service, the
parties being in pari delicto, neither of them may
bring an action against the other to enforce their
illegal contract provided in Art. 1412 (a), Civil
Code.
Unquestionably, the parties herein operated under
an arrangement, commonly known as the "kabit
system" whereby a person who has been granted
a certificate of public convenience allows another
person who owns motor vehicles to operate under
such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the
government. Abuse of this privilege by the
grantees thereof cannot be countenanced. The
"kabit system" has been Identified as one of the
root causes of the prevalence of graft and
corruption in the government transportation offices.
Although not outrightly penalized as a criminal
offense, the kabit system is invariably recognized
as being contrary to public policy and, therefore,
void and 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 both where it finds then.
Upon this premise it would be error to accord the
parties relief from their predicament.