Transpo Brilliant

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

The Public Service Act (CA No. 146 as amended) provides that the term public service
"includes every person that now or hereafter may own, operate, manage, or control in the Philippines,
for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier, railroad, street railway, traction railway,
sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever
may be its classification, freight or carrier service or any class, express service, steamboat, or steamship
line, pontines, ferries, and water craft, engaged in the transportation of passengers and freight or both,
shipyard, marine repairshop, [warehouse], wharf or dock, ice plant, ice refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power, petroleum, sewerage
system, wire or wireless communications system, wire or wireless broadcasting stations and other
similar public services..." [Sec. 13(b)] (Albano vs Reyes)
Albano vs Reyes 175 SCRA 264
F:
On 20 April 1987, the Phil. Ports Authority (PPA) adopted a resolution directing mgmt. to prepare the
Invitation to Bid and all relevant bidding documents necessary for the public bidding of the development,
mgmt., and operation of the Manila Intl. Container Terminal (MICT) and authorized the Board Chairman
Secretary Reyes to oversee and implement the project.
Secretary Reyes created a 7-man MICT Bidding Committee to evaluate all bids and recommend to the
Board the best bid. The PPA published the Invitation to Bid with the reservation that it had the right to reject
any bid and to accept such bid it may deem advantageous to the govt.
Seven companies submitted bids. The Committee recommended that the contract be awarded to Intl.
Container Terminal Services (ICTSI) on the ground that it offered the best technical and financial proposal.
Secretary Reyes awarded the contract to ICTSI. Before the contract could be signed, two cases were filed
questioning the legality or regularity of the bidding. The first was a special action for prohibition with prelim
injunction filed by Alo, a concerned taxpayer. The second was a civil case for prohibition with prayer for TRO
filed by Sharp Co. which actively participated in the bidding.
The President approved the proposed MICT contract. The PPA and ICTFSI perfected the contract.
Rodolfo Albano, a member of the House of Representatives filed the present case assailing the award of the
contract on the ground that since the MICT is a public utility, it needs a legislative franchise before it can
legally operate as a public utility.
Issue : WON a legislative franchise is necessary.

Held : NO. Petition dismissed.
A franchise specially granted by Congress is not necessary for the operation of the MICT by a
private entity. A contract entered into by the PPA and such entity is substantial compliance with the law.
1. Executive Order No. 30 authorized the PPA to take over, manage and operate the MICT in
accordance with PD 857 (Revised Charter of the PPA). PD 857 expressly empowers the PPA to provide
services within Port Districts "whether on its own, by contract or otherwise." Therefore, under EO 30
and PD 857, the PPA may contract with ICTSI for the mgmt., operation and devt. of the MICT.
2. Even if the MICT be considered a public utility or a public service on the theory that it is a wharf or
a dock as contemplated by the Public Service Act, its operation would not necessarily call for a
legislative franchise. Legislative franchises are not required before each and every public utility may
operate. The law has granted certain administrative agencies the power to grant licenses for or to
authorize the operation of certain public utilities.
That the Consti provides that the issuance of a franchise for the operation of a public utility
shall be subject to amendment, alteration or repeal by Congress does not necessarily imply that only
Congress has the power to grant such authorization. There are several laws granting specified agencies
in the Executive Dept. the power to issue such authorization for certain classes of public utilities. [ 1.
LTFRB wrt Certificates of Public Convenience authorizing the operation of public land transportation
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services provided by motorized vehicles; 2. ERB wrt operation of electric power utilities and services
except electric coops]
Reading EO 30 and PD 857 together, the PPA has been empowered to undertake by itself or to
authorize the operation and mgmt. of the MICT by another by contract. The latter power having been
delegated to the PPA, a legislative franchise is no longer necessary. In this case, the PPA's contracting
with ICTSI is wholly within its jurisdiction and powers.
3. The award of the contract to ICTSI is all the authorization that is necessary. The award made by the
PPA and the President enjoys the presumption of validity and regularity of official action. There is no
evidence to the contrary.
4. Albano has standing to assail the contract. While the expenditure of public funds may not be
involved under the contract, public interest is definitely involved considering the important role of the
MICP in the economic devt. of the country and the magnitude of the amount involved. He has sufficient
standing since a public right (disclosure provision) is sought to be enforced.
5. There in no conflict among the 3 branches of govt. The Executive Dept. has not contravened an act
of Congress. There is no usurpation of powers of another branch.
6. The determination of the winning bid should be left to the sound judgment of the PPA. It is in the
best position to evaluate the bids. It has the technical expertise which neither the Court nor Congress
has. No abuse of discretion has been shown.
2. CA 146, as amended, Sec 13 (b)
The term public service includes every person that now or hereafter may operate, manage,
or control in the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or
both with or without fixed route and whatever may be its classification, freight or carrier service or
any class, express service, steamboat, or steamship line, pontines, ferries, and water craft, engaged
in the transportation of passengers and freight or both, shipyard, marine repairshop, [warehouse],
wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power, petroleum, sewerage system, wire or wireless communications
system, wire or wireless broadcasting stations and other similar public services: Provided,
however, that a person engaged in agriculture, not otherwise a public service, who owns a motor
vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is
offered for hire or compensation to a third party or third parties engaged in agriculture, not itself
or themselves a public service, for operation by the latter for a limited time and for a specific
purpose directly connected with the cultivation of his or their farm, the transportation, processing,
and marketing of agricultural products of such third party or third parties shall not be considered
as operating a public service for the purposes of this Act.
B. Transportation
1. Definition - A contract of transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, news from one place to another
for a fixed price. It is the removal of goods or persons from one place to another.
2. Public Nature
(a) Public Service Act
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Section 13 (a) The Commission (PSC) shall have jurisdiction, supervision, and control over
all public services and their franchises, eqpt., and other properties, and in the exercise of its
authority, it shall have the necessary powers and the aid of the public force: Provided, That public
services owned or operated by govt. entities or GOOCs shall be regulated by the Commission in
the same way as privately owned public services, but certificates of public convenience or
certificates of public convenience and necessity shall not be required of such entities or
corporations: And provided, further, That it shall have no authority to require steamboats,
motorships and steamship lines, whether privately owned or owned or operated by any govt.
controlled corporation or instrumentality to obtain certificates of public convenience or to
prescribe their definite routes or lines of service.
(b) The term public service includes every person that now or hereafter may operate,
manage, or control in the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight
or passenger, or both with or without fixed route and whatever may be its classification, freight or
carrier service or any class, express service, steamboat, or steamship line, pontines, ferries, and
water craft, engaged in the transportation of passengers and freight or both, shipyard, marine
repairshop, warehouse, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power, petroleum, sewerage system, wire or
wireless communications system, wire or wireless broadcasting stations and other similar public
services: Provided, however, that a person engaged in agriculture, not otherwise a public service,
who owns a motor vehicle and uses it personally and/or enters into a special contract whereby said
motor vehicle is offered for hire or compensation to a third party or third parties engaged in
agriculture, not itself or themselves a public service, for operation by the latter for a limited time
and for a specific purpose directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of such third party or third
parties shall not be considered as operating a public service for the purposes of this Act.
(c) The word "person" includes every individual, co- partnership, joint stock co. or
corporation, whether domestic or foreign, their lessees, trustees, or receivers, as well as any
municipality, province, city, GOOC, or agency of the govt. of the Philippines, and whatever other
person or entities that may own or possess or operate public services.
Section 14. The ff. are exempted from the provisions of the preceding section :
(a) Warehouses;
(b) Vehicles drawn by animals and bancas moved by oar or sail, and tugboats and lighters;
(c) Airships within the Philippines except as regards the fixing of their maximum rates on
freight and passengers;
(d) Radio companies except with respect to the fixing of rates;
(e) Public services owned or operated by any instrumentality of the Natl. Govt. or by any
GOOC, except with respect to the fixing of rates.
Section 15. With the exception of those enumerated in the preceding section, no public
service shall operate in the Philippines without possessing a valid and subsisting certificate from
the PSC known as the certificate of public convenience, or certificate of public convenience and
necessity as the case may be, to the effect that the operation of said service and the authorization
to do business will promote the public interests in a proper and suitable manner.
The Commission may prescribe as a condition for the issuance of the certificate provided
in the preceding paragraph that the service can be acquired by the Republic of the Philippines or
any instrumentality thereof upon payment of the cost price of its useful eqpt., less reasonable
depn.; and likewise, that the certificate shall be valid only for a definite period of time; and that the
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violation of any of these conditions shall produce the immediate cancellation of the certificate
without the necessity of any express action on the part of the Commission.
In estimating the depn., the effect of the use of the eqpt., its actual condition, the age of the
model, or other circumstances affecting its value in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or amendment of certificates actually
in force and to those which may hereafter be issued, to permit to modify itineraries and time
schedules of public services, and to authorizations to renew and increase eqpt. and properties.
Section 16. Proceedings of the Commission, upon notice and hearing. The Commission
shall have power, upon proper notice and hearing in accordance with the rules and provisions of
this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary.
(a) To issue certificates ... authorizing the operation of public services within the
Philippines, whenever the Commission finds that the operation of the public service proposed and
the authorization to do business will promote the public interest in a proper and suitable manner.
Provided, that certificates will be granted only to citizens of the Philippines or of the US or to
corps., co-partnerships, associations or joint stock companies constituted and organized under the
laws of the Philippines; Provided, that 60% of the stock or paid-up capital ... must belong entirely
to citizens of the Philippines or of the US; Provided, further, that no such certificate shall be issued
for a period of more than 50 years.
(b) To approve, subject to constitutional limitations any franchise, privilege granted under
the provisions of Act No. 667, as amended by Act. No. 1022, by any political subdivision of the
Philippines when, in the judgment of the Commission, such franchise or privilege will properly
conserve the public interests xxx
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules
thereof, as well as commutation, mileage, kilometrage, and other special rates which shall be
imposed, observed and followed thereafter by any public service ; Provided, further that in case
the public service equipment of an operator is used principally or secondarily for the promotion of
a private business, the net profits of said business shall be considered in relation with the public
service of such operator for the purpose of fixing the rates.
(d) To fix just and reasonable standards, classifications, regulations, practices,
measurements, or service to be furnished, imposed, observed, and followed thereafter by any
public service.
(e) To ascertain and fix adequate and serviceable standards for the measurement of
quantity, quality, pressure, initial voltage, or other condition pertaining to the supply of the
product or service rendered by any public service, and to prescribe reasonable regulations for the
examination and test of such product or service and for the measurement thereof.
(f) To establish reasonable rules, regulations, instructions, specifications, and standards, to
secure the accuracy of all meters and appliances for measurements.
(g) To compel any public service to furnish safe, adequate, and proper service as regards
the manner of furnishing the same as well as the maintenance of the necessary material and eqpt.
(h) To require any public service to establish, construct, maintain and operate any
reasonable extension of its existing facilities, where, in the judgment of said commission, such
extension is reasonable and practicable, and will furnish sufficient business to justify the
construction and maintenance of the same, and when the financial condition of the said public
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service reasonably warrants the original expenditure required in making and operating such
extension.
(i) To direct any railroad, street, railway or traction co. to establish and maintain at any
junction or point of connection or intersection with any other line of said road or track, or with any
other line of any other railroad, street, railway or traction co., such just and reasonable connection
as shall be necessary to promote the convenience of shippers of property, or of passengers, and in
like manner to direct any railroad, street railway or traction co. engaged in carrying merchandise,
to construct, maintain and operate, upon reasonable terms, a switch connection with any private
sidetrack which may be constructed by any shipper to connect with the railroad, street railway or
traction company line where, in the judgment of the commission, such connection is reasonable and
practicable, and can be put in with safety, and will furnish sufficient business to justify the
construction and maintenance of the same.
(j) To authorize, in its discretion, any railroad, street railway of traction company to lay its
tracks across tracks of any other railroad, street railway or traction company, or across any public
highway.
(k) To direct any railroad or street railway co. to install such safety devices or to adopt
such other reasonable measures as may in the judgment of the commission be necessary for the
protection of the public at passing grade crossings of (1) public highways and railroads, (2) public
highways and street railways, or (3) railroads and street railways.
(l) To fix and determine the proper and adequate rates of depn. of the property of any
public service which will be observed in proper and adequate depn. account to be carried for the
protection of stockholders, or bondholders or creditors, in accordance with such rules, regulations,
and forms of account as the commission may prescribe. Said rates shall be sufficient to provide
the amounts required over and above the expenses of maintenance to keep such property in a state
of efficiency corresponding to the progress of the industry. Each public service shall conform its
depreciation accounts to the rates so determined and fixed, and shall set aside the money so
provided for out of its earnings and carry the same in a depreciation fund. The income from such
investments of money in such fund shall likewise be carried in such fund. This fund shall not be
expended otherwise than for depreciation, improvements, extensions, new constructions or
additions to the property of such public service.
(m) To amend, modify or revoke at any time any certificate under the provisions of this act,
whenever the facts and circumstances on the strength of which said certificate was issued have
been misrepresented or materially changed.
(n) To suspend or revoke any certificate issued under the provisions of this act whenever
the holder thereof has violated or willfully and consumatedly refused to comply with any order,
rule or regulation of the commission or any provisions of this act: Provided, that the commission
for good cause, may prior to the hearing suspend for a period not exceeding 30 days any certificate
or the exercise of any right or authority issued or granted under this act by order of the
commission, whenever such step shall in the judgment of the commission be necessary to avoid
serious and irreparable damage or inconvenience to the public or to private interests.
(o) To fix, determine, and regulate, as the convenience of the state may require, a special
type for auto buses, trucks and motor trucks, to be hereafter constructed, purchased, and operated
by operators after the approval of this act; to fix and determine a special registration fee for autobuses, trucks and motor trucks so constructed, purchased, and operated: Provided, that said fees
shall be smaller than those charged for autobuses, trucks, and motor trucks of types not made
regulation under this subsection.
PAGE 6
Section 17. Proceedings of commission without previous hearing:

(a) To investigate, upon its own initiative, or upon complaint in writing, any matter
concerning any public service as regards matters under its jurisdiction; to require any public
service to furnish safe, adequate and proper service as the public interest may require and
warrant; to enforce compliance with any standard xxx and to prohibit or prevent any public
service from operating without first securing a certificate of public convenience or public necessity
and convenience xxx and require existing public services to pay the fees provided for in this act for
the issuance of the proper certificate xxx under the penalty, in the discretion of the commission, of
the revocation and cancellation of any acquired right.
(b) To require payment of actual expenses incurred in any investigation if a violation shall
be found; to assess costs not to exceed 25% with reference to such investigation
(c) To appraise and value the property of any public service; in relation thereto, to have
access to and use any books, documents or records in the possession of any govt. dept., bureau,
office, or political subdivision
(d) To provide, on motion by or at the request of any consumer, for the examination and
test of any appliance used for the measuring of any product or service of a public service, to enter
any premises where said appliances may be, and other premises of the public service, for the
purpose of setting up and using on said premises any apparatus necessary therefor, and to fix fees
to be paid by the consumer who may apply for such examination, and in case of defect, to refund
the fees paid
(e) To permit any street railway or traction company to change its existing gauge to
standard steam railroad gauge
(f) To grant any public service special permits to make extra or special trips within the
territory covered by its certificate and to make special excursions outside if the public interest or
special circumstances so require; Provided where the public service cannot render such extra
service on its own line or in its own territory, a special permit for such extra service may be
granted to any other public service
(g) To require any public service to keep its books, records, and accounts; to adopt a
uniform system of accounting as approved by the auditor general
(h) To require any public service to furnish annual reports of finances and operations,
covering the 12 month period ending December 31
(i) To require every public service to file with the commission a written, verified statement
made by the owner, president or secretary setting forth the officers, authority, power and duties of
every officer, as to disclose the source and origin of each administrative act or rule
(j) To require any public service to comply with the laws of the Philippines and with any
local resolution or ordinance or its charter
(k) To investigate accidents directly or indirectly arising from or connected with the
maintenance or operation of the public service
(l) To require every public service to file a complete schedule of every classification,
individual or joint rate, toll, fare or charge, and in case of public carriers, a complete statement of
itineraries or routes
PAGE 7
o Section 18 - It shall be unlawful for any individual, co- partnership, association, corporation or
joint-stock company, their lessees, trustees or receivers xxx to engage in any public service
business without having first secured from the commission a certificate, except grantees of
legislative franchises expressly exempting such grantee from the reqts of securing a certificate from
the commission, as well as those expressly exempted from the jurisdiction of the commission
Section 19. Unlawful acts - It shall be unlawful for any public service :
(a) To provide or maintain any service that is unsafe, improper or inadequate ,or withhold
or refuse any service which can reasonably be demanded and furnished, as found and determined
by the commission in a final order which shall be conclusive and shall take effect in accordance
with this act, upon appeal or otherwise.
(b) To make or give, directly or indirectly, by itself or through its agents, attorneys or
brokers, or any of them, discounts or rebates on authorized rates, or grant credit for the payment
of freight charges, or any undue or unreasonable preference or advantage to any person or
corporation or to any locality or to any particular person or corporation or locality or any
particular description of traffic or service, or subject any particular person or corporation or
locality or any particular description of traffic to any prejudice or disadvantage in any respect
whatsoever; to adopt, maintain, or enforce any regulation, practice or measurement which shall be
found or determined by the commission to be unjust, unreasonable, unduly preferential, or
unjustly discriminatory, in a final order which shall be conclusive and shall take effect in
accordance with the provisions of this act, upon appeal or otherwise.
(c) To refuse or neglect, when requested by the director of posts or his authorized
representative to carry public mail on the regular trips of any public land transportation service
maintained or operated by any such public service, upon such terms and conditions and for a
consideration in such amount as may be agreed upon between the Director of Posts and the public
service carrier or fixed by the commission in the absence of an agreement between the Director of
Posts and the carrier. In case the Director of Posts and the public service carrier are unable to
agree on the amount of the compensation to be paid for the carriage of the mail, the Director of
Posts shall forthwith request the commission to fix a just and reasonable compensation for such
carriage and the same shall be promptly fixed by the commission in accordance with section 16 of
this act.
Section 20. Acts requiring the approval of the Commission - Subject to established
limitations and exceptions and saving provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee or operator thereof, without the approval and authorization of the
Commission previously had (a) To adopt, establish, fix, impose, maintain, collect or carry into effect any individual or
joint rates, commutation, mileage or other special rate, toll, fare, charge, classification or itinerary.
The Commission shall approve only those that are just and reasonable and not nay that are
unjustly discriminatory or unduly preferential, only upon reasonable notice to the public services
and other parties concerned, giving them a reasonable opportunity to be heard and the burden of
the proof to show that the proposed rates or regulations are just an reasonable shall be upon the
public service proposing the same.
(b) To establish, construct, maintain or operate new units or extend existing facilities or
make any other addition to or general extension of the service.
PAGE 8

(e) Hereafter to issue any stock or stock certificates representing an increase of capital; or
issue any share of stock without par value; or issue any bonds or other evidence of indebtedness
payable in more than one year from the issuance thereof, provided that it shall be the duty of the
Commission, after hearing, to approve any such issue maturing in more than one year from the
date thereof, when satisfied that the same is to be made in accordance with law, and the purpose of
such issue be approved by the Commission.
(g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates,
privileges or rights or any part thereof; or merge or consolidate its property, franchises, privileges
or rights, or any part thereof, with those of any public service. The approval herein required shall
be given, after notice to the public and after hearing, if it be shown that there are just and
reasonable grounds for making the mortgage or encumbrance, for liabilities of more than one year
maturity, or the sale, alienation, lease , merger or consolidation to be approved, and that the same
are not detrimental to the public interest, and in case of a sale, the date on which the same is to be
consummated shall be fixed in the order of approval: Provided, however, that nothing herein
contained shall be construed to prevent the transaction from being negotiated or completed before
its approval or to prevent the sale, alienation, or lease by any public service of any of its property
in the ordinary course of its business.
(h) To sell or register in its books the transfer or sale of shares of its capital stock, if the
result of that sale in itself or in connection with another previous sale, shall be to vest in the
transferee more than 40% of the subscribed capital of said public service. Any transfer made in
violation of this provision shall be void and of no effect and shall not be registered in the books of
the public service corporation. Nothing herein contained shall be construed to prevent the holding
of shares lawfully acquired.
(i) To sell, alienate or in any manner transfer shares of its capital stock to any alien if the
result of that sale, alienation, or transfer in itself or in connection with another previous sale shall
be the reduction to less than 60% of the capital stock belonging to Philippine citizens. Such sale,
alienation or transfer shall be void and of no effect and shall be sufficient cause for ordering the
cancellation of the certificate.
(b) The Certificate of Public Convenience (CPC), the Certificate of Public
Convenience and Necessity (CPCN), and the Prior Operator Rule
Difference between CPC and CPCN : A CPCN is issued by the PSC to a public service to which any
political subdivision has granted a franchise under Act 667 after the PSC has approved the same under
Section 16(b). A CPC is any authorization to operate a public service issued by the PSC. A CPC is an
authorization issued by the Commission for the operation of public services for which no franchise,
either municipal or legislative, is required by law (e.g. auto-trucks and motor vehicles). A CPCN is an
authorization issued by the PSC for the operation of public services for which a franchise is required by
law (e.g. electric, telephone services).
Nature of certificate : It constitutes neither a franchise nor a contract, confers no property rights and is a
mere license or privilege, and such privilege is forfeited when the grantee fails to comply with his
commitments behind which lies the paramount interest of the public, for public necessity cannot be
made to wait, nor sacrificed for private convenience.
However, certificates represent property rights to the extent that if the rights which any public
utility is exercising pursuant to lawful orders of the PSC has been invaded by another public utility, in
appropriate cases actions may be maintained by the complainant public utility. Owners of public
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utilities have the right to maintain appropriate actions against other public utilities not authorized to
operate in competition with the complainant.
Certificates are considered as property as used in Civil Procedure as they have material value
and are material assets. They are subject to attachment and seizure by legal process, and may be
acquired by purchase.
Determination of WON an issuance of a certificate is for public convenience - (1) financial
responsibility of the applicant, (2) reliability of the applicant, (3) priority of filing the application for a
certificate, and (4) priority of operation
Prior operator rule - to carry out the purpose and intent for which the PSC was created the law
contemplates that the first licensee will be protected in his investment and will not be subjected to a
ruinous competition. It is not therefore the policy of the law for the PSC to issue a CPC to a second
operator to cover the same field and in competition with a first operator who is rendering sufficient,
adequate and satisfactory service, and who in all things and respects is complying with the rules and
regulations of the PSC. Accordingly, a CPC or CPCN ought not to be granted where there is no
complaint as to existing rates and the co. in the field is rendering adequate services.
- regular operators are preferred over irregular operators
- prior operator is given opportunity to improve service
- prior operator given opportunity to extend lines
- basis of rule : to prevent ruinous and wasteful competition in order that the interests of the public
would be conserved and preserved; so long as the operator complied with the terms and conditions of the
license and the reasonable demands of the public, it is the duty of the PSC to protect rather than to
destroy its investment
Raymundo vs Luneta Motor 58 Phil 889
F:
Nicanor de Guzman signing as Guzco Transit purchased trucks from Luneta Motor and executed PNs
guaranteed by a chattel mortgage on several trucks. Failing to pay the PNs, a suit for collection was filed. A
writ of attachment was issued and garnishment was served on the PSC attaching the right, title, and
participation of Guzco Transit in the CPC covering the bus transportation lines between Manila and Rizal. The
CFI ordered the selling of these certificates in a public bidding in which Luneta Motor was the highest bidder.
Nine days after the certificates were attached, these were sold to Raymundo (including certificate No.
25951 which was not included in the sale to Luneta Motor Co.). The approval of the sale was sought from the
PSC. The PSC approved the sale in the public bidding and disapproved the sale to Raymundo except with
respect to Certificate No. 25951 which Raymundo could apply for its approval.
Issue : Which of the two sales should prevail? public auction by virtue of an attachment vs voluntary
sale
Held : Sale to Luneta Motor Co. in a public auction
The Public Service Law authorizes certificates of public convenience to be secured by public
service operators from the PSC. A CPC grants a right in the nature of a limited franchise. The Code of
Civil Procedure does not exclude franchises or certificates from the word "property." The test by which
to determine WON a property can be attached and sold upon execution is whether the judgment debtor
has such a beneficial interest therein that he can sell or otherwise dispose of it for value. The Public
Service Law permits the PSC to approve the sale, alienation, mortgaging, encumbering or leasing of
property, franchises, privileges, or rights or any part thereof. If the holder of a certificate can voluntary
sell it, there is no reason why the same cannot be sold involuntarily pursuant to court process.
CPCs have considerable material value. They are valuable assets. They are subject to being sold
for consideration as much as any other property. They are even more valuable than ordinary properties,
taking into consideration that they are not granted to every one who applies for them but only to those
who undertake to furnish satisfactory and convenient service to the public. Though intangible, they are
of value and are considered properties which can be seized through legal process.
PAGE 10
Batangas Transportation Co. vs Orlanes 52 Phil 455

F:
Orlanes sought to have a CPC to operate a line of auto trucks with fixed times of departure between
Taal and Bantilan, with the right to receive passengers and freight from intermediate points. The evidence is
conclusive that at the time of his application, Orlanes was an irregular operator between Bantilan and Taal, and
that BTC was a regular operator between Batangas and Rosario. Orlanes sought to have his irregular operation
changed into a regular operation, and to set aside and nullify the prohibition against him in his CPC that he
shall not have or receive any passengers or freight at any of the points served by the BTC which holds a prior
license from the PSC. His petition is based on the fact that to comply with the growing demands of the public,
the BTC applied for a permit to increase the no. of trip hours at and between the same places and for an order
that all irregular operators be prohibited from operating unless they should observe an interval of 2 hours before
or one hour after the regular hours of the BTC. The PSC granted the petition of Orlanes.
Issue : WON a CPC should be issued to a second operator in a field where, and in competition with, a
first operator who is already operating a sufficient, adequate and satisfactory service.
Held : NO. Decision of PSC is revoked.
An autobus line is a public utility, and as such, is a common carrier and an impt. factor in the
business affairs of the community.
The PSC has the power to specify and define the terms and conditions upon which any public
utility shall operate and to make reasonable rules and regulations for its operation, and to fix the
compensation that it shall receive for its service to the public, and for good cause may suspend or even
revoke a license granted.
It is not the policy of the law for the PSC to issue a CPC to a second operator to cover the same
field and in competition with a first operator who is rendering sufficient, adequate and satisfactory
service, and who in all things and respects is complying with the rules and regulations of the PSC.
The power of the PSC to issue a CPC is founded on the condition precedent that after a full
hearing and investigation, it shall find as a fact that the proposed operation is for the convenience of the
public.
So long as the first operator keeps and performs his terms and conditions of its license and
complies with the reasonable demands of the public, it has more or less of a vested and preferential
right over another who seeks to acquire a later license to operate over the same route.
To carry out the purpose and intent for which the PSC was created, the law contemplates that
the first license will be protected in his investment and will not be subjected to ruinous competition.
The primary purpose of the PSC is to secure adequate, sustained service for the public at the
least possible cost and to protect and conserve investments which have already been made for that
purpose. A CPCN for the operation of an auto truck line in occupied territory should not be granted
where there is no complaint as to existing rates and the co. in the field is rendering adequate service. It
is the duty of the PSC to protect rather than to destroy the investment of a public utility.
The policy of regulation upon which the present public utility commission plan is based and
which tends to do away with competition among public utilities as they are natural monopolies, is at
once the reason that the regulation of an existing system of transportation, which is properly serving a
given field, or may be required to do so, is to be preferred to competition among several independent
systems. While requiring a proper service from a single system for a territory in consideration for
protecting it as a monopoly for all the service required and in conserving its resources, no economic
waste results and service may be furnished at a minimum cost.
Carmelo vs Monserrat 55 Phil 644
PAGE 11

F:
Monserrat twice applied to Congress for an exclusive franchise to operate a taxicab service in Manila.
The Governor General twice vetoed the bill. Monserrat then applied to the PSC for a CPC. It was granted.
Carmelo and Oriol then applied to the PSC for a CPC to operate a taxicab service within Manila.
Monserrat opposed. The PSC denied the application.
Held : There is no valid, legal reason why Monserrat should have the exclusive right of operating a
taxicab service. In the granting and refusal of a CPC, the question is what is for the best interest of the
public. Tested by that rule, it is hard to conceive how it would be for the best interests of the public to
have one taxicab service only, and how the public would be injured by the granting of the certificate in
question, for it must be conceded that two companies in the field would stimulate the business, and the
public would much sooner and much easier become educated in the use of taxi.
Monserrat does not have a vested right in the business of any person that might want the use of
a taxi, for the simple reason that the use of any taxi is the sole discretion of the customer. This is unlike
the BTC case which dealt with an autobus service with fixed schedules and routes.
San Pablo vs Pantranco South Express, Inc. 153 SCRA 199

F:
Pantranco operates passenger buses from Metro Manila to Bicol and Eastern Samar. It wrote to the
Maritime Industry Authority (MARINA) requesting authority to lease/purchase MV Black Double to be used in
operating a ferryboat service from Matnog, Sorsogon and Allen, Samar that will provide service to co. buses
and freight trucks that have to cross the Bernardo Strait. MARINA denied the petition on the ground that the
Matnog- Allen run is adequately serviced by the Cardinal Shipping Corp. and Epitacio San Pablo and that
market conditions cannot support the entry of additional tonnage.
Pantranco acquired the vessel. It then applied to BOT claiming that it can operate a ferry service in
connection with its franchise for bus operation in the highway from Pasay City to Tacloban City for the purpose
of continuing the highway, which is interrupted by a small body of water, and that the proposed ferry operation
is merely a necessary and incidental service to its main service and obligation of transferring passengers from
Pasay City to Tacloban City. Accdg. to it, there is no need to obtain a separate CPC to operate a ferry service to
cater exclusively to its passenger buses and ferry trucks. Pantranco began operating its ferry service. The BOT
held that the ferryboat service is part of Pantranco's CPC and amended Pantranco's CPC to provide so. The two
other ferry boat services filed motions for reconsideration.
Issue : WON the sea can be considered as a continuation of the highway. WON a land transpo co. can
be authorized to operate a ferry service or coastwise or interisland shipping service along its authorized
route as an incident to its franchise without the need of filing a separate application for the same.
Held : The water transport service between Matnog and Allen is not a ferryboat service but a coastwise
or interisland shipping service. Before private respondent may be issued a franchise or CPC for the
operation of the said service as a common carrier, it must comply with the usual reqts. of filing an
application, payment of the fees, publication, adducing evidence at a hearing and affording the
oppositors the opportunity to be heard.
Considering the environmental circumstances of the case, the conveyance of passengers from
Matnog to Allen is not a ferryboat service but a coastwise or interisland shipping service. Under no
circumstances can the sea between Matnog and Allen be considered a continuation of the highway.
While a ferryboat service has been considered as a continuation of the highway when crossing rivers or
even lakes, which are small body of waters separating the land, however, when as in this case the two
terminals are separated by an open sea, it cannot be considered a continuation of the highway.
Pantranco must secure a separate CPC for the operation of an interisland or coastwise shipping service.
Its CPC cannot be merely amended to include this water service under the guise that it is a mere private
ferry service.
PAGE 12

Pantranco does not deny that it charges its passengers separately from the charges for the bus
trips and issues separate tickets whenever they board the MV Black Double. It cannot pretend that it
issued tickets as a private carrier and not as a common carrier. It in fact accepts walk in passengers
during the trips. It cannot claim that it is both a private carrier and a common carrier at the same time.
In the case of Javellana vs PSC, the Court differentiated between ferry service and interisland or
coastwide service. Ferry means service either by barges or rafts, even by motor or steam vessels,
between the banks of a river or stream to continue the highway which is interrupted by a body of water,
or in some cases, to connect two points on opposite shores of an arm of the sea such as a bay or lake
which does not involve too great a distance or too long a time to navigate. But where the line or service
involves crossing a body of water which is wide and dangerous with big waves, then such line or service
belongs properly to interisland or coastwide trade.
3. Private nature: rights and obligations of parties inter se arising from transactions
relating to transportation
(a) absent a transportation contract
(b) arising from a transportation contract
(i) contract of transportation, defined - one whereby a certain person or
association of persons obligate themselves to transport persons, things or news
from one place to another for a fixed price
(ii) contract of transportation, elements
Parties to the contract :
1. shipper - one who gives rise to the contract of transportation by agreeing to deliver the things
or news to be transported, or to present his own person or those of other or others in the case of
transportation of passengers
2. carrier or conductor - one who binds himself to transport persons, things, or news as the
case may be or one employed in or engaged in the business of carrying goods for others for hire
Persons or corporations who undertake to transport or convey goods, property, or persons from
one place to another, gratuitously or for hire, and are classified as private or special carriers and
common or public carriers
C. Regulation of the Transportation Industry
* The Department of Transportation and Communications
EO 125, Sec. 4. Mandate. The DOTC shall be the primary policy, planning, programming,
coordinating, implementing, regulating, and administrative entity of the Executive Branch of the
govt. in the promotion, devt. and regulation of dependable and coordinated networks of
transportation and communication systems, as well as in the fast, safe, efficient, and reliable postal,
transportation and communication services.
To accomplish such mandate, the Dept. shall have the ff. objectives:
(a) promote the devt. of dependable and coordinated networks of transportation and
communication systems;
PAGE 13

(b) guide govt. and private investments in the devt. of the country's inter-modal
transportation and communication system in a most practical, expeditious, and orderly fashion for
maximum safety, service and cost effectiveness;
(c) impose appropriate measures so that technical, economic and other conditions for the
continuing economic viability of the transportation and communication entities are not jeopardized
and do not encourage inefficiency and distortion of traffic patronage;
(d) develop an integrated plan for a nationwide transmission system in accordance with
national and intl. telecommunications service reqts. including, among others, radio and television
broadcast relaying leased channel services and data transmission;
(e) guide govt. and private investments in the establishment, operation and maintenance of
an intl. switching system for incoming and outgoing telecommunication services;
(f) encourage the devt. of a domestic telecommunications industry in coordination with the
concerned entities particularly, the manufacture of communications/electronics equipment and
components to complement and support, as much as possible, the expansion, development,
operation and maintenance of the nationwide telecommunication network;
(g) Provide for a safe, reliable and efficient postal system for the country.
EO 125-A, Sec. 5. To accomplish its mandate, the Dept. shall have the ff. powers and
functions:
(a) formulate and recommend national policies and guidelines for the preparation and
implementation of integrated and comprehensive transportation and communications systems at
the national, regional and local levels; (b) establish and administer comprehensive and integrated
programs for transportation and communications, xxx call on any agency, corp., or organization
xxx to participate and assist in the preparation and implementation of such program;
(c) assess, review and provide direction to xxx research and devt. programs of the govt
xxx;
(d) administer and enforce all laws xxx in the field of transportation and communication;
(e) coordinate with the DPWH in the design, location, devt, rehabilitation, improvement,
etc. of all infrastructure projects and facilities of the Dept. xxx
(f) establish, operate and maintain a nationwide postal system xxx;
(g) issue certificates of public convenience for the operation of public land and rail
transportation utilities and services;
(h) accredit foreign aircraft and manufactures xxx;
(i) establish and prescribe rules and regulations for identification of routes, zones and/or
areas of operation of particular operator of public land services;
(j) establish and prescribe rules xxx for the establishment, operation and maintenance of
such telecommunication facilities in areas not adequately served by the private sector xxx;
(k) establish and prescribe rules xxx operation and maintenance of a nationwide postal
system xxx;
(l) establish and prescribe rules xxx issuance of CPCs for public land transportation
utilities, such as motor vehicles, trimobiles, and railways;
(m) establish and prescribe rules xxx inspection and registration of air and land
transportation facilities, such as motor vehicles, trimobiles, and aircrafts;
(n) establish and prescribe rules xxx issuance of licenses xxx;
(o) establish and prescribe rules xxx enforcement of laws governing transportation xxx;
(p) determine, fix and/or prescribe charges and/or rates pertinent to the operation of
public air and land transportation utility facilities and services xxx;
(q) establish and prescribe rules xxx accreditation of driving schools;
(r) administer and operate the Civil Aviation Training Center xxx;
PAGE 14

(s) perform such other powers and functions as it may be prescribed by law, or as may be
necessary, incidental, or proper to its mandate, or as may be assigned from time to time by the
President.
(a) Air
(i) Air Transportation Office
EO 125, as amended by EO 125-A
Sec. 10. Assistant Secretaries and Service Chiefs.
xxx
h) Office of the Assistant Secretary for Air Transportation
Sec. 11. xxx The present Airport Offices of the Bureau of Air Transportation are hereby
abolished and their functions are transferred to the Dept. Airport Offices. xxx
Sec. 13. xxx
d) The Civil Aeronautics Board is hereby transferred from the Dept. of Tourism to the
Dept. as an attached agency xxx. The Secretary of Transportation and Communications or his
designated representative shall be the Chairman of the Board xxx
Sec. 25, RA 776. The Civil Aeronautics Administration shall be under the administrative
supervision and control of the Dept. of Commerce and Industry (now the DOTC) xxx
(ii) Civil Aeronautics Board
RA 776, as amended
Section 5. The Civil Aeronautics Board shall be composed of the Secretary of Commerce
and Industry (now DOTC) as Chairman, the CAB Administrator, the Commanding Officer of the
Phil. Air Force, and 2 others to be appointed by the President xxx
Section 10 (A) Except as otherwise provided herein, the Board shall have the power to
regulate the economic aspect of air transportation, and shall have the general supervision and
regulation of, and jurisdiction and control over, air carriers, as well as their property, property
rights, equipment, facilities, and franchise, in so far as may be necessary for the purpose of
carrying out the provisions of this Act.
Section 10 (C) Powers and Duties of the CAB
1. issue, deny, amend, revise, alter, modify, cancel, suspend, or revoke xxx any temporary
operating permit or CPCN xxx
2. fix and determine reasonable individual, joint or special rates, charges, or fares which an
air carrier may demand, collect or receive for any service in connection with air commerce xxx
3. authorize charters whether domestic or intl. and special air services or flights xxx;
4. approve or disapprove increase of capital, sale of equipment of an air carrier engaged in
air commerce, consolidation, merger, purchase, lease, operating contract, or acquisition and
control between domestic air carriers xxx
5. inquire into the mgmt. of the business of any air carrier xxx;
6. require annual, monthly, periodical and special reports from any carrier xxx;
PAGE 15

7. prescribe the forms of any and all accounts, records, and memoranda of the movement
of traffic, as well as of the receipt and expenditures of money and the length of time such accounts,
records, and memoranda shall be preserved xxx;
8. require each officer and director of any air carrier to transmit a report describing the
shares of stock or other interest held by such air carrier with any person engaged in any phase of
aeronautics, and the holding of the stock in, and control of, other persons engaged in any phase of
aeronautics.
Section 11. A CPCN is a permit issued by the Board authorizing a person to engage in air
commerce and/or air transportation, foreign and/or domestic.
Any permit may be altered, amended, modified, suspended, canceled and revoked by the
Board xxx whenever the Board finds such action to be in the public interest.
There shall be attached to the exercise of the privileges xxx such reasonable terms,
conditions, or limitations as, in the judgment of the Board, the public interest may require.
xxx
Section 12. Except as otherwise provided in the Constitution and existing treaty or treaties,
a permit authorizing a person to engage in domestic air commerce and/or air transportation shall
be issued only to citizens of the Philippines.
(b) Land
(i) Land Transportation Office
EO 125-A
Section 9. Assistant Secretaries and Service Chiefs
xxx
e) Office of the Assistant Secretary for Land Transportation
Section 11. xxx The present Regional Offices of the Land Transportation Commission are
hereby abolished and their functions are transferred to the respective Department Regional offices
for Land Transportation. xxx
Section 13 (a) The Land Transportation Commission is hereby abolished and its staff
functions are transferred to the service offices of the Dept. Proper and line functions are
transferred to the Dept. Regional Offices for Land Transportation as provided in Section 11
herein. xxx The quasi-judicial powers and functions of the Commission are transferred to the Dept.
The corresponding position structure and staffing pattern shall be approved and prescribed by the
Secretary xxx.
Administrative Code of 1987, Title XV
Sec. 9. The Department shall have the following line offices :
(1) The Office of the Assistant Secretary for Land Transportation.
xxx
(ii) Land Transportation Franchising and Regulatory Board
EO 202
PAGE 16

Sec.1. There is hereby created in the DOTC, the Land Transportation Franchising and
Regulatory Board.
Sec.2. The Board shall be composed of a Chairman and 2 members with the same rank,
salary and privileges of an Assistant Secretary, xxx
Sec.4. The Secretary of Transportation and Communications, through his duly designated
Undersecretary, shall exercise administrative supervision and control over the LTFRB.
Sec.5. Powers and functions:
a. prescribe and regulate routes of service, xxx zones or areas of operation of public land
transportation services provided by motorized vehicles xxx;
b. issue, amend, revise, suspend or cancel CPCs or permits authorizing the operation of
public land transportation services provided by motorized vehicles xxx;
c. determine, prescribe, approve and periodically review and adjust reasonable fares, rates
and other related charges, relative to the operation of public land transportation services provided
by motorized vehicles;
d. issue preliminary or permanent injunction xxx;
e. punish for contempt of the Board, both direct and indirect xxx;
f. issue subpoena and subpoena duces tecum and to summon witnesses to appear in any
proceedings of the Board, to administer oaths and affirmations;
g. conduct investigations and hearings of complaints for violation of the public service laws
on land transportation and of the Board's rules and regulations xxx;
h. to review motu proprio the decisions, actions of the Regional Franchising and
Regulatory Office herein created;
i. promulgate rules and regulations governing proceedings before the Board and the
Regional Franchising and Regulatory Office xxx;
j. fix, impose, and collect, and periodically review and adjust reasonable fees and other
related charges for services rendered;
k. formulate, promulgate, administer, implement and enforce rules and regulations on land
transportation public utilities, standards of measurements and/or design, and rules and regulations
requiring operators of any public land transportation service to equip, install and provide in their
utilities and in their stations such devices, eqpt. facilities and operating procedures and techniques
as may promote safety, protection, comfort and convenience to persons and property in their
charges as well as the safety of persons and property within their areas of operations;
l. coordinate and cooperate with other govt. agencies and entities xxx;
m. perform such other functions and duties as may be provided by law, or as may be
necessary, or proper or incidental to the purposes and objectives of this Executive Order.
Sec.6. The Board xxx shall sit and render its decision en banc; xxx concurrence and
signature of at least 2 members xxx
The decision shall be appealable to the Secretary within 30 days from receipt of the
decision; Provided, that the Secretary may motu proprio review any decision or action of the
Board before the same becomes final.
Sec.7. There shall be a Regional Franchising and Regulatory Office in each of the
administrative regions of the country which shall be headed by a Board Regional Manager having
the rank, salary and privileges of a Dept. Assistant Regional Director. The Regional Franchising
and Regulatory Offices shall hear and decide uncontested applications/petitions for routes, within
their respective administrative regions: Provided, that applications/petitions for routes extending
their respective territorial jurisdictions shall be heard and decided by the Board.
PAGE 17
Administrative Code, Title XV

Sec. 15. The quasi-judicial powers and functions with respect to land transportation shall
be exercised through the Land Transportation and Regulatory Board.
Sec. 16. The Board shall be composed of a Chairman and 2 members with the rank, salary
and privileges of an Assistant Secretary, all of whom shall be appointed by the President upon the
recommendation of the Secretary of Transportation and Communications xxx
Sec. 17. The Board shall have an Executive Director who shall also be appointed by the
President xxx. He shall have the rank, salary and privileges of a Dept. Service Chief. He shall
assist the Board in the performance of its powers and functions.
The Board shall be supported by the Technical Evaluation Division, Legal Division,
Management Information Division, Administrative Division and Finance Division.
Sec. 18. The Secretary
of Transportation and Communications shall exercise
administrative supervision and control over the Board.
Sec. 19. Powers and functions of the Board:
1. prescribe and regulate routes xxx;
2. issue, amend, revise, suspend, or cancel CPCs or permits, xxx;
3. determine, prescribe, approve and periodically review and adjust reasonable fares xxx;
4. issue injunctions xxx;
5. punish for contempt of the Board xxx;
6. issue subpoena and subpoena duces tecum and to summon witnesses xxx;
7.
conduct investigations and hearings of complaints for violation of the public service laws on land
transportation xxx;
8. review motu proprio the decisions, actions of the Regional Franchising and Regulatory
Offices xxx;
9. promulgate rules and regulations governing proceedings before the Board and the
Regional Franchising and Regulatory Office xxx;
10. fix, impose and collect, and periodically review and adjust reasonable fees, and other
related charges for services rendered;
11. formulate, promulgate, administer, implement and enforce rules and regulations on
land transportation xxx;
12. coordinate and cooperate with other govt. agencies and entities concerned with any
aspect involving public land transportation services xxx;
13. perform such other functions and duties as may be provided by law, or as may be
necessary, or proper or incidental to the purposes and objectives of the Dept.
Sec. 20. The Board shall xxx sit and decide en banc; concurrence and signature of at least 2
members; decision shall be appealable to the Secretary within 30 days from receipt of the decision;
the Secretary may motu proprio review any decision or action of the Board before it becomes final.
Sec. 21. Regional Franchising and Regulatory Offices - hear and decide uncontested
applications/ petitions for routes xxx;
Sec. 22. decisions of the Regional Franchising and Regulatory Offices shall be appealable
to the Board within 30 days from receipt of the decision.
PAGE 18
(c) Water
(i) Maritime Industry Authority
EO 125, Sec. 14 as amended by EO 125-A, Sec. 3
The Maritime Industry Authority is hereby retained and shall have the ff. functions:
a. develop and formulate plans, policies, projects xxx geared toward the promotion and
devt. of the maritime industry, the growth and effective regulation of shipping enterprises, and for
the national security objectives of the country;
b. establish, prescribe and regulate routes, zones and/or areas of operation of particular
operators of public water services;
c. issue CPCs for the operation of domestic and overseas water carriers;
d. register vessels as well as issue certificates, licenses or document necessary or incident
thereto;
e. undertake the safety regulatory functions pertaining to vessel construction and
operation including the determination or manning levels and issuance of certificates of competency
to seamen;
f. enforce laws, prescribe and enforce rules and regulations, including penalties for
violations thereof, governing water transportation and the Phil. merchant marine xxx;
g. undertake the issuance of licenses to qualified seamen and harbor, bay and river pilots;
h. determine, fix, prescribe charges/rates pertinent to the operation of public water
transport utilities xxx;
i. accredit marine surveyors and maritime enterprises engaged in shipbuilding, ship repair
xxx;
j. issue and register the continuous discharge book of Filipino seamen;
k. establish and prescribe rules and regulations, standards and procedures for the efficient
and effective discharge of the above functions;
l. perform such other functions as may now or hereafter be provided by law.
PAGE 19
II. Common Carriers

A. In General
1. Definitions; essential elements
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
Aguedo F. Agbayani, COMMERCIAL LAWS OF THE PHILIPPINES, vol. 4, 1989 ed. (hereinafter 4
Agbayani)
Transportation defined.-- a contract of 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
Classification :
1. As to object: (1) things; (2) persons; (3) news
2. As to place of travel: (1) land; (2) water; (3) air
Parties to contract of transportation:
(1) shipper or consignor.-- person to be transported; one who gives rise to the contract of
transportation by agreeing to deliver the things or news to be transported, or to present his own person
or those of other or others in the case of transportation of passengers
(2) carrier or conductor.-- one who binds himself to transport persons, things, or news as the
case may be; one employed in or engaged in the business of carrying goods for other for hire
(3) consignee.-- the party to whom the carrier is to deliver the things being transported; one to
whom the carrier may lawfully make delivery in accordance with its contract of carriage (but the
shipper and the consignee may be one person)
Freight defined.-- The terms has been defined as: (1) the price or compensation paid for the
transportation of goods by a carrier, at sea, from port to port. But the term is also used to denote (2) the
hire paid for the carriage of goods on land from place to place, or on inland streams or lakes. The name
PAGE 20

is also applied to (3) the goods or merchandise transported at sea, on land, or inland streams or lakes.
Thus the term is used in 2 senses: to designate the price for the carriage, also called freightage, or to
designate the goods carried.
Contracts through transportation agents.-- A contract of transportation is not changed, altered or
affected by the mere fact that the obligor avails of other parties to effect the transportation agreed upon,
as in the case of transportation agents.
Carriers defined.-- Persons or corporations who undertake to transport or convey goods, property or
persons, from one place to another, gratuitously or for hire, and are classified as private or special
carriers, and common or public carriers
Private carriers defined.-- Those who transport or undertake to transport in a particular instance for
hire or reward
Common carriers vs Private carriers:
(1) the common carrier holds
himself out in common, that is,
to all persons who choose to employ him, as ready to carry for
hire; no one can be a common
carrier unless he has held himself
out to the public as a carrier in
such a manner as to render him
liable to an action if he should
refuse to carry for anyone who
wished to employ him
(1) the private carrier agrees

in some special case with some
private individual to carry
for hire
(2) a common carrier is bound to

carry all who offer such goods as
it is accustomed to carry and
tender reasonable compensation
for carrying them
(2) a private carrier is not

bound to carry for any reason,
unless it enter into a special
agreement to do so
(3) a common carrier is a public service

and is therefore subject to regulation
(3) a private carrier does not

hold itself out as engaged in
the business for the public,
and is therefore not subject
to regulation as a common carrier
Test for a common carrier:

(1) He must be engaged in the business of carrying goods for others as a public employment,
and must hold himself out as ready to engage in the transportation of goods for persons generally as a
business, and not a casual occupation.
(2) He must undertake to carry goods of the kind to which his business is confined.
(3) He must undertake to carry by the methods by which his business is conducted, and over his
established roads.
(4) The transportation must be for hire.
PAGE 21

The true test is whether the given undertaking is a part of the business engaged in by the carrier
which he has held out to the general public as his occupation rather than the quantity or extent of the
business actually transacted, or the no. and character of the conveyances used in the employment (the
test is therefore the character of the business actually carried on by the carrier.)
Case : an airplane owner is a common carrier where he undertakes for hire to carry all persons who
apply for passage indiscriminately as long as there is room and no legal excuse for refusing; airlines
engaged in the passenger service on regular schedules on definite routes, who solicit patronage of the
traveling public, advertise schedules for routes, times of leaving and rates of fare, and make the usual
stipulation as to baggage are common carriers
Characteristics of common carriers:
(1) The common carrier undertakes to carry for all people indifferently; he holds himself out as
ready to engage in the transportation of goods for hire as a public employment and not as a casual
occupation, and he undertakes to carry for all persons indifferently, within the limits of his capacity and
the sphere of the business required of him, so that he is bound to serve all who apply and is liable for
refusal, without sufficient reason, to do so
(2) The common carrier cannot lawfully decline to accept a particular class of goods for
carriage to the prejudice of the traffic in those goods
Exception : for some sufficient reason, where the discrimination in such goods is reasonable
and necessary (substantial grounds)
(3) No monopoly is favored - the Commission has the power to say what is a reasonable
compensation to the utility and to make reasonable rules and regulations for the convenience of the
traveling public and to enforce them
(4) Public convenience - for the best interests of the public
Meaning of Public use.-- It is not confined to privileged individuals, but is open to the indefinite public;
there must be a right which the law compels the owner to give to the general public. Public use is not
synonymous with public interest. The true criterion is whether the public may enjoy it by right or only
by permission
The law prohibits unreasonable discrimination by common carriers.-- The law requires common
carriers to carry for all persons, either passengers or property, for exactly the same charge for a like or
contemporaneous service in the transportation of like kind of traffic under substantially similar
circumstances or conditions. The law prohibits common carriers (CC) from subjecting any person, etc.
or locality, or any kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever.
Exception: When the actual cost of handling and transporting is different, then different rates
may be charged
Cases : (1) merchandise of like quantity may not be considered alike - the quantity, kind and quality may
be exactly the same, and yet not be alike, so far as the cost of transportation is concerned
(2) shipments may be alike although composed of different classes of merchandise - difference
in the charge for handling and transporting may only be made when the difference is based upon actual
cost
Determination of justifiable refusal:
This involves a consideration of the following--
PAGE 22

(1) suitability of the vessels of the company for the transportation of such products;
(2) reasonable possibility of danger or disaster, resulting from their transportation in the form
and under the conditions in which they are offered for carriage;
(3) the general nature of the business done by the carrier;
(4) all the attendant circumstances which might affect the question of the reasonable necessity
for the refusal by the carrier to undertake the transportation of this class of merchandise
Case: The mere fact that the carriage of dynamites may lead to destructive explosions is not sufficient to
justify refusal if it can be proven that in the condition in which it is offered for carriage there is no real
danger to the carrier nor reasonable ground to fear that the vessel and those on board will be exposed to
unnecessary or unreasonable risks
US vs Tan Piaco, 40 Phil 853
F:
Tan Piaco rented two automobile trucks and was using them upon the highways of Leyte for the
purpose of carrying some passengers and freight. He carried passengers and freight under a special contract in
each case and had not held himself out to carry all passengers and freight for all persons who might offer
passengers and freight. He was convicted for violation of the Public Utility Law for operating a public utility
without permission from the Public Utility Commission.
Issue: WON defendant operated a public utility. NO.

Held: There is no public use. The trucks were used under special agreements to carry particular
persons and property.
Under the Public Service Law, two things are necessary : (1) the individual, co-partnership, etc.
must be a public utility; and (2) the business in which such individual, co-partnership, etc. is engaged
must be for public use. "Public use" means the same as "use by the public." The essential feature of
public use is that it is not confined to privileged individuals, but is open to the indefinite public. In
determining whether a use is public, we must look not only to the character of the business to be done,
but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public
benefit is merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the
public utility commission. There must be, in general, a right which the law compels the owner to give to
the general public. It is not enough that the general prosperity of the public is promoted. Public use is
not synonymous with public interest. The true criterion by which to judge the character of the use is
whether the public may enjoy it by right or only by permission.
Home Insurance Co. vs American Steamship Agencies, 23 SCRA 24
F:
A Peruvian firm shipped fishmeal through the SS Crowborough consigned to the SMB and insured by
the Home Insurance Co. The cargo arrived with shortages. SMB demanded and Home Insurance Co. paid
P14,000 in settlement of SMB's claim. Home Insurance filed for recovery from Luzon Stevedoring and
American Steamship Agencies. Luzon Stevedoring claimed that it merely delivered what it received from the
carrier in the same condition it received it. American Steamship contended that it was not liable because of a
stipulation in the charter party that the charterer and not the shipowner was to be liable for any loss or damage
to the cargo. The CFI absolved Luzon Stevedoring but ordered American Steamship to reimburse the P14,000
to Home Insurance, declaring that Art. 587 of the Code of Commerce makes the ship agent civilly liable for
damages in favor of third persons due to the conduct of carrier's captain and that the stipulation in the charter
party exempting owner from liability is against public policy under Art. 1744 of NCC.
Issue : Is the stipulation valid? YES.
PAGE 23

Held : The provisions of our Civil Code on common carriers were taken from Anglo-American law.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner
from liability for the negligence of its agents is not against public policy and is deemed valid.
The Civil Code provisions on common carriers should not be applied where the carrier is not
acting as such but as a private carrier. The stipulation in the charter party absolving the owner from
liability for loss due to the negligence of the agent would be void only if the strict public policy
governing CC is applied. Such policy has no force where the public at large is not involved, as in the
case of a ship totally chartered (as in this case) for the use of a single party. Based on the stipulation,
recovery cannot be had, for loss or damage to the cargo against shipowners, unless the same is due to
personal acts or negligence of said owner or its managers, as distinguished from agents or employees.
No personal act or negligence has been proved.
In a charter of the entire vessel, the bill of lading issued by the master to the charterer, as
shipper, is in fact and legal contemplation merely a receipt and a document of title and not a contract,
for the contract is the charter party.
De Guzman vs CA, 168 SCRA 612
F:
Cendana was a junk dealer and was engaged in buying used bottles and scrap materials in Pangasinan
and brought these to Manila for resale. He used two 6-wheeler trucks. On the return trip to Pangasinan, he
would load his vehicles with cargo which various merchants wanted delivered to Pangasinan. For that service,
he charged freight lower than regular rates. General Milk Co. contracted with him for the hauling of 750
cartons of mild. On the way to Pangasinan, one of the trucks was hijacked by armed men who took with them
the truck and its cargo and kidnapped the driver and his helper. Only 150 cartons of milk were delivered. The
Milk Co. sued to claim the value of the lost merchandise based on an alleged contract of carriage. Cendana
denied that he was a common carrier and contended that he could not be liable for the loss since it was due to
force majeure. The TC ruled that he was a common carrier. The CA reversed.
Issue : WON Cendana is a common carrier. YES.

Held : Cendana is properly characterized as a common carrier even though he merely backhauled goods
for other merchants, and even if it was done on a periodic basis rather than on a regular basis, and even
if his principal occupation was not the carriage of goods.
Art. 1732 makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity. It also avoids
making a distinction between a person or enterprise offering transportation services on a regular or
scheduled basis and one offering service on an occasional, episodic or unscheduled basis. Neither does
it make a distinction between a carrier offering its services to the general public and one who offers
services or solicits business only from a narrow segment of the population.
The fact that Cendana does not hold a CPC is no excuse to exempt him from incurring
liabilities as a CC. Otherwise, it would be to reward persons who fail to comply with applicable
statutory reqts. and would be offensive to public policy. The liability arises the moment a person or firm
acts as a common carrier, without regard to whether or not such carrier has also complied with the
requirements of the applicable regulatory statute and implementing regulations.
Issue : WON Cendana may be held liable for the loss of the milk. NO.
Held: Common carriers by the very nature of their business and for reasons of public policy are held to
a very high degree of care and diligence (extra-ordinary diligence) in the carriage of goods as well as
passengers. Article 1734 establishes the general rule that CC are responsible for the loss, destruction, or
deterioration of the goods which they carry unless the same is due to the causes enumerated therein.
Such enumeration is a closed list. Causes falling outside the list, even if they are force majeure, fall
PAGE 24

within the scope of Art. 1735 which provides that CC are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence required under Art. 1733.
However, Art. 1745 provides that a CC cannot be allowed to divest or diminish his
responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers
acted with grave or irresistible threat, violence or force. The limits of extraordinary diligence are
reached where there is grave or irresistible threat, violence or force. In this case, the loss was quite
beyond the control of the CC. Even CC are not made absolute insurers against all risks of travel and of
transport of goods, and are not liable for acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous standard of extraordinary diligence.
Planters Products vs CA, G.R. 101503 (Sept. 15, 1993)
F:
Planters purchased urea fertilizer from Mitsubishi, New York. The fertilizer was shipped on MV Sun
Plum, which is owned by KKKK, from Alaska to San Fernando, La Union. A time charter party was entered
into between Mitsubishi as shipper/charterer and KKKK as shipowner. Upon arrival in the port, PPI unloaded
the cargo. It took PPI 11 days to unload the cargo. PPI hired a marine and cargo surveyor to determine if there
was any shortage. A shortage and contamination of the fertilizer was discovered. PPI sent a claim letter to
SSA, the resident agent of KKKK for the amount of the loss. An action for damages was filed. SSA contended
that the provisions on CC do not apply to them because they have become private carriers by reason of the
charter-party. The TC awarded damages. The CA reversed.
Issue : Does a charter party between a shipowner and a charterer transform a CC into a private one as
to negate the civil law presumption of negligence in case of loss or damage to its cargo? NO.
Held : A charter-party is a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use. There are 2 kinds: (1) contract of affreightment
which involves the use of shipping space or vessels leased by the owner in part or as a whole, to carry
goods for others; and (2) charter by demise or bareboat charter where the whole vessel is let to the
charterer with a transfer to him of its entire command and possession and consequent control over its
navigation, including the master and the crew, who are his servants.
It is not disputed that the carrier operates as a CC in the ordinary course of business. When
PPI chartered the vessel, the ship captain, its officers and crew were under the employ of the shipowner
and therefore continued to be under its direct supervision and control. Thus it continued to be a public
carrier.
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel, provided the charter is limited to the ship only, as in the case of a
time-charter or a voyage-charter. It is only when the charter includes both the vessel and the crew, as in
a bareboat or demise that a CC becomes private, insofar as such particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of respondent carrier has been overcome by the
showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. On the
other hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exercise
of due diligence in order to minimize the loss or damage to the goods it carried.
Coastwise Lighterage Corp. vs. CA, GR No. 114167, July 12, 1995
F:
Pag-asa Sales, Inc. entered into a contract to transport molasses from Negros to Mla. w/ Coastwise,
using the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marcia, w/c is likewise
owned by Coastwise.
PAGE 25

Upon reaching Mla. Bay, while approaching Pier 18, one of the barges, "Coastwise 9," struck an
unknown sunken object. The forward buoyancy compartment was damaged, and water gushed in through a
hole 2 inches wide and 22 inches long. As a consequence, the molasses at the cargo tanks were contaminated
and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa to reject the shipment of
molasses as a total loss. Thereafter, Pag-asa filed a formal claim w/ the insurer of its cargo, herein pvt. resp.,
Phil. Gen. Insurance Co. (Philgen) and against the carrier, herein petitioner Coastwise. Coastwise denied the
claim and it was Philgen w/c paid the consignee the amount of P700,000 representing the value of the damaged
cargo of molasses.
In turn, Phil-gen filed an action agsint Coastwise bef. RTC-Mla. seeking to recover the P700,000 it
paid to Pag-asa. RTC ruled in favor of Philgen. CA affirmed the RTC decision. Hence, this petition.
RULINGS: (1) Bareboat charter and contract of affreightment, difference; Coastwise, by the
contract of affreightment, was not converted into a private carrier, but remained a common carrier.-Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the
owner of the voyage or service stipulated. The charterer mans the vessel w/ his own people and
becomes the owner pro hac vice, subject to liability to others for damages caused by negligence. To
create a demise, the owner of a vessel must completely and exclusively relinquish possession,
command and navigation thereof to the charterer; anything short of such a complete transfer is a
contract of affreightment (time or voyage charter party) or not a charter party at all.
A contract of affreightment is one in w/c the owner of the vessel leases part or all of its space to
haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and
under such contract the general owner retains the possession, command and navigation of the ships, the
charterer or freighter merely having use of the space in the vessel in return for his payment of the
charter hire. xxx
xxx
Although a charter party may transform a common carrier into a private one, the same,
however, is not true in a contract of affreightment on account of the aforementioned distinctions bet. the
two.
Petitioner admits that the contract it entered into w/ the consignee was one of afreightment. We
agree. Pag-asa only leased 3 of petitioner's vessels, in order to carry cargo from one point to another,
but the possession, command and navigation of the vessels remained w/ petitioner.
(2) Petitioner is liable for breach of contract of carriage, having failed to overcome the
presumption of negligence w/ the loss and destruction of goods it transported, by proof of its exercise
of extraordinary diligence.-- Mere proof of delivery of goods to a carrier and the subsequent arrival of
the same goods at the place of destination in bad order makes for a prima facie case against the carrier.
Jesus Constantino, the patron of the vessel "Coastwise 9" admitted that he was not licensed. This
violates the rule in the Code of Commerce (Art. 609) w/c requires that patrons must "have the legal
capacity to contract in accordance w/ this code, and prove the skill, capacity and qualifications
necessary to command and direct the vessel xxx and must be qualified xxx for the discharge of the
duties of the position. xxx" Coastwise cannot safely claim to have extraordinary diligence, by placing
a person whose navigational skills are questionable, at the helm of the vessel w/c eventually met the
fateful accident. xxx Had the patron been licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their way to
Pier 8. RAM.
2. Nature of business; power of State to regulate
Art. 1765. The [Public Service Commission] Board of Transportation may, on its own
motion or on petition of any interested party, after due hearing, cancel the certificate of public
convenience granted to any common carrier that repeatedly fails to comply with his or its duty to
observe extraordinary diligence as prescribed in this Section.
PAGE 26
4 Agbayani:
Common carriers are subject to legislative regulation.-- The business of a common carrier holds such
a peculiar relation to the public interest that there is superinduced upon it the right of public regulation.
The business of a common carrier is affected with public interest. When, therefore, one devotes his
property to a use in which the public has an interest, he, in effect, grants to the public an interest in that
use, and must submit to be controlled by the public for the common good, to the extent of the interest he
had thus created.
Limitation on power to regulate.-- Such regulations must not have the effect of depriving an owner of
his property without due process of law, nor of confiscating, or appropriating private property without
just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully
acquired under a charter or franchise [just compensation, due process of law]
When judiciary may interfere with legislative regulation of common carriers.-- The judiciary ought
not to interfere with legislative regulations unless they are so plainly and palpably unreasonable as to
make their enforcement equivalent to the taking of property for public use without such compensation as
under all circumstances is just both to the owner and to the public.
Pantranco vs PSC, 70 Phil 221
F:
Pantranco has been engaged for the past 20 years in the business of transporting passengers by means
of motor vehicles in accordance with the CPCN issued to it. It filed with the PSC an application for
authorization to operate 10 addtl. new trucks. The application was granted with two conditions : (1) that the
CPCN would be valid for only 25 years and (2) that the service can be acquired by the govt. upon payment of
cost price of its useful eqpt. less reasonable depreciation. Pantranco challenged the constitutionality of Art. 15,
CA 146 as an undue delegation of legislative powers.
Issue : WON the PSC may prescribe the 2 conditions as a prerequisite to the issuance of the CPCN.
Held : Yes. CA 146 provides a sufficient standard, which is public interest, by which the PSC is guided
in imposing such conditions.
The business of a common carrier holds such a peculiar relation to the public interest that there
is superinduced upon it the right of public regulation. When private property is affected with a public
interest, it ceases to be juris privati only. When, therefore, one devotes his property to a use in which the
public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be
controlled by the public for the common good, to the extent of the interest he had thus created. He may
withdraw his grant by discontinuing the use, but so long as he maintains the use, he must submit to
control. Indeed this right is so far beyond question that it is settled that the power of the state to exercise
legislative control over public utilities may be exercised through the board of commissioners. This right
of the state to regulate public utilities is founded upon the police power, and statutes for the control and
regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as the
utilities themselves. Such statutes are not unconstitutional, either as impairing the obligation of
contracts, taking property without due process, or denying the equal protection of the laws, especially
inasmuch as the question WON private property shall be devoted to a public use and the consequent
burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public
service he cannot complain that it becomes subject to the regulatory powers of the state. This is more so
in the light of authorities which hold that a CPC constitutes neither a franchise nor a contract, confers
no property rights and is a mere license or privilege.
3. Nature and Basis of Liability
PAGE 27
Art. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles
1734, 1735, and 1745, Nos. 5,6, and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in Articles 1755 and 1756.
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packaging or in the containers;
(5) Order or act of competent public authority.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in Art. 1733.
Art. 1745. Any of the ff. or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx
(5) That the common carrier shall not be responsible for the acts or omissions of
his or its employees;
(6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violence or force, is dispensed
with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or
deterioration of goods on account of the defective condition of the car, vehicle, ship,
airplane or other equipment used in the contract of carriage.
Art. 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles 1733 and 1755.
4 Agbayani:
Extraordinary diligence required of common carriers.-- The law requires CC to exercise extraordinary diligence which means that they must render service with the greatest skill and utmost
foresight. The extra-ordinary diligence required of carriers in the handling of the goods of the shippers
and consignees last from the time the cargoes are loaded in the vessels until they are discharged and
delivered to the consignees.
Reasons for requiring extra-ordinary diligence.-- The nature of the business of common carriers and
the exigencies of public policy demand that they observe extra-ordinary diligence; the business of CC is
impressed with a special public duty and therefore subject to control and regulation by the state. The
public must of necessity rely on the care and skill of CC in the vigilance over the goods and safety of the
passengers
PAGE 28

Rigorous law on common carriers not applicable to special employment as carrier.-- The laws
applicable to CC are rigorous and should not be extended to a person who has neither expressly
assumed that character, nor by his conduct and from the nature of his business justified the belief on the
part of the public that he intended to assume it.
Registered owner primarily and solidarily liable with driver, under the "kabit system."-Registered owner is primarily and solidarily liable for the damage caused by the vehicle registered in his
name, even if the said vehicle had already been sold, leased or transferred to another person who was, at
the time of the accident, actually operating the vehicle. The operator of record continues to be the
operator of the vehicle in contemplation of law, as regards the public and third persons, and as such is
responsible for the consequences incident to its operation; such owner/operator of record is held in
contemplation of law as the employer of the driver.
Kabit system.-- One whereby a person who has been granted a certificate of public convenience allows
other persons who own vehicles to operate them under such license, for a fee or percentage of the
earnings. This is contrary to public policy, and therefore, void and inexistent; "this is a pernicious
system that cannot be too severely condemned; it constitutes an imposition upon the good faith of the
govt."
Reason for holding registered owner liable.-- The law does not relieve the registered owner directly of
the responsibility that the law fixes and places upon him as an incident or consequence of registration -where a registered owner allowed to evade responsibility by proving who the supposed transferee or
owner is, it would be easy for him by collusion with others or otherwise, to escape said responsibility
and transfer the same to an indefinite person or to one who possesses no property with which to respond
financially for the damage or injury done; in case of an accident, the registered owner should not be
allowed to disprove his ownership to the prejudice of the person injured or to be relieved from
responsibility
Cangco vs MRR, 38 Phil 768
F:
Jose Cangco, an employee of MRR, was riding on its train. As it drew up to the station, the plaintiff
made his exit. As he alighted, his foot stepped on a sack of watermelons causing him to slip and his right arm
was crushed. This happened between 7 and 8 p.m. and as the railroad station was lighted dimly by a single
light, objects on the platform were difficult to see.
Issue : WON MRR is liable to pay damages for the acts of its EEs.
Held : YES.
It cannot be doubted that the EEs of the railroad co. were guilty of negligence in piling sacks on
the platform; their presence constituted an effective legal cause of the injuries sustained by Cangco.
It is impt. to note that the foundation of the legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all,
from the breach of that contract by reason of the failure of defendant to exercise due care in its
performance. Its liability is direct and immediate (culpa contractual), differing essentially, from that
presumptive responsibility for the negligence of its servants, which can be rebutted by proof of the
exercise of due care in the selection and supervision of EEs (culpa aquiliana).
The liability of masters and employers for the negligent acts or omissions of their servants or
agents, when such act or omissions cause damage which amount to the breach of a contract, is not
based upon a mere presumption of the master's negligence in their selection or control, and proof of
exercise of the utmost diligence and care in this regard does not relieve the master of his liability for the
breach of his contract. When the facts averred show a contractual undertaking by defendant for the
benefit of plaintiff, and it is alleged that plaintiff has failed or refused to perform the contract, it is
PAGE 29

not necessary for plaintiff to specify in his pleadings whether the breach of the contract is due to
wilful fault or to negligence on the part of the defendant, or of his servants or agents. Proof of the
contract and of its nonperformance is sufficient prima facie to warrant recovery.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry
him in safety and to provide safe means of entering and leaving its trains. That duty, being contractual,
was direct and immediate, and its nonperformance could not be excused by proof that the fault was
morally imputable to defendant's servants.
Medina vs Cresencia, 99 Phil 506
F:
A passenger jeepney driven by Brigido Avorque smashed into a Meralco post resulting in the death of
Vicenta Medina, one of its passengers. In a criminal case of homicide through reckless imprudence, Avorque
pleaded guilty. The right to file a separate action for damages was reserved. Cresencia was still the registered
operator of the jeepney in the records of the Motor Vehicles Office and the PSC, while Rosario Avorque was the
owner at the time of the accident.
Issue: WON Cresencia is liable for breach of the contract of carriage. YES.
Ratio: The law requires the approval of the PSC, in order that a franchise, or any privilege pertaining
thereto, may be sold or leased without infringing the certificate issued to the grantee; and that if
property covered by the franchise is transferred or leased without this requisite approval, the transfer is
not binding against the public or the PSC; and in contemplation of law, the grantee of record continues
to be responsible under the franchise in relation to the PSC and to the public. Since a franchise is
personal in nature, any transfer or lease thereof should be notified to the PSC so that the latter may take
proper safeguards to protect the interest of the public.
Plaintiff's action is based on the breach of the carrier's contractual obligation to carry his
passengers safely to their destination (culpa contractual). The liability of the carrier is direct and
immediate.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
F:
Plaintiff boarded defendant's bus as a paying passenger from Albay. The bus collided with a pick-up
truck which was coming from the opposite direction trying to swerve from a pile of gravel. As a result, his left
arm was completely severed. Plaintiff chose to hold defendant liable on its contractual obligation. Plaintiff
brought this action for damages which the lower court dismissed holding the driver of the pick-up negligent
and not that of the bus.
Issue : WON defendant observed extra-ordinary diligence or the utmost diligence of a very cautious
person in avoiding the collision. YES.
Held : The facts of the case show that the bus and the pick-up were approaching each other head-on.
The bus swerved to the right and went over a pile of stones and gravel. Despite the efforts of the bus
driver, the pick up car still hit the rear left side of the bus. The sense of caution one should observe
cannot always be expected from one who is placed suddenly in a predicament where he is not given
enough time to take the proper course of action under ordinary circumstances. Furthermore, plaintiff is
guilty of contributory negligence since he placed his left elbow outside the window.
Ratio: A CC is bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all circumstances. This extraordinary diligence required of common carriers is calculated to protect the passengers from the tragic
mishaps that frequently occur in connection with rapid modern transportation. This high standard of
PAGE 30

care is imperatively demanded by the preciousness of human life and by the consideration that every
person must in every way be safeguarded against all injury.
Principles as to liability of CC:
(1) the liability of a carrier is contractual and arises upon breach of its obligation; there is
breach if it fails to exert extra-ordinary diligence accdg. to all the circumstances of each case
(2) a carrier is obliged to carry its passenger with the utmost diligence of a very cautious
person, having due regard for all the circumstances
(3) a carrier is presumed to have been at fault or to have acted negligently in case of death of, or
injury to, passengers, it being it duty to prove that it exercised extra-ordinary diligence
(4) the carrier is not an insurer against all risks of travel.
Fores vs Miranda, 105 Phil 266
F:
Respondent, a professor of Fine Arts, was a passenger of a jeep registered in the name of Fores but
actually operated by Carmen Sackerman. While the jeep was descending at Sta. Mesa bridge at excessive
speed, the driver lost control of it causing it to swerve and hit the bridge wall resulting to injuries to its
passengers including respondent who suffered a fracture of the upper right humerus. In an action for damages,
the CFI awarded actual damages. The CA reduced the actual damages and added moral damages and attorney's
fees.
Issue : WON the approval of the PSC is necessary for the sale of a public service vehicle even without
conveying therewith the authority to operate the same. YES.
Held : A transfer made without the requisite approval of the PSC is not effective and binding in so far as
the responsibility of the grantee under the franchise in relation to the public is concerned. The law was
designed primarily for the protection of the public interest.
Issue : WON moral damages may be awarded.
Held : In case of breach of contract (including one of transportation), proof of bad faith or fraud, i.e.,
wanton or deliberately injurious conduct, is essential to justify an award of moral damages. The
exception to this is when a mishap results in the death of a passenger, in which a CC is liable to pay
moral damages for the mental anguish by reason of the death of the passenger. So where the injured
passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty
of malice or bad faith.
Under the law, the presumption is that common carriers acted negligently but not maliciously.
The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and
negligence (as mere carelessness) is too fundamental in our law to be ignored. A carrier's bad faith is
not to be lightly inferred from a mere finding that the contract was breached through negligence of the
carrier's employees.
Phil. Rabbit Bus Lines vs IAC, 189 SCRA 159
F:
Several passengers boarded the jeepney owned by spouses Mangune and driven by Manalo at Dau,
Pampanga bound for Carmen, Rosales, Pangasinan. Their contract with Manalo was P24 for the trip. Upon
reaching Tarlac, the right wheel of the jeepney was detached, so it was running in an unbalanced position.
Manalo stepped on the brake, making a sudden U-turn and encroaching on the right of way of the other
vehicles. The Phil. Rabbit bus bumped from behind the jeepney. As a result of the collision, 3 persons died
while the others sustained injuries. Cases were filed against the spouses Mangune, Manalo, Phil. Rabbit and De
los Reyes (driver).
Issue: Who should be held liable? the Mangunes and Filriters Guaranty Assurance Corp. (Insurance co.)
PAGE 31
Ratio: The principle of last clear chance would call for application in a suit between the owners and
drivers of two colliding vehicles. It does not arise where a passenger demands responsibility from the
carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent
driver of the jeepney and its owners on the ground that the other driver was likewise guilty of
negligence.
On the presumption that the drivers who bump the rear of another vehicle are guilty and the
cause of the accident, unless contradicted by other evidence, the SC held that the jeep made a sudden Uturn which was so abrupt that the other driver de los Reyes did not anticipate the sudden U-turn.
The proximate cause of the accident was the negligence of Manalo and the spouses Mangune.
In culpa contractual, the carrier is presumed to have been at fault or to have acted negligently, and this
disputable presumption may only be overcome by evidence that he had observed extra-ordinary
diligence or that the death or injury of the passenger was due to a fortuitous event.
The driver cannot be held jointly liable with the owners of the jeep in case of breach of the
contract of carriage. The contract of carriage is between the carrier and the passenger, and in the event
of contractual liability, the carrier is exclusively responsible therefore to the passenger, even if such
breach be due to the negligence of the driver. To make the driver jointly liable would make the carrier's
liability personal instead of merely vicarious and consequently, the victim is entitled to recover only the
share which corresponds to the driver.
4. Classes of common carriers
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.
Art. 1755. A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due regard
for all circumstances.
5. Laws applicable
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by special laws.
4 Agbayani:
New Civil Code primarily governs common carriers.-- The Provisions of the Civil Code [17321766] primarily govern common carriers and the provisions of the Code of Commerce [Overland
Transportation and Maritime Commerce] and special laws [Carriage of Goods by Sea Act; Salvage Act]
have only subsidiary application to common carriers.
PAGE 32

Art. 1753, NCC. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or deterioration.
The provisions of the NCC primarily govern contracts of carriage of goods from foreign ports
to Philippine ports
Eastern Shipping Lines vs IAC 150 SCRA 463

F:
These two cases, both for the recovery of value of cargo insurance, arose from the same incident, the
sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo.
In the first case, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, loaded at
Kobe, Japan for transportation to Manila 5,000 pieces of colorized lance pipes in 28 packages valued at
P256,039 consigned to Phil. Blooming Mills and 7 cases of spare parts valued at P92,361.75 consigned to
Central Textile Mills. Both sets of goods were insured against marine risk for their stated value with
respondent Devt. Insurance and Surety Corporation.
In the second case, the same vessel took on board 128 cartons of garment fabrics and accessories, in 2
containers, consigned to Mariveles Apparel Corporation, and 2 cases of surveying instruments consigned to
Aman Enterprises and General Merchandise. The 128 cartons were insured by respondent Nisshin Fire and
Marine Insurance Co. and Dowa Fire & Marine Insurance Co.
En route for Manila, the ship caught fire and sank. The insurers paid the corresponding marine
insurance values and were subrogated to the rights of the latter as the insured. They filed suits against the
petitioner Carrier and won (affirmed by the CA). Petitioner carrier denies liability on the ff. grounds:
(a) that the loss was due to an extraordinary fortuitous even which is an exempting circumstance under
Sec. 4(2)(b) of the Carriage of Goods by Sea Act (COGSA);
(b) that when fire is established, the burden of proving negligence is shifted to the cargo shipper.
Issues: (1)Which law should govern : the Civil Code or the Carriage of Goods by Sea Act.
(2)Who has the burden of proof to show negligence of the carrier.
Ratio : (1) The law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration. As the cargoes in question were
transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the
Civil Code. However, in all matters not regulated by said Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and special laws. Thus, the COGSA, a special
law, is suppletory to the provisions of the Civil Code.
(2) Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extra-ordinary diligence in the vigilance over goods, accdg. to all the
circumstances of each case. Common carriers are responsible for the loss, destruction, or deterioration
of the goods unless the same is due to any of the ff. causes only (Art. 1734, NCC):
"(1) Flood, storm, earthquake, lightning or other natural disaster or calamity; xxx"
The Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase
"natural disaster or calamity." However, we are of the opinion that fire may not be considered a natural
disaster or calamity. This must be so as it arises almost invariably from some act of man or by human
means. It does not fall within the category of an act of God unless caused by lightning or by other
natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.
As the peril of fire is not comprehended within the exceptions in Article 1734, then Article 1735
provides that in all cases other than those mentioned in Art. 1734, the CC shall be presumed to have
PAGE 33

been at fault or to have acted negligently, unless it proves that it has observed the extra-ordinary
diligence required by law.
In this case, the respective Insurers, as subrogees of the cargo shippers, have proven that the
transported goods have been lost. Petitioner carrier has also proven that the loss was caused by fire.
The burden then is upon Petitioner carrier to prove that it has exercised the extra-ordinary diligence
required by law.
Having failed to discharge the burden of proving that it had exercised the extra-ordinary
diligence required by law, Petitioner Carrier can not escape liability for the loss of the cargo.
And even if fire were to be considered a natural disaster within the meaning of Art. 1734, it is
required under Art. 1739 of the same Code that the natural disaster must have been the proximate and
only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss
before, during or after the occurrence of the disaster. This petitioner carrier has also failed to establish
satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the COGSA. It is provided therein
that:
"Sec.4 (2). Neither the carrier nor the ship shall be responsible for loss or damage arising or
resulting from: (b) Fire, unless caused by the actual fault or privity of the carrier."
In this case, both the TC and the CA, in effect, found, as a fact, that there was "actual fault" of
the carrier shown by lack of diligence in that when the smoke was noticed, the fire was already big; that
the fire must have started 24 hrs before the same was noticed; and that after the cargoes were stored in
the hatches, no regular inspection was made as to their condition during the voyage.
The foregoing suffices to show that the circumstances under which the fire originated and
spread are such as to show that Petitioner carrier or its servants were negligent in connection therewith.
Consequently, the complete defense afforded by the COGSA when the loss results from fire is unavailing
to petitioner carrier.
B. Common Carriers
1. Liability and presumption of negligence
(read discussion under [3] Nature and basis of liability)
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only:
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at
PAGE 34

fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
required in Art. 1733.
4 Agbayani:
Responsibility of common carriers.-- In general, CC are responsible for the loss, destruction, or
deterioration of the goods carried by them. This responsibility arises from contract, as the relation
between a carrier and its patrons is of a contractual nature. A failure on the carrier to use extraordinary care in carrying goods or passengers safely is a breach of contract and constitutes culpa
contractual not culpa aquiliana. While the liability of a carrier as an insurer is not recognized in this
jurisdiction, a carrier is liable for damages suffered by goods carried if such damages arise from its
negligence. The carrier is also liable even in those cases where the cause of the loss or damage is
unknown.
Due extraordinary diligence required, carriers given wide discretion in selection and supervision
of persons to handle goods.-- The law requires CC to exercise extra-o diligence which means that they
must render service with the greatest skill and utmost foresight. The extra-o diligence required of CC in
the handling of the goods of the shipper and the consignees lasts from the time the cargoes are loaded in
the vessels until they are discharged and delivered to the consignees. To comply with this obligation,
CC should be afforded the right of having a wide discretion in the selection and supervision of persons
who will handle the goods.
Air carrier can terminate services of pilot for serious misconduct and drunkenness, because of its
duty of extraordinary dilignece.-- The CC can terminate the services of its drivers, pilots and EEs for
serious misconduct and drunkenness because of its duty of extra-ordinary diligence. Whenever a
passenger dies or is injured the presumption is that the CC is at fault notwithstanding the fact that it has
exercised due diligence of a good father of a family in the selection and supervision of its EEs. Thus,
extra-ordinary measures and diligence should be exercised by it for the safety of its passengers and their
belongings. A CC can terminate an EE whose continued service is inimical to its interests and the safety
of the passengers.
Carrier has duty to keep and care for goods carried.-- It is the duty of the CC to properly and
carefully handle, carry, keep and care for the goods carried and to exercise due care to ascertain and
consider the nature of the goods offered for shipment and to use such methods for their care during the
voyage as their nature requires. The carrier is liable for injury to, or loss of, cargo resulting from the
failure to properly care for and handle the cargo en route; and it is required to provide adequate
ventilation for the safe carriage of the cargo, and provide reasonable and ordinary inspection and care
in and about the transportation of cargo. A vessel should not accept cargo unless it can be given the
type of storage that its character requires, for placing of conditions in a bill of lading does not relieve the
vessels of obligation to take appropriate care of the cargo.
Duty of carrier to deliver cargo in good condition as when loaded.-- There is no absolute obligation
for a CC to accept cargo. It should not be accepted unless it can be given the type of storage that its
character requires. Where a vessel accepts a cargo for shipment for valuable consideration, it takes the
risk of delivering it in good condition as when it was loaded. And if the fact of improper packing is
known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods
notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom.
In the exercise of extra-ordinary diligence required by law, the CC must give due regard to all
circumstances and take all steps necessary to insure the safety of the passengers and the goods given the
circumstances.
PAGE 35

Presumption of negligence.-- Under Art. 1735, if the goods are proved to have been lost, destroyed or
deteriorated, CC are presumed to have been at fault or to have acted negligently, unless they prove that
they have observed the extra-o diligence required by law.
The plaintiff needs only to prove that the goods he transported have been lost, destroyed or
deteriorated
CC must then prove that he has exercised extra-ordinary diligence required by law or that the
loss, etc. was due to accident or some other circumstances inconsistent with its liability
Mere proof of delivery of goods in order to a carrier, and of their arrival at the place of
destination in bad order makes out a prima facie case against the CC
Defenses available to CC:
1. Art. 1734
2. Art. 1735 (exercise of extra-ordinary diligence required by law)
3. Natural disaster: The CC is exempt from liability if he proves that the loss or destruction of
the merchandise was due to accident and force majeure and not to fraud, fault or negligence on the part
of the EEs and owners of the CC.
CC cannot interpose the defense that it exercised due diligence in the selection and supervision
of EEs. The liability of the CC arises from breach of the contract of carriage and not from culpa
aquiliana. It is however the duty of CC to teach their drivers not to overload vehicles, not to exceed
safe and legal speed limits, and other safety precautions.
Carrier not insurer.-- CC are not required to exercise all the care, skill and diligence of which the
human mind can conceive nor such as will free the transportation of passengers from all possible perils.
A CC is not an insurer of the safety of the passengers and is not absolutely and at all events to carry
them safely and without injury.
Ynchausti Steamship Co. vs Dexter 41 Phil 289
F:
The Govt. of the Philippines, acting through the Insular Purchasing Agent, employed the services of
petitioner, Ynchausti Steamship Co., a common carrier for the transportation, on board the steamship Venus,
from the port of Manila to the port of Appari, Cagayan, of consignments of merchandise, consisting of 30 cases
of Wine Rose mineral oil of two 5-gallon cans to the case. On another occasion, the Govt. also sent 96 cases of
Cock brand mineral oil, ten gallons to the case. The goods were delivered by the shipper to the carrier which
accordingly received them, and to evidence the contract of transportation, the parties duly executed and
delivered what is popularly called Govt. bill of lading, whereby it was stipulated that the carrier, Ynchausti,
received the above-mentioned supplies in apparent good condition, obliging itself to carry said supplies to the
place agreed upon.
Both shipments arrived with one case missing per shipment. Ynchausti denied negligence. However,
upon investigation, the Insular Auditor decided that the leakages were due to Ynchausti's negligence. The
Insular Auditor deducted the amount of the lost goods from the entire amount payable to Ynchausti. Petitioner
refused to accept the warrant. Hence, this action was filed.
Issue : Is Ynchausti liable for the loss? YES.

Ratio : Sec. 646 of the Administrative Code provided that when Govt. property is transmitted from one
source to another by carrier, it shall be upon proper bill of lading or receipt, from such carrier; and it
shall be the duty of the consignee or his representative to make all notation of any evidence of loss,
shortage, or damage, on the bill of lading or receipt before accomplishing it. It is admitted by petitioner
that the consignee, at the time the goods were delivered, noted the losses in the respective bill of ladings.
Such notation made in obedience to the code, is competent evidence to show that the shortage did exist.
Inasmuch as the fact of loss was proven, it results in the presumption that the petitioner was to blame
for the loss; and it was incumbent upon the petitioner to rebut that presumption by proving that the loss
was not due to any fault or negligence of the petitioner.
PAGE 36

The mere proof of delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case against the carrier, so that if no
explanation is given as to how the injury occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was due to accident or some other circumstance
inconsistent with its liability. Indeed, if the Govt. had instituted an action in court against petitioner to
recover the value of the oil lost, it would, based on the facts, be entitled to judgment. In the absence of
proof showing that the carrier was not at fault for the loss, the Insular Auditor was entitled to withhold
the amount admittedly due to the petitioner for the freight charges, a sum sufficient to cover the value of
the oil lost in transit.
Mirasol vs Dollar 53 Phil 124
F:
Mirasol was the owner of two cases of Encyclopedia Brittanica shipped in good order and condition on
board Dollar's steamship, President Garfield, to be transported from New York to Manila. The books arrived in
bad order and damaged condition, resulting in total loss of one case and partial loss of the other. Mirasol filed
claims, but Dollar refused to pay alleging that the damage was caused by sea water and that Mirasol entered
into a contract providing that Dollar will not be held liable for loss or damage of merchandise resulting from
"acts of God" or "perils of the sea," and that in no case shall it be held liable beyond $250 for any article not
enclosed in a package unless a higher value is stated therein and ad valorem freight paid or assessed thereon.
The LC ruled in favor of Mirasol for payment of P 2,080.
Issue : WON Dollar may be held liable. YES.

Ratio: There was no claim or pretense that Mirasol signed the bill of lading or that he knew of its
contents. In that situation, he was not legally bound by the clause limiting Dollar's liability. Where it
appears that a bill of lading was issued to a shipper containing a clause limiting the carrier's
liability, printed in fine letters on the back of the bill of lading, which the shipper did not sign and of
which he was not advised, the shipper is not bound by the clause limiting liability and the stipulation
is void or against public policy.
Shippers who are forced to ship goods in an ocean liner have legal rights. When the goods are
delivered on board the ship in good order and condition and the carrier delivers them to the shipper in
bad order and condition, in an action for damages, the burden of proof shifted and it devolves upon the
carrier to both allege and prove that the goods were damaged by reason of some act which legally
exempts it from liability.
Having received the boxes in good condition, its legal duty was to deliver them in the same
condition as received. Dollar, having admitted that the goods were damaged while in transit and in its
possession, the burden of proof then shifted and it devolved upon him to allege and prove that the
damage was caused by reason of some fact which exempted it from liability. As to when and how the
goods were damaged in transit is a matter peculiarly within the knowledge of the carrier and its
employees. To require Mirasol to prove such, would force him to rely upon the EEs of Dollar's ship,
which in legal effect would be to say that he could not recover damages at all.
Since Dollar was not even able to prove that the goods were wet with sea water due to a
fortuitous event, it must be presumed that the carrier was liable.
2. Exemption from liability
Proof of the delivery of the goods in good order to a carrier, and of their arrival at the place of
destination short or in bad order, makes a prima facie case; it is incumbent on the carrier, in order to
exonerate itself, to prove that the loss or injury was due to some circumstances inconsistent with its
liability
PAGE 37

(a) Natural disaster
the goods, unless the same is due to any of the ff. causes only:
xxx
Art. 1739. In order that the common carrier may be exempted from responsibility, the natural
disaster must have been the proximate and only cause of the loss. However, the common carrier must
exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood,
storm, or other natural disaster in order that the common carrier may be exempted from liability for the
loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in
case of an act of the public enemy referred to in Art. 1734 (2).
Art. 1740. If the CC negligently incurs in delay in transporting the goods, a natural
disaster shall not free such carrier from responsibility.
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the
contrary has not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer during the
transportation by reason of fortuitous event, force majeure, or the inherent nature and defect of
the goods, shall be for the account and risk of the shipper.
Proof of these accidents is incumbent upon the carrier. (Code of Commerce.)
4 Agbayani:
Effect of New Civil Code.-- Transportation of the merchandise "at the risk and venture of the shipper"
means that the shipper will suffer losses and deterioration arising from fortuitous event, force majeure,
or inherent nature and defects of the goods. It does not mean that the carrier is free from liability for
losses and deterioration arising from his negligence or fault, w/c is presumed. Thus construed, par. 1 of
Art. 361 is not inconsistent with Art. 1735 of the NCC.
Requisites for defense of natural disaster:
1. Art. 1739 -- natural disaster must have been the proximate and only cause of the loss
2. The CC must exercise due diligence to prevent or minimize the loss before, during and after
the occurrence of flood, storm, or other natural disaster. If the CC does not exercise due diligence in
minimizing the loss, he may yet be held liable notwithstanding the fact that the loss, destruction or
deterioration of the goods arose out of natural disaster.
3. Art. 1740 -- the CC must not be in delay. If the CC incurs in delay, a natural disaster shall
not free it from responsibility. Under Art. 1165 par. 3, if the obligor incurs delay, he shall be responsible
for any fortuitous event until he has effected delivery.
However, if between the delay or refusal of the CC to transport the goods and the loss of the
goods due to an act of God there intervened the shipper's negligence, thus causing a break in the chain
of causation between the act of God which caused their loss and the CC's fault, the act of God is the
proximate cause of the loss and the carrier's delay or refusal to transport the goods, is merely the remote
cause. In such cases, the shipper is not even entitled to set up the claim of contributory negligence. It is
then necessary that it be established that the CC was guilty of a willful or negligent act and that between
this willful or negligent act and the act of God, no negligence on the part of the shipper intervened.
PAGE 38
Accident due to defects of carrier not caso fortuito.-- Accidents caused either by defects in the
carrier or through the negligence of the carrier is not caso fortuito. The passenger or shipper has every
right to presume that the carrier is perfectly in good condition and could transport him safely and
securely to his destination
Tan Chiong San vs Ynchausti & Co., 22 Phil 152
F:
Ynchausti and Co. received from Ong Bien Sip in Manila 205 bundles of goods to be conveyed by
YC's steamer to Gubat in Sorsogon, and there to be transhipped to another vessel belonging to YC and
transported to Catarman, in Samar. As the lorcha Pilar, which was to transport the goods to Catarman was not
yet in Gubat when the cargo arrived, the cargo was stored in YC's warehouse.
Several days later, the lorcha arrived and the goods were loaded. However, as the lorcha was being
towed, a storm arose, drove the lorcha to the shore and wrecked it, scattering the goods on the beach. YC's
laborers proceeded to gather up the goods. As it was impossible to preserve the goods, they were sold at a
public auction. Plaintiff filed an action for damages for P 20,000. LC decided that plaintiff was entitled only
to P 14,642.63.
Issues: (1) WON the carrier is relieved from liability due to force majeure. YES.
(2) WON the carrier is liable for the loss of the cargo and for failure to deliver the same at the
place of destination. NO.
Ratio: (1) It is a proven fact that the loss or damage to the goods shipped on the said lorcha was due to
the force majeure which caused the wreck of the said craft. Accdg. to Art. 361 of the Code of
Commerce, merchandise shall be transported at the risk and venture of the shipper, unless the contrary
be expressly stipulated. No such stipulation appears of record, therefore, all damages and impairment
suffered by the goods in transportation, by reason of accident, force majeure, or by virtue of the nature
or defect of the articles, are for the account and risk of the shipper. The carrier is exempt from liability
if he is able to prove, as he did prove, that the loss or destruction of the merchandise was due to accident
and force majeure and not to fraud, fault or negligence on the part of the captain or owner of the ship -that the loss was a result of the stranding of Pilar because of the hurricane that overtook it.
(2) The record bears no proof that said loss caused by the destruction of Pilar occurred through
the carelessness or negligence of the defendant, its agents or patron of the lorcha. The defendant as well
as its agents and patron had a natural interest in preserving the craft -- an interest equal to that of the
plaintiff. The record discloses that Pilar was manned by an experienced patron and a sufficient number
of crewmen plus the fact that it was fully equipped. The crewmen took all the precautions that any
diligent man should have taken whose duty it was to save the boat and its cargo, and by the instinct of
self- preservation of their lives. Considering, therefore, the conduct of the men of the defendant Pilar
and of its agents during the disaster, the defendant has not incurred any liability whatsoever for the loss
of the goods, inasmuch as such loss was the result of a fortuitous event or force majeure, and there was
no negligence or lack of care or diligence on the part of the defendant or its agents.
Loss of a ship and of its cargo, in a wreck due to accident or force majeure must, as a general
rule, fall upon their respective owners, except in cases where the wrecking or stranding of the vessel
occurred through malice, carelessness or lack of skill on the part of the captain or because the vessel put
to sea is insufficiently repaired and prepared. (Art. 841, Code of Commerce)
Martini Ltd. vs Macondray & Co., 39 Phil 934
F:
Martini shipped on board the Easter, owned by the Australian Steamship Co. represented in the
Philippines by Macondray, 219 cases of chemicals for Kobe, Japan. Upon arrival in Kobe, it was discovered
that the shipment was damaged by rain and sea water. Martini claims that it was the ship's duty to stow the
cargo in the hold and not to place it on the deck exposed to the elements. Macondray denied any responsibility
PAGE 39

on the ground that the contract of affreightment clearly states that the cargo was to be carried on deck at
shipper's risk as evidenced by the words "on deck at shipper's risk" stamped on the bill of lading.
Ordinarily, when a shipper wishes to avail of space on board a ship, he first obtains a shipping order
from the ship owner. This shipping order is authority for the ship's officers to accept the shipper's cargo. When
signed by the ship's mate, this would constitute the mate's receipt showing that the cargo has been taken aboard.
The shipper would then present this receipt to the agent of the ship's company who would then issue the bill of
lading. However, in this case, the shipper obtained the bill of lading without first presenting the mate's receipt
(so as to expedite the negotiation of the bill with the banks). By doing so, the shipper entered into a written
guaranty, binding himself to abide by the terms of the mate's receipt which in this case obtained a stipulation
that the cargo shall be shipped on or under the deck at the option of the ship and at shipper's risk.
In this case, plaintiff protested the arrangement but when the defendant informed them that the cargo
could be discharged if they were dissatisfied, plaintiff did not order its discharge. The CFI ruled for Martini.
Issues: (1) WON plaintiff consented to having the cargo carried on deck. YES.
(2) WON defendant was negligent and thus liable for the damage to the cargo. NO.
Ratio: While Martini would have greatly preferred for the cargo to be carried under the hatches, they
nevertheless consented for it to go on deck. Codina, an EE of Martini, if attentive to the interests of his
company, must have known from the tenor of the guaranty which he signed that defendant had reserved
the right to carry the cargo on deck. The bill of lading plainly showed that the cargo would be so
carried. The plaintiff was duly notified as to the manner by which was the cargo was to be shipped.
They only protested after the bill had been negotiated at the bank and even when there was time to stop
the shipment, they failed to give the necessary instructions thereby manifesting acquiescence.
In every contract of affreightment, losses by dangers of the seas are excepted from the risk
which the carrier takes upon himself whether the exception is expressed in contract or not. The
exception is made by law and falls within the general principle that no one is responsible for fortuitous
events. But then this general law is subject to the exception that when the inevitable accident is
preceded by fault of the carrier, without which it would not have happened, then he becomes responsible
for it.
The carrier is responsible for safe and proper storage of the cargo, and there is no doubt that by
the general maritime law he is bound to secure the cargo safely under deck. If he carries the goods on
deck without the consent of the shipper and the goods are damaged or lost in consequence of being
exposed, the carrier cannot protect himself by showing that they were damaged or lost by the dangers of
the sea. When the shipper consents to his goods being carried on deck, he takes the risk upon himself.
If goods shipped are found to have been damaged, the burden of proof is on the carrier to show
that the damage was due to fortuitous events. But, even if the damage is caused by one of the excepted
causes, the carrier is still responsible if the injury might have been avoided by the exercise of reasonable
skill and attention on their part. However, in this case, where the shipper consented to the conditions of
carriage, the burden of proof is shifted to the shipper.
As there is no allegation or proof of negligence on the part of the carrier in protecting the cargo
from rain or sea water and as the complaint clearly indicates that the damage was due to it being kept on
deck, and such manner of carriage having been consented to by the plaintiff, the defendant is absolved.
It is not permissible for the court, in the absence of any allegation or proof of negligence, to attribute
negligence to the ship's employees in the matter of protecting the goods from rains and storms.
Eastern Shipping Lines vs IAC, 150 SCRA 463
Issue: Should petitioner be exempted from liability under Art. 1734 on the ground that the loss of the
vessel by fire comes under the phrase "natural disaster or calamity?" NO.
Ratio: Fire may not be considered a natural disaster or calamity. This must be so as it arises almost
invariably from some act of man or by human means. It does not fall within the category of an act of
God unless caused by lightning or by another natural disaster or calamity. It may even be caused by the
actual fault or privity of the carrier. Art. 1680 which considers fire as an extra-ordinary fortuitous event
PAGE 40

does not apply since it refers only to leases of rural lands where a reduction of rent is allowed when
more than 1/2 of the fruits have been lost due to such event.
As the peril of fire is not comprehended under Art. 1734, Art. 1735 applies and the CC shall be
presumed to have been at fault or to have acted negligently, unless it proves extra-ordinary diligence.
The burden is on the CC.
The LC and the CA found that there was lack of diligence on the part of CC amounting to
actual fault. Even if the fire were to be considered a natural disaster under Art. 1734, it is required
under Art. 1739 that the disaster must have been the proximate and only cause of the loss, and that the
CC exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the
disaster. Nor may petitioner seek refuge under COGSA since fire is only an exempting circumstance if
not caused by actual fault or privity of the carrier.
Issue: On the $500 Per Package Limitation
Ratio: Petitioner carrier avers that its liability should not exceed $500 per package as provided in
Section 4(5) of the COGSA, which reads:
"(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or
in connection with the transportation of goods in an amount exceeding $500 per package xxx or in case of
goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the
bill of lading."
Article 1749, NCC also allows the limitations of liability in that it provides that "a stipulation
that the CC's liability is limited to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding."
It is to be noted that the Civil Code does not of itself limit the liability of the CC to a fixed
amount per package, although the Code expressly permits a stipulation limiting such liability. Thus, the
COGSA, which is suppletory to the Civil Code, steps in and supplements the Code by establishing a
statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the
goods by the shipper in the bill of lading. The provisions of the COGSA on limited liability are as much
a part of a bill of lading as though physically in it and as much a part thereof as though placed therein
by agreement of the parties.
In these cases, there is no stipulation in the respective bills of lading limiting the carrier's
liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the
goods. Hence, petitioner carrier's liability should not exceed $500 per package, or its peso equivalent,
at the time of the payment of the value of the goods lost, but in no case "more than the amount of
damage actually sustained."
The liability was computed as: 128 cartons (shipping unit) x $500 = $64,000. The cartons and
not the containers should be considered as the shipping unit.
Dissenting : Yap, J.
There is no evidence that the containers were carrier- supplied. The shipper must have saved on
freight charges by using containers for shipment. The containers should be considered as the shipping
unit.
(b) Act of public enemy
xxx
PAGE 41

Art. 1739. In order that the common carrier may be exempted from responsibility, the
natural disaster must have been the proximate and only cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize loss before, during and after the
occurrence of flood, storm, or other natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is
incumbent upon the common carrier in case of an act of the public enemy referred to in Art. 1734
(2).
4 Agbayani:
Acts of public enemy.-- This defense is not absolute. Under 1739, in order for the CC to be exempted
from liability, (1) the act of the public enemy must have been the proximate and only cause; and (2) the
CC must have exercised due diligence to prevent or minimize the loss before, during and after the act of
the public enemy causing the loss, destruction or deterioration of the goods.
(c) Act or omission of the shipper
xxx
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or
deterioration of the goods, the proximate cause thereof being the negligence of the common carrier,
the latter shall be liable in damages, which, however, shall be equitably reduced.
Act or omission of the shipper.-- The act or omission of the shipper must be the proximate cause of
the loss, destruction or deterioration of the goods. If the shipper merely contributed to the loss,etc. and
the proximate cause is still the negligence of the CC, the CC shall still be liable for damages although
the damages shall be equitably reduced.
(d) Character of goods, etc.
Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by
the character of the goods, or the faulty nature of the packing or of the containers, the common
carrier must exercise due diligence to forestall or lessen the loss.
Art. 366. Within the twenty four hours following the receipt of the merchandise, a claim
may be brought against the carrier on account of damage or average found therein on opening the
packages, provided that the signs of the damage or average giving rise to the claim may not be
known from the exterior part of the packages, and in case that they may be so ascertained, said
claim shall only be admitted at the time of the receipt of the packages.
PAGE 42

After the periods mentioned have elapsed, or after the transportation charges have been
paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered. (Code of Commerce.)
Claims for damages must be made at the time the goods are delivered unless the indications of
the damage cannot be ascertained from the exterior of the package, in which case such written claims
must be made w/in 24 hours from delivery
Rule: As long as the damage to the goods was due purely to the inherent nature or defect of the
goods or of the containers thereof, the CC cannot be held responsible. However, under 1742, the CC
must exercise due diligence to forestall or lessen the loss for it to completely escape liability.
Govt. vs Ynchausti, 40 Phil 219
F:
Plaintiff shipped a cargo of roofing tiles from Manila to Iloilo on a vessel owned by Ynchausti.
Defendant stamped on the bill of lading the condition that the goods have been accepted for transportation
subject to the conditions prescribed by the Insular Collector of Customs. The tiles were delivered by defendant
to the consignee of the plaintiff at Iloilo. Upon delivery, it was found that some of the tiles had been damaged.
The LC absolved the defendant from any liability since the defendant was able to prove that the tiles were
leaded, stored and discharged by hand labor and not by any mechanical device. Defendant proved, without
dispute from the plaintiff, that there was no negligence on its part, the tiles being discharged by handlabor and
not by mechanical device.
Issue : WON the terms and conditions of the bill of lading were binding upon the plaintiff. YES.
Ratio: The defendant placed said stamp upon the bill of lading before the plaintiff shipped the tiles, and
that having shipped the tiles under said bill, with the terms and conditions of carriage stamped thereon,
the govt. must be deemed to have assented to said terms and conditions. The binding effect of the
conditions stamped on the bill of lading did not proceed from the Collector of Customs, but from the
actual contract which the parties made. Each bill of lading is a contract and the parties thereto are
bound by its terms.
The defendant, to free itself from liability, was only obliged to prove that the damages suffered
by the tile were by virtue of the nature or defect of the articles. The plaintiff, to hold the defendant
liable, was obliged to prove that the damage to the tiles, by virtue of their nature, occurred on account
of the defendant's negligence or because the latter did not take precaution usually adopted by careful
persons.
The defendant proved,and the plaintiff did not attempt to dispute that the tiles were of a brittle
and fragile nature and that they were delivered to the defendant without any packing or protective
covering. The plaintiff, not having proved negligence on the part of the defendant, is not entitled to
recover damages.
Southern Lines vs CA, 4 SCRA 256
F:
The city of Iloilo requisitioned for rice from NARIC in Manila. NARIC shipped from Manila to Iloilo
1726 sacks of rice on board the SS Gen. Wright belonging to Southern Lines. After the city paid for the rice, it
was noted that 41 sacks were missing. The city filed a complaint against NARIC and Southern Lines to recover
the amount. The LC absolved NARIC but ordered Southern Lines to pay. The CA affirmed.
Issue: WON petitioner is liable for the loss or shortage. YES.
PAGE 43

Ratio: Under Art. 361 of the Code of Commerce, the carrier, in order to free itself from liability, was
only obliged to prove that the damage suffered by the goods were by virtue of defects of the articles.
Under Art. 362, the plaintiff in order to hold the carrier liable, was obliged to prove that the damage to
the goods by virtue of their nature, occurred on account of the carrier's negligence or because the carrier
did not take the precaution adopted by careful persons.
Petitioner claims exemption based on the fact that the sacks were in bad condition and that rice
was improperly packed causing a lot of spillage of the rice while it was being loaded.
Southern Lines' contention is untenable, for if the fact of improper packing is known to the
carrier or its servants or apparent upon ordinary observation, but it accepts the goods notwithstanding
such condition, it is not relieved of liability for loss or injury resulting therefrom. Furthermore, the
petitioner itself frankly admitted that the strings tying the bags of rice were broken, that some bags were
with holes and plenty of rice were spilled inside the hull of the vessel, and that the boat personnel
collected 26 sacks of rice, which they distributed among themselves. This shows that the shortage
resulted from the negligence of the petitioner.
This is an action for refund of the amount paid in excess of delivery and is not for damages.
Therefore, the 24 hour rule under Art. 366 does not apply.
(e) Order of competent authority
xxx
Art. 1743. If through order of public authority the goods are seized or destroyed, the
common carrier is not responsible, provided said public authority had power to issue the order.
4 Agbayani:
Order or act of competent authority.-- Under 1743, the CC is not responsible for the loss, etc. of the
goods if the public authority had power to issue the order. Where the officer acts without legal process,
the CC will be held liable.
Ganzon vs CA, 161 SCRA 646
F:
Gelacio Tumambing contracted the services of Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan to the port of Manila on board the lighter LCT Batman. When half of the scrap iron was already loaded,
the mayor of Mariveles arrived and demanded P 5,000 from Tumambing. An argument resulted in the shooting
of Tumambing. The loading of the scrap iron was resumed but the acting mayor arrived and ordered Captain
Niza to dump the scrap iron. The acting mayor took the rest to the compound of NASSCO and took custody of
the scrap iron. Tumambing filed an action for damages against Ganzon based on culpa contractual. The TC
and CA held Ganzon liable.
Held: Ganzon contended that the scrap iron had not been unconditionally placed under his custody and
control to make him liable. However, he admitted that he received the scraps of iron which Tumambing
delivered to him. By the said act of delivery, the scraps were unconditionally placed in the possession
and control of the common carrier and upon their receipt by the carrier for transportation, the contract
of carriage was deemed perfected. The carrier's extraordinary responsibility for the loss, destruction, or
deterioration of the goods commenced.
PAGE 44

Pursuant to Art. 1736, such extra-ordinary responsibility would cease only upon the delivery,
actual or constructive, by the carrier to the consignee or to the person who has the right to receive them.
The fact that part of the shipment had not been loaded on board the lighter did not impair the said
contract of transportation as the goods remained in the custody and control of the carrier, albeit still
unloaded.
Ganzon failed to show that the loss was due to any causes under Art. 1734. We cannot sustain
the theory of caso fortuito. The carrier raised the defense that the loss was due to an order or act of
competent public authority. The carrier, however, failed to show that the acting mayor had the power to
issue the disputed order or that it was lawful or issued under legal process of authority. The order was
part of the pressure by the mayor to shakedown Tumambing for P 5,000. The order did not constitute
valid authority for Ganzon to carry out.
In any case, the intervention of the municipal officials was not of a character that would render
impossible the fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the
illegal order to dump into the sea the scrap iron. There is absence of sufficient proof that the issuance of
the order was attended with such force or intimidation as to completely overpower the will of the
carrier's EEs.
Melencio-Herrera, Dissenting: Through the order or act of competent public authority, the performance
of the contract was rendered impossible. The captain has no control over the situation just as
Tumambing had no control over the situation.
3. Duration of Extraordinary Responsibility

Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without prejudice to the provisions of
Art. 1738.
Art. 1737. The common carrier's duty to observe extra-ordinary diligence in the vigilance
over the goods remains in full force and effect even when they are temporarily unloaded or stored
in transit, unless the shipper or owner has made use of the right of stoppage in transitu.
Art. 1738. The extra-ordinary liability of the common carrier continues to be operative
even during the time the goods are stored in a warehouse of the carrier at the place of destination
until the consignee has been advised of the arrival of the goods and has reasonable opportunity
thereafter to remove them or otherwise dispose of them.
4 Agbayani:
When carrier's responsibility begins.-- Under Art. 1738, the extra-o responsibility of the CC begins
from the time the goods are delivered to the carrier. The delivery to the CC must place the goods to be
transported unconditionally in the possession of the CC and the CC must receive them. Otherwise, the
extra-ordinary responsibility of the CC will not commence.
When carrier's responsibility terminates.-- Under 1738, the extra-ordinary responsibility of the CC
is terminated at the time the goods are delivered to the consignee or the person who has a right to receive
them (actual or constructive delivery).
PAGE 45

Constructive delivery: Notice by the CC that the cargo had already arrived, placing them at the
disposal of the shipper or consignee releases CC from extra-ordinary responsibility. From such moment
the consignee or shipper should exercise over the cargo the ordinary control pertinent to ownership
(should unload cargo from the CC)
Shipper bound to observe all diligence in obtaining delivery of goods.-- The shipper is bound to
observe all diligence in obtaining delivery of the goods. Once the goods are delivered, the extraordinary responsibility of the CC ceases.
Liability of shipper for delay in obtaining delivery of goods, demurrage.-- The shipper is liable for
lost earnings occasioned by the unnecessary delay in the use of the vehicles belonging to the carrier, due
in turn to the failure of the former, upon receipt of notice of the arrival of the goods at the place of
destination, to unload forthwith and take away the cargo from the vehicles. This is a charge for
demurrage (addtl. service provided by CC)
Effect of storing in transit.-- Under 1737, the temporary unloading or storage of the goods during the
time that they are being transported does not interrupt the extra-ordinary responsibility of the CC
Exception: Where the shipper or owner exercises its right of stoppage in transitu (the act by
which the unpaid vendor of goods stops their progress and resumes possession of them, while they are in
the course of transit from him to the purchaser, and not yet actually delivered to the latter. This is
exercised when the buyer is or becomes insolvent.)
Responsibility of carrier when right exercised.-- The extra-ordinary responsibility of the CC ceases
when the goods being transported are temporarily unloaded or stored in transit be reason of the exercise
of the right of stoppage in transitu by the unpaid seller. The CC holds the goods in the capacity of an
ordinary bailee or warehouseman upon the theory that the exercise of the right of stoppage in transitu
terminates the contract of carriage (ordinary diligence is required)
Effect of storage in warehouse of carrier.-- Under 1738, the extra-ordinary responsibility of the CC
does not cease notwithstanding the fact that the goods being transported are stored in the warehouse of
the CC at the place of destination. Extra-ordinary responsibility ceases only after the consignee has
been advised of the arrival of the goods and has had reasonable opportunity to remove them or
otherwise dispose of them.
Liability as a warehouseman (ordinary diligence) arises only when the consignee has been
advised of the arrival of the goods and has had reasonable opportunity to remove them or otherwise
dispose of them
Cia Maritima vs Insurance Co. of North America, 12 SCRA 213
F:
Macleod and Co. contracted the services of Cia Maritima for the shipment of bales of hemp from
Davao to Manila. The bales were loaded into CC's lighters. One of the lighters sunk. The insurance co. paid
Macleod and filed to collect from CC. CC denied liability on the grounds that the hemp was loaded on a barge
owned by the CC free of charge, that there was no bill of lading issued thereby resulting to the nonexistence of
a contract of carriage, that the sinking was due to a fortuitous event, and that the insurance co. has no
personality to sue.
Held: There was a complete contract of carriage the consummation of which has already begun when
the shipper delivered the cargo to the carrier and the latter took possession of the same by placing it on a
lighter manned by its EEs, under which Macleod became entitled to the privilege secured to him by law
for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion
of the voyage. The barges or lighters were merely employed as the first step of the voyage, which is
part of the contract.
PAGE 46

The receipt of the goods by the carrier has been said to lie at the foundation of the contract to
carry and deliver, and if no goods are received there can be no such contract. The liability and
responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery
to, or receipt by the carrier or an authorized agent, of the goods. The test as to whether the relation of
shipper and carrier had been established is: Had the control and possession of the goods been
completely surrendered by the shipper to the CC. Whenever the control and possession of goods passes
to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the
relation of shipper and carrier has been established.
The bill of lading is not indispensable to a contract of carriage. It is merely documentary proof
of the agreement of the parties.
There was no force majeure. The reason for the damage or the loss was lack of adequate
protections and measures taken by the carrier to prevent the loss.
Lu Do vs Binamira, 101 Phil 120
F:
Delta Co. of NY shipped six cases of films and photographic supplies consigned to Binamira. The
shipped arrived in Cebu and discharged her cargo, placing it in the possession and custody of the arrastre
operator appointed by the Bureau of Customs. The cargo was checked both by the stevedoring co. as well as by
the arrastre operator and was found in good order. In the contract of carriage, however, it was stipulated that
the carrier is no longer liable for the cargo upon its delivery to the hands of the custom authorities. The cargo
was delivered to Binamira and some goods were missing.
Held: The general rule is that CC's responsibility to observe extra-ordinary diligence lasts from the time
the goods are placed in the possession of the carrier until they are delivered to the consignee. BUT this
rule applies only when the loss, destruction and deterioration of the goods takes place while the goods
are in the possession of the carrier and not after it has lost control of them. While the goods are in its
possession, it is but fair that it exercise extra-ordinary diligence in protecting them from damage and if
loss occurs, the law presumes that it was due to its fault or negligence.
While delivery to the customs authorities is not delivery to the consignee, the parties may
however, agree to limit the liability of the carrier considering that the goods have still to go through the
inspection of the customs authorities before they are actually turned over to the consignee. This
stipulation is not contrary to morals or public policy. This is a situation where the CC loses control of
the goods because of custom regulations and it is unfair that it be made responsible for any loss or
damage during such interregnum.
APL vs Klepper, 110 Phil 243
F:
Klepper shipped one lift van containing personal and household effects from Yokohama to Manila.
While the lift van was being unloaded by crane, it fell on the pier damaging its contents. The TC found for
Klepper.
Held: APL does not question the finding that the damage was due its negligence but contends that its
liability cannot exceed $500 based on the bill of lading and Sec 4(5) of the COGSA. Regardless of its
negligence, the carrier's liability would attach because being a CC, its responsibility is extra-ordinary
and lasts from the time the goods are placed in its possession until they are delivered, actually or
constructively, to the consignee or to the person who has a right to receive them.
The carrier should only pay $ 500; the shipper who accepted the bill of lading is bound by its
terms. COGSA is merely suppletory to the provisions of the NCC which govern the contract.
4. Agreement Limiting Liability
PAGE 47

(a) As to diligence required
Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the
liability of the former for the loss or destruction, or deterioration of the goods to a degree less than
extra-ordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the CC; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction or deterioration of
the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good
father of a family, or of a man of ordinary prudence in the vigilance over the movable transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its
employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of
goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment
used in the contract of carriage.
Art. 1751. The fact that the common carrier has no competitor along the line or route, or a
part thereof, to which the contract refers shall be taken into consideration of the question of
whether or not a stipulation limiting the common carrier's liability is reasonable, just and in
accordance with public policy.
(b) As to amount liability
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is
binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
Ysmael vs Barreto, 51 Phil 90
F:
Plaintiff sought to recover from defendant the alleged value of 4 cases of merchandise which it
delivered to a vessel of defendant at the port of Manila to be shipped to Surigao, but which were never delivered
to consignee. Defendant relied on clause 7 of the bill of lading where it provided that actions not brought
within 60 days from the time the cause of action accrued shall be barred, and on clause 12 which provided that
the defendant is not liable for any package in excess of P 300 unless the value and contents of such package are
correctly stated in the bill of lading at the time of the shipment. Plaintiffs complaint was filed a little less than
6 months after the shipment was made.
PAGE 48

Held: The evidence shows that 164 cases were shipped valued at P 2,500 a case. The limit of
defendant's liability for each case for loss or damage from any cause or for any reason, would put it in
the power of the defendant to take the whole cargo of 164 cases at a value of P 300/case, or less than
1/8 of its actual value. If that rule should be sustained, no silk would ever be shipped. Such limitation
of value is unconscionable and void as against public policy.
The validity of stipulations limiting the carrier's liability is to be determined by their
reasonableness and their conformity to the sound public policy. It cannot lawfully stipulate for
exemption from liability unless such exemption is just and reasonable and unless the contract is freely
and fairly made. No contractual limitation is reasonable which is subversive of public policy. A CC
cannot limit its liability for injury or loss where such is caused by its own negligence, unskillfulness or
carelessness of its EEs. The rule rests on public policy. The shipper and CC are not on equal terms; the
shipper is entirely at the mercy of the CC unless protected by the law. Such contracts are wanting in the
element of voluntary assent.
The action was brought within reasonable time considering the distance between Surigao and
Manila and the fact that plaintiff had to make a full investigation to determine liability. Stipulations
limiting the time for bringing suit must be reasonable, otherwise they can be declared void.
Heacock vs Macondray, 42 Phil 205
F:
Plaintiff shipped Edmonton clocks from NY to Manila on board defendant's vessel. It was agreed in
the bill of lading that the value of the goods receipted do not exceed $500 per freight on or in proportion for any
part of a ton, unless the value be expressly stated in the bill and freight paid. It was also agreed that in the
event of claims for shortage or damage the carrier shall not be liable for more than the net invoice price plus
freight and insurance less charges, and any loss or damage for which the carrier may be liable shall be adjusted
pro rata on said basis. The clocks were not delivered despite demands. Plaintiff claimed P420 as the MV of the
clocks, while defendant claimed P76.36 as the proportionate freight ton value.
Held: Three kinds of stipulations have often been made in a bill of lading. First, one exempting the
carrier from any and all liability for loss or damage occasioned by its own negligence. Second, one
providing for an unqualified limitation of such liability to an agree valuation. Third, one limiting the
liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a
higher rate of freight. The first and second stipulations are invalid as contrary to public policy. The
third is valid and enforceable.
A stipulation in the bill of lading limiting the liability of the CC to a specified amount unless
the shipper declares a higher value and pays a higher freight is valid and enforceable. If a CC gives
to a shipper the choice of 2 rates, the lower of them conditioned upon his agreeing to a stipulated
valuation of his property in case of loss, even by the carrier's negligence, if the shipper makes the choice
understandingly and freely, and names his valuation, he cannot thereafter recover more than the value
which he thus places upon his property.
Shewaram vs PAL, 17 SCRA 606

F:
Plaintiff bought a plane ticket from Zamboanga to Manila. When he arrived in Manila, his suitcase
was tampered with and his camera and radio were lost. PAL contended that plaintiff was bound by the
conditions printed at the back of his ticket which provided that the liability of PAL for any loss is limited to the
value of the thing unless the passenger declares in advance a higher valuation and pays an additional charge,
and that the value is conclusively deemed not to exceed P 100/ticket.
PAGE 49

Held : Two requisites must be fulfilled in order that the liability of PAL be limited according to the
stipulations behind the ticket stub : (1) the contract is just and reasonable under the circumstances; and
(2) it has been fairly and freely agreed upon. (Art. 1750)
The fact that the conditions are printed at the back of the ticket stub in letters so small that they
are hard to read would not warrant the presumption that plaintiff was aware of those conditions such
that he had "fairly and freely agreed" to those conditions. PAL has admitted that passengers do not sign
the ticket. Also the carrier cannot limit his liability for injury or loss of goods shipped when such injury
or loss was caused by its own negligence. (Arts. 1734, 1735)
Ong Yiu vs CA, 91 SCRA 223
F:
Atty. Ong Yiu was a passenger on a PAL Cebu-Butuan flight to attend court hearings in Butuan. His
suitcase was accidentally sent to Manila. PAL-Manila sent the suitcase to Butuan but the lock had been opened
and a folder containing court documents was missing. Plaintiff refused to accept the luggage. PAL-Cebu
delivered the luggage to Ong Yiu with the promise to investigate the matter. Plaintiff sued and was awarded
moral and exemplary damages. CA reversed holding that PAL was guilty of simple negligence and denied
moral and exemplary damages but ordered PAL to pay P100, the baggage liability assumed by it under the
condition of carriage printed on the back of the ticket.
Held: PAL incurred delay in the delivery of petitioner's luggage. However, there was no bad faith. The
liability of PAL was limited to the stipulations printed on the back of the ticket.
While the passenger had not signed the plane ticket, he is nevertheless bound by the provision
thereof; such provisions have been held to be part of the contract of carriage and valid and binding
upon the passenger regardless of the latter's lack of knowledge or assent to the regulation. It is what
is known as a contract of adhesion wherein one party imposes a ready made form of contract on the
other; it is not entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. A contract limiting liability upon an agree valuation does
not offend against the policy of the law forbidding one from contracting against his own negligence.
Considering that petitioner had failed to declare a higher value for his baggage, he cannot be
permitted a recovery in excess of P 100.00. Besides, passengers are advised not to place valuable items
inside their baggage. Also, there is nothing in the evidence to show the actual value of the goods
allegedly lost by petitioner.
PAN AM vs IAC, 164 SCRA 268
F:
This is a petition filed by Pan Am to limit its liability for lost baggage containing promotional and
advertising materials for films to be exhibited in Guam and the US, clutch bags, barong tagalogs and personal
belongings of Rene Pangan to the amount specified in the airline ticket absent a declaration of a higher
valuation and payment of additional charges.
Pan Am contends that its liability for lost baggage is limited to $600 ($20 x 30 kilos) as the latter did
not declare a higher value for his baggage. Such stipulation is printed at the back of the ticket.
Held : Pan Am cited Ong Yiu vs CA. Such case is squarely applicable in this case. The ruling in
Shewaram vs PAL is inapplicable since it was premised on the fact that the conditions printed at the
back of the ticket were so small and hard to read.
Liability is limited to $600 as stipulated at the back of the ticket.
The SC reversed the CA ruling awarding respondent damages for lost profits. The rule laid
down in Mendoza vs PAL provides that before damages can be awarded for loss of profits on account of
delay or failure of delivery, it must have appeared that CC had notice at the time of delivery to him of
the particular circumstances attending the shipment, and which probably would lead to such special loss
if he defaulted. In the absence of a showing that Pan Am's attention was called to the special
circumstances requiring prompt delivery of the luggage, it cannot be held liable for the cancellation of
PAGE 50

respondent's contracts as it could not have foreseen such an eventuality when it accepted the luggage for
transit.
Pan Am vs Rapadas, 209 SCRA 67
F:
Jose Rapadas was en route from Guam to Manila. While standing in line to board the flight, he was
ordered by Pan Am's handcarry control agent to check in his Samsonite attache case. He protested on the
ground that other passengers were permitted to handcarry bulkier baggages. He tried to check-in without
having to register his attache case. He was however forced to register his baggage. He gave his attache case to
his brother who checked it in for him without declaring its contents or the value of its contents. Upon arriving
in Manila, he was given all his checked-in baggages except the attache case. Since he felt ill, he sent his son to
request for the search of the missing luggage. He sent letters of demand to Pan Am.
Pan Am offered to settle the claim for $160, representing the CC's alleged limit of liability for loss or
damage to a passenger's personal property. Rapadas filed this action for damages. He alleged that Pan Am
discriminated or singled him out in ordering that his luggage be checked in; that Pan Am neglected its duty in
the handling and safekeeping of his attache case from the point of embarkation in Guam to his destination in
Manila; that the value of the lost attache case and its contents is $42,403.90. According to him, the loss
resulted in his failure to pay certain obligations, failure to remit money sent through him to relatives, inability
to enjoy the fruits of his retirement and vacation pay and inability to return to Tonga Construction Co. to
comply with then existing contracts. During the trial, he showed proof of the contents of his attache case.
Pan Am contended that the claim was subject to the Notice of Baggage Liability Limitations attached
to the ticket. Such notice was also conspicuously posted in its offices. It alleged that its liability is limited to
$160 because Rapadas did not declare a higher value and did not pay the corresponding additional charges.
The lower court ruled in favor of Rapadas. It however did not find Pan Am guilty of discriminatory
acts or bad faith. CA affirmed the decision.
Issue: WON a passenger is bound by the terms of a passenger ticket declaring that the limitations of
liability set forth in the Warsaw Convention as amended by the Hague Protocol shall apply in case of
loss, damage or destruction to a registered luggage of a passenger. YES. Pan Am was ordered to pay
$400 and P 10,000 as attorney's fees and costs of suit.
Held: There is no dispute that there was a notice appearing on page 2 of the ticket stating that the
Warsaw Convention governs in case of death or injury to a passenger or of loss, damage or destruction
to a passenger's luggage. Such notice should be sufficient notice showing the applicability of the
Warsaw limitations. The passenger, upon contracting with the airline and receiving the plane ticket, was
expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to
overcome the stipulations, he cannot avoid the application of the liability limitations.
The Warsaw Convention, as amended, specifically provides that it is applicable to international
carriage which it defines as "any carriage in which, according to the agreement between the parties, the
place of departure and the place of destination xxx are situated either within the territories of two High
Contracting Parties or within the territory of a single High Contracting Party if there is an agreed
stopping place within the territory of another State xxx." Nowhere in the Warsaw Convention is such
detailed notice of baggage liability limitations required. It is however a common, safe and practical
custom for air carriers to indicate beforehand the precise sums equivalent to those fixed by Art. 22(2) of
the Convention.
The facts show that Rapadas actually refused to register his attache case. In attempting to
avoid registering the luggage, he manifested a disregard of airline rules on allowable handcarried
baggages. Prudence dictates that cash and jewelry should be removed from checked-in luggage and
placed in one's pockets or handcarried. The alleged lack of enough time for him to make a declaration of
a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply
with the requirement that will exclude the application of limited liability. Had he readily complied with
airline regulations from the start, this situation would not have arisen.
PAGE 51

While contracts of adhesion are not entirely prohibited, neither is blind reliance on them
encouraged. In the face of facts showing they should be ignored because of their basically one- sided
nature, the Court does not hesitate to rule out blind adherence to their terms. The SC is not saying that
passengers are always bound to the stipulated amounts printed on a ticket, found in a contract of
adhesion, or printed elsewhere but referred to in handouts or forms. The Court simply recognizes that
the reasons behind stipulations on liability limitations arise from the difficulty, if not impossibility, of
establishing with a clear preponderance of evidence the contents of a lost suitcase. Unless the contents
are declared, it will always be the word of a passenger against that of the airline. If the loss of life or
property is caused by the gross negligence or arbitrary acts of the airline or the contents of the lost
luggage are proved by satisfactory evidence other than the self-serving declarations of one party, the
Court will not hesitate to disregard the fine print in a contract of adhesion. Otherwise, the Court is
constrained to rule that we have to enforce the contract as it is the only reasonable basis to arrive at a
just award.
(c) Factors affecting agreement
Art. 1746. An agreement limiting the common carrier's liability may be annulled by the
shipper or owner if the CC refused to carry the goods unless the former agree to such stipulation.
Art. 1747. If the common carrier, without just cause, delays the transportation of the
goods or changes the stipulated or usual route, the contract limiting the common carrier's liability
cannot be availed of in case of the loss, destruction, or deterioration of the goods.
Art. 1748. An agreement limiting the common carrier's liability for delay on account of
strikes or riots is valid.
Art. 1751. The fact that the common carrier has no competitor along the line or route or a
part thereof, to which the contract refers shall be taken into consideration on the question of
whether or not a stipulation limiting the common carrier's liability is reasonable, just, and in
consonance with public policy.
Art. 1752. Even when there is an agreement limiting the liability of the common carrier in
the vigilance over the goods, the common carrier is disputably presumed to have been negligent in
case of their loss, destruction or deterioration.
4 Agbayani:
Kinds of stipulation limiting liability.-- The following stipulations are often made in a bill of lading
bill of lading:
1. stipulation exempting the CC from any and all liability for loss or damage occasioned by its
own negligence - VOID
2. stipulation providing for an unqualified limitation of such liability to an agreed stipulation VOID
3. stipulation limiting the liability of the CC to an agreed valuation unless the shipper declares a
higher value and pays a higher rate of freight -- VALID and ENFORCEABLE
When stipulation limiting liability valid.-- Under 1744, the shipper or owner and the CC may
stipulate to limit the liability of the CC for the loss, destruction or deterioration of goods to a degree less
than extra-ordinary diligence :
1. the stipulation must be in writing and signed by both parties;
PAGE 52

2. the stipulation must be supported by valuable consideration other than the service rendered
by the CC;
3. the stipulation must be reasonable, just and not contrary to public policy. This applies only
when the CC is acting as such but not when it acts as a private carrier [in Home Insurance vs American
Steamship Co., the SC held that the Civil Code provisions on CC should not be applied where the CC is
not acting as such but as a private carrier; such policy has no force where the public at large is not
involved]
The parties may stipulate that the diligence to be exercised by the CC be less than extraordinary diligence, provided that the requirements under Article 1744 are complied with. However, the
parties cannot reduce the diligence to less than that of a good father of a family. Art. 1745 provides for
7 stipulations which shall be considered unreasonable, unjust and contrary to public policy.
Construction of stipulations limiting common carrier's liability.-- An exemption in general words
not expressly relating to negligence, even though the words are wide enough to include loss by
negligence or default of CC's servants, must be construed as limiting the liability of the CC as assurer,
and not as relieving him from the duty of exercising reasonable skill and care
Effect of lack of competitor to common carrier.-- Under 1751, the lack of competition of the CC
shall be considered in determining WON a stipulation limiting CC's liability is reasonable, just and in
consonance with public policy.
Examples of valid stipulations:
1. 1748 - an agreement limiting the CC's liability for delay on account of strikes or riots
2. 1749, Heacock vs Macondray - a stipulation that the CC's liability is limited to the value of
the goods appearing in bill of lading unless the shipper or owner declares a greater value
3. 1750 - a contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction or deterioration of the goods, if it is reasonable and just under the circumstances, and has
been fairly and freely agreed upon
Under 1746, an agreement limiting the CC's liability may be annulled by the shipper or owner if the CC
refused to carry the goods unless the former agreed to such stipulation. The effect of the shipper's
consent obtained by means of refusal on the part of the carrier to carry the goods is to make the
agreement limiting the CC's liability voidable at the instance of the shipper
Principles : [St. Paul Insurance vs Macondray, 70 SCRA 122]
1. A stipulation in the bill of lading limiting the CC's liability to the value of the goods
appearing in the bill, unless the shipper or owner declares a greater value, is valid and binding.
2. The insurer who pays the insured on his claim for damage is merely subrogated to the rights
of the insured; therefore, said insurer cannot collect from the CC more than what the insured can collect
from the CC.
3. The obligation to pay the damage begins from the date it fails to deliver the shipment in good
condition to the consignee (on the basis of the rate of exchange on that date).
Effect of delay in transportation, etc.-- Under 1747, the CC cannot avail of the contract limiting his
liability in these cases : (1) where the CC delays the transportation of the goods; (2) where the CC
changes the stipulated or usual route [in both cases, the delay or change of route must be without just
cause]
Presumption as to negligence in case of limited liability.-- Under 1752, the presumption continues
even when there is an agreement limiting the liability of the CC in the vigilance of the goods. This
presumption is disputable or rebuttable by evidence that the CC exercised extra-ordinary diligence.
PAGE 53

5. Applicable Law in foreign trade
Art. 1753. The law of the country to which the goods are to be transported shall govern
the liability of the common carrier for their loss, destruction or deterioration.
4 Agbayani:
The Civil Code governs the liability of the CC in case of loss, damage or deterioration. Under
1766, in all matters not regulated by the Civil Code, the rights and obligations of CC shall be governed
by the Code of Commerce and by special laws which are suppletory to the provisions of the Civil Code.
6. Rules on Passenger Baggage
Art. 1754. The provisions of Arts.1733 to 1753 shall apply to the passenger's baggage
which is not in his personal custody or in that of his employees. As to other baggage, the rules in
Articles 1998 and 2000 to 2003 concerning the responsibility of hotel keepers shall be applicable.
Art. 1998. The deposit of effects made by travelers in hotels and inns shall also be
regarded as necessary. The keepers of hotels and inns shall be responsible for them as depositaries,
provided that notice was given to them, or to their employees, of the effects brought by the guests
and that, on the part of the latter, they take the precautions which said hotel-keepers or their
substitutes advised relative to the care and vigilance of their effects.
Art. 2000. The responsibility referred to in the preceding article shall include the loss of,
or injury to the personal property of the guests caused by the servants or employees of the keepers
of hotels or inns as well as by strangers; but not that which may proceed from any force majeure.
The fact that travelers are constrained to rely on the vigilance of the keeper of the hotel or inn shall
be considered in determining the degree of care required of him.
Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force
majeure, unless it is done with the use of arms or through irresistible force.
Art. 2002. The hotelkeeper is not liable for compensation if the loss is due to the acts of
the guest, his family, servants or visitors, or if the loss arises from the character of the things
brought into the hotel.
Art. 2003. The hotelkeeper cannot free himself from responsibility by posting notices to
the effect that he is not liable for the articles brought by the guest. Any stipulation between the
hotelkeeper and the guest where the responsibility of the former as set forth in Arts. 1998 to 2001
is suppressed or diminished shall be void.
Classes of baggage of passengers.-- The law makes a distinction between (1) baggage in the custody
of the passengers or their EEs; and (2) baggage not in such custody but in that of the CC.
Liability for baggage in custody of passenger.-- Art. 1754 refers to Arts. 1998, 2000- 2003
concerning the responsibility of hotel keepers. Under 1998, the baggage of passengers in their personal
custody or in that of their EEs while being transported shall be regarded as necessary deposits. The CC
shall be responsible for such baggage as depositaries, provided that (1) notice was given to them or to
their EEs, of the baggage brought by their passengers, and that (2) the passengers take the precautions
which said CCs advised relative to the care and vigilance of their baggage.
PAGE 54

Responsibility for acts of EEs, thieves.-- Under 2000, a CC is responsible as a depositary for
the loss of or injury to the baggage in the personal custody of passengers, caused by the CC's servants
or EEs but not those caused by force majeure.
Under 2001, the act of a thief or robber, who has entered the CC's vehicle is not deemed force
majeure, unless it is done with the use of arms or through irresistible force.
Under 2002, the CC is not liable if the loss of the baggage in the personal custody of the
passenger is due to the acts of the passengers, his family, servants or visitors, OR if the loss arises from
the character of the baggage.
Stipulations limiting liability.-- Under 2003, a CC cannot free himself from responsibility by
posting notices to the effect that he is not liable for the baggage brought by the passengers. Any
stipulation diminishing the responsibility required under 1998 to 2001 shall be void.
Liability for baggage not in custody of passenger.-- This refers to baggage delivered to the custody
of the CC and received by him, to be carried in the same manner as other goods being transported by
him. As the CC has custody of such baggage and are carried like any other goods, the provisions on
carriage of goods shall apply (extra-ordinary diligence in the vigilance over the goods).
The moment the effects of a passenger are unconditionally placed in the possession of and
received by a carrier for conveyance, the law immediately imposes on the CC extra-ordinary
responsibility for the loss thereof which lasts until the actual or constructive delivery of the effects to the
passenger as the person who has the right to receive them (presumption of negligence exists but may be
rebutted by proof of exercise of extraordinary diligence or causes under 1734).
A CC is liable for the loss of baggage although not declared and the charges not paid, if it
accepted them for transportation
C. Common Carrier of Passengers
1. Nature and extent of responsibility
1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the
Art. 1755. A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due regard
for all circumstances.
4 Agbayani:
Common carriers must exercise extraordinary diligence in carrying passengers.-- Art. 1755 shows
clearly the high degree of care and extra-o diligence required of a CC with respect to its passengers.
Carrier's duty of extraordinary diligence extends also to crew members.-- The duty to exercise the
utmost diligence on the part of CCs is for the safety of passengers as well as for the members of the
crew or the complement operating the carrier. This must be so for any omission, lapse or neglect thereof
will certainly result to the damage, prejudice, injuries or even death to all aboard the plane.
PAGE 55
Cangco vs MRR, 38 Phil 768

Facts: supra. EE riding on train who stepped on watermelons.
Held: The conduct of plaintiff in undertaking to alight while the train was yet slightly underway was not
characterized by imprudence and that he was not guilty of contributory negligence.
It is not negligence per se for a traveler to alight from a slowly moving train.
MRR failed to exercise due care in not providing for safe exit of its passengers. It also failed to
provide adequate lighting for its station.
It is impt. to note that the foundation of the legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all,
from the breach of that contract by reason of the failure of defendant to exercise due care in its
performance. Its liability is direct and immediate (culpa contractual), differing essentially, from that
presumptive responsibility for the negligence of its servants, which can be rebutted by proof of the
exercise of due care in the selection and supervision of EEs (culpa aquiliana).
The liability of masters and employers for the negligent acts or omissions of their servants or
agents, when such act or omissions cause damage which amount to the breach of a contract, is not
based upon a mere presumption of the master's negligence in their selection or control, and proof of
exercise of the utmost diligence and care in this regard does not relieve the master of his liability for the
breach of his contract. When the facts averred show a contractual undertaking by defendant for the
benefit of plaintiff, and it is alleged that plaintiff has failed or refused to perform the contract, it is not
necessary for plaintiff to specify in his pleadings whether the breach of the contract is due to willful
fault or to negligence on the part of the defendant, or of his servants or agents. Proof of the contract
and of its nonperformance is sufficient prima facie to warrant recovery.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry
him in safety and to provide safe means of entering and leaving its trains. That duty, being contractual,
was direct and immediate, and its nonperformance could not be excused by proof that the fault was
morally imputable to defendant's servants.
Strong vs Iloilo-Negros Air Express, 40 OG 269

F:
Plaintiff was a passenger aboard defendant's plane en route from Iloilo to Manila. The plane's motors
went dead and, notwithstanding the efforts of its pilot, it plunged into the sea and sank. The passengers and the
pilot were rescued.
Held : In aviation, inevitable accident is defined as one that is not occasioned in any degree remotely
or directly by want of such skill or care as the law holds for what man is bound to exercise . Airplane
companies are not required to exercise all the care. Passengers necessarily should take upon the usual
and ordinary perils to airplane travel. A carrier is not an insurer against all risks.
A carrier is not liable for defects of ignition cables used on his plane, nor of the installation
thereof, which cables were purchased from a competent and reputable manufacturer in the absence of a
showing that it knew those defects or that such kind of ignition cable is not ordinarily used on the
airplane operated by it.
The doctrine of res ipsa loquitor cannot be applied when there is no proof that according to the
general experience of mankind, the accident was such that it does not usually occur in the ordinary
course of events without the negligence on the part of those in control.
PAGE 56

Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
F:
supra. Passenger aboard a bus who placed his left arm on the window lost his arm when the bus
collided with a pick up.
Held : If the carrier's EE is confronted with a sudden emergency, he is not held to the same degree of
care he would otherwise be required in the absence of such emergency.
By placing his left arm on the window, the passenger is guilty of contributory negligence, and
although contributory negligence cannot relieve the carrier but can only reduce his liability (Art. 1762),
this is a circumstance which militates against plaintiff's position. It is negligence per se for passengers
to protrude any part of his body and that no recovery can be had for an injury.
Ratio: A CC is bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all circumstances. This
extraordinary diligence required of common carriers is calculated to protect the passengers from the
tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard
of care is imperatively demanded by the preciousness of human life and by the consideration that every
person must in every way be safeguarded against all injury.
Principles as to liability of CC:
(1) The liability of a carrier is contractual and arises upon breach of its obligation; there is
breach if it fails to exert extraordinary diligence accdg. to all the circumstances of each case
(2) A carrier is obliged to carry its passenger with the utmost diligence of a very cautious
person, having due regard for all the circumstances
(3) A carrier is presumed to have been at fault or to have acted negligently in case of death of,
or injury to, passengers, it being its duty to prove that it exercised extraordinary diligence
(4) The carrier is not an insurer against all risks of travel
Landingin vs Pantranco, 33 SCRA 284
F:
Plaintiffs are parents of 2 girls who were passengers on a Pantranco bus on an excursion trip from
Dagupan to Baguio. The bus was open on one side. The TC found that the crossjoint of the bus broke and the
bus started to roll back. Some passengers jumped out. The bus driver maneuvered the bus safely to the
mountainside. Two of the girls who jumped were seriously injured and died.
Held : In Lasam vs Smith, the court held that accidents caused by defects in the automobile are not
caso fortuito. The rationale is that the passenger has neither the choice nor control over the carrier
in the selection and use of the equipment and appliances in use by the carrier.
When the passenger dies or is injured, the presumption is that the CC is at fault or acted
negligently. This is only rebutted by proof on the carrier's part that it observed extraordinary diligence
required in Art. 1733 and the utmost diligence of very cautious persons required in Art. 1755.
It does not appear that the carrier gave due regard for all the circumstances with cross joints'
inspection the day previous to the accident. The bus was heavily laden, and it would be traversing
mountainous, circuitous and ascending road. Thus the entire bus would naturally be taxed more heavily
than it would be under the ordinary circumstances. The mere fact that the bus was inspected only
recently and found to be in order would not exempt carrier from liability unless it is shown that the
particular circumstances under which the bus would travel were also considered.
Landicho vs BTC, 52 OG 764
F:
Landicho boarded a BTC bus. Before he did so, the conductor helped him in placing his two baskets
of chicken inside the running board. After a distance, he claimed that he noticed one cage falling and he called
PAGE 57

the conductor's attention who did not respond. He tried to fix it himself resulting in his fall in which he
suffered injuries.
Held : The facts show that the cage was not about to fall. Plaintiff was probably dizzy or sleepy that he
fell from the truck.
It is true that defendant being a CC is bound to transport its passengers from the point of origin
to the place of destination, but the duty does not encompass all the risks attendant to a passenger in
transit, for then the co. would be a good source of stipend for a family who would like to end it all by
simply boarding, paying the fare and intentionally falling off. It is enough for the CC's EEs to see to it
that the passenger places himself safely inside the vehicle, that it is operated carefully and that its
mechanism is perfectly alright to prevent mishaps. It would be unreasonable to exact upon operators to
determine beforehand whether a passenger is likely to fall dizzy or sleepy on the way, for that is the
lookout of the passenger himself. A passenger must see to it that he seats himself in a safe portion of the
vehicle.
Necesito vs Paras, 105 Phil 75
F:
A mother and son boarded a passenger autotruck of the Phil. Rabbit Bus Lines. While entering a
wooden bridge, its front wheels swerved to the right, the driver lost control and the truck fell into a creek. The
mother drowned; the son was injured.
Held : While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held
answerable for the flaws of its equipment if such flaws were discoverable. The liability of the CC rests
upon negligence or his failure to exercise the utmost degree of diligence that the law requires. The
rationale of CC's liability for manufacturing defects is the fact that the passenger has neither choice
nor control over the carrier in the selection and use of the eqpt. and appliances in use by the carrier .
Having no privity whatever with the manufacturer or vendor of the defective eqpt, the passenger has no
remedy against him. In this case, the defect could have been detected with the exercise of utmost
diligence by the CC.
2. Duration of responsibility
4 Agbayani:
When relationship of carrier and passenger terminates.-- The relation of CC and passenger does not
cease at the moment that the passenger alights from the CC's vehicle at a place selected by the CC at the
point of destination, but continues until the passenger had reasonable time or a reasonable opportunity
to leave the CC's premises. What is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances
La Mallorca vs CA, 17 SCRA 739
F:
Husband and wife together with minor children boarded a La Mallorca bus. They alighted from the
bus. The father returned to the bus to get their baggage. He was followed by his daughter. While the father
was still on the running board awaiting for the conductor to give his baggage, the bus stated to run so that the
father had to jump. His daughter was run over and was killed. The bus co. contended that when she was killed,
she was no longer a passenger and the contract of carriage had terminated.
Held: Whether or not the relation between carrier and passenger does not cease at the moment the
passenger alights from the carrier's premises is to be determined from the circumstances.
PAGE 58

In this case, there was no utmost diligence. The driver stopped the bus but did not turn off the
engine. He started to run the bus even before the conductor gave him the signal. The presence of
passengers near the bus was not unreasonable and the duration of the responsibility still exists.
Bataclan vs Medina, 102 Phil 181
F:
The bus of Medina Trans left Cavite for Pasay with 18 passengers. Around dawn, the front tires burst
and the vehicles began to zigzag until it fell into a canal and turned turtle. Some passengers were able to get
out while four were trapped including Bataclan. Later, 10 men came to help, one of them carrying a lighted
torch, fueled by petroleum. A fire started, burning the bus and the 4 passengers. Gas had leaked when the bus
overturned.
Held: The proximate cause of the death was the overturning of the vehicle which was followed by the
negligence of the driver and the conductor who were on the road walking back and forth. They should
have known that with the position of the bus, leakage was possible aside from the fact that gas when
spilled can be smelled from a distance. The failure of the driver and conductor to have cautioned or
taken steps to warn rescuers not to bring a lighted torch too near the bus constitutes negligence on the
part of the agents of the carrier.
Aboitiz vs CA 179 SCRA 95
F:
A farmer boarded a boat owned by Aboitiz at Mindoro bound for Manila. When the vessel arrived,
Pioneer Stevedoring took over control of the cargoes loaded at the vessel and placed its crane alongside the
vessel. One hour after he disembarked, he went back to get his cargo but the crane hit him and he died.
Held: Aboitiz is still liable for his death under the contract of carriage. The relation of carrier and
passenger continues until the passenger has been landed at the port of destination and has left the vessel
owner's dock. Once created the relationship will not ordinarily terminate until the passenger has
safely alighted from the carrier's conveyance or had reasonable opportunity to leave the carrier's
premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to
be deemed passengers and what is reasonable time is to be determined from all circumstances and
includes a reasonable time to see after his baggage and prepare for his departure. The CC-passenger
relationship is not terminated merely by the fact that the person transported has been carried to his
destination if the person remains in the premises to claim his baggage.
The test is the existence of a reasonable cause as will justify the presence of the passenger
near the vessel.
A CC is bound to carry its passengers as far as human care and foresight can provide, using the
utmost diligence of a very cautious person with due regard for all circumstances.
PAL vs CA, G.R. 82619, Sept. 1993
F:
Pedro Zapatos was among 21 passengers on a PAL flight from Cebu to Ozamis. The flight was CebuOzamis-Cotabato. Fifteen minutes before landing in Ozamis, the pilot received a message that the airport was
closed due to heavy rains and inclement weather and that he should proceed to Cotabato City. In Cotabato, PAL
informed the passengers of their options and that due to limited number of seats in the other flights, the basis
for priority would be the check-in sequence at Cebu. Zapatos chose to return to Cebu but was not
accommodated because he checked in as passenger no. 9. However, his personal belongings including a
camera from Japan were still on board the flight to Manila. He tried to stop the departure but his plea fell on
deaf ears. He was given a free ticket to Iligan City which he received under protest. He was left at the airport.
PAL neither provided him with transportation from the airport to the city proper nor food and accommodation
PAGE 59

for his stay in Cotabato City. The next day, he purchased a ticket to Iligan City. He informed PAL that he would
not use the free ticket because he was filing a case against PAL. His personal belongings were never recovered.
PAL denied that it unjustifiably refused to accommodate Zapatos. It alleged that there was simply no
more seat for him on Flight 560 to Manila; and that there was force majeure which was a valid justification for
the pilot to bypass Ozamis City and proceed directly to Cotabato City. PAL contended that it did not
unjustifiably deny his demand for priority over confirmed passengers which they could not satisfy in view of the
limited seats. PAL also asserted that it should not be charged with the task of looking after the passengers'
comfort and convenience because the diversion of the flight was due to a fortuitous event, and that if made
liable, an added burden is given to PAL which is over and beyond its duties under the contract of carriage. It
argued that granting there was negligence, PAL cannot be liable in damages in the absence of fraud or bad
faith.
The RTC held in favor of plaintiff. The CA affirmed.
Held: The passenger's complaint touched on PAL's indifference and inattention to his predicament and
not on PAL's refusal to comply with his demand for priority over the other passengers. He claimed that
he was exposed to the peril of Muslim rebels and that he suffered mental anguish, mental torture, social
humiliation, besmirched reputation and wounded feeling. He referred to PAL's apathy.
The contract of air carriage is a peculiar one. Being imbued with public interest, the law
requires common carriers to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all the circumstances. In Air
France vs Carrascoso, the SC held that the contract to transport passengers is quite different from any
contractual relation in that it invites people to avail of the comforts and advantages it offers. The
diversion of the flight was due to a fortuitous event. However, such did not terminate PAL's contract
with its passengers. Being in the business of air carriage, PAL is deemed equipped to deal with
situations like the case at bar. The relation of carrier and passenger continues until the latter has been
landed at the port of destination and has left the CC's premises. Hence, PAL necessarily would still
have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of the
stranded passengers until they have reached their final destination. PAL was therefore remiss in its duty
of extending utmost care to Zapatos while being stranded in Cotabato City.
The CA held : "While the failure of Zapatos to reach his destination xxx in accordance with the
contract of carriage was due to the closure of the airport on account of rain and inclement weather xxx
it becomes the duty of PAL to provide all means of comfort and convenience to its passengers when they
would have to be left in a strange place in case of such by-passing. If the cause of non-fulfillment of the
contract is due to a fortuitous event, it has to be the sole and only cause. Since part of the failure to
comply with the obligation to deliver its passengers safely to their destination lay in PAL's failure to
provide comfort and convenience to its stranded passengers using extraordinary diligence, the cause of
non-fulfillment is not solely and exclusively due to fortuitous event, but due to something that PAL
could have prevented, PAL becomes liable to the passenger." However the SC found that although PAL
was remiss in its duty of extending utmost care to Zapatos while being stranded in Cotabato City, there
was no sufficient basis to conclude that PAL failed to inform him about his other options.
3. Presumption of negligence
Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
4 Agbayani:
Presumption of negligence.-- CCs are presumed to have been at fault or to have acted negligently in
case of death or injuries to passengers. This disputable presumption may only be overcome by superior
evidence that he had observed extraordinary diligence prescribed in 1733, 1755, 1756
PAGE 60

Where death or injury results to the passenger because of the negligence of the CC's Es, the CC
is liable, notwithstanding the fact that he had exercised all the diligence of a good father of a family, in
the selection and supervision of his EEs
xxx
Consequently, in an action for damages, the issue is not WON the party seeking damages has
adduced sufficient evidence to show the negligence of the CC but WON the carrier has presented the
required quantum of proof to overcome the presumption that it has been at fault or that it acted
negligently in the performance of its duty.
In the exercise of extraordinary diligence, the CC must give due regard for all circumstances in
connection with the transport of passengers
How presumption of negligence overcome.-- To overcome such presumption, it must be shown that
the CC had observed the required extraordinary diligence or that the accident was caused by fortuituos
event. In order to constitute caso fortuito that would exempt a person from responsibility, it is
necessary that :
1. The event must be independent of human will;
2. The occurrence must render it impossible for the obligor to fulfill his obligation in a normal
manner;
3. The obligor must be free of a concurrent or contributory fault or negligence. [Estrada vs
Consolacion, 71 SCRA 523]
Carrier not precluded from proving negligence of other carrier involved in collision.-- While the
plaintiff-passenger does not need to prove the negligence of the CC, he may not preclude the CC from
proving the legal defense of negligence of the other vehicle involved in the collision (the CC may file a
third-party complaint against the other vehicle for reimbursement)
"Last clear chance" rule not applicable to contracts of carriage.-- The principle of last clear chance
applies only in a suit between the owners and drivers of two colliding vehicles; it does not apply where a
passenger demands responsibility from the CC to enforce its contractual obligation; it would be
iniquitous to exempt the driver and his ER on the ground that the other driver was also negligent
Court need not make express finding of carrier's fault or negligence.-- The court need not make an
express finding of fault or negligence on the part of the CC in order to hold it responsible to pay the
damages sought by the passenger. By the contract of carriage, the CC assumes the express obligation to
observe extraordinary diligence in transporting the passenger This is an exception to general rule that
negligence must be proved.
Carriers not ordinarily liable for injuries to passengers due to fires or explosions caused by
articles brought into conveyance by other passengers.-- CC is not ordinarily liable for injuries to
passengers due to fires or explosions caused by articles brought into conveyance by other passengers.
Fairness demands that in measuring the CC's duty towards its passengers, allowance should be given to
the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their
common safety (that the passenger will not take with him anything dangerous to his co-passengers.) For
the carrier to be liable, he must be aware, through his EEs of the nature of the article or must have had
some reason to anticipate danger therefrom (circumstances must show that there are causes for
apprehension that the passenger's baggage is dangerous and that the CC fails to act in the fact of such
evidence) [Nocum vs Laguna Bus Co., 1969]
4. Force Majeure
Bachelor Express vs CA 188 SCRA 217
PAGE 61
F:
Bus No. 800 owned by Bachelor Express and driven by Cresencio Rivera was the situs of a stampede
which resulted in the death of passengers Beter and Rautrat. The bus came from Davao City on its way to
Cagayan de Oro passing Butuan City. While in Tabon-Tabon, Butuan, the bus picked up a passenger. A
passenger suddenly stabbed a PC soldier which caused commotion and panic among the passengers. Two
passengers jumped out (finding of the TC which was reversed by the CA) of the bus and were found dead as a
result of head injuries. The passenger- assailant ran away from the bus but was killed by the police. The
parents of the dead passengers filed a complaint for a sum of money against the CC, the owner and the driver.
The CC denied liability and alleged that the driver was able to transport his passengers safely to their
respective places of destination except for the two passengers who jumped off the bus without the knowledge
and consent, much less, the fault of the driver; that the CC exercised due diligence in the choice of its EEs to
avoid as much as possible accidents; that the incident was not a traffic or vehicular accident but was an incident
very much beyond the control of the CC; that the CC was not a party to the incident as it was an act of a third
party who is not in any way connected with the CC and of which they have no control and supervision. The CC
argued that the incident's proximate cause was the act of the passenger who ran amuck and which triggered off
the commotion and panic.
The TC dismissed the complaint. The CA reversed and ordered the CC, the owner and driver
solidarily liable to the heirs of the deceased.
Held : The CC is liable for the death of the passengers.

Bachelor Express as a CC is bound to carry its passengers safely as far as human care and
foresight can provide using the utmost diligence of very cautious person, with due regard for all the
circumstances. In this case where passengers suffered injuries which caused their death, under 1756,
the CC is presumed to have acted negligently unless it can prove that it had observed extraordinary
diligence. The CC raised the defense of caso fortuito. Art. 1174 provides that no person shall be
responsible for those events which could not be foreseen or which though foreseen were inevitable. In
Lasam vs Smith, the SC held that a caso fortuito must have the following elements: (1) The cause of
the unforeseen and unexpected occurrence must be independent of the human will; (2) It must be
impossible to foresee the event; (3) The occurrence must be so as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (4) The obligor must be free from any
participation in the aggravation of the injury resulting to the creditor. The running amuck of the
passenger was the proximate cause of the incident and is within the context of force majeure.
However, in order that a CC may be absolved from liability in case of force majeure, it is not
enough that the accident was caused by force majeure. The CC must still prove that it was not
negligent in causing the injuries resulting from such accident. It must prove that there was no negligence
or lack of care and diligence on the part of the CC.
The TC and the CA had conflicting findings of fact. The SC upheld the findings of the CA-- the
driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full
stop; the victims fell from the bus door when it was opened or gave way while the bus was still running;
the conductor panicked and blew his whistle after people had already fallen off the bus; the bus was not
properly equipped with doors in accordance with law. It is therefore clear that the petitioners have
failed to overcome the presumption of fault and negligence found in the law governing CCs.
The CC's argument that it is not an insurer of its passengers deserves no merit in view of the
failure of the CC to prove that the deaths of the 2 passengers were exclusively due to force majeure and
not to the failure of the CC to observe extra-ordinary diligence in transporting safely the passengers to
their destinations as warranted by law.
5. Limitation of liability; validity of stipulations
Art. 1757. The responsibility of the common carrier for the safety of passengers as
required in Arts. 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting
of notices, by statements on tickets, or otherwise.
PAGE 62

Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common
carrier's liability for negligence is valid, but not for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the common carrier's liability.
Ticket given to a passenger is a written contract.-- Ticket given to passenger is a written contract
with the ff. elements: (1) the consent of the contracting parties manifested by the fact that the passenger
boards the ship and the shipper consents or accepts him in the ship for transportation; (2) cause or
consideration which is the fare paid by the passenger as stated in the ticket; (3) object, which is the
transportation of the passenger from the place of departure to the place of destination which are stated
in the ticket.
Passenger bound notwithstanding his failure to sign ticket containing stipulation limiting liability.-Even if the passenger failed to sign the ticket, he is nevertheless bound by the provisions thereof. Such
provisions are part of the contract of carriage, regardless of the passenger's lack of knowledge or assent
to the regulation. It is what is known as a contract of adhesion which is not entirely prohibited by law.
The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his
consent. Accordingly, where the CC incurred delay, it is liable only for the amount printed in the ticket
the passenger not having declared a higher value for his luggage nor paid addtl. charges.
Dispensing with or limiting liability.-- General rule: Under 1757, the extraordinary diligence required
under 1733 and 1755 for the carriage of passengers cannot be dispensed with or lessened (1) by
stipulation, (2) by the posting of notices, (3) by statements on tickets, or (4) otherwise
What cannot be stipulated in a carriage of passengers :
(1) absolutely exempting the CC from liability from the passenger's death or injuries;
(2) lessening the extraordinary diligence required by law to the diligence of a good father of a
family
Exception: Effect of gratuitous carriage.-- Under 1758, the CC and the passenger may validly
stipulate limiting the CC's liability for negligence where the passenger is carried gratuitously (but the
parties cannot stipulate to entirely eliminate liability of CC)
Effect of reduction of fares.-- Under 1758 (2), the reduction of fare does not justify any limitation of
the CC's liability -- the law requires gratuitous passage.
The law is much stricter with respect to carriage of passengers as compared with carriage of
goods: a stipulation limiting the CC's liability in writing, signed by the parties, supported by sufficient
consideration, not contrary to law will still be void where the passenger is not carried gratuitously.
Liability of owner of CC to accommodation passengers or invited guests.-- [Lara vs Valencia, 1958]
an owner of an automobile owes a guest the duty to exercise ordinary or reasonable care to avoid
injuring him; since one riding in an automobile is no less a guest because he asked for the privilege of
doing so, the same obligation of care is imposed upon the driver and owner as in the case of one
expressly invited to ride
6. Responsibility for acts of EEs
Art. 1759. Common carriers are liable for the death of or injuries to passengers through
the negligence or willful acts of the former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carrier.
The liability of the common carrier does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
PAGE 63
Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot
be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets, or
otherwise.
4 Agbayani:
Liability for negligence or willful acts of employees.-- Under 1759, CC are held liable for the death
or injuries to passengers caused by the negligence or the willful acts of their EEs, although such EEs
may have acted beyond the scope of their authority or in violation of the orders of the CC. The CC
cannot escape liability by interposing the defense that its EEs have acted without any authority or
against the orders of the CC
The passenger is entitled to protection from personal violence by the CC or its agents or EEs
since the contract of transportation obligates the CC to transport a passenger safely to his destination
and a CC is responsible for the misconduct of its EEs
Cardenas vs Fernando, 54 OG no. 4, p. 1043 (1957): (1) extraordinary diligence required of CC:
calculated to protect the passengers as demanded by the preciousness of human life and by the
consideration that every person must in every way be safeguarded against all injury; (2) liability for
injury of passenger is based on a breach of contract of carriage for failure to bring the passenger safely
to his destination
Reason for making the CC liable for the misconduct of its EEs in their own interest.-- The servant
is clothed with delegated authority and charged with the duty by the CC, to execute his undertaking to
carry the passenger safely; when the EE mistreats the passenger, he violates the contractual obligation
of the CC for which he represents the CC
Liability of CC for defects of its equipment.-- A passenger is entitled to recover damages from a CC
for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it
appears that the defect would have been discovered by the CC if it had exercised the degree of care
which under the circumstances was incumbent upon it, with regard to inspection and application of the
necessary tests; for the purposes of this doctrine, the manufacturer is considered as being in law the
agent or servant of the CC, as far as regards the work of constructing the appliance
Common carrier is exempt from acts of EE not done in line of duty.-- The CC is exempt from
liability where the EE was never in a position in which it became his duty to his ER to represent him in
discharging any duty of the CC towards the passenger; the EE is deemed as a stranger or co-passenger
since his act was not done in the line of duty
Defense of diligence in selection, etc., of employees.-- CC cannot escape liability by interposing
defense that he exercised due diligence in the selection and supervision of his EEs; his liability is based
on culpa contractual
When relationship of carrier and passenger terminates.-- The relation of CC and passenger does not
cease at the moment that the passenger alights from the CC's vehicle at a place selected by the CC at the
point of destination, but continues until the passenger had reasonable time or a reasonable opportunity
to leave the CC's premises. What is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances
Elimination or limitation of carrier's liability.-- Under 1760, the CC's liability for the negligence or
willful acts of his EEs which cause death of or injury to passengers cannot be eliminated or limited by
(1) stipulation, (2) by the posting of notice, (3) by statements on the tickets, or (4) otherwise
PAGE 64
Bataclan vs Medina, 104 Phil 181

F:
supra. Bus turned turtle with gas leaking out. Rescuers brought torches which resulted in fire.
Held : There was a breach of the contract of carriage and negligence on the part of the agent of the CC,
the driver. At the time of the blowout of the tires, the bus was speeding. The proximate cause of the
death was the overturning of the vehicle which was followed by the negligence of the driver and the
conductor who were on the road walking back and forth. They should have known that with the position
of the bus, leakage was possible aside from the fact that gas when spilled can be smelled from a
distance. The failure of the driver and conductor to have cautioned or taken steps to warn rescuers not
to bring a lighted torch too near the bus constitutes negligence on the part of the agents of the carrier.
De Gillaco vs MRR, 97 Phil 884
F:
Plaintiff's husband was a passenger in the train from Calamba to Manila. When the train reached the
Paco Railroad, a train guard of MRR was in the station waiting for the same train to take him to Tutuban to
report for duty. He had a long standing grudge against Gillaco and he shot and killed him upon seeing him
inside the train coach.
Held : While a passenger is entitled to protection from personal violence by the CC or its agents or EEs,
the responsibility of the CC extends only to those acts that the CC could foresee or avoid through the
exercise of the degree of care and diligence required of it. The OCC did not impose upon CC the
absolute liability for assaults of their EEs upon the passengers.
The act of the guard was entirely unforeseeable by MRR which had no means to ascertain or
anticipate that the two would meet nor could it foresee every personal rancor that might exist between
its EEs and its passengers. The shooting was a caso fortuito, both being unforeseeable and inevitable
under the circumstances.
When the crime took place, the guard had no duties to discharge. His position would be that of
a passenger also waiting transportation and not of an EE assigned to discharge duties.
Maranan vs Perez, 20 SCRA 412
F:
A passenger in a taxicab was stabbed and killed by the driver. The driver claimed self defense since
accdg to him, he was stabbed first by the passenger. The taxicab operator claimed caso fortuito.
Held: The NCC unlike the OCC makes the CC absolutely liable for intentional assaults committed by its
EEs upon its passengers (Art. 1754). The CC's liability is based on either (1) respondeat superior or
(2) the CC's implied duty to transport the passenger safely. Under respondeat superior (w/c is the
minority view), the CC is liable only when the act of the EE is within the scope of his authority and
duty. Under the second view, the CC is liable as long as the assault occurs within the course of the
performance of the EE's duty. It is no defense that the act was done in excess of authority or in
disobedience of the CC's orders. The CC's liability is absolute in the sense that it practically secures the
passengers from assaults committed by its own EEs. Three cogent reasons underlie this rule : (1) the
special undertaking of the CC requires that it furnish the passengers the full measure of protection
afforded by the exercise of the high degree of care prescribed in the law, from violence and insults in the
hands of strangers, other passengers, and from its own servants charged with the passenger's safety; (2)
liability is based on the CC's confiding in the servant's hands the performance of his contract to safely
transport the passenger, delegating therewith the duty of protecting the passenger with utmost care
prescribed by law; (3) as between the CC and the passenger, the CC must bear the risk of wrongful acts
or negligence of the CC's EEs against passengers since it has the power to select and remove them.
PAGE 65

It is the CC's obligation to select its drivers with due regard not only to their technical
competence and physical ability but also to their total personality, including patterns of behavior, moral
fiber, and social attitude.
7. Responsibility for acts of strangers and co-passengers
Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account
of the willful acts or negligence of other passengers or of strangers, if the common carrier's
employees through the exercise of the diligence of a good father of a family could have prevented
or stopped the act or omission.
4 Agbayani:
The CC is responsible for such willful acts or negligence of other passengers or of strangers, provided
that the CC's EEs could have prevented or stopped the act or omission through the exercise of ordinary
diligence. If the injury could not have been avoided by the exercise of ordinary diligence on the part of
the EEs of the CC, the CC is not liable
Notice that the law speaks of injuries suffered by the passenger but not his death. However,
there appears to be no reason why the common carrier should not be held liable under such
circumstances. The word "injuries" should be interpreted to include "death." (Aguedo F. Agbayani,
COMMERCIAL LAW REVIEWER, 1988 ed.)
Pilapil vs CA 180 SCRA 546
F:
While on a bus, an unidentified bystander hurled a stone at the bus and hit Pilapil above his left eye.
He sustained some injuries to his eye.
Held: The law does not make the CC an insurer of the absolute safety of its passengers. Art. 1755
qualifies the duty of the CC in exercising vigilance to only such as human care and foresight can
provide. The presumption created by law against the CC is rebuttable by proof that the CC had
exercised extraordinary diligence in the performance of its obligations and that the injuries suffered were
caused by fortuitous events. The liability of the CC necessarily rests upon its negligence, or its failure
to exercise the degree of diligence required by law. Under Art. 1763, the diligence required, with
regards to its liability in cases when intervening acts of strangers directly caused the injury, is the
diligence only of a good father of a family and not the extraordinary diligence generally required. The
rule is not so exacting as to require one charged with its exercise to take doubtful or unreasonable
precautions to guard against unlawful acts of strangers. The CC would only be negligent if the tort
caused by a third person could have been foreseen and prevented by them.
The injury was in no way connected to the performance of the obligation of the bus company. It
was caused by a stranger, over which the carrier had no control or even knowledge of, and which could
not have been prevented.
Bachelor Express vs CA, 180 SCRA 217
F:
supra. A passenger stabbed a PC officer which caused a commotion which resulted in the death of 2
passengers.
Held: The CC raised the defense of caso fortuito. The running amuck of the passenger was the
proximate cause of the incident and is within the context of force majeure. However, in order that a CC
may be absolved from liability in case of force majeure, it is not enough that the accident was caused by
force majeure. The CC must still prove that it was not negligent in causing the injuries resulting from
PAGE 66

such accident. It must prove that there was no negligence or lack of care and diligence on the part of the
CC.
The TC and the CA had conflicting findings of fact. The SC upheld the findings of the CA-- the
driver did not immediately stop the bus at the height of the commotion; the bus was speeding from a full
stop; the victims fell from the bus door when it was opened or gave way while the bus was still running;
the conductor panicked and blew his whistle after people had already fallen off the bus; the bus was not
properly equipped with doors in accordance with law. It is therefore clear that the petitioners have
failed to overcome the presumption of fault and negligence found in the law governing CCs.
The CC's argument that it is not an insurer of its passengers deserves no merit in view of the
failure of the CC to prove that the deaths of the 2 passengers were exclusively due to force majeure and
not to the failure of the CC to observe extraordinary diligence in transporting safely the passengers to
their destinations as warranted by law.
8. Duty of passenger; effect of contributory negligence
Art. 1761. The passenger must observe the diligence of a good father of a family to avoid
injury to himself.
Art. 1762. The contributory negligence of the passenger does not bar recovery of damages
for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but
the amount of damages shall be equitably reduced.
Law does not protect negligence of passenger.-- Law does not protect negligence of passenger to the
extent of doing harm or damage upon a public utility
Diligence required of passenger.-- Diligence of a good father of a family to avoid injury to himself.
Effect of negligence of passenger.-- Where the proximate cause of the death of or injury to the
passenger is his own negligence, and not that of the CC, the CC is exempted from liability
Effect of passenger's contributory negligence.-- Contributory negligence on the part of the passenger
does not justify the CC's exemption from liability. Where it is not the proximate cause of the death or
injury, he or his heirs are not barred from recovery of damages, provided of course that the CC is the
proximate cause of his death or injury
Cangco vs MRR 38 Phil 768
F:
supra. EE riding on train who stepped on watermelons.
Held: The conduct of plaintiff in undertaking to alight while the train was yet slightly underway was not
characterized by imprudence and that he was not guilty of contributory negligence.
The circumstances show that it was no means so risky for him to get off while the train was yet moving.
It is not negligence per se for a traveler to alight from a slowly moving train.
Isaac vs A. L. Ammen
F:
supra. Passenger aboard a bus who placed his left arm on the window lost his arm when the bus
collided with a pick up.
PAGE 67

Held: By placing his left arm on the window, the passenger is guilty of contributory negligence, and
although contributory negligence cannot relieve the carrier but can only reduce his liability (Art. 1762),
this is a circumstance which militates against plaintiff's position. It is negligence per se for passengers
to protrude any part of his body and that no recovery can be had for an injury.
In this case, the bus driver had done what a prudent man could have done to avoid the collision.
The injury was due to passenger's fault.
Liability of air carrier under the Warsaw Convention (Oct. 12, 1929)
Art. 17. The carrier shall be liable for damages sustained in the event of death or wounding of a
passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so
sustained took place on board the aircraft or in the course of any of the operations of embarking or
disembarking.
Art. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or loss
of, or of damage to, any checked baggage or any goods, if the occurrence which caused the damage so
sustained took place during the transportation by air.
(2) The transportation by air within the meaning of the preceding paragraph shall comprise the
period during which the baggage or goods are in the charge of the carrier, whether in an airport or on
board an aircraft, or, in case of a landing outside an airport, in any place whatsoever.
(3) The period of the transportation by air shall not extend to any transportation by land, by sea,
or by river performed outside an airport. If however, such transportation takes place in the performance
of a contract for transportation by air, for the purpose of loading, delivery, or transshipment, any damage
is presumed, subject to proof to the contrary, to have been the result of an event which took place during
the transportation by air.
Art. 19. The carrier shall be liable for damages occasioned by delay in the transportation by air
of passengers, baggage or goods
SC has held that these provisions merely declare the carrier liable for damages in the
enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in
the Convention regulate or exclude liability for other breaches of contract by the carrier.
D. Damages Recoverable from Common Carriers
1. In general
Art. 1764. Damages in cases comprised in this Section shall be awarded with the title
XVIII of this book concerning damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
Art. 2197. Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated;
(6) Exemplary or corrective.
2. Actual or compensatory
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Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation referred to as actual or compensatory damages.
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted
in good faith is liable shall be those that are natural and probable consequences of the breach of
the obligation, and which the parties have foreseen or could have reasonably foreseen at the time
the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for
all damages which may be reasonably attributed to the non-performance of the obligation.
Art. 2203. The party suffering loss or injury must exercise diligence of a good father of a
family to minimize the damages resulting from the act or omission in question.
Art. 1764. Damages in cases comprised in this Section shall be awarded with the title
XVIII of this book concerning damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least P 3,000 (now P50,000), even though there may have been mitigating circumstances. In
addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and
the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed
and awarded by the court, unless the deceased on account of permanent physical disability not
caused by the defendant, had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article 291,
the recipient who is not an heir called to the decedent's inheritance by the law of testate or
intestate succession, may demand support from the person causing the death, for a period not
exceeding five years, the exact duration to be fixed by the court;
(3) The spouses, legitimate and illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish by reason of the death of the deceased.
Cariaga vs LTBCo., 110 Phil 346
F:
Edgardo Cariaga, a fourth year medical student of UST, was a passenger of an LTBC bus which
bumped against a train of MRR on the national highway crossing a railroad tract at Laguna de Bay. Cariaga
suffered severe injuries on the head making him unconscious during the first 35 days after the accident,
reducing his intelligence by 50% and rendering him in a helpless condition, virtually invalid, both physically
and mentally. LTBC paid all medical expenses plus allowance during convalescence. Later, Cariaga's parents
brought an action to recover damages from LTBC and MRR in the amount of P 312,000 as actual,
compensatory, moral and exemplary damages. LTBC disclaimed liability and filed a cross-complaint against
MRR for recovery of expenses paid by it to the plaintiff placing MRR negligent for not providing a crossing bar
at the national highway railroad track. Laguna CFI dismissed the cross-complaint against MRR and held
LTBC liable for P 10,000 as compensatory damages with interest. Plaintiff and LTBC appealed.
Held: The train driver was not negligent. He sounded the train's whistle four times before the
intersection, which were heard even by the bus passengers. The bus did not slow down but instead the
bus driver tried to pass the intersection before the train. In addition, another LTBC bus which arrived
ahead of the bus in this case, at the crossing heeded the train whistle by stopping and allowing the train
to pass. Clearly, the bus driver was negligent in totally disregarding the warning. On the other hand,
MRR cannot be held to be contributorily negligent because LTBC was not able to discharge its burden
of proof when it alleged that MRR violated its charter by failing to ring the locomotive bell.
PAGE 69

The evidence shows that Ed C. had been rendered physically and mentally invalid by the
accident. He suffered head injuries specifically a fractured right forehead necessitating the removal of
all the right frontal lobe of his brain, which reduced his intelligence by 50% so that he can no longer
finish his medical course. In addition, he has to lead a quiet and retired life because if the tantalum plate
which replaced a portion of his skull is pressed in or dented, it would cause his death.
LTBC admitted that under Art. 2201, it is liable for damages that are the natural and probable
consequences of the breach and which the parties had foreseen or could have reasonably foreseen at the
time the obligation was constituted. It however claims that the said provision contemplates only the
medical, hospital, and other expenses in the total sum of P 17,719.75. The SC ruled that the income
which Ed could earn if he should finish the medical course, and pass the corresponding board exams
must be deemed included because they could have reasonably been foreseen by the parties at the time he
boarded the bus.
While his scholastic record may not be first rate, it is sufficient to justify the assumption that he
could have finished his course and would have passed the board exams in due time. As regards the
income that he could possibly earn as a doctor, P 300 (accdg. to LTBC witness, Dr. Doria) could easily
be expected as minimum monthly income of Ed C. had he finished his studies. Compensatory damages
should be increased to P 25,000.
The claim for moral damages could not be granted because Art. 2219 enumerates the instances
when moral damages may be recovered and the present case does not fall under any of them, even par.
(2) thereof because this case is not one of quasi-delict and could not be considered as such because of a
pre-existing contractual relation between Ed C. and LTBC. Neither could LTBC be liable under Art.
2220 because it did not act fraudulently or in bad faith. Attorney's fees could also not be granted
because this case does not fall under Art. 2208.
The claim by the parents for actual and compensatory damages is also without merit because
the present action is based upon a breach of contract of carriage and the parents were not a party
thereto, and were not themselves injured as a result of the collision.
Pan Am vs IAC, 164 SCRA 268
F:
supra. Baggage containing promotional and advertising materials for films to be exhibited in the US,
clutch bags, barong tagalogs and personal belongings was lost. PAN AM sought to limit its liability to the
amount specified in the ticket absent a declaration of higher valuation and the payment of addtl. charges.
Held: On the basis of stipulations printed at the back of the ticket, Pan Am contends that its liability for
the lost baggage of Pangan is limited to $ 600.00 ($20 x 30 kilos) as the latter did not declare a higher
value for his baggage and pay the corresponding charges.
The SC applied the ruling in Mendoza vs PAL: Before defendant could be held to special
damages, such as alleged loss of profits on account of delay or failure of delivery, it must have appeared
that he had notice at the time of delivery to him of the particular circumstances attending the shipment,
and which probably would lead to such special loss if he defaulted. In order to impose on the
defaulting party further liability than for damages naturally and directly, i.e. in the ordinary course of
things, arising from a breach of contract, such unusual or extraordinary damages must have been
brought within the contemplation of the parties as the probable result of the breach at the time of or
prior to contracting. In the absence of proof that Pan Am's attention was called to the special
circumstances requiring prompt delivery of Pangan's luggages, petitioner cannot be held liable for the
cancellation of Pangan's contracts as it could not have reasonably foreseen such eventuality when it
accepted the luggage for transit. Pan Am was not privy to the contracts of Pangan nor was its attention
called to the condition therein requiring delivery of the promotional and advertising materials on or
before a certain date.
No attorney's fees could be awarded since there was no unjustified refusal by Pan Am to satisfy
the passenger's just and valid claim.
PAGE 70
Villa Rey Transit vs CA, 31 SCRA 511

F:
Policronio Quintos boarded a Villa Rey Transit bus at Lingayen, Pangasinan for Manila and was
seated on the first seat right side. When they reached the national highway in Pampanga, the bus frontally hit
the rear side of a bull cart filled with hay. The end of the bamboo pole tied to the cart hit the windshield and
landed on the face of Quintos who was seated in front. He died of cerebral injuries. His sisters and surviving
heirs brought an action against the bus co. The TC and CA held Villa Rey liable for P 63,750.00.
Held: The determination of damages due is dependent on 2 factors : (1) on the no. of years on the basis
of which damages shall be computed (life expectancy); and (2) rate at which the losses sustained should
be fixed.
CA determined life expectancy accdg. to the American Expectancy Table of Mortality; and since
Quintos was around 30 years old at the time of his death : 2/3 x [80 - 30] = 33 1/3 years. The bus co.
wanted to use the 4 year basis adopted in Alcantara vs Surro but the court held that the case is not
controlling as it did not lay down any rule on the length of time to be used in the computation of
damages. In fact, it declared that there is no fixed basis for determination of indemnity and much is left
to the discretion of the court considering the material damages involved and that there can be no exact
or uniform rule for measuring the value of human life and the measure of damages cannot be arrived at
by precise mathematical calculations.
Villa Rey impugns the decision on the ground that damages will have to be paid NOW where
most of those sought to be indemnified will be suffered years later. This argument if offset by the fact
that payment of the award will take place upon the finality of the decision, fixed at the rate of P 2,184
per year and did not anymore compute the potentiality and capacity of Quintos to increase his future
income, upon conclusion of his training, when he would be promoted and receive a higher salary.
In determining the losses sustained by the dependents and heirs of Quintos. they consist NOT of
the full amount of his earnings but of the support they would have received from him had he not died.
In fixing said amount, the necessary living expenses should therefore be deducted from his earnings.
The amount recoverable would therefore be the NET earnings, which is the portion which the
beneficiaries would have received. To this sum must be added P12,000 pursuant to Art. 104 and 107 of
the RPC, in relation to Art. 2206, NCC and P 1,727.95 for the amount actually spent by the sisters for
his medical and burial expenses and
P 2, 500 attorney's fees.
PAL vs CA, 185 SCRA 110
F:
In 1960, Nicanor Padilla boarded the PAL flight from Iloilo to Manila. The plane crashed on Mt.
Baco, Mindoro. The plane, a PI-C133, was manufactured in 1942 and was acquired by PAL in 1948. It had
been certified airworthy by the Civil Aeronautics Administration. As a result of her son's death, Mrs.
Padilla demanded P 600,000 as actual and compensatory damages plus exemplary damages and P 60,000
attorney's fees.
Prior to his death, Nicanor Padilla was 29 years old, President and General Manager of Padilla
Shipping Co. at Iloilo City, and a legal assistant of the Padilla Law Office. Upon learning of the death of her
son, she suffered shock and mental anguish, because her son who was still single was living with her. Nicanor
had life insurance of P 20,000, the proceeds of which were paid to his sister. Eduardo Mate of the Allied
Overseas Trading Co. testified that the deceased was one of the incorporators of the co. and also its VP with a
monthly salary of P 455. Isaac Reyes, auditor of Padilla Shipping Co., declared that the deceased was President
and General Manager and received a salary of P 1,500 per month.
The RTC and the CA awarded damages of P 477,000 as award for the expected income of the
deceased, P 10,000 as moral damages; P 10,000 as attorney's fees and to pay the costs. PAL appealed the
decision since accdg. to it, the court erred in computing the awarded indemnity based on the life expectancy of
the deceased rather than on the life expectancy of the mother. Accdg. to it, the life expectancy of the deceased
or of the beneficiary, whichever is shorter, is used in computing for amount of damages.
PAGE 71

Held: Under Arts. 1764 and Article 2206 (1), the award of damages for death is computed on the basis
of the life expectancy of the deceased and not of the beneficiary. In this case, the lower courts
determined the deceased gross annual income to be P 23,100 less P 9,200 as living expenses,
resulting in a net income of P 13,900. The lower court allowed the deceased a life expectancy of 30
years. Multiplying his annual net income by his life expectancy of 30 years, the product is P 417,000,
which is the death indemnity due to his mother and only forced heir.
Because of the long delay in this case, the mother already died without being able to receive the
indemnity she deserved. PAL is ordered to pay her heirs the death indemnity with legal rate of interest of
6% per annum.
3. Moral
Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral damages may be recovered if they are
the proximate result of the defendant's wrongful act or omission.
Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated. The assessment of such
damages, except liquidated ones, is left to the discretion of the court, according to the
circumstances of each case.
Art. 2219. Moral damages may be recovered in the following analogous cases :
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
xxx
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.
xxx
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages
if the court should find that, under the circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted fraudulently or in bad faith.
Art. 2206. xxx
(3) The spouses, legitimate and illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish by reason of the death of the deceased.
Fores vs Miranda 105 Phil 266
F:
supra. While the jeepney was descending the Sta. Mesa bridge at an excessive rate of speed, the driver
lost control, causing it to swerve and hit the bridge wall. Five of the passengers were injured, including the
respondent. The CA awarded moral damages.
Held: Art. 1764 makes it all the more evident that where the injured passenger does not die, moral
damages are not recoverable unless it is proved that the CC was guilty of malice or bad faith. In the
case at bar, there is no other evidence of such malice to support an award of moral damages. To award
moral damages for breach of contract, without proof of bad faith or malice on the part of the CC, as
required by Art. 2220, would be to violate the clear provisions of the law, and constitute unwarranted
legislation. A CC's bad faith is not to be lightly inferred from a mere finding that the contract was
PAGE 72

breached through negligence of the CC's EEs. The exception is a mishap resulting to the death of a
passenger in which case Art. 1764 makes the CC subject to Art. 2206 (award of moral damages).
Air France vs Carrascoso, 18 SCRA 155
F:
Plaintiff, a civil engineer, was a member of a group of 48 Filipinos that left Manila for Lourdes on
March 30, 1958. Air France, through its authorized agent, PAL, issued to plaintiff a first class round trip ticket
from Manila to Rome. From Manila to Bangkok, he traveled first class, but at Bangkok, Air France forced him
to vacate the first class seat that he was occupying because there was a white man who had a better right to the
seat. There was a commotion when plaintiff first refused to give up his seat, but he was pacified by his fellow
Filipino passengers to give up his seat and transfer to another class.
The lower court sentenced Air France to pay P 25,000 as moral damages, P 10,000 as exemplary
damages, the difference in fare between first class and tourist class plus P 3,000 for attorney's fees and costs of
suit. The CA reduced the refund from P 393.20 to P 383.20.
Held: Air France contended that the issuance of the first class ticket was no guarantee that he would
have a first class ride, but such would depend upon the availability of first class seats. The SC ruled
that it could not understand how a reputable firm like Air France could have the indiscretion to give out
tickets it never meant to honor at all. It received the corresponding amount in payment of first-class
tickets and yet it allowed the passenger to be at the mercy of its EEs. Plaintiff was indeed confirmed for
first class all the way to Rome.
There was contract to furnish plaintiff a first class passage. Said contract was breached when
the CC failed to furnish the first class transportation at Bangkok. Third, there was bad faith when
petitioner's EE compelled Carrascoso to leave his first class accommodation after he was already seated
and to take a seat in the tourist class by reason of which he suffered inconvenience, embarrassments and
humiliation, thereby causing him mental anguish, serious anxiety, wounded feelings, and social
humiliation, resulting in moral damages. It is true that the complaint did not use the term Bad Faith.
But the interference of BF is there. The manager not only prevented Carrascoso from enjoying his right
to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made
him suffer the humiliation of having to go to the tourist class compartment -- just to give way to another
passenger whose right thereto has not been established. This is certainly BF. For the willful malevolent
act of CC's manager, the CC-ER must answer. Moral damages are recoverable.
CC's contract with Carrascoso is attended with public duty. The expulsion of Carrascoso is a
violation of a public duty by the CC -- a case of quasi-delict. Damages are proper. The manner of
ejectment of Carrascoso fits into the legal precept for awarding exemplary damages in addition to moral
damages.
Lopez vs Pan Am, 16 SCRA 431
F:
Plaintiffs made first class reservations with defendant air carrier, in its Tokyo-SF flight, which
reservation was confirmed and first class tickets issued; but defendant's agent by mistake canceled plaintiff's
reservations and thereafter deliberately withheld from plaintiffs the information, letting them go on believing
that their first class reservations stood valid and confirmed, expecting some cancellations of bookings would be
made before the flight time, which failed to occur. Upon arrival in Tokyo, only then were the plaintiffs
informed that there were no accommodations for them in the first class, and they were constrained, due to
pressing engagements in the US, to take the flight as tourist passengers, which they did under protest.
Plaintiffs sued the defendant for moral and exemplary damages. The Rizal CFI awarded the plaintiffs moral
and exemplary damages and attorney's fees. Upon plaintiff's MFR, said damages were increased in amount.
Held: In so misleading the plaintiffs into purchasing first class tickets in conviction that they had
confirmed reservations when in fact they had none, defendant willfully and knowingly placed itself into
position of having breached its contract with plaintiffs.
PAGE 73

Such actions of the defendant may indeed have been prompted by nothing more than the
promotion of its self-interest in holding on to plaintiffs as passengers and foreclosing on their chances to
seek the service of other airlines that may have been able to afford to them first class accommodations.
All the same, in legal contemplation, such conduct already amounts to action in BF. For bad faith
means a breach of a known duty through some motive of interest of ill will. It may not be humiliating
to travel as tourist passengers, but it is humiliating to be compelled to travel as such, contrary to what is
rightfully to be expected from the contractual undertaking.
Plaintiffs are entitled to moral damages. Considering their official, political, social and
financial standing, they are awarded P 200,000 as moral damages, P 75,000 as exemplary damages
all with interest, and P 50,000 as attorney's fees considering the standing of plaintiff's counsel.
Ortigas vs Lufthansa, 64 SCRA 610
F:
Plaintiff took a first class accommodation on Lufthansa Airlines in Rome for his trip to Manila, with
confirmation of the airlines office, but its EE on seeing plaintiff's Filipino nationality in his passport, disallowed
him to board the place and his seat was given to a Belgian. Plaintiff having a heart ailment was advised by his
physician to take only a first class seat, but he was compelled to take an economy seat with a promise of the
Lufthansa EE that plaintiff will be transferred to first class in Cairo and onward to Hongkong. Upon arrival in
Cairo, the promise was not complied with. Similar false representations were made to him at Dharnan and
Calcutta. Plaintiff sued the airlines for damages. TC awarded plaintiff moral and exemplary damages.
Held: It is the opinion of the SC that moral damages should be raised from P 100,000 to P 150,000 and
exemplary damages be increased from P 30,000 to P 100,000. It is our considered view that when it
comes to contracts of common carriage, inattention and lack of care on the part of the CC resulting in
the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or
fraud which entitles the passenger to an award of moral damages in accordance with Art. 2220. In this
case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over
plaintiff was done willfully and in wanton disregard of plaintiff's rights and his dignity as a human being
and as a Filipino, who may not be discriminated against with impunity. Since both Alitalia and
Lufthansa are members of IATA and are agents of each other, they are bound by the mistakes committed
by a member such as the mistake of the Alitalia EE to inform Ortigas that he could travel first class
instead of only being waitlisted. The award of higher damages is justified by the aggravation of the
situation when the Lufthansa EE at Rome falsely noted on Ortigas' ticket that he was traveling economy
from Rome to HK and which was repeated four times. Also taken into consideration was the heart
condition of Ortigas which gave him added apprehension about traveling economy against the advice of
the doctor.
4. Exemplary
Art. 2229. Exemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or compensatory
damages.
Art. 2232. In contracts and quasi contracts, the court may award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Art. 2233. Exemplary damages cannot be recovered as a matter of right; the court will
decide whether or not they should be adjudicated.
Mecenas vs CA, 180 SCRA 83
PAGE 74

F:
M/V Tacloban City (TC) left Amlan, Negros Oriental bound for Manila. M/V Don Juan (DJ) left
Manila bound for Bacolod. TC had visual contact of DJ when they were about 5 miles apart and as a
precaution, it was steered to its left. DJ had radar contact of TC when they were four miles apart and following
R18 of the International Rules of the Road when a collision is possible, it was steered to its right. At 10:30 PM,
both collided as a result of which DJ sank 15 minutes later and hundreds of its passengers perished.
Petitioners, children of the victims, filed a case against Negros Navigation, owner of DJ, based on
quasi-delict. The RTC awarded damages of P 400,000 for the death of plaintiffs' parents and P 15,000 for
attorney's fees. The CA modified the award to P 100,000 as actual and compensatory damages.
Held: Before going into the issue, the SC ruled that the action which was based on quasi-delict should
be appropriately regarded as grounded on contract, and indulged in the presumption of negligence on
the part of the CC although its EEs may have acted beyond the scope of their authority or even in
violation of its instructions. Its liability would include moral damages (Art. 1764) and exemplary
damages if the defendants acted recklessly or with gross negligence (Art. 2332).
There is no question that the defendants are negligent. As found by the CFI, DJ steered to the
right while TC continued its course to the left. There can be no excuse for them not to realize that with
such maneuvers, they will collide. They executed maneuvers inadequately and too late, to avoid
collision. The question is WON the defendants were recklessly or grossly negligent. The SC ruled in
the affirmative.
As for the captain, he was playing mahjong before and up to the time of the collision. WON he
was then off-duty is immaterial; there is, both realistically speaking and in contemplation of law, no
such thing as off-duty hours for the master of a vessel at sea that is a CC upon whom the law imposes
the duty of extraordinary diligence. When the collision occurred, the captain failed to supervise his
crew in the process of abandoning the ship and he failed to avail of measures to prevent the too rapid
sinking of his vessel, thus aggravating the casualties.
As for Negros Aviation, in permitting, or in failing to discover and correct the regularity of the
captain's mahjong sessions while DJ was at sea, it must be deemed grossly negligent. It also sailed with
an overload (1,004 passengers and crewmembers).
As for the failure of TC to follow R18 by turning right instead of left, the SC ruled that it is not
applicable and will not relieve DJ from responsibility if the collision could have been avoided by proper
care and skill on her part or even by a departure from the rules. DJ is still at fault when, upon seeing
TC turn to its left, it still turned to its right resulting in the collision.
The SC awarded moral damages of P 307,000 and exemplary damages of P 307,000 and
attorney's fees of P 15,000 together with actual and compensatory damages for wrongful death of P
126,000 and P 60,000 for a total of P 815,000. Although the petitioners only asked for P 400,000
award of damages granted by the CFI, the SC increased it to P 800,000 following the doctrine that the
SC must consider and resolve all issues which must be decided in order to render substantial justice to
the parties, including issues not explicitly raised by the parties affected.
In discussing the rule of exemplary damages in law, the SC looks to it as an instrument to
serve the ends of law and public policy by reshaping socially deleterious behaviors, specifically, in
the case, to compel CC to control their EEs, to tame their reckless instincts, and to force them to take
adequate care of human beings and their property.
5. Nominal, Temperate and Liquidated
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.
Art. 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be proved with certainty.
PAGE 75
Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be
paid in case of breach thereof.
Art. 1757. The responsibility of a common carrier for the safety of passengers as required
in Arts. 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of
notices, by statements on tickets, or otherwise.
Alitalia vs IAC, 192 SCRA 10
F:
Dr. Felipa Pablo, an associate professor of UP and a research grantee of the Phil. Atomic Energy
Association was invited to take part at a meeting sponsored by the United Nations in Ispra, Italy. She accepted
the invitation and was then scheduled by the organizers to read her paper. She was to be the 2nd speaker on the
first day of the meeting. She then booked passage with Alitalia. She arrived in Milan on the day before the
meeting in accordance with the itinerary set for her by Alitalia but her luggage was delayed as it was in one of
the succeeding flights from Rome to Milan. However, the other flights from Rome did not have her baggage on
board. Her luggage consisted of 2 suitcases-- one for her clothing and personal items and the other for her
scientific papers, slides and other research material.
Feeling desperate, she went to Rome to try to locate her bags. She inquired about her suitcases in the
international and domestic airports and filled out the forms required by Alitalia for people in her predicament.
However, her baggage could not be found. Discouraged, she returned to Manila without attending the meeting
in Ispra, Italy.
In Manila, she demanded that Alitalia make reparation for damages suffered by her. Alitalia offered
her free airline tickets which she rejected while instituting this action. Her bags were located and forwarded to
Ispra but only on the day after her scheduled appearance. As she was no longer there to accept delivery, her
bags were not actually returned to her until after 11 months. The CFI awarded nominal damages of P 20,000
and attorney's fees of P 5,000 plus costs of the suit. The IAC increased the award of nominal damages to P
40,000. The increase was justified as follows-- considering the negligence committed by defendant, the amount
of P20,000 under present inflationary conditions as awarded to plaintiff as nominal damages is too little to
make up for the plaintiff's frustration and disappointment in not being able to appear at said conference, and for
the embarrassment and humiliation she suffered from the academic community for failure to carry out an
official mission for which she was singled out by the faculty to represent her institution and the country.
Alitalia appealed on the following grounds: (1) That the Warsaw Convention should have been
applied to limit Alitalia's liability; and (2) That there is no warrant in fact or in law for the award of nominal
damages and attorney's fees.
Held: Under the Warsaw Convention, an air carrier is made liable for damages for: (1) The death,
wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft
or in the course of its operations of embarking or disembarking; (2)
The destruction, or loss of damage to, any registered luggage or goods, if the occurrence causing it took
place during the carriage by air; and (3) Delay in the transportation by air of passengers, luggage or
goods. The Convention also limits the liability of the carriers for each passenger to 250,000 francs and
for registered baggage and cargo to 250 francs per kg unless the passenger has declared a higher rate
and has paid additional charges. The Warsaw Convention, however, denies to the carrier availment of
the provisions which exclude or limit his liability, if the damage is caused by his wilful misconduct or
by such default on his part as is considered to be equivalent to wilful misconduct or if the damage is
similarly caused by any agent of the carrier acting within the scope of his employment. The Convention
does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an
absolute limit of the extent of that liability. Such proposition is not borne out by the language of the
Convention. The Convention should be deemed a liability only in those cases where the cause of the
death or injury to person, or destruction, loss or damage to property or delay in its transport is not
attributable to or attended by any wilful misconduct, bad faith, recklessness, or otherwise improper
conduct. The Convention does not regulate or exclude liability for other breaches of contract by the
carrier. Otherwise, an air carrier would be exempt from any liability for damages in the event of its
PAGE 76

absolute refusal, in bad faith, to comply with a contract of carriage. The Warsaw Convention has
invariably been held inapplicable, or as not restrictive of the carrier's liability, where there was
satisfactory evidence of malice or bad faith attributable to its officers and employees.
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the EEs of
Alitalia. Dr. Pablo's luggage was eventually returned belatedly, but without appreciable damage. The
fact is, nevertheless, that some special species of injury was caused to her because Alitalia misplaced
her baggage and failed to deliver it to her at the time appointed -- a breach of its contract of carriage -with the result that she was unable to read her paper that she had painstakingly labored over. The
opportunity to claim honor or distinction for herself, for UP and for the country, was irretrievably lost to
her. She also underwent profound distress and anxiety, which gradually turned into panic and despair,
when she learned that her suitcases were missing.
The compensation for the injury suffered by Dr. Pablo cannot under the circumstances be
restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage. She is not
entitled to be compensated for loss or damage to her luggage since they were ultimately delivered to her.
She is however entitled to nominal damages, which is adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated and recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered.
As to the argument that she failed to include a specific claim for nominal damages in her
complaint, it suffices that her general prayer includes "such other and further just and equitable relief in
the premises." Also absent any claim for actual or compensatory damages (she asked for moral and
exemplary damages and attorney's fees), and with proof of Dr. Pablo's right being violated, the issue of
nominal damages is raised.
The award of P 5,000 for attorney's fees is reasonable. The law authorizes recovery of
attorney's fees where the defendant's act or omission has compelled the plaintiff to litigate with third
person or to incur expenses to protect his interest, or where the court deems it just and equitable.
Saludo vs CA 207 SCRA 498
F:
After the death of plaintiff's mother Crispina Galdo, Saludo in Chicago, Pomierski and Son Funeral
Home, made the necessary preparations and arrangements for the shipment of the body from Chicago to the
Philippines. They had the body embalmed and secured a permit from the Philippine Vice Consul in Chicago.
The Phil. Vice Consul sealed the shipping case on Oct. 26,1976. On the same date, Pomierski brought the
remains to the Continental Mortuary Air Service (CMAS) which made the necessary arrangements such as
flights, transfers,etc. CMAS is a national service used by undertakers which furnishes the air pouch in which
the casket is enclosed in and they see to it that the remains are taken to the proper air freigh terminal. CMAS
booked the shipment with PAL, through its agent Air Care International, with Pomierski as shipper and Maria
Saludo as consignee. PAL Airway Bill was issued for the route from Chicago to SF on board TWA Flight 131 of
Oct. 27, 1976, and from SF to Manila, on board PAL Flight 107 of Oct. 27, 1976, and from Manila to Cebu on
board PAL Flight 149 of Oct. 29, 1976.
Maria Saludo and Saturnino Saludo, children of the deceased were booked with United Airlines from
Chicago to California and with PAL from California to Manila. When she learned of her mother's
arrangements, she changed reservations from UA to TWA. She watched from the look-out area but she saw no
body being brought on the flight. She reluctantly took the TWA flight with her cousin's assurance to look into
the matter. Upon arrival in SF, she went to the TWA counter to inquire about her mother's remains but she was
told that they did not know anything about it. She then called Pomierski who then called CMAS which in a
matter of 10 minutes told him that the remains had been switched with another body and had been sent to
Mexico. Based on the facts, there was a mix-up in Chicago Airport between the two bodies. Arrangements
were made to send the body to California through Texas. On October 28, 1976, the remains arrived in SF and
was received by PAL at 7:45 p.m. The shipment was immediately loaded on PAL flight for Manila that same
evening and arrived in Manila on October 30, 1976, a day after its expected arrival on October 29, 1976.
Plaintiffs then filed a case against PAL and TWA before the CFI of Leyte, praying for the award of
actual damages of P 50,000, moral damages of P 1,000,000, exemplary damages and attorney's fees and costs of
suit. The CFI and CA absolved the two airline companies. Plaintiffs then appealed the decision on the ff.
grounds: (1) That the delay in the delivery of the remains was due to the fault of the airlines, (2) The one day
delay in the delivery constitutes breach of contract as would entitle them to damages, (3) That damages are
PAGE 77

recoverable by petitioners for the humiliating, arrogant, and indifferent acts of the EEs of TWA and PAL. The
airlines objected on the ground that this petition only raises factual questions. Since it is precisely the
soundness of the inferences or conclusions that may be drawn from the factual issues which are here being
assailed, the issues raised in the petition indeed warrant a second look.
Held: (1) Petitioners allege that private respondents received the casketed remains of petitioner's mother
on Oct. 26, 1976 as evidenced by the issuance of the PAL Airway Bill. From said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so much so that for
the alleged switching of the caskets on Oct. 27, 1976, or one day after private respondents received the
cargo, the latter must necessarily be liable. Petitioners relied on the doctrine that the issuance of the bill
of lading carries the presumption that the goods were delivered to the carrier issuing the bill, for
immediate shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the
receipt of the goods by the carrier. A bill of lading is a written acknowledgment of the receipt of the
goods and an agreement to transport and deliver them at a specified place to a person named or on his
order. A bill of lading is a receipt as to the quantity and description of the goods shipped and a contract
to transport the goods to the consignee or other person therein designated, on the terms specified in such
instrument.
SC: An airway bill estops the carrier from denying receipt of goods. However, as between the
shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop
the carrier from showing the true facts. We must therefore allow the airline companies to explain, why,
despite the issuance of the airway bill and the date thereof, they deny having received the remains of
Saludo on Oct. 26, 1976.
As found by the CA, the airway bill was issued, not as evidence of receipt of delivery but
merely as confirmation for the booking made for the SF-Manila flight scheduled on October 27, 1976.
It was not until Oct. 28 that PAL received physical delivery of the body at SF. The extraordinary
responsibility of CC begins from the time the goods are delivered to the carrier. This responsibility
remains in force even when they are temporarily unloaded or stored in transit, unless the shipper
exercises the right of stoppage in transitu, and terminates ony after the lapse of a reasonable time for
the acceptance of the goods by the consignee or other person entitled to receive them. For such duty to
commence, there must in fact have been delivery of the cargo subject of the contract of carriage. Only
when such fact of delivery has been unequivocally esablished can the reqt. of extraordinary
responsibility arise.
As found by the CA, the body was really received by PAL on Oct. 28, 1976 and it was from
such date that it became responsible for the agreed cargo under the airway bill. Consequently, for the
switching of caskets prior thereto which was not caused by them and subsequent events caused thereby,
PAL cannot be held liable.
(2) Petitioners allege that even assuming CMAS was at fault, PAL would still be liable because whoever
brought the cargo to the airport or loaded it on the plane did so as agent of PAL.
SC: This contention is without merit. When the cargo was received from CMAS, Air Care Intl,
PAL's agent and TWA had no way of determining its actual contents, since the casket was hermetically
sealed by the Philippine Vice-Consul. They had to rely on the information given by CMAS. No amount
of inspection by the airlines could have guarded against the switching that had taken place. They had no
authority to unseal and open the casket. It is the right of the carrier to require good faith on the part of
those persons who deliver goods to be carried by it. In the absence of more definite information, the
carrier has the right to accept shipper's marks as to the contents of the package offered for
transportation and is not bound to inquire particularly about them. It can safely be said that a CC is
entitled to fair representation of the nature and value of the goods to be carried, with the concomitant
right to rely thereon, and that a carrier has no obligation to inquire into the correctness or sufficiency of
such information. The consequent duty to conduct an inspection arises in the event that there should be
reason to doubt the veracity of such representations.
PAGE 78

In this case, private respondents had no reason to doubt the truth of the shipper's
representations. The airway bill was issued on the basis of such representations.
Neither can they be held accountable on the basis of petitioner's theory that whoever brought the
cargo to the airport or loaded it on the plane did so as an agent of private respondents, so that even if
CMAS was indeed at fault, the liability would be attributed to the airlines. CMAS was not an agent of
private respondents. It was hired to handle all the necessary shipping arrangements for the
transportation of the remains. CMAS may be classified as a forwarder, which is regarded as the agent
of the shipper (Pomierski) and not of the crrier. It merely contracts for the transportation of goods by
carriers and has no interest in the freight but receives compensation from the shipper as his agent.
The facts of the case would point to CMAS as the culprit. In fact, even the petitioners wrote
CMAS entertaining serious doubts as to whether they were responsible for the mix-up. But the court
cannot rule on the possible liability of CMAS as such is not at issue in this case and there has not been
convincing evidence on the matter.
(3) Petitioners contended that TWA by agreeing to transport the remains, it made itself a party to the
contract of carriage nad was therefore bound by the airway bill. When TWA shipped the remains ten
hours earlier than scheduled, it allegedly violated the terms of the airway bill which compounded, if not
directly caused, the switching of the caskets. The EEs of TWA presumably caused the mix-up by
loading the wrong casket on the plane. TWA must be presumed negligent unless such is rebutted. TWA
contends that it faithfully complied with the obligations under the airway bill. Said faithful compliance
was not affected by the fact that the remains were shipped on an earlier flight as there was no fixed time
for completion of carriage stipulated on. TWA did not undertake to carry the cargo aboard any specified
aircraft, in view of the condition on the back of the airway bill, which provides that " xxx no time is
fixed for the completion of the carriage, xxx and that Carrier may without notice substitute alternate
carriers or aircrafts xxx."
SC : TWA's contention is tenable. TWA can use substitute aircraft, even without notice and
without the assumption of any obligation whatsoever to carry the goods on any specified aircraft. This is
clearly sanctioned by the contract of carriage. When a CC undertakes to convey goods, the law implies
a contract that they shall be delivered at destination within a reasonable time, in the absence of any
agreement as to the time of delivery. In case at bar, no special contract for prompt delivery was entered
into by the parties.
Condition No. 5 is binding on the plaintiff even if it is printed at the back of the airway bill.
This is in the nature of a contract of adhesion. However, such condition only serves to insulate the
carrier from liability in those instances when the changes in routes, flights and schedules are clearly
justified by the peculiar circumstances of a particular cae, or by general transportation practices,
customs and usages, or by contingencies, emergencies in aviation, such as weather turbulence,
mechanical failure, reqts. of national security and the like. In this case, the delay in the delivery of the
remains cannot be attributed to the fault, negligence or malice of private respondents. When TWA
shipped the remains on an earlier flight, it did so in the exercise of sound discretion and with reasonable
prudence -- they wanted to assure that the shipment would be received in SF in sufficient time for
transfer to PAL. TWA knew of the urgency of the shipment due to the notation on the airway bill : "xxx
Please return bag first available flight to SFO."
(4) Petitioners alleged that private respondents are liable for tort on account of humiliating, arrogant and
indifferent acts of their officers and personnel. They contended that there was no reason for the
personnel to disclaim knowledge of the arrival or whereabouts of the body other than their sheer
arrogance, indifference and extreme insensitivity to their feelings.
SC: It affirmed the CA's findings that TWA EEs did not deal with petitioners in a grossly
humiliating, arrogant or indifferent manner as to amount to BF or malice. It must be pointed out that
the lamentable actuations of TWA's EEs leave much to be desired, particularly so given the grief of
PAGE 79

petitioners, their tension and anxiety wrought by the confusion and the fear about where their mother's
remains were. Airline companies are sternly admonished to strictly require their personnel to be more
accommodating to passengers and the general public.
Petitioners agonized for 5 hours unattended to and without any assurance from the EEs of
TWA. Common sense should have dictated that they exert a little extra effort in making more extensive
inquiry, by themselves or through their superiors, rather than just shrug off the promblem with a callous
and uncaring remark that they had no knowledge about it.
The foregoing observations do not appear to be applicable to PAl and its EEs.
(5) In the absence of strong and positive evidence of fraud, malice or bad faith, moral damages cannot
be awarded. Neither can exemplary damages nor attorney's fees, in the absence of proof that defendants
acted with malice, fraud or BF. The censurable conduct of TWA's EEs cannot be said to have
approximated the dimensions of fraud, malice or BF. Nonetheless, the facts show that petitioners' right
to be treated with due courtesy in accordance with the degree of diligence required by law to be
exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal
damages from TWA alone. Arts. 2221 and 2222 of the Civil Code makes it clear that nominal
damages are not intended for indemnification of loss suffered but for the vindication or recognition of
a right violated or invaded. They are recoverable where some injury has been done but the amount of
which the evidence fails to show, the assessment of damages being left to the discretion of the court
accdg. to the circumstances of the case. Nominal damages of P 40,000 to be paid by TWA was awarded
in favor of petitioners as a reasonable amount in the circumstances.
6. Attorney's Fees and Interest
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident BF in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages or household helpers, laboreres and skilled
workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other cases where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded
for breach of contract.
4 Agbayani:
Damages arising from death; factors to be considered
1. number of years on the basis of which the damages shall be computed
PAGE 80

2. the rate at which the losses sustained should be fixed. In the determination of the losses or
damages sustained by dependents and heirs of the deceased, said damages consist not of the full amount
of his earnings, but of the support they received or would have received from him had he not died in
consequence of the negligence of defendant.
In fixing the amount of support, only net earnings are to be considered-- total earnings less
expenses necessary in the creation of such earnings less living and incidental expenses
Damages recoverable when death occurs due to commission of crime.-- (1) indemnity for the death
of victim (P 50T); (2) indemnity for loss of earning capacity of the deceased; (3) moral damages; (4)
exemplary damages; (5) attorney's fees and expenses of litigation; and (6) interest. Indemnity arising
from the fact of death is fixed whereas the others are still subject to the determination of the court based
on evidence presented; indemnity for death is distinct and separate from the other forms of indemnity
Common carrier not liable for moral damages to passenger injured due to negligence of driver.-A CC's bad faith is not to be lightly inferred from a mere finding that the contract was breached through
negligence of the CC's employees (Fores vs Miranda)
Extent of liability of air carrier for death of passenger:
(1) where there was no satisfactory explanation on the part of PAL as to how and why the accident
occurred, the presumption is that it was at fault, under Art. 1756
(2) liability for lost earnings are the deceased passenger's net earnings during his expected
length of life based on accepted mortality tables (compensatory damages)
(3) PAL is not liable for exemplary damages where it was not proven that it acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner
[Davila vs PAL]
Nature of liability of air carrier to its passengers:
[Zulueta vs Pan Am]
F:
Filipino passenger who went to relieve himself was berated by the captain for coming back late to the
plane and was called a monkey.
Held: A passenger is entitled to courteous treatment from the carrier and its EEs and failure of the CC
to comply with this obligation will entitle the passenger to damages.
The relation between CC and passenger involves special and peculiar obligations and duties,
differing in kind and degree, from those of almost every legal or contractual relation. On account of the
peculiar situation of the parties, the law implies a promise and imposes upon the CC the corresponding
duty of protection and courteous treatment. Therefore, the CC is under the absolute duty of protecting
his passengers from assault or insult by himself or his servants.
A contract to transport passengers is quite different in kind and degree from any other
contractual relation. And this, because of the relation which an air carrier sustains with the public. Its
business is mainly with the traveling public. It invites people to avail of the comforts and advantages it
offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect
or malfeasance of the CC's employees naturally could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be treated by the
CC's EEs with kindness, respect, courtesy and due consideration. They are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such employees. So it is,
that any rude or discourteous conduct on the part of EEs towards a passenger gives the latter an action
for damages against the CC.
PAGE 81

Damages caused by CC on third persons.-- Negligence refers to the failure to observe for the
protection of the interests of another person that degree of care, precaution, and vigilance which the
circumstances justify demand, whereby such other person suffers injury
Common carrier is liable only for damages that are natural and probable consequence of breach of
contract.-- Where the CC is guilty of a breach of contract, but acted in GF, it is liable only for the
natural and probable consequences of the breach and which the parties had foreseen or could have
reasonably foreseen at the time the obligation was constituted (includes medical, hospital expenses)
Actual damages.-- (1) lost income.-- includes income to be earned by the injured passenger or deceased
passenger had he finished his course (could have been foreseen)
(2) sum being carried by the deceased passenger which was lost
(3) funeral expenses
(4) attorney's fees
(5) loss of merchandise carried by the deceased
(6) loss of baggage and personal belongings
Exception to rule that CC is not liable for moral damages in breach of contract:
(1) where the mishap results in death of the passenger
(2) where it is proved that the CC was guilty of fraud or BF, even if death does not result Ex.
where because of the BF of the CC, the passenger suffered social humiliation, wounded feelings, serious
anxiety and mental anguish
Under 2206, the heirs of the deceased passenger may demand moral damages in an amount
commensurate with the mental anguish suffered by them
xxx
In a case where the passenger suffers physical injuries because of the CC's injuries, he cannot
recover moral damages for such breach of contract since it does not fall under any of the cases where
moral damages are recoverable under Art. 2219
xxx
In determining the amount of moral damages, the TC may consider the nature and extent of the
injuries and the suffering occasioned by them and the duration thereof. The appellate court should not
interfere unless such is palpably and scandalously excessive so as to indicate that it was the result of
passion, prejudice or corruption on the part of the TC
BF justifying moral damages must be in the securing, execution and enforcement of contract of
carriage. BF cannot be imputed but must be alleged and proved; mere carelessness of the CC's driver
does not per se constitute or justify an inference of malice or BF on the part of the CC
xxx
CC is subsidiarily liable for moral damages in actions ex delicto or where the action is based
upon its liability arising from a crime
xxx
CC is not ordinarily liable for exemplary or corrective damages based upon the wrongful act of
its EE or driver where it did not have anything to do with the wrongful act or had not previously
authorized or subsequently ratified such act (Art. 2332) This cannot be presumed but must be proven by
evidence; exemplary damages cannot be recovered as a matter of right
Nominal and exemplary damages awarded for willful breach of contract committed through
agent or EE
xxx
Where the CC has incurred in delay in the delivery of the luggage of the offended party, but it
had not acted in BF nor been guilty of gross negligence, the offended party is not entitled to moral nor
PAGE 82

exemplary damages but only to the limited amount printed in the plane ticket where the offended party
had not declared a higher value nor paid addtl. transpo charges
Liability of air carriers for moral and exemplary damages.-- [Ortigas vs Lufthansa] (1) Under the
pool arrangement among different airlines of the IATA agreement of which Alitalia and Lufthansa are
signatories, both airlines are constituted as agents of each other in the issuing of tickets and other
matters pertaining to their relations with those who would need their services.
(2) When it comes to contracts of common carriage, inattention and lack of care on the part of
the CC resulting in the failure of the passenger to be accommodated in the class contracted for amounts
to BF or fraud which entitles the passenger to the award of moral damages. Where the passenger's seat
was given to a white passenger, there is willful breach giving rise to an action for moral damages.
(3) Exemplary damages were awarded. Defendant as an airline should be made to pay an
amount that can really serve as a deterrent against a seeming pattern of indifference and unconcern, and
discrimination for racial reasons, discernible in the treatment of air passengers.
[PAL vs CA, 106 SCRA 391] The duty to exercise the utmost diligence on the part of the CC is for the
safety of passengers as well as for the members of the crew or the complement operating the carrier.
Any omission, lapse or neglect thereof will certainly result to the damage, prejudice, injuries and even
death to all aboard the plane, passengers, and crew members alike.
xxx
[KLM vs CA] A provision in passage ticket that carriage by successive air carriers is to be regarded as
a single operation makes the ticket-issuing carrier liable for tortious conduct of other carriers
xxx
Exemplary damages may be awarded where the vehicle involved in the accident operated under
the kabit system, which is a pernicious system in violation of law and which is in fraud of the traveling
public which has a right to expect that the holder of the certificate of convenience be the one to actually
operate his transport line.
xxx
CC is liable for nominal damages for its failure to bring passengers to their destination which is
in violatin of their right as passengers.
xxx
The CC is liable for the negligence of his driver in case of breach of contract and cannot avail
of the defense that he exercised due diligence in the employment of his driver. The action for breach of
contract imposes on the CC a presumption of liability upon mere proof of injury to the passenger.
xxx
An action for damages against CC for breach of contract is primary and independent and does
not depend upon the previous conviction of the driver or EE. Indemnification in a criminal prosecution
is distinct from that awarded as damages in a civil action.
Other Principles :
The offended party has the option between an action for enforcement of civil liability based on
culpa criminal and an action for recovery of damages based on culpa aquiliana. Responsibility for
negligence under the Civil Code is entirely separate from negligence under the Penal Code.
An independent civil action based on quasi-delict against the ER-operator of a negligent driver
cannot be suspended by the filing of a criminal action against the driver.
Death of driver is not a hindrance to a separate quasi-delict action against the CC-employer
PAGE 83

There is no error in awarding civil damages against a driver in a criminal case even when a
separate civil action was filed against the ER. Culpa contractual and an act or omission punishable by
law are two distinct sources of obligation.
III. CODE OF COMMERCE PROVISIONS ON OVERLAND TRANSPORTATION

COMMERCIAL CONTRACTS FOR TRANSPORTATION OVERLAND
A. Scope of Overland Transportation
B. Nature of Contract
Art. 349. A contract of transportation by land or waterways of any kind shall be
considered commercial:
1. When it involves merchandise or any object of commerce.
2. When, no matter what its object may be, the carrier is a merchant or is customarily
[habitually] engaged in transportation for the public.
Requisites for a contract of transportation by land or water to be commercial :
(1) transportation of merchandise is always commercial
(2) transportation of person or news is commercial only when the CC is a merchant or is
habitually engaged in transportation for the public
* principal requirement : the CC is a merchant or is habitually engaged in transportation for the
public; the object carried is of little importance
A contract of air transportation may be regarded as commercial since it is analogous to land and
water transportation. The reason for its non-inclusion in the Code of Commerce was that at the time of
its promulgation, air transportation on a commercial basis was not yet known.
C. Effect of Civil Code
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by special laws. (New Civil Code.)
Art. 2270.
The following laws and regulations are hereby repealed:
(2) The provisions of the Code of Commerce governing sales, partnership, agency, loan,
deposit and guaranty;
(4) All laws, Acts, parts of Acts, rules of court, executive orders, and administrative
regulations which are inconsistent with this Code. (Ibid.)
There is now no distinction between a transportation contract of a CC under the Civil Code and
a transportation contract under the Code of Commerce
PAGE 84

The New Civil Code does not expressly repeal the provisions of the Code of Commerce on
overland transportation; it makes such provisions suppletory to the provisions of the Civil Code on CCs.
D. Contract of Carriage
1. Bill of Lading
(a) Definition, Subject Matter
Art. 352. The bills of lading or tickets in cases of transportation of passengers may be
diverse, one for persons and another for baggage; but all of them shall bear the name of the
carrier, the date of shipment, the point of departure and arrival, the cost, and with regard to the
baggage, the number and weight of the packages, with such other statements which may be
necessary for their easy identification.
A bill of lading may defined as a written acknowledgment of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a person named or on his order. It
comprehends all methods of transportation.
Nature : (1) each bill is a contract in itself and the parties are bound by its terms
(2) a bill of lading is also a receipt
(3) it is also a symbol of the goods covered by it
A bill of lading is also a document of title. A document of title is any document used in the
ordinary course of business in the sale or transfer of goods, as proof of the possession or control of
goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive,
either by indorsement or by delivery, goods represented by such document.
(b) Form, Contents
Art. 350. The shipper as well as the carrier of merchandise and goods may mutually
demand of each other the issuance of a bill of lading in which there shall be stated:
1. The name, surname, and domicile of the shipper.
2. The name, surname, and domicile of the carrier.
3. The name, surname, and domicile of the person to whom or to whose order the goods
are addressed, or whether they are to be delivered to the bearer of the said bill.
4. A description of the goods, stating their generic character, their weight, and the
external marks or signs of the packages containing the same.
5. The cost of the transportation.
6. The date of which the shipment is made.
7. The place of the delivery to the carrier.
8. The place and time at which the delivery is to be made to the consignee.
9. The damages to be paid by the carrier in case of delay, if any agreement is made on
this point.
Art. 351. In transportation made by railroads or other enterprises which are subject to schedules
or the time fixed by regulations, it shall be sufficient that the bills of lading or the declarations of
shipment furnished by the shipper refer, with respect to the rate, terms, and special conditions of
the transportation, to the schedules and regulations, the application of which he requests; and
should no schedule be determined, the carrier must apply the rate of the merchandise paying the
PAGE 85

lowest, with the conditions inherent therein, always including such statement or reference to them
in the bill of lading which he delivers to the shipper.
Many of the items required in a bill of lading may be omitted with much advantage to commerce, which
aims to have the greatest number of transactions in the last possible time especially in cases where there
are tariffs or regulations issued by the carrier company. In this case, the circumstances relative to
price, term and conditions of carriage may be omitted and simple reference be made to the tariff and
regulations under which the transportation is to be made. (Art. 351)
The form of the bill of lading is not material : if it contains an acknowledgment by the carrier of
the receipt of goods for transportation, it is in legal effect, a bill of lading
A ticket issued by a carrier to a passenger is not only a receipt for the fare paid but is the
contract between the passenger and the carrier, of the passenger's right to ride in the CC's vehicle
Classes of bills of lading :
1. negotiable B/L - where it is stated that the goods will be delivered to the bearer, or to the
order of any person named in such document
2. non-negotiable B/L - where the goods are to be delivered to a specified person
3. clean B/L - does not indicate any defect in the goods
4. foul B/L - indicates that the goods covered by it are in bad condition
5. spent B/L - covers goods that have already been delivered by the CC without a surrender of a
signed copy of the B/L; the subsequent delivery of the spent B/L cannot give to the buyer of it any
actual control of the goods, or anything which can fairly be called delivery
6. through B/L - issued by the CC who is obliged to use the facilities of other carriers as well as
his own facilities for the purpose of transporting the goods from the city of the seller to the city of the
buyer, which B/L is honored by the subsequent interested carriers who do not issue their own ladings
7. on board B/L - states that the goods have been received on board the vessels which is to
carry the goods
8. received for shipment B/L - states that the goods have been received for shipment with or
w/o specifying the vessel by which the goods are to be shipped; issued when conditions are not normal
and there is an insufficiency of shipping space
9. custody B/L - issued by the CC to whom the goods have been delivered for shipment but the
steamer indicated in the B/L which is to carry the goods has not yet reached the port where the goods
are held for shipment
10. port B/L - issued by the CC to whom the goods have been delivered and the steamer
indicated in the B/L by which the goods are to be shipped is already in the port where the goods are held
for shipment
Negotiation of Bills by delivery/ by indorsement
Effect of fraud, accident on validity of negotiation : not impaired where the person to whom the
bill was negotiated paid value thereof in GF without notice of the breach of duty or loss, theft, fraud,
accident, mistake, duress or conversion
Who may negotiate? owner; any person to whom possession or custody of the bill has been
entrusted by the owner
Rights acquired:
1. such title to the goods as the person negotiating the bill had or had ability to convey to a
buyer in good faith for value
PAGE 86

2. direct obligation of the CC issuing the bill to hold possession of the goods for him according
to the terms of the B/L as fully as if such CC contracted directly with him
Transfer of non-negotiable B/L
Rights acquired:
1. as against the transferor, title to the goods subject to the terms of any agreement with the
transferor
2. right to notify the CC who issued the bill and thereby acquire the direct obligations of such
CC to hold possession of the goods for him accdg to the terms of the document; prior to notification of
the CC, the title of the transferee may be defeated by levy upon the goods or a subsequent purchaser
from the transferor of a subsequent sale of the goods by a transferor
(c) Function
Art. 353. The legal basis of the contract between the shipper and the carrier shall be the
bills of lading, by the contents of which all disputes which may arise with regard to their execution
and fulfillment shall be decided, no exceptions being admissible other than forgery or material
errors in the drafting thereof.
After the contract has been complied with, the bill of lading shall be returned to the carrier
who may have issued it, and by virtue of the exchange of this title for the article transported, the
respective obligations and actions shall be considered canceled, unless the same act the claims
which the contracting parties desire to reserve are reduced to writing, exception being made of the
provisions of Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed
by the carrier, due to its loss or for any other cause, he shall give said carrier a receipt for the
goods delivered, this receipt producing the same effect as the return of the bill of lading.
B/L constitutes the legal evidence of the contract of transportation --> all disputes between the parties
regarding the execution and performance of the contract shall be decided by the contents of the B/L
issued by the CC --> the law admits no exceptions other than falsity and material error in the drafting of
the B/L
As a contract expressing the terms and conditions upon which the property is to be transported,
it is to be regarded as merging all prior and contemporaneous agreements of the parties, and in the
absence of fraud, concealment or mistake, its terms or legal import, when free from ambiguity cannot be
explained nor added to by parol (Parol Evidence Rule)
2. Refusal to Transport
Art. 356. Carriers may refuse to accept packages which appear unfit for transportation;
and if said transportation is to be made by railway, and the shipment is insisted on, the company
shall carry them, being exempt from all liability if its objections are so stated in the bill of lading.
CC cannot ordinarily refuse to carry a particular class of goods to the prejudice of the traffic in those
goods
exception : when the goods or packages are unfit for transportation
PAGE 87

--> if transpo is insisted upon, railroads cannot refuse to carry them, but they shall be exempt from all
responsibility if their objections are made to appear in the B/L
3. Doubtful declaration of contents
Art. 357. If by reason of well-founded suspicions of falsity in the declaration of the
contents of a package, the carrier should decide to examine it, he shall do so before witnesses, in
the presence of the shipper or of the consignee.
Should the shipper or consignee cited not appear, the examinations shall be made before a
notary, who shall draft a certificate of the result of the examination, for such purposes as may be
proper.
If the declaration of the shipper should be correct, the expenses caused by the examination
and those of carefully repacking the packages shall be defrayed by the carrier, and in a contrary
case by the shipper.
If the CC has a well-founded suspicion of falsity in the declaration as to the contents of a package, he
may examine it --> he must follow the procedure under 357
4. No bill of lading
Art. 354. In the absence of a bill of lading the respective claims of the parties shall be
decided by the legal proofs that each one may submit in support of his claims, in accordance with
the general provisions established in this Code for commercial contracts.
Art. 351. In transportation made by railroads or other enterprises which are subject to
schedules or the time fixed by regulations, it shall be sufficient that the bills of lading or the
declarations of shipment furnished by the shipper refer, with respect to the rate, terms, and special
conditions of the transportation, to the schedules and regulations, the application of which he
requests; and should no schedule be determined, the carrier must apply the rate of the
merchandise paying the lowest, with the conditions inherent therein, always including such
statement or reference to them in the bill of lading which he delivers to the shipper.
Bill not essential to contract : While under 350, the shipper and the CC may mutually demand that a
B/L is made, it is not obligatory. The fact that a B/L is not issued does not preclude the existence of a
contract of transpo. Provided there is a meeting of the minds and from such meeting arise rights and
obligations, there should be no limitations as to form.
The B/L is not essential to the contract, although it may become obligatory by reason of the
regulations of companies or as a condition imposed in the contract by agreement of the parties
themselves
Where no B/L is issued, the disputes between the parties shall be decided accdg. to the rules laid
down in Art. 354
E. Responsibility of the Carrier
1. When it commences
Art. 355. The liability of the carrier shall begin from the moment he receives the
merchandise, in person or through a person entrusted therewith in the place indicated for their
reception.
PAGE 88
The responsibility of the CC commences from the moment he receives the merchandise --> the delivery
must be made to him personally or through his duly authorized agent, and at the place indicated for
receiving the merchandise
2. Route
Art. 359. If there should be an agreement between the shipper and the carrier with regard
to the road over which the transportation is to be made, the carrier may not change the route,
unless obliged to do so by force majeure; and should he do so without such cause, he shall be liable
for any damage which may be suffered by the goods transported for any other cause whatsoever,
besides paying the amount which may have been stipulated for such a case.
When on account of said force majeure the carrier is obliged to take another route, causing
an increase in the transportation charges, he shall be reimbursed for said increase after formal
proof thereof.
Where there is an agreed route, the CC shall be liable for losses due not only to the change of route but
also to other causes, together with the indemnity agreed upon --> the CC may not avail of the contract
limiting his liability in case of unjustified change of route
Where there is no agreed route, the carrier must select one which may be the shortest, least
expensive and practically passable
3. Care of Goods
Article 361. The merchandise shall be transported at the risk and venture of the shipper, if
the contrary was not expressly stipulated.
Therefore, all damages and impairment suffered by the goods during the transportation,
by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for
the account and risk of the shipper.
The proof of these accidents is incumbent on the carrier.
When goods are delivered on board a ship in good order and condition, and the shipper-owner delivers
them to the shipper in bad order and condition, it then devolves upon the shipowner to both allege and
prove that the goods were damaged by reason of some fact which legally exempts him from liability
The shipper will suffer losses and deteriorations arising from fortuitous event, force majeure, or
inherent nature and defects of the goods (at the risk and venture of the shipper)
It does not mean that the CC is free from liability for losses and deterioration arising from his
negligence or fault, which is presumed
Relate this with Art. 1734 and 1735 of the Civil Code
Art. 362. The carrier, however, shall be liable for the losses and damages arising from the
causes mentioned in the foregoing article if it is proved that they occurred on account of his
negligence or because he did not take the precautions usually adopted by careful persons, unless
the shipper committed fraud in the bill of lading, making him believe that the goods were of a class
or quality different from what they really were.
PAGE 89

If, notwithstanding the precaution referred to in this article, the goods transported run the
risk of being lost on account of the nature or by reason of an unavoidable accident, there being no
time for the owners to dispose of the same, the carrier shall proceed to their sale, placing them for
this purpose at the disposal of the judicial authority or of the officials determined by special
provisions.
Burden of proof : the CC has the burden of proving that the injury was occasioned by one of the
excepted causes
The shipper then has the burden to prove that although the injury may have been occasioned by
one of the excepted causes, yet still the CC is responsible if the injury might have been avoided by the
exercise of reasonable skill and attention on his part
Art. 362 is in consonance with Art. 1735, NCC --> except that under 1732, proof of extra-o
diligence is required and not just ordinary diligence as implied under 362
Where goods run risk of loss due to their nature, Art. 362 provides for the remedy of sale by the
CC of the goods, placing them for the purpose at the disposal of the judicial authority or of the officials
designated by special provisions
the goods, unless the same is due to any of the ff. causes only:
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority. (New Civil Code.)
Art. 1735. In all cases other than those mentioned in Nos. 1,2,3,4, and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, CCs are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary diligence as required
in Art. 1733. (Ibid.)
4. Delivery
(a) Condition of Goods
Art. 363. With the exception of the cases prescribed in the second paragraph of Article
361, the carrier shall be obliged to deliver the goods transported in the same condition in which,
according to the bill of lading, they were at the time of their receipt, without any damage or
impairment, and should he not do so, he shall be obliged to pay the value of the goods not
delivered at the point where they should have been and at the time the delivery should have taken
place.
If part of the goods transported should be delivered the consignee may refuse to receive
them, when he proves that he cannot make use thereof without the others.
PAGE 90

Duty to deliver goods : duty to deliver the goods in the same condition in which accdg. to the B/L they
were found at the time they were received, without damage or impairment --> otherwise, the CC is liable
for damages
Partial delivery: The consignee may refuse to receive the goods delivered, if he can prove that he
cannot make use of them independently of those not delivered --> true solution depends upon the
economic use which the goods transported have (consignee cannot be arbitrary and must justify his
determination)
Estoppel of shipper by laches : neglect or delay of shipper to demand immediately, or within a
reasonable time, the return of the merchandise shipped or its value in case of non-delivery constitutes
estoppel by laches
Places the CC at a disadvantageous position to show that it had fulfilled what it had
undertaken; makes it difficult for the CC to prove delivery
Art. 364. If the effect of the damage referred to in Article 361 should be only a reduction
in the value of the goods, the obligation of the carrier shall be reduced to the payment of the
amount of said reduction in value, after appraisal by experts.
Where all the goods are delivered but damage is to such an extent that their value is diminished,
the obligation of the CC shall be reduced to the payment of the amount which, in the judgment of
experts, constitute such difference in value --> subject of course to other damages under the NCC
Art. 365. If, on account of the damage, the goods are rendered useless for sale or
consumption for the use for which they are properly destined the consignee shall not be bound to
receive them, and may leave them in the hands of the carrier, demanding payment of their value at
the current market price that day.
If among the goods damages there should be some in good condition and without any
defect whatsoever, the foregoing provision shall be applicable with regard to the damaged ones,
and the consignee shall receive those which are sound, this separation being made by distinct and
separate articles, no object being divided for the purpose, unless the consignee proves the impossibility of conveniently making use thereof in this form.
The same provision shall be applied to merchandise in bales or packages, with distinction
of the packages which appear sound.
Where damage renders the goods useless for sale and consumption for the purposes for which they are
properly destined:
1. if the damage affects all goods, the consignee may abandon all the goods to the CC who shall
pay the corresponding damages
2. if the damage affects only some of the goods, the consignee may abandon only the damaged
goods --> but if the consignee can prove that it is impossible to conveniently use the undamaged goods
in that form, without the damaged goods, the law authorizes the consignee to abandon all the goods
Art. 366. Within the twenty-four hours following the receipt of the merchandise a claim
may be made against the carrier on account of damage or average found upon opening the
packages, provided that the indications of the damage or average giving rise to the claim cannot be
ascertained from the exterior of said packages, in which case said claim shall only be admitted at
the time of the receipt of the packages.
PAGE 91

which the goods transported were delivered.
In case of damaged goods, the damage may either be (1) ascertainable only by opening of the packages,
or (2) ascertainable from the outside part of the package
In Case 1, the claim against the CC for damages must be made within 24 hours following the
receipt of the merchandise
In Case 2, the claim must be made at the time of receipt
The claim must be made before the payment of transportation charges
** otherwise, no action for damages may be maintained against the CC
When period begins to run : period begins to run when the consignee received possession of the
goods such that he may exercise over it the ordinary control pertinent to ownership
There must be delivery of the merchandise by the CC to the consignee at the place of
destination --> Art. 366 applies only to cases of claims for damage to goods actually turned over by the
CC and received by the consignee
The conditions under Art. 366 are not limitation of action but are conditions precedent to a
cause of action --> if the shipper or consignee fails to allege and prove the conditions under 366, he
shall have no right of action against the CC
The CC may require in the B/L that the goods be examined at the time of delivery thereof -->
the CC may likewise waive such right
Art. 366 is modified by a B/L prescribing a longer period for filing of written claim with the CC
or its agent
The unilateral action of a CC in stamping a condition in the notice of arrival, requiring
examination of bad order cargo by the ship's agent before removal from port authorities as condition
precedent to an action for recovery cannot modify or add conditions to the B/L --> unreasonable and
unfair in that it allows CC to avoid responsibility for the loss of or damage to their cargo when in
packages or covered
The purpose of short period for claiming damages : to afford the CC a reasonable opportunity
and facilities to check the validity of the claims while the acts are still fresh in the minds of the person
who took part in the transaction and the documents are still available.
The consignee may file a provisional claim : it is not necessary that such claim should state a
detailed list of the loss or damage; they only have to contain descriptions of the shipments in question
sufficient to have allowed the CC to make reasonable verifications of such claim --> the determination
of the specific amount of damages claimed should be done carefully and without haste and these can be
done only in a formal claim which will be filed after the provisional claim
This stipulation is in the nature of a limitation upon the owner's right to recovery --> the burden
of proof is on the CC to show that the limitation was reasonable and in proper form or within the time
stated (see Southern Lines vs CA)
A a stipulation in the B/L providing for a shorter period than the statutory period within which
to bring action for breach is valid --> does not in any way defeat the right to recover but merely
requires that said right be asserted by action at an earlier period (filing of claims is different from filing
of suits)
PAGE 92
Art. 367. If there should occur doubts and disputes between the consignee and the carrier
with regard to the condition of goods transported at the time of their delivery to the former, the
said goods shall be examined by experts appointed by the parties, and in case of disagreement, a
third one appointed by the judicial authority, the result of the examination being reduced to
writing; and if the persons interested should not agree to the report of the experts and could not
settle their disputes, said judicial authority shall order the deposit of the merchandise in a safe
warehouse, and the parties interested shall make use of their rights in the proper manner.
If doubts and disputes should arise between the consignee and the CC with respect to the condition of
the goods transported at the time of the delivery, Art. 367 shall govern --> expert opinion on the matter
is not conclusive on the parties
(b) To Whom Delivery Made
Art. 368. The carrier must deliver to the consignee without any delay or obstruction the
merchandise received by him, by the mere fact of being designated in the bill of lading to receive it;
and should he not do so he shall be liable for the damages which may arise therefrom.
The delivery must be made to the consignee
Where the B/L is issued to the order of the shipper, the CC is under a duty not to deliver the
merchandise except upon presentation of the B/L duly indorsed by the shipper, and where the CC
delivered the goods to another person who did not present the B/L, such CC is liable for misdelivery -->
duty to transport the goods safely and to deliver them to the person indicated in the B/L
Misdelivery: Delivery to a person different from that indicated in the B/L --> different from nondelivery
In case of conflicting orders of the shipper and the consignee (where one orders the return and
the other orders the delivery of the goods), there is no other recourse than to determine at what moment
the right of the shipper to countermand the shipment terminates --> this moment can be no other than the
time when the consignee or legitimate holder of the B/L appears with such B/L before the CC and makes
himself a party to the contract (prior to that time, he is a stranger to the contract)
(c) Judicial Deposit
Art. 369. Should the consignee be not found at the domicile indicated in the bill of lading,
or should refuse to pay the transportation charges and expenses, or to receive the goods, the
deposit of said goods shall be ordered by the municipal judge, where there is no judge of first
instance, to be placed at the disposal of the shipper or sender, without prejudice to a person having
a better right, this deposit having all the effects of a delivery.
Judicial deposit as a remedy:
1. where the consignee cannot be found at the residence indicated
2. where the consignee refused to pay the transportation charges
3. where the consignee refuses to receive the goods
PAGE 93

Judicial deposit shall produce all the effects of delivery subject to third persons with better
rights
Duty to look for consignee : if consignee is not present, he is entitled to reasonable notice from
the CC of their arrival and a fair opportunity to take care of and remove them
: if the consignee is unknown to the CC, the latter must use proper and reasonable diligence to
find him, and if the consignee still cannot be found, the goods may be stored in a proper place and the
CC will have performed his whole duty and shall be discharged from liability as a CC
Failure to look for consignee and to give him reasonable notice shall make the CC liable for
damages resulting from the delay in the receipt of the goods by the consignee --> apply 1738 on the
liability of the CC even when the goods are deposited in its warehouse until after the consignee has been
given reasonable notice and opportunity to remove the goods
Art. 1752. Even when there is an agreement limiting the liability of the CC in the vigilance
over the goods, the CC is disputably presumed to have been negligent in case of their loss,
destruction or deterioration. (New Civil Code.)
(d) When to be made
Article 370. If a period has been fixed for the delivery of the goods, it must be made
within the same, otherwise the carrier shall pay the indemnity agreed upon in the bill of lading,
neither the shipper nor consignee being entitled to anything else.
Should no indemnity have been agreed upon and the delay exceeds the time fixed in the bill
of lading, the carrier shall be liable for the damages which may have been caused by the
delay.
Art. 358. Should no period within which goods are to be delivered be previously fixed, the
carrier shall be under the obligation to forward them in the first shipment of the same or similar
merchandise which he may make to the point of delivery; and should he not do so, the damages
occasioned by the delay shall be suffered by him.
Where period fixed for delivery : the CC must deliver the goods within the time fixed --> for failure to
do so, the CC shall pay indemnity stipulated in the B/L, neither the shipper nor the consignee being
entitled to anything else --> however, under the CC, damages shall be paid if the carrier refuses to pay
the stipulated indemnity or is guilty of fraud in the fulfillment of his obligation (Art. 1126,NCC)
If no indemnity has been stipulated and the delay exceeds the time fixed in the B/L, the CC shall
be liable for the damages that the delay may have caused, e.g. the difference between the MV of the
goods at the time when they should have been delivered, and the price at the time when they were
delivered to which may be added reasonable expenses caused by delay
A CC in GF may be held liable only for damages that were foreseen or might have been
foreseen at the time the contract of transpo was entered into --> before a CC could be held liable for
special damages, such as loss of profits on account of the delay or failure of deliver, he must have notice
at the time of the delivery of the particular circumstances attending the shipment and which would
probably lead to such special loss if he defaulted (Mendoza vs PAL)
If the CC incurs in delay in transporting the goods, a natural disaster shall not free such carrier
from responsibility; where the CC without cause delays the transportation of the goods, the contract
limiting the CC's liability cannot be availed of in case of the loss, destruction or deterioration of the
goods
PAGE 94

Where property in the hands of a CC is not delivered within a reasonable time after it has
reached its destination, the CC in the absence of any legal exemption and after demand has been made
and delivery refused, is liable for a conversion of the property --> the consignee may waive title to the
property and sue for conversion and is entitled to the value of the goods at the time they should have
been delivered to him --> subsequent tender of the goods by the CC is not available as a defense
If there has been demand and the CC tenders the goods, the consignee cannot refuse to receive
the goods and sue for conversion; his sole remedy is an action for damages on account of the delay -->
there can only be conversion if there has been demand and the CC refuses delivery
The time for delivery when no period fixed : the CC shall be bound to forward them in the first
shipment of the same or similar goods which he makes to the point where he must deliver them -->
should he not do so, the damages caused by the delay shall be for his account
Art. 358 is not violated when though the goods were not shipped on the train agreed upon, they
were shipped on another train which arrived earlier than the one agreed upon
(e) Two or more carriers
Art. 373. A carrier who delivers merchandise to a consignee by virtue of agreements or
combined services with other carriers shall assume the obligations of the carriers who preceded
him, reserving his right to proceed against the latter if he should not be directly responsible for the
fault which gives rise to the claim of the shipper or of the consignee.
The carrier making the delivery shall also assume all the actions and rights of those who
may have preceded him in the transportation.
The shipper and the consignee shall have an immediate right of action against the carrier
who executed the transportation contract, or against the other carriers who received the goods
transported without reservation.
The reservations made by the latter shall not however exempt them from the liabilities they
may have incurred by reason of their own act.
Successive carriers shall assume the obligations of previous carriers but have a right of action against
previous carriers is the latter are directly responsible for the fault giving rise to the claim of the shipper
(f) Obligation to keep registry
Art. 378. Transportation agents shall be obliged to keep a special registry, with the
formalities required by Article 36, in which there shall be entered, in progressive order of number
and dates, all the goods the transportation of which is undertaken, stating the circumstances
required by Articles 350 et seq. for the respective bills of lading.
(g) Compliance with administrative regulations
Art. 377. The carrier shall be liable for all the consequences arising from noncompliance
on his part with the formalities prescribed by the laws and regulations
of the public
administration during the entire course of the trip and upon arrival at the point of destination,
except when his omission arises from his having been induced into error by false statements of the
shipper in the declaration of the merchandise.
PAGE 95

If the carrier has acted in accordance with a formal order received from the shipper or
consignee of the merchandise both shall incur liability.
The CC is exempted from responsibility where his failure to comply arises from having been led into
error by the falsehood on the part of the shipper in the declaration of the merchandise
The shipper or consignee may become liable for noncompliance with govt. rules and
regulations, when the CC has acted by virtue of a formal order of the shipper or consignee --> but the
CC continues to be liable
F. Rights and Obligations of Shipper and/or Consignee
1. Right to Damages
(a) Condition imposed on right
Art. 366. Within the twenty-four hours following the receipt of the merchandise a claim
may be made against the carrier on account of damage or average found upon opening the
packages, provided that the indications of the damage or average giving rise to the claim cannot be
ascertained from the exterior of said packages, in which case said claim shall only be admitted at
the time of the receipt of the packages.
which the goods transported were delivered.
Art. 357. If by reason of well-founded suspicions of falsity in the declaration of the
contents of a package, the carrier should decide to examine it, he shall do so before witnesses, in
the presence of the shipper or of the consignee.
Should the shipper or consignee cited not appear, the examinations shall be made before a
notary, who shall draft a certificate of the result of the examination, for such purposes as may be
proper.
If the declaration of the shipper should be correct, the expenses caused by the examination
and those of carefully repacking the packages shall be defrayed by the carrier, and in a contrary
case by the shipper.
PAGE 96

Effect of return of the B/L or giving of the receipt: The respective obligations and actions of the
parties against each other shall be considered canceled, except where in the same act of return or giving
of a receipt the claims of the parties be reduced to writing subject to the provisions of Art. 366
(b) Amount of damages for loss
Art. 372. The value of the goods which the carrier must pay in case of their being lost or
mislaid shall be fixed in accordance with what is stated in the bill of lading, no proofs being
allowed on the part of the shipper that there were among the goods declared therein articles of
greater value, and money.
Horses, vehicles, vessels, equipments, and all the other principal and accessory means of
transportation, shall be especially obligated in favor of the shipper, although with respect to
railroads said obligation shall be subordinated to the provisions of the laws of concession with
regard to property and to those of this Code with regard to the manner and form of making
attachments and seizures against the said companies.
The value of the goods stated in the B/L is conclusive between the parties and the shipper is not allowed
to prove a higher value
It is only when the CC's fault is so gross as to amount to actual fraud, that the actual amount of
the losses and damages suffered may be proved by the shipper against the carrier
Par. 2 especially binds the horses, vehicles, vessels and eqpt. and all other principal and accessory
means of the CC in favor of the shipper --> this lien is a security for the payment of the value of the
goods which the CC must pay in case of loss or misplacement
Art. 1744, NCC. A stipulation between the CC and the shipper or owner limiting the
liability of the former for the loss, destruction or deterioration of the goods to a degree less than
extra-o diligence shall be valid, provided it be:
(1) in writing, signed by the shipper or owner;
(2) supported by a valuable consideration other than the service rendered by the CC; and
(3) reasonable, just, and not contrary to public policy. (New Civil Code.)
(c) Amount of damages for delay
Art. 371. In cases of delay on account of the fault of the carrier, referred to in the
foregoing articles, the consignee may leave the goods transported in the hands of the carrier,
informing him thereof in writing before the arrival of the same at the point of destination.
When this abandonment occurs, the carrier shall satisfy the total value of the goods, as if
they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss and damages on account of the
delays cannot exceed the current price of the goods transported on the day and at the place where
the delivery was to have been made. The same provision shall be observed in all cases where this
indemnity is due.
Damages for delay (par. 3) : Provided there is no express agreement as to indemnity in the B/L and there
is no fraud on the part of the CC, and the goods have a known current price at the place and on the day
they should have been delivered, the damages shall not exceed such value --> subject to Civil Code
provisions on damages in case of delay
PAGE 97
2. Right to abandon
Art. 371. In cases of delay on account of the fault of the carrier, referred to in the
foregoing articles, the consignee may leave the goods transported in the hands of the carrier,
informing him thereof in writing before the arrival of the same at the point of destination.
When this abandonment occurs, the carrier shall satisfy the total value of the goods, as if
they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss and damages on account of the
delays cannot exceed the current price of the goods transported on the day and at the place where
the delivery was to have been made. The same provision shall be observed in all cases where this
indemnity is due.
Right of abandonment: Exceptional but limited right
The right must be exercised during the intervening period between the moment when the fault of
the CC produces a delay, which is the generative cause of the action, until the moment just before the
arrival of the goods at the place of delivery, by communicating such abandonment to the CC in writing
Where these conditions do not concur, the refusal to accept cannot be effective
Damages for abandonment : Art. 371 (2) --> subject to Civil Code
Art. 360. The shipper may, without changing the place where the delivery is to be made,
change the consignment of the goods delivered to the carrier, and the latter shall comply with his
orders, provided that at the time of making the change of the consignee the bill of lading
subscribed by the carrier, if one were issued, be returned to him, exchanging it for another containing the novation of the contract.
The expenses arising from the change of consignment shall be defrayed by the shipper.
Art. 365. If, on account of the damage, the goods are rendered useless for sale or
consumption for the use for which they are properly destined the consignee shall not be bound to
receive them, and may leave them in the hands of the carrier, demanding payment of their value at
the current market price that day.
If among the goods damages there should be some in good condition and without any
defect whatsoever, the foregoing provision shall be applicable with regard to the damaged ones,
and the consignee shall receive those which are sound, this separation being made by distinct and
separate articles, no object being divided for the purpose, unless the consignee proves the impossibility of conveniently making use thereof in this form.
The same provision shall be applied to merchandise in bales or packages, with distinction
of the packages which appear sound.
Art. 363. With the exception of the cases prescribed in the second paragraph of Article
361, the carrier shall be obliged to deliver the goods transported in the same condition in which,
according to the bill of lading, they were at the time of their receipt, without any damage or
impairment, and should he not do so, he shall be obliged to pay the value of the goods not
delivered at the point where they should have been and at the time the delivery should have taken
place.
If part of the goods transported should be delivered the consignee may refuse to receive
them, when he proves that he cannot make use thereof without the others.
PAGE 98

Cases where consignee may abandon goods :
1. Art. 363, in case of partial non-delivery where the consignee proves that he cannot make use
of the goods capable of delivery independently of those not delivered
2. Art. 365, where the goods are rendered useless for sale and consumption for the purposes for
which they are properly destined
3. Art. 371, where there is delay through the fault of the carrier
2. Right to change consignment
Art. 360. The shipper may, without changing the place where the delivery is to be made,
change the consignment of the goods delivered to the carrier, and the latter shall comply with his
orders, provided that at the time of making the change of the consignee the bill of lading
subscribed by the carrier, if one were issued, be returned to him, exchanging it for another containing the novation of the contract.
The expenses arising from the change of consignment shall be defrayed by the shipper.
3. Obligation to pay transportation charges
Art. 374. The consignees to whom the remittance may have been made may not defer the
payment of the expenses and transportation charges on the goods that they received after twentyfour hours have elapsed from the time of the delivery; and in case of delay in making this payment,
the carrier may demand the judicial sale of the goods he transported to a sufficient amount to
cover the transportation charges and the expenses incurred.
Railroad corporations have the power to detain freight, goods or luggage, to answer for the
freight, storage and other transportation charges
In case of failure of the shipper, owner or consignee to pay for such charges, the CC has the
power to sell such freight, goods, or luggage at public auction following the procedure under the law
Art. 375. The goods transported shall be specifically bound to answer for the
transportation charges and for the expenses and fees caused by the same during their
transportation, and until the time of their delivery.
This special right shall be limited to eight days after the delivery has been made, and after
said prescription the carrier shall have no further right of action than that corresponding to an
ordinary creditor.
Art. 376. The preference of the carrier to the payment of what is due him for the
transportation and expenses of the goods delivered to the consignee shall not be affected by the
bankruptcy of the latter, provided the action is brought within the eight days mentioned in the
foregoing article.
Art. 2241. With reference to specific movable property of the debtor, the ff. claims or liens
shall be preferred :
xxx
(9) Credits for transportation, upon the goods carried, for the price of the contract and
incidental expenses, until their delivery and for thirty days thereafter. (New Civil Code.)
PAGE 99
Two sanctions for the enforcement by the CC of the payment of expenses and transpo charges :
1. Art. 374 - judicial sale of the goods transported
2. Art. 375 - creating a lien in favor of the CC on the goods transported --> 8 day period has
been increased to 30 days by the NCC
The purpose of the lien and time limit: Reciprocal to that established in favor of the shipper
under
Art. 372(par. 2); time limit rests on the necessity which the consignee must have for alienation of the
goods, by which the CC is given a period relatively urgent pertaining to the said goods transported -->
after the time has prescribed, his preference prescribes and his only remedy is by ordinary action
The mere fact that the goods remain in the possession of the CC because they have not been
removed by the consignee, and the right of the CC to demand the sale of the goods to satisfy the cost of
transportation and other expenses, do not deprive the CC of its right to demand in a proper action the
amounts owing to it by reason of the contract of transpo
The bankruptcy of the consignee shall not cut off the preference of the CC, provided that the
claim is made w/in 30 days from date of delivery (NCC)
5. Obligation to return bill of lading
Under par. 2, Art. 353, after the contract of transpo has been complied with, the B/L shall be returned to
the issuing CC in exchange for the goods transported which are delivered to the shipper or consignee
Where the consignee upon receiving the goods cannot return the B/L to the CC by reason of its
loss or any other cause, par. 3, Art. 353 provides that he must give the CC a receipt of the goods
delivered
Effect of return of the B/L or giving of the receipt: The respective obligations and actions of the
parties against each other shall be considered canceled, except where in the same act of return or giving
of a receipt the claims of the parties be reduced to writing subject to the provisions of Art. 366
G. Applicability of Provisions
PAGE 100

Art. 379. The provisions contained in Article 349 et seq. shall also be understood as
relating to persons who, although they do not personally effect the transportation of commercial
goods, contract to do so through others, either as contracts for a special and fixed transaction or as
freight and transportation agents.
In either case they shall be subrogated to the place of the carriers with regard to the
obligations and liability of the latter, as well as with regard to their right.
IV. ADMIRALTY AND MARITIME COMMERCE
A. Concept of Admiralty; Jurisdiction over Admiralty Cases
BP 129, Sec. 19. Regional Trial Courts shall exercise exclusive original jurisdiction:
xxx
(3) In all actions in admiralty and maritime jurisdiction where the demand or claim
exceeds one hundred thousand pesos (P100,000) xxx.
BP 129, Sec. 33. Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit
Trial Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and
intestate, including the grant of provisional remedies in proper cases, where the value of the
personal property, estate or amount of the demand does not exceed one hundred thousand pesos
(P100,000), or in Metro Manila where such personal property, estate, or amount of the demand
does not exceed Two hundred thousand pesos (P200,000), exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses, and costs, the amount of which must be
specifically alleged: Provided, That interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs shall be included in the determination of the filing fees: Provided, further,
That where there are several claims or causes of action between the same or different parties,
embodied in the same complaint, the amount of the demand shall be the totality of the claims in all
the causes of action, irrespective of whether the causes of action arose out of the same or different
actions.
International Harvester vs Aragon 84 Phil 363
F:
The S/S Belle of the Sea took on board in LA, goods for shipment to Manila and covered by B/L No.
105. The S/S Belle of the Sea arrived in Manila and discharged her cargo at the govt. piers under the
supervision and custody of the defendant Manila Terminal Inc. Of the entire shipment, one carton of assorted
samples with a stipulated value of P200 was not delivered to plaintiff Yaras and Co. The latter filed a
complaint with the Municipal Court of Manila against International Harvester, as agent of the S/S Belle of the
Sea and Manila Terminal Inc. The complaint charged that the merchandise was lost through the negligence of
either of the defendants. Before trial could proceed, the International Harvester Inc. (IH) filed a motion to
dismiss on the ground that the court had no jurisdiction. The motion was denied. Prohibition proceedings were
instituted before the CFI of Manila to stop the judge from proceeding with the action. The petition was granted
and the respondents now appeal.
Held : It is clear from the complaint that IH is being held liable only on the assumption that the goods
had been lost in transit or before being discharged at the pier. The liability of IH is predicated on the
contract of carriage by sea between IH and Yaras & Co. as evidenced by the B/L, independently of the
liability of the Manila Terminal Co. as operator of an arrastre service.
Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever they were
executed or are to be performed, but not over non-maritime contracts. Whether or not a contract is
maritime depends not on the place where the contract is made and is to be executed, making the locality
PAGE 101

the test, but on the subject matter of the contract, making the true criterion a maritime service or a
maritime transaction. Specifically, admiralty has jurisdiction of a proceeding in rem or in personam for
the breach of a contract of affreightment, whether evidenced by a B/L or a charter party. And typical of
a controversy over contracts of affreightment is a suit of one party against the other for loss or damage
to the cargo. This is the very case before us, because the respondent Yaras & Co. seeks to recover from
the petitioner IH the value of certain lost cargo.
The contention of Yaras that the admiralty jurisdiction is not involved because the contract in
question was made upon land and to be terminated upon land, merely reflects the English rule which had
long been rejected in the US. It is now well-settled in the latter country that the jurisdiction of admiralty
in matters of contract depends upon the subject matter, i.e., the nature and character of the contract and
that the English rule which conceded jurisdiction only to contracts made upon and to be performed upon
navigable waters, is inadmissible, the true criterion being that the contract has reference to maritime
service or maritime transaction. Under the law, the CFI has jurisdiction over admiralty cases.
B. Vessels
1. Meaning
Lopez vs Duruelo 52 Phil 229
F:
Augusto Lopez, of Silay, Occidental Negros, wanted to embark on the interisland steamer San Jacinto
bound for Iloilo. The steamer was anchored some half a mile from the shore or port of Silay. In order to board
the steamer, Lopes boarded the motor boat Jison at the landing which was then engaged in conveying
passengers and luggage to and from the steamer. Whether due to negligence or incompetence of Duruelo, the
engineer of Jison aged 16, as alleged, the boat approached too near to the stern of the steamer wherein it was
struck by the still turning propeller of the steamer. The boat sunk and Lopez was thrown into the water against
the propeller wherein he suffered a bruise in the breast, two serious fractures of the bones of the left leg and a
compound fracture of the left femur. As a result, Lopez was hospitalized from February 28 to October 19, 1927
or eight months. Lopez filed a complaint and sought damages amounting to P120,000 alleging that he suffered
injuries due to the negligence and inexperience having only been in its third day of apprenticeship on the day of
the accident. It was also alleged that Jison was overloaded when it carried 14 passengers instead of its capacity
for eight or nine. The defendants assigned in it demurrer that the plaintiff did not show a right of action since
the complaint did not allege that a protest had been presented by the plaintiff within 24 hours after the
occurrence, to the competent authority of the port where the accident occurred as provided under the Code of
Commerce. CFI dismissed the complaint, hence the appeal.
Held : Assuming that article 835 of the Code of Commerce states a condition precedent to the
maintenance of an action in a case requiring protest, such as protest is nevertheless not necessary in the
case at bar. The article is found in the section dealing with collisions and the context shows the
collisions intended are collisions of sea-going vessels. Said article cannot be applied to small boats
engaged in river and bay traffic. The vessels intended in the Third Book of the Code of Commerce
which deals with maritime commerce and in which Art. 865 is found was evidently intended to define the
law relative to merchant vessels and marine shipping, and the vessels intended in that Book are such as
are run by masters having special training with the elaborate apparatus of crew and equipment indicated
in the Code. The word "vessel" used in the section was not intended to include all ships, craft, or
floating structures of every kind without limitation, and the provision of that section should not be held
to include minor craft engaged only in river or bay traffic. Vessels of minor nature, such as river boats
and those carrying passengers from ship to shore are governed as to their liability in passengers, by the
Civil Code.
The word ship and vessel, in their grammatical sense are applied to designate every kind of
craft, large or small, merchant or war, a signification which does not differ essentially from its juridical
meaning according to which vessels for the purpose of the Code of Commerce, are considered not only
PAGE 102

those engaged in navigation whether coastwise or high seas, but also floating docks, pontoons,dredges,
scows, and other floating apparatus for the service of the industry or maritime commerce.
Yet notwithstanding these principles from which it would seem that any floating apparatus
which serves directly for the transportation of things or persons or which indirectly is related to this
industry, ought to be subjected to the principles of the Code with reference to ownership, transfer, rights,
registrations, etc. they are not applicable to small craft which are only subject to administrative
regulations in the matter of port service and in the fishing industry.
But even if The Code Of Commerce was applicable, a protest still need not be made since under
Art. 836, want of protest cannot prejudice a person not in a condition to make known his wishes. A
person who has suffered injuries like that of the plaintiff cannot be supposed to be in a condition to
make a protest.
2. Nature and acquisition of vessels
Art. 573. Merchant vessels constitute property which may be acquired and transferred by
any of the means recognized by law. The acquisition of a vessel must be included in a written
instrument, which shall not produce any effect with regard to third persons if not recorded in the
registry of vessels.
The ownership of a vessel shall also be acquired by the possession thereof
in good faith for three years, with a good title duly recorded.
In the absence of any of these requisites, uninterrupted possession for ten years shall be
necessary in order to acquire ownership.
A captain cannot acquire by prescription the ship of which he is in command.
Vessels: Those engaged in navigation , whether coastwise or on the high seas, including floating docks,
pontoons, dredges, scows and any other floating apparatus destined for the services of the industry or
maritime commerce
Vessels engaged in the business of carrying or transporting passengers or goods for
compensation, offering their services to the public are common carriers --> governed primarily by the
Civil Code provisions on common carriers and subsidiarily by the Code of Commerce and special laws
The Code of Commerce regulates merchant ships or those engaged in the transportation of
passengers and freight from one port to another or from place to another
The Code of Commerce does not refer to pleasure ships, yachts, pontoons, health service and
harbor police vessels, floating storehouses, warships or patrol vessels, coast guard vessels, fishing
vessels, towboats and other craft destined to other uses, such as coast and geodetic survey, scientific
research and exploration, crafts engaged in the loading and the discharge of vessels, or transhipments
from one vessel to another
Vessels of a minor nature not engaged in maritime commerce, such as, river boats and those
carrying passengers from ship to shore, must be governed as to their liability to passengers, by the
provisions of the Civil Code
Modes of acquisition: (1) purchase and sale, (2) prescription, (3) construction, (4) capture, (5)
donation, (6) succession, and (7) other means, such as barter
Possession in GF will ripen into ownership in 3 years; if the possession is otherwise, it will
ripen into ownership in 10 years
There can be no prescription in favor of the captain because the nature of the possession of the
captain is such that he is only an agent of the owner, a depositary of the vessel
The acquisition of a vessel must appear in a written instrument and such instrument must be
registered in order that the transfer may affect third persons
PAGE 103
Art. 574. Builders of vessels may employ the material and follow with regard to their
construction and rigging the systems most suitable to their interest. Ship owners and seamen shall
be subject to the provisions of the laws and regulations of the public administration on navigation,
customs, health, safety of vessels, and other similar matters.
The business of constructing and repairing vessels or parts thereof shall not be considered a public
utility and no CPC shall be required thereof
Art. 585. For all purposes of law not modified or restricted by the provisions of this Code,
vessels shall continue to be considered as personal property.
Vessels are considered personal or movable property; but they partake to a certain extent, of the nature
and conditions of real property, on account of their value and importance in the world of commerce
Art. 712. Ownership is acquired by occupation and by intellectual creation.
Ownership and other real rights over property are acquired and transmitted by law, by
donation, by testate and intestate succession, and in consequence of certain contracts, by tradition.
They may also be acquired by means of prescription. (New Civil Code.)
3. Registration; certificates issued; distinctions
Tariff and Customs Code, Sec. 802
(1) vessels - every sort of boat, craft or other artificial contrivance used, or capable of
being used, as a means of transportation on water
(2) duly registered - person, natural or juridical, registered with the proper govt. agencies,
as Bureau of Commerce, SEC, NACIDA, BOI, Export Incentives Board or Oil Commission, as
now or may hereafter be required by law.
PD 761 as amended by PD 1064, 1521
Sec. 806. Upon registration of a vessel of domestic ownership, and of more than 15 tons
gross, a certificate of Philippine registry shall be issued for it. If the vessel is of domestic
ownership and of 15 tons gross or less, the taking of the certificate of Philippine registry shall be
optional with the owner.
Domestic ownership means ownership vested in the citizens of the Philippines or
corporations or association organized under the laws of the Philippines at least 60% of the C/S or
capital of which is wholly owned by citizens of the Philippines, and in the case of corporations or
associations which will engage in coastwise trade the president and managing directors thereof
shall be such citizens xxx
xxx an enterprise duly registered with the Board of Investments WON entirely owned by
foreign nationals, may register its own vessels xxx if such vessels are to be used exclusively to
transport its own raw materials and finished products in Philippine waters as an incident to its
manufacturing, processing or business activity registered with the BOI and certified to by said
Board as an essential element in the operation of the registered project.
Rule III, Marina Rules and Regulations:
PAGE 104
Subjects of Registration:
1) All vessels used in Phil. waters, not being transients of foreign registry, shall be
registered with the MARINA. To this end, it shall be the duty of the master, owner and agent of
every such vessel to make application to the proper MARINA district office for registration thereof
within 15 days after the vessel becomes subject to such registration.
2) A vessel of 3 tons gross or less shall not be registered unless the owner shall so desire,
nor shall documents licenses of any kind be required for such vessel, but the proper fee shall be
charged for measurement when measurement is necessary, except when the same is engaged in
towing or carrying of articles and passengers for hire.
3) All undocumented vessels shall be numbered in such form as may be prescribed by the
Administrator.
Vessels exempt from Registration :

AFP vessels, vessels owned and/or operated by the AFP or by foreign govt. for military
purposes, and bancas, sail boats and other water craft which are not motorized of less than 3 gross
tons shall not be subject to the requirements of these rules and regulations relative to registration
and navigation, except in so far as may be prescribed by regulations of MARINA.
The Phil. Coast Guard is vested with exclusive authority over the registration and documentation of
Phil. vessels, as well as the issuance of all certificates, licenses, or other documents necessary or
incident to such registration
The registration shall be effected at its home port or at the nearest Coast Guard district or
station when the home port does not have such
Certificates of Philippine register: upon registration of a vessel of domestic ownership and of more
than 15 tons gross, a certificate of Phil. register shall be issued for it
The purpose of certificates of register of vessels : to declare the nationality of a vessel engaged
in trade with foreign nations and to enable her to assert that nationality wherever found
Privileges of certificate: It confers upon the vessel the right to engage, consistently with law, in
the Philippines coastwise trade and entitles it to the protection of the authorities and the flag of the
Philippines in all ports and on the high seas, and at the same time secures to it the same privileges and
subjects it to the same disabilities as, under the laws of the Philippines, pertain to foreign built vessels
transferred abroad to citizens of the Philippines
Certificates of ownership : upon registration of a vessel of more than 5 tons gross, a certificate of
ownership shall be issued for it
4. Significance of registration of transactions affecting vessels
Presumption of ownership from registration : the presumption is that the person in whose name a vessel
is registered has legal title thereto --> but such is not conclusive proof against the real owners
It is essential that a record of documents affecting the title of a vessel be entered in the
Philippine Coast Guard
Arroyo vs Yu 54 Phil 511
PAGE 105
F:
The appeal of Yu relates to the preferences to the ten lorchas as between herself and the PNB. Among
the facts found by the trial judge is that they were owned by Lim Ponzo Navigation Co. They were mortgaged
to Po Pauco to guarantee a loan of P20,000. This was duly registered with the register of deeds. Po Pauco later
mortgaged them in favor of PNB and registered with the register of deeds but was recorded in the Office of
Collector of Customs much later. Meanwhile, Yu secured a judgment against Lim Ponzo Navigation Co. The
notice of seizure was recorded by the collector of customs of Iloilo on which date the records of the office
disclosed the vessels as free from encumbrances.
HELD : Sec. 1171 of AC has modified the provisions of the Chattel Mortgage Law, particularly Sec. 4
thereof. It is now not necessary for a chattel mortgage of a vessel to be noted in the register of deeds.
But it is essential that a record of documents affecting the title of a vessel be entered in the office of the
collector of customs at a port of entry. This is designed to protect persons who deal with a vessel on the
strength of the record title. Mortgages on vessels., although not recorded, are good as between the
parties. But as against creditors of the mortgagor, an unrecorded mortgage is valid.
However, we find an explanation of the delay of registration with the collector of customsbecause of doubts entertained by the latter relative to the applicability of Act No. 3324 to a mortgage
executed in 1918 in favor of a Chinese subject. This uncontradicted fact must be taken as curing the
bank's defective title. That the collector did not perform his duty was no fault of PNB.
Judgment affirmed in part in the sense that as between Yu and PNB, the latter has a superior
right to its claim for P20,000, and set aside in part in the sense that the record is remanded for further
proceedings.
Rubiso vs Rivera 37 Phil 72
F:
Defendant Rivera acquired by purchase the pilot boat Valentina on a date prior to that of the purchase
and adjudication at public auction by plaintiff Rubiso. But the sale at public auction to Rubiso was recorded in
the office of the collector of customs on Jan. 27, 1915 and in the commercial registry on March 4, 1915, while
the sale to Rivera was entered in the customs registry only on March 17, 1915. Lower court decided for
plaintiff. Defendant appealed.
HELD : The requisite of registration in the registry of the purchase of a vessel is necessary and
indispensable in order that the purchaser's rights may be maintained against a claim filed by a third
person. Such registration is required both Art. 573 of the Code of Commerce in connection with Sec 2
of Act No. 1900 which Act amended said article. The amendments solely consisted in charging the
Insular Collector of Customs, as at present, with the fulfillment of the duties of the commercial register
concerning the registering of vessels, so that the registration of a bill of sale of a vessel shall be made in
the Insular Collector of Customs, who, since May 18, 1909, has been performing the duties of the
commercial registry in place of this latter official. In view of said legal provisions, it is undeniable that
defendant's rights cannot prevail over those acquired by plaintiff in the ownership of said boat, in as
much as defendant's registration came after plaintiff's registration.
C. Persons Participating in Maritime Commerce
1. Shipowners and shipagents
Art. 586. The owner of a vessel and ship agent shall be civilly liable for the acts of the
captain and for the obligations contracted by the latter to repair, equip, and provision the vessel,
provided the creditors proves that the amount claimed was invested therein.
By agent is understood the person entrusted with the provisioning of a vessel, or who
represents her in the port in which she happens to be.
PAGE 106
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the goods which the vessel
carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments
and the freightage he may have earned during the voyage.
Art. 588. Neither the owner of the vessel nor the agent shall be liable for the obligations
contracted by the captain if the latter exceeds his powers and privileges inherent in his position or
those which may have been conferred upon him by the former.
However, if the amounts claimed were made use of for the benefit of the vessel, the owner
or agent shall be liable.
Liability of shipowner and shipagent :
(1) under Art. 857, for the acts of the captain
(2) for contracts entered into by the captain to repair, equip and provision the vessel, provided
that the amount claimed was invested for the benefit of the vessel
(3) for the indemnities in favor of third persons which may arise from the conduct of the captain
in the care of the goods transported, as well as for the safety of passengers transported
(4) for damages to third persons for tort or quasi-delict committed by the captain, except
collision with another vessel
(5) under Art. 826, for damages in case of collision due to the fault, negligence, or want of skill
of the captain, sailing mate, or any other member of the complement
The agent is liable to the shippers and owners of the cargo transported by it, for losses and
damages occasioned to such cargo without prejudice to his rights against the owner of the ship, to the
extent of the value of the vessel, its equipment and the freight
Under 588, the shipowner and the shipagent are not liable for the obligations contracted by the captain
if he exceeds his authority, unless the amounts claimed were invested for the benefit of the vessel -->
however under Art. 1759, NCC, the ship owner is liable for the death of or injuries to the passengers
which are caused by the negligence or wilful acts of his EEs although such EEs may have acted beyond
the scope of their authority or in violation of the orders of the shipowner
Art. 589. If two or more persons should be part owners of a merchant vessel, an
association shall be presumed as established by the part owners.
This association shall be governed by the resolutions of a majority of the members.
A majority shall be the relative majority of the voting members.
If there should be only two part owners, in case of disagreement the vote of the member
having the largest interest shall be decisive. If the interests are equal, it shall be decided by lot.
The representation of the smallest part in the ownership shall have one vote; and
proportionately the other part owners as many votes as they have parts equal to the smallest one.
A vessel cannot be detained, attached or levied upon execution in her entirety for the
private debts of a part owner, but the proceedings shall be limited to the interest the debtor may
have in the vessel, without interfering with her navigation.
PAGE 107

Art. 590. The co-owners of a vessel shall be civilly liable, in the proportion of their
contribution to the common fund, for the results of the acts of the captain, referred to in Article
587.
Each part owner may exempt himself from this liability by the abandonment before a
notary of the part of the vessel belonging to him.
Art. 591. All the part owners shall be liable, in proportion to their respective ownership,
for the expenses which are incurred by virtue of a resolution of the majority.
They shall likewise be liable in the same proportion for the expenses of maintenance,
equipment, and provisioning of the vessel, necessary for navigation.
Art. 592. The resolutions of the majority with regard to the repair, equipment, and
provisioning of the vessel in the port of departure shall bind the minority, unless they renounce
their participation therein, which must be acquired by the other part owners after a judicial
appraisement of the value of the portion or portions assigned.
The resolutions of the majority relating to the dissolution of the association and sale of the
vessel shall also be binding on the minority.
The sale of the vessel shall be made at a public auction, subject to the provisions of the law
of civil procedure unless the part owners unanimously agree otherwise, subject always to the right
of pre-emption and redemption mentioned in Article 575.
Art. 593. The owners of a vessel shall have preference in her charter over other persons,
offering equal conditions and price. If two or more of the former should claim said right the one
having greater interest shall be preferred, and should they have an equal interest it shall be decided
by lot.
Art. 594. The part owners shall elect the manager who is to represent them in the capacity
of agent.
The appointment of director or agent shall be revocable at the will of the partners.
Art. 595. The agent, be he at the same time an owner of a vessel or a manager for an
owner or for an association of co- owners, must be qualified to trade and must be recorded in the
merchant's registry of the province.
The agent shall represent the ownership of the vessel, and may in his own name and in
such capacity take judicial and extrajudicial steps in all that relates to commerce.
Art. 596. The agent may discharge the duties of captain of the vessel, subject, in every
case, to the provisions contained in Article 609.
If two or more co-owners request the position of captain, the disagreement shall be decided
by a vote of the members; and if the vote should result in a tie, the position shall be given to the
part owner having the larger interest in the vessel.
If the interest of the petitioners should be the same, and there should be a tie, the matter
shall be decided by lot.
PAGE 108

Art. 597. The agent shall select and enter into an agreement with the captain, and shall
contract in the name of the owners, who shall be bound in all that refers to repairs, details of
equipment, armament, provisions, fuel, and freight of the vessel, and, in general, in all that relates
to the requirements of navigation.
Art. 598. The agent cannot order a new voyage, nor make contracts for a new charter, nor
insure the vessel, without the authority of her owner or by virtue of a resolution of the majority of
the co-owners, unless these powers were granted him in the certificate of his appointment.
If he should insure the vessel without authority therefor he shall be subsidiarily liable for
the solvency of the underwriter.
Art. 599. The managing agent of an association, shall give his co-owners an account of the
results of each voyage of the vessel, without prejudice to always having the books and correspondence relating to the vessel and to its voyages at their disposal.
Art. 600. After the account of the managing agent has been approved by a relative
majority, the co-owners shall satisfy the expenses in proportion to their interest, without prejudice
to the civil or criminal actions which the minority may deem fit to institute afterwards.
In order to enforce the payment, the managing agents shall be entitled to an executory
action, which shall be instituted by virtue of a resolution of the majority, and without further
proceedings than the acknowledgment of the signatures of the persons who voted for the
resolution.
* Note : an executory action is no longer recognized in this jurisdiction
Art. 601. Should there be any profits, the co-owners may demand of the managing agent
the amount due them, by means of an executory action without further requisite than the
acknowledgment of the signatures in the instrument approving the account.
Art. 602. The agent shall indemnify the captain for all the expenses he may have made
from his own funds or from those of other persons, for the benefit of the vessel.
Art. 603. Before a vessel goes out to sea the agent may at his discretion, discharge the
captain and members of the crew whose contract did not state a definite period nor a definite
voyage, paying them the salaries earned according to their contracts, and without any indemnity
whatsoever, unless there is an expressed and specific agreement in respect thereto.
Art. 604. If the captain or any other member of the crew should be discharged during the
voyage, they shall receive their salary until their return to the place where the contract was made, unless
there are good reasons for the discharge, all in accordance with Art. 636 et seq. of this Code.
Art. 605. If the contracts of the captain and members of the crew with the agent should be
for a definite period or voyage, they cannot be discharged until the fulfillment of their contracts,
except for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and
damage caused to the vessel or to its cargo by malice or manifest or proven negligence.
PAGE 109
Art. 606. If the captain should be a part owner in the vessel, he may not be discharged
unless the agent returns to him the amount of his interest therein, which, in the absence of an
agreement between the parties, shall be appraised by experts appointed in the manner established
in the law of civil procedure.
Art. 607. If the captain who is a part owners should have obtained the command of the
vessel by virtue of a special agreement contained in the articles of copartnership, he cannot be
deprived thereof except for the reasons mentioned in Article 605.
Art. 608. In case of the voluntary sale of the vessel, all contracts between the agent and
captain shall terminate, reserving to the latter his right to the indemnity which may be proper,
according to the agreements made with the agent.
The vessel sold shall remain subject to the security of the payment of said indemnity if,
after the action against the vendor has been instituted, the latter should be insolvent.
Art. 618. The captain shall be civilly liable to the ship agent and the latter to the third
persons who may have made contracts with the former 1. For all the damages suffered by the vessel and its cargo by reason of want of skill or
negligence on his part. If a misdemeanor or crime has been committed he shall be liable in
accordance with the Penal Code.
2. For all the thefts and robberies committed by the crew, reserving his right of action
against the guilty parties.
3. For the losses, fines, and confiscations imposed on account of violation of the laws and
regulations of customs, police, health, and navigation.
4. For the losses and damages caused by mutinies on board the vessel, or by reason of
faults committed by the crew in the service and defense of the same, if he does not prove that he
made full use of his authority to prevent or avoid them.
5. For those arising by reason of a misuse of powers and nonfulfillment of the duties which
pertain to him in accordance with Articles 610 and 612.
6. For those arising by reason of his going out of his course or taking a course which, in
the opinion of the officers of the vessel, at a meeting attended by the shippers or supercargoes who
may be on board, he should not have taken without sufficient cause.
No exception whatsoever shall exempt him from his obligation.
7. For those arising by reason of his voluntarily entering a port other than his destination,
with the exception of the cases or without the formalities referred to in Article 612.
8. For those
arising by reason of the nonobservance of the provisions contained in the regulations for lights and
maneuvers for the purpose of preventing collisions.
Art. 618 provides for the direct responsibility of the shipowner and shipagent to third persons; the
captain shall be civilly liable to the ship agent and the latter is the one liable to third persons
This
article applies to breaches of contract and tortious negligence of the captain
But where the vessel is totally chartered for use of a single party, the shipowner and that party
may validly stipulate that the latter shall be exempt from liability for the negligence of the captain and
crew
Reason for imposition of liability on owner for damages suffered by third persons occasioned by
the acts of the captain: To place the primary liability upon the person who has actual control over the
PAGE 110

conduct of the voyage and who has the most capital embarked in the venture, namely, the owner of the
ship, leaving him to obtain recourse, from other individuals who have been drawn into the venture as
shippers
The shippers and passengers in making contracts with the captain do so through the confidence
they have in the shipowner who appointed him --> they presume that the owner made a most careful
investigation before appointing him
Distinction between liability for lawful and unlawful acts :
The lawful acts and obligations of the captain beneficial to the vessel may be enforced as
against the agent/owner for the reason that such obligations arise from the contract of agency ( provided
that the captain does not exceed his authority)
As to any liability incurred by the captain through his unlawful acts, the ship agent is simply
subsidiarily liable
Liabilities of captain: the responsibility of the captain extends to every fraudulent or negligent act of
any person in the complement, in the execution of his employment --> he does not respond for personal
injuries of the crew arising from personal quarrels but he is liable for damages to persons or property
occasioned by a maneuvering of the vessel, for failure to follow international rules and regulations, for
failure to take the precautions to prevent every damage possible to the vessel which has suffered an
average
Standard Oil vs Castelo 42 Phil 256
F:
Castelo, owner of the interisland steamer Batangueno, contracted with Chumbuque stipulating that for
a term of one year, the latter shall use it in conveying cargo; that the crew should be supplied by the owner; and
that the charterer should have no control over the captain and crew than to specify the voyages. Plaintiff
delivered petroleum which was placed on deck. While the steamer was on her way, a typhoon came,
compelling the captain to jettison the petroleum. When the storm abated, the ship made port and 13 cases of
petroleum were recovered, but the remainder was wholly lost. Plaintiff brought action to recover the petroleum
value against the shipowner. CFI rendered judgment for plaintiff.
Held : Ordinarily, the loss of cargo carried on deck shall not be considered as general average loss, as
expressed in the York- Antwerp Rules. This rule, first made during the days of sailing vessels has
changed and it is now generally held that jettisoned goods carried on deck, according to the customs of
trade, by steam vessels navigating coastwise and inland waters, are entitled to contribution as general
average loss. The reason for this, in coastwise trade, is that boats are small and voyages are short, with
the result that the coasting vessel can use more circumspection about the condition of the weather at
departure time. It is evident therefore, that the loss of the petroleum is a general average with the result
that plaintiff is entitled to recover an amount bearing such proportion to its total loss as the value of
both ship and cargo bears to the value of ship and entire cargo before jettison was effected.
It is universally recognized that the captain is the representative of the owner and both under
Art. 586 of the Code of Commerce, are civilly liable for the acts of the master. When jettison of cargo
occurs, it is the duty of the captain to effect the adjustment, liquidating and distribution of the general
average; his failure gave rise to liability for which the owner of the ship must answer.
The owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any
shipper of cargo. Moreover, the shipowner, in captain's person, has complete and exclusive control of
the crew and ship navigation. It is therefore proper that any person whose property may have been cast
should have a right of action directly against the shipowner for breach of duty which the law imposed on
the captain with respect to such cargo. The evident intention of the Com. Code is to place primary
liability upon the person who has actual control over the conduct of the voyage and who has most
capital in the venture, namely, the shipowner, leaving him to obtain recourse, as it is very easy to do,
from other individuals who have been drawn into the venture as shippers. Defendant is therefore liable.
PAGE 111
Araullo, and Avancena, dissenting :

Action for recovery, if any, should be brought not against the defendant owner but against the
captain thereof.
(a) Responsibilities and liabilities
Yu Con vs Ipil 41 Phil 770
F:
Yu delivered to Ipil and Solamo P 450 for delivery from Catmon to Cebu aboard a banca named Maria
of which Lauron was the owner and Ipil and Solamo, the master and supercargo, respectively. The money
together with various merchandise belonging to plaintiff was to be carried from the port of Cebu to Catmon in
Cebu. The money was placed by Yu in his trunk and was transferred to that of Ipil. That night, the window of
the stateroom in which the trunk containing the money was kept was broken through by persons not identified
and through which the said trunk was stolen. It was found at the trial that Ipil and Solamo were negligent in
guarding the money because they were sound asleep at the time of the theft and they assigned no one to stand
guard during the night. Their defense was that Yu chartered and had control and responsibility of the banca
and that the theft was due to Yu's negligence. The CFI held Ipil and Solamo negligent and held Lauron liable
as ER and shipowner under Articles 586, 587 and 618 of the Code of Commerce.
Held : Ipil and Solamo, as carriers and depositories of the money were liable under the Civil Code, the
theft not being a fortuitous event or of force majeure and they being manifestly negligent and at fault.
As to the liability of Lauron, the SC proceeded by first defining the banca "Maria" as within the
meaning of the term "vessel." Thus, according to the foregoing definitions (by the Mercantile Code, by
Reus in Commentaries on the Code of Commerce, and by Blanco) we hold that the banca "Maria"
chartered by Yu Con from Lauron, was a "vessel" under Mercantile Law and the Code of Commerce.
Ipil, the master of the banca, was also held to be the captain (masters are to small vessels as captains
are to big ones). Under Arts. 587 and 618, the shipowner shall be civilly liable to third persons when the
captain of the vessel causes the damage or loss to goods entrusted to him by said third persons under a
contract to carry said goods. Thus, it is well and god that the shipowner be not held criminally liable for
such crimes or quasi crimes but he cannot be excused from liability for the damage and harm which in
consequence of those acts may be suffered by the third parties who contracted with the captain in his
double capacity of agent and subordinate of the shipowner himself. In maritime commerce, the shippers
and passengers in making contracts with the captain do so through the confidence they have in the
shipowner who appointed him.
The owner of a minor craft who has equipped and victualed it for the purpose of using it in the
transportation of merchandise from one port to another is under the law a shipowner and the master of
the craft is to be considered as its captain in the legal acceptation of this word, and the former must be
held civilly liable for indemnities in favor of third parties to which the conduct of the master/captain
may give rise in the custody of the effects laden on the craft, and for all losses which, through his fault
or negligence, may occur to the merchandise or effects delivered to him for their transportation as well
as for the damages suffered by those who contracted with him, in consequence of misdemeanors and
crimes committed by him or by the members of the crew of the craft.
Manila Steamship vs Abdulhaman 100 Phil 32
F:
At around 7 p.m., M/L Consuelo V, owned by Lim Hong To, laden with cargoes and passengers left
Zamboanga City bound for Siokon under the command of Faustino Macrohon. Among her passengers were
plaintiff Insa Abdulhaman, his wife, and their 5 kids. On the same night, the M/S Bowline Knot owned by the
Manila Steamship Co. were navigating from Maribojoc towards Zamboanga City. The weather then was
considered fair.
PAGE 112

At around 10 PM, without any warning to the resting passengers, both vessels collided. M/L Consuelo
V capsized, resulting in the death of Abdulhaman's five children. The above facts found by the Board of Marine
Inquiry, was used by the CFI to hold the owners of both vessels solidarily liable to Abdulhaman for P 20,784 as
damages. The CA, however, exempted Lim from liability by reason of the sinking and total loss of his vessel.
Hence, this petition by the Manila Steamship Co. questioning the exemption of Lim while also alleging its
exemption having had exercised due diligence in the selection of its EEs.
Held : (1) While it is true that plaintiff's action against petitioner is based on a tort or quasi-delict, the
tort in question is not a civil tort under the Civil Code but is a maritime tort resulting in a collision at
sea, governed by Arts. 826-939 of the Code of Commerce, while the owners of both colliding vessels are
solidarily liable for damages caused. This direct responsibility is recognized in Art. 618 of the Code of
Commerce, under which the captain shall be civilly liable to the ship agent, and the latter is the one
liable to third persons.
In fact it is a general principle well established in the maritime law and custom, that shipowners
and shipagents are civilly liable for the acts of the captain (Art. 586) and for the indemnities due to the
third persons (Art. 587). This direct liability moderated and limited by the owner's right of abandonment
of the vessel and earned freight (Art. 587) has been declared to exist not only in the case of breached
contracts but also in cases of tortious negligence.
It is easy to see that to admit the defense of the diligence of a bonus pater familias in the
selection and vigilance of the officers and crew as exempting the shipowner from any liability for their
faults, would render nugatory the solidary liability in Art. 827 for the greater protection of injured
parties.
(2) It is to be noted that Macrohon was not duly licensed as a shipmaster and Lim knew of this
fact when it hired the former, thus deliberately increasing the risk to which the unknowing passengers
would be subjected. The liability of Lim, cannot, therefore be identical to that of a shipowner who bears
in mind the safety of the passengers by employing duly licensed officers. To hold, as the CA had done,
that Lim may limit his liability to the value of his vessels, is to erase all differences between compliance
with law and the deliberate disregard thereof.
The international rule is to the effect that the right of abandonment of vessels, as a legal
limitation of a shipowner's liability, does not apply to cases where the injury of the average is due to
shipowner's own fault.
(b) The doctrine of limited liability
* Doctrine of limited liability is provided for in Arts. 587, 590 and 837
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the goods which the vessel
carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments
and the freightage he may have earned during the voyage.
A shipagent is liable notwithstanding the insolvency of the principal/owner
BUT the ship agent may exempt himself from liability by abandoning the vessel with all her equipment
and the freight it may have earned during the voyage --> the effect of abandonment is to extinguish the
liability of the shipagent
The ship agent's liability is confined to that which he is entitled as a matter of right to abandon :
the vessel with all her eqpt. and the freight it may have earned during the voyage and to the insurance
thereof
Limited liability is not applicable when no abandonment of vessel is made
PAGE 113

Effect of abandonment: An abandonment amounts to an offer of the value of the vessel, of her
equipment, and freight money earned --> results in the cessation of the responsibility of the owner/agent
Abandonment cannot be refused by creditors
This applies to all cases where the owner/agent may be held liable for the negligent or illicit acts
of the captain
Effect of loss or destruction of vessel: The shipagent's liability is merely co-extensive with his interest
in the vessel such that the total loss thereof results in its extinction --> the total destruction of the vessel
extinguishes a maritime lien as there is no longer any res to which it can attach.
Thre (3) cases where the loss of the vessel extinguishes the liability of the shipowner:
(1) under 587, liability arising from the conduct of the captain in the vigilance of the goods and
for the safety of the passengers and for any liability arising from the negligent or illicit acts of the
captain for which the shipowner or ship agent may be held liable
(2) under 643, liability for the wages of the captain and the crew and for advances made by the
shipagent if the vessel is lost by shipwreck or capture
(3) under 837, liability for collision
Exceptions:
(1) Doctrine does not apply where shipowner is at fault : the doctrine is premised on the condition that
the death or injury to the passenger occurred by reason of the fault or negligence of the captain only
(2) Doctrine does not apply in cases of Workmen's Compensation --> such compensation has nothing to
do with maritime commerce; it is an item in the cost of production which must be included in the budget
of any well-managed industry
(3) Total destruction of the vessel does not affect the liability of the owner for repairs on the vessel
completed before its loss --> owners of a vessel are liable for necessary repairs; its liability for repairs
remains unaffected by the loss of the thing
Reason for limited liability: This doctrine had its origin when maritime trade and sea voyage was
attended by innumerable hazards and perils --> to offset against these adverse conditions and to
encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to the vessel, eqpt. and freight or insurance, if any
Limited liability is evidence of the real and hypothecary nature of maritime law:
(1) limitation of liability to the actual value of the vessel and freight; (2) right to retain the cargo and the
embargo and detention of the vessel in cases where the ordinary civil law would not allow more than a
personal action against the debtor or personal liable --> the maritime creditor may attach the vessel
itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the
prejudice of a third person
Manila Steamship vs Abdulhaman 100 Phil 32
Issue : How is the doctrine of limited liability applied in this case with M/V Consuelo?
Held : The direct liability may be moderated or limited by the shipowner's right to abandon the vessel
and earned freight. However, this right of abandonment of vessels, as a legal limitation of a shipowner's
liability does not apply to cases where the injury or the average is due to shipowner's fault. Thus, the
owner of Consuelo is solidarily liable with Manila Steamship, the former having caused the vessel to
sail without licensed officers, for injuries caused by the collision over and beyond the value of the said
vessel.
PAGE 114

In the application for permission to operate, despite lack of trained crew, Lim Hong To even
declared expressly, "that in case of any accident, damage, or loss, I shall assume full risks and
responsibility for all consequences, thereof." Hence, Lim cannot escape liability because of the sinking
of the vessel. Operating with an unlicensed shipmaster constitutes such negligence as would prevent the
shipowner from claiming the benefit of limited liability under Art. 587.
Yangco vs Laserna 73 Phil 330
F:
Petitioner Yangco's vessel SS Negros left Romblon for Manila. The captain was duly advised and his
attention was called by the passengers that typhoon Signal No. 2 was up. But the boat proceeded to sail after
some loading. The boat was overloaded with cargo and passengers (180 instead of only 123). After two weeks
of sailing, the sea became too dangerous. The captain ordered that they return to Romblon and while turning, a
big wave caught them on the side causing it to capsize. Among the passengers who perished were the relatives
of respondents Laserna.
In the separate civil action for damages for the death of the passengers, the CFI held Yangco liable for
a total of P3,180. After the rendition of the judgment, Yangco sought to abandon the vessel to
plaintiffs/respondents with all its equipments. Abandonment was denied. The CA affirmed the judgment.
Held : Art. 587 accords a shipowner or agent the right of abandonment; and by necessary implication,
his liability is confined to that which he is entitled as of right to abandon -- the vessel with all her
equipments and the freight it may have earned during the voyage. In other words, such liability is
limited to the value of the vessel and other things appertaining thereto such that a total loss thereof
results in its extinction. Although the article appears to deal only with the limited liability of shipowners
or agents for damages arising from the misconduct of the captain in the care of the goods which the
vessel carries, this is a mere deficiency of language and in no way indicates the true extent of such
liability, to wit, the benefit of limited liability applies in all cases (as regards both goods and passengers
of the vessel) wherein the shipowner or agent may properly be held for the negligent or illicit acts of the
captain.
The reason for the limited liability is the real and hypothecary nature of maritime law as
distinguished from civil law and mercantile law in general. As evidence of this real nature, we have (1)
the limitation of the liability of the agents to the actual value of the vessel and the freight money and (2)
the right of the maritime creditor to retain the cargo, and the embargo and detention of the vessel in
cases where the ordinary civil law would not allow more than a personal action against the debtor or
person liable. Thus, even assuming that Yangco is liable for breach of contract because his relationship
to the passengers rests on a contract of carriage, the exclusively real and hypothecary nature of
maritime law still operates to limit his liability to the value of the vessel or to the insurance thereon, if
any. In this case, the vessel was not insured. Whether the abandonment of the vessel sought by the
petitioner in instant case was in accordance with law or not, is immaterial. The vessel having totally
perished, any act of abandonment would be an idle ceremony. Petitioner is absolved from all
complaints.
Abueg vs San Diego 77 Phil 730
F:
Bartolome San Diego was the owner of 2 motorships, San Diego II and Bartolome S. Dionisia Abueg
is the widow of Amado Nunez, who was a machinist on board the M/S San Diego II. Marciana de Salvacion is
the widow of Victoriano Salvacion, who was a machinist on board the M/S Bartolome S. Rosario Oching is
the widow of Francisco Oching, who was the captain of the M/S Bartolome S. The 2 ships, while engaged in
fishing operations around Mindoro Island on October 1941, were caught by a typhoon as a consequence of
which they were sunk and totally lost. Nunez, Salvacion and Oching while acting in their capacities perished
in the shipwreck. The vessels were not covered by any insurance. The widows were awarded compensation
under the Workmen's Compensation Act by the CFI.
PAGE 115

Held : The real and hypothecary nature of the liability of the shipowner or agent embodied in the
provisions of the Maritime Law, had its origin in the prevailing conditions of the maritime trade and sea
voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these
adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship, equipment, and
freight, his liability was extinguished.
The provisions of the Code of Commerce regarding maritime commerce have no room in the
application of the Workmen's Compensation Act which seeks to improve, and aims at the amelioration
of, the condition of laborers and EEs. Said Act creates a liability to compensate EEs and laborers in
cases of injury received by or inflicted upon them, while engaged in the performance of their work or
employment, or the heirs and dependents of such laborers and EEs in the event of death caused by their
employment.
The officers of motor ships engaged in fishing are industrial EEs and are entitled to the benefits
of the Workmen's Compensation Act. If an accident is compensable under the WCA, it must be
compensated even when the workman's right is not recognized by or is in conflict with other provisions
of the Civil Code or Code of Commerce. The reason is that the WCA was enacted in abrogation of
existing laws.
Heirs of Amparo de los Santos vs CA 186 SCRA 649
F:
M/V Mindoro owned by Compania Maritima sailed from Manila bound for New Washington, Aklan.
Said vessel met typhoon Welming on the Sibuyan Sea, causing the death of many of its passengers, although
about 136 survived. Mauricio de los Santos declared that he, his wife and 4 children were aboard the boat
together with their household utensils valued at P 1,000, with the intention of living in Aklan permanently. His
wife and his children were among the casualties. The Board of Marine Inquiry found that the captain and some
officers of the crew were negligent in operating the vessel and imposed upon them a suspension and/or
revocation of their license certificates. This decision could not be executed against the captain who perished
with the vessel. The shipowner alleged that no negligence was ever established and in fact they took all the
necessary precautions in operating the vessel. Furthermore, the loss of lives as a result of the drowning of some
passengers, including the relatives of the plaintiffs, was due to force majeure because of the strong typhoon
Welming. It also presented the findings of the Board of Marine Inquiry recommending that the captain be
exonerated and that the ship was in seaworthy condition. The CFI dismissed the complaint in view of lack of
sufficient evidence. The CA ruled that while concurring negligence on the part of the captain is imputable to
Maritima, Maritima could not be held liable in damages based on the principle of limited liability of the
shipowner or shipagent under Art. 587 of the Code of Commerce.
Held : There is no dispute as to the finding of the captain's negligence. The present controversy centers
on the questions of Maritima's negligence and of the application of Art. 587 of the Code of Commerce.
Under this provision, a shipowner or agent has the right of abandonment; and by necessary implication,
his liability is confined to that which he is entitled as of right to abandon -- the vessel with all her
equipments and the freight it may have earned during the voyage. This rule is found necessary to offset
against the innumerable hazards and perils of a sea voyage and to encourage shipbuilding and marine
commerce. The limited liability doctrine applies not only to the goods but also in all cases like death or
injury to passengers wherein the shipowner of agent may properly be held liable for the negligent or
illicit acts of the captain. Art. 587 speaks only of situations where the fault or negligence is committed
solely by the captain. In cases where the shipowner is likewise to be blamed, Art. 587 does not apply.
Such a situation will be covered by the Civil Code provisions on CCs. Owing to the nature of their
business and for reasons of public policy, they are required to observe EO diligence.
Maritima's claim that it had no information of typhoon Welming until after the boat was at sea
is untenable in light of modern technology which enables it to detect any incoming atmospheric
disturbances. In fact, the Weather Bureau issued a total of 17 warnings or advisories of typhoon
Welming. In allowing the ship to depart late from Manila despite the typhoon advisories, Maritima
PAGE 116

displayed lack of foresight and minimum concern for the safety of its passengers taking into account the
surrounding circumstances of the case.
While the captain was negligent for overloading the ship, Maritima shares equally in his
negligence. M/V Mindoro was cleared for departure at 2 PM by the Bureau of Customs and the Coast
Guard but its departure was delayed for 4 hours. Maritima could not account for the delay because it
neither checked from the captain the reasons behind the delay. It was due to this interim that there is
great probability that unmanifested cargo and passengers were loaded.
Maritima presented evidence of the seaworthy condition of the ship prior to its departure,
including the installation of life saving equipment and other navigational instruments. But it could not
present evidence that it specifically installed a radar which could have allowed the vessel to navigate
safely for shelter during the storm. An important device such as the radar could have enabled the ship to
pass through the river and to safety.
Maritima's lack of EO diligence coupled with the negligence of the captain were the proximate
causes of the sinking of M/V Mindoro. Maritima is liable for the deaths and injury of the victims. It was
ordered to pay death indemnities to the heirs of the victims, moral damages, actual damages and
attorney's fees.
(c) Specific rights and prerogatives

Art. 575. Part owners of vessels shall enjoy the right of pre-emption and redemption in
the sales made to strangers; but they can only exercise it within the nine days following the record
of the sale in the registry and by delivering the price at once.
Art. 593. The owners of a vessel shall have preference in her charter over other persons,
offering equal conditions and price. If two or more of the former should claim said right the one
having greater interest shall be preferred, and should they have an equal interest it shall be decided by
lot.
Art. 594. The part owners shall elect the manager who is to represent them in the capacity
of agent.
The appointment of director or agent shall be revocable at the will of the partners.
Art. 596. The agent may discharge the duties of captain of the vessel, subject, in every
case, to the provisions contained in Article 609.
If two or more co-owners request the position of captain, the disagreement shall be decided
by a vote of the members; and if the vote should result in a tie, the position shall be given to the
part owner having the larger interest in the vessel.
If the interest of the petitioners should be the same, and there should be a tie, the matter
shall be decided by lot.
Art. 609. Captains, masters or patrons of vessels must be Filipinos, have legal
capacity to contract in accordance with this Code, and prove the skill, capacity, and
qualifications necessary to command and direct the vessel, as established by marine or
PAGE 117

navigation laws, ordinances, or regulations, and must not be disqualfied according to the
same for the discharge of the duties of the position.
If the owner of a vessel desires to be the captain thereof, without having the legal
qualifications therefor, he shall limit himself to the financial administration of the vessel,
and shall intrust the navigation to a person possessing the qualifications required by said
ordinances nd regulations.
Art. 601. Should there be any profits, the co- owners may demand of the managing agent
the amount due them, by means of an executory action without further requisite than the
acknowledgment of the signatures in the instrument approving the account.
2. Captains and Masters
(a) Qualifications and licensing
RA 5173
Sec. 3. The Philippine Coast Guard shall perform the following functions : (e) to issue
licenses and certificates to officers, pilots, major and minor patrons and seamen, as well as suspend
and revoke such licenses and certificates.
Art. 609. Captains and masters of vessels must be Filipinos having legal capacity to bind
themselves in accordance with this Code, and must prove that they have the skill, capacity, and
qualifications required to command and direct the vessel, as established by marine laws, ordinances,
or regulations, or by those of navigation, and that they are not disqualified according to the same for
the discharge of the duties of that position.
If the owner of a vessel desires to be the captain thereof and does not have the legal
qualifications therefore, he shall limit himself to the financial administration of the vessel, and shall
entrust her navigation to the person possessing the qualifications required by said ordinances and
regulations.
notes:
- Captain - one who governs vessels that navigate the high seas or ships of large dimensions and
importance, although they may be engaged in coastwise trade
- Master - one who commands smaller ships engaged exclusively in coastwise trade
- captain and master have the same meaning for maritime commerce
- patron - bancas
- Roles of the captain :
(1) general agent of the shipowner
(2) technical director of the vessels
(3) represents the government of the country under whose flag he navigates
(b) Inherent Powers
Art. 610. The following powers are inherent in the position of captain or master of a vessel:
1. To appoint or make contracts with the crew in the absence of the ship agent and propose
said crew, should said agent be present; but the agent may not employ any member against the
captain's express refusal.
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2. To command the crew and direct the vessel to the port to its destination, in accordance
with the instructions he may have received from the ship agent.
3. To impose, in accordance with the contracts and the laws and regulations of the
merchants marine, on board the vessel, correctional punishment upon those who do not comply with
his orders or who conduct themselves against discipline, holding a preliminary investigation on the
crimes committed on board the vessel on the high seas, which he shall turn over to the authorities,
who are to take cognizance thereof, at the first port touched.
4. To make contracts for the charter of the vessel in the absence of the ship agent or of the
consignee, acting in accordance with the instructions received and protecting the interests of the
owner with utmost care.
5. To adopt all the measures which may be necessary to keep the vessel well supplied and
equipped, purchasing all that may be necessary for the purpose, provided there is no time to request
instructions of the agent.
6. To provide in similar urgent cases and on a voyage, for the repairs to the hull and engines
of the vessel and to her rigging and equipment which are absolutely necessary in order for her to be
able to continue and conclude her voyage; but if she should arrive at a point where there is a
consignee of the vessel, he shall act in concurrence with the latter.
notes: The first three powers cannot be renounced as they relate to public order and are vested in the
captain as a delegation of public authority
Art. 611. In order to comply with the obligations mentioned in the foregoing article, and
when he has no funds and does not expect to receive any from the agent, the captain shall procure
the same in the successive order stated below:
1. By requesting said funds of the consignees of the vessel or the correspondents of the ship
agent.
2. By applying to the consignees of the cargo or to the persons interested therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a bottomry loan.
5. By selling a sufficient amount of the cargo to cover the amount absolutely necessary to
repair the vessel and to equip her to pursue the voyage.
In the two last cases he must apply to the judicial authority of the port, if in the Philippines
and to the Filipino consul, if in a foreign country; and where there should be none, to the local
authority, proceeding in accordance with the prescriptions of Article 583, and with the provisions of
the law of civil procedure.
Art. 583. If while on a voyage the captain should find it necessary to contract
one or more of the obligations mentioned in subdivisions 8 and 9 of articl 580, he shall
apply to the judge or court if he is in the Philippine territory, and otherwise to the consul
of the Republic of the Philippines, should there be one, and in his absence, to the judge
or court or proper local authority, presenting the certificate of the registration sheet
treated of in Article 612 and the instruments proving the obligation contracted.
The judge or court, the consul, or the local authority, as the case may be, in view
of the result of the proceedings institutied, shall make a temporary memorandum of their
result in the certificate, in order that it may be recorded in the registry when the vessel
returns to the port of its registry, or so that it can be admitted as a legal and preferred
obligation in case of sale before its return, by reason of the sale of the vessel on account
of a declaration of unseaworthiness.
The omission of this formality shall make the captain personally liable for the
credits prejudiced on his account.
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(the ff. is not required by the outline)
Art. 612. The following duties are inherent in the office of captain:
1. To have on board before starting on a voyage a detailed inventory of the hull, engines,
rigging, tackle, stores, and other equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts entered into with the crew; the list of
passengers; the health certificate; the certificate of the registry proving the ownership of the vessel;
and all the obligations which encumber the same up to that date; the charters or authenticated
copies thereof; the invoices or manifest of the cargo, and the instrument of the expert visit or
inspection, should it have been made at the port of departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing at the beginning of each one a note of
the number of folios it contains, signed by the marine official, and in his absence by the competent
authority.
In the first book, which shall be called "log book," he shall enter every day the condition of
the atmosphere, the prevailing winds, the course sailed, the rigging carried, the horsepower of the
engines, the distance covered, the maneuvers executed, and other incidents of navigation. He shall
also enter the damage suffered by the vessel in her hull engines, rigging, and tackle, no matter what
is its cause, as well as the imperfections and averages of the cargo, and the effects and consequence
of the jettison, should there be any; and in cases of grave resolutions which require the advice or a
meeting of the officers of the vessel, or even of the passengers and crew, he shall record the decision
adopted. For the informations indicated he shall make use of the binnacle book, and of the steam or
engine book kept by the engineer.
In the second book, called the "accounting book", he shall enter all the amounts collected
and paid for the account of the vessel, entering specifically article by article, the sources of the
collection, and the amounts invested in provisions, repairs, acquisition of rigging or goods, fuel,
outfits, wages, and all other expenses. He shall furthermore enter therein a list of all the members of
the crew, stating their domiciles, their wages and salaries, and the amounts they may have received
on accounts, either directly or by delivery to their families.
In the third book, called "freight book," he shall record the entry and exit of all the goods,
stating their marks and packages, names of the shippers and of the consignees, ports of loading and
unloading, and the freight earned. In the same book he shall record the names and places of sailing
of the passengers and the number of packages of which their baggage consists, and the price of the
passage.
4. To make, before receiving the freight, with the officers of the crew, and the two experts, if
required by the shippers and passengers, an examination of the vessel, in order to ascertain whether
she is watertight, and whether the rigging and engines are in good condition; and if she has the
equipment required for good navigation, preserving a certificate of the memorandum of this
inspection, signed by all the persons who may have taken part therein, under their liability.
The experts shall be appointed one by the captain of the vessel and the other one by the
persons who request the examination, and in case of disagreement a third shall be appointed by the
marine authority of the port.
5. To remain constantly on board the vessel with the crew during the time the freight is
taken on board and carefully watch the stowage thereof; not to consent to any merchandise or goods
of a dangerous character to be taken on, such as inflammable or explosive substances, without the
precautions which are recommended for their packing, management and isolation; not to permit that
any freight be carried on deck which by reason of its disposition, volume, or weight makes the work
of the sailors difficult, and which might endanger the safety of the vessel; and if, on account of the
nature of the merchandise, the special character of the shipment, and principally the favorable
season it takes place, he allows merchandise to be carried on deck, he must hear the opinion of the
officers of the vessel, and have the consent of the shippers and of the agent.
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6. To demand a pilot at the expense of the vessel whenever required by navigation, and
principally when a port, canal, or river, or a roadstead or anchoring place is to be entered with
which neither he, the officers nor the crew are acquainted.
7. To be on deck at the time of sighting land and to take command on entering and leaving
ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. He
shall not spend the night away from the vessel except for serious causes or by reason of official
business.
8. To present himself, when making a port in distress, to the maritime authority if in the
Philippines and to the Filipino consul if in a foreign country, before twenty-four hours have elapsed,
and make a statement of the name, registry, and port of departure of the vessel, of its cargo, and
reason of arrival, which declaration shall be vised by the authority of by the consul if after
examining the same it is found to be acceptable, giving the captain the proper certificate in order to
show his arrival under stress and the reasons therefore. In the absence of marine officials or of the
consul, the declaration must be made before the local authority.
9. To take the steps necessary before the competent authority in order to enter in the
certificate of the vessel in the registry of the vessels, the obligations which he may contract in
accordance with Article 583.
10. To put in a safe place and keep all the papers and belongings of any members of the
crew who might die on the vessel, drawing up a detailed inventory, in the presence of passengers as
witnesses, and, in their absence, of members of the crew.
11. To conduct himself according to the rules and precepts contained in the instructions of
the agent, being liable for all that he may do in violation thereof.
12. To give an account to the agent from the port where the vessel arrives, of the reason
therefore, taking advantage of the semaphore, telegraph, mail, etc., according to the cases; notify
him the freight he may have received, stating the name and domicile of the shippers, freight earned,
and amounts borrowed on bottomry bond, advise him of his departure, and give him any
information and date which may be of interest.
13. To observe the rules on the situation of lights and evolutions to prevent collisions.
14. To remain on board in case of danger to the vessel, until all hope to save her is lost, and
before abandoning her to hear the officers of the crew, abiding by the decision of the majority; and if
he should have to take a boat he shall take with him, before anything else, the books and papers, and
then the articles of most value, being obliged to prove in case of the loss of the books and papers
that he did all he could to save them.
15. In case of wreck he shall make the proper protest in due form at the first port reached,
before the competent authority or Filipino consul, within twenty-four hours, stating therein all the
incidents of the wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and rules of navigation, customs,
health, and others.
Notes: Although the duties in Art. 612 are inherent in the captain, the civil liability arising from the nonfulfillment thereof is not limited to the captain, since while the captain is liable to the shipagent, the
shipagent is liable to third persons (Art. 618).
(not included in the outline)
Art. 622. If when on a voyage the captain should receive news of the appearance of
privateers or men of war against his flag, he shall be obliged to make the nearest neutral port,
inform his agents or shippers, and await an occasion to sail under convoy or until the danger is over
or to receive final orders from the ship agent or shippers.
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Art. 624. A captain whose vessel has gone through a hurricane or who believes that the
cargo has suffered damages or averages, shall make a protest thereon before the competent
authority at the first port he touches within the twenty-four hours following his arrival, and shall
ratify it within the same period when he arrives at the place of his destination, immediately
proceeding with the proof of the facts, it not being permitted to open the hatches until after this has
been done.
The captain shall proceed in the same manner if, the vessel having been wrecked, he is saved
alone or with part of his crew, in which case he shall appear before the nearest authority, and make a
sworn statement of the facts.
The authority or the consul abroad shall verify the said facts, receiving sworn statements of
the members of the crew and passengers who may have been saved, and taking such other steps as
may help in arriving at the facts, he shall make a statement of the result of the proceedings in the log
book and in that of the sailing mate, and shall deliver the original records of the proceedings to the
captain, stamped and folioed, with a memorandum of the folios, which he must rubricate, for their
presentation to the judge or court of the port of destination.
The statement of the captain shall be believed if it is in accordance with those of the crew
and passengers; if they disagreed, the latter shall be accepted, unless there is proof to the contrary.
Art. 625. Upon arrival at the port of destination, the captain shall, under his personal
liability, turn over the cargo, without any defalcation, to the consignees, and, in a proper case, the
vessel, rigging, and freights to the agent, after having obtained the necessary permission from the
health and customs officers and fulfilled the other formalities required by the regulations of the
administration.
[If, by reason of the absence of the consignee or on account of the nonappearance of a legal
holder of the invoices, the captain does not know to whom he is to make the legal delivery of the
cargo, he shall place it at the disposal of the proper judge or court or authority, in order that he may
decide with regard to its deposit, preservation, and custody.]
Notes: Under 619, the delivery of the cargo at the port of discharge terminates the captain's responsibility
as to the cargo
INTER-ORIENT MARINE ENTERPRISES V. NLRC [235 S 634 (1994)]
F:
1. Captain Rizalino Tayong was employed by petitioner shipwoners as master of a vessel for one year.
His instructions were to replenish bunker and diesel fuel and to sail to South Africa , and there to load 120,000
metric tons of coal.
2. While in HK, a storm hit, and precautionary measures were taken since the vessel was 14 years old and the
turbo-charger was leaking. The Captain requisitioned for supplies of oxygen and acetylene necessary for the
repairs. The vessel sailed from HK to Singapore.
3. While in Singapore, the supplies were not available, hence after consultation with the Chied Engineer, the
Captain decided to delay departure and wait for the supplies.
PAGE 122
4. After the supplies were delivered, the vessel sailed for South Africa, where upon arrival, the Captain was
instructed to turn over his post to a new captain. He was then repatriated to the Philippines.
5. Captain Tayong filed with the POEA a complaint for illegal dismissal, which was dismissed.
6. On appeal, the NLRC reversed and ordered the shipowner to pay his salary for the unexpired contract plus one
month leave benefit, and attorney's fees. Hence, this appeal.
ISSUE: W/N CAPTAIN TAYONG WAS ILLEGALLY DISMISSED?

HELD: Yes.
1. It is well settled that confidential and managerial employees cannot be arbitrarily dismissed at any time,
and without case as reasonably established in an appropriate investigation.
2. The captain of a vessel is a confidential and managerial employee within the meaning of the above
doctrine. A master or captain, for purposes of maritime commerce, is one who has command of a vessel.
A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is
also commander and technical director of the vessel; and (3) he is a representative of the country under
whose flag he navigates. Of these roles, by far the most important is the role performed by the captain as
commander of the vessel, for such role (which to our mind, is analogous to that of "Chief Executive
Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and protection of the
vessel during its voyag and the protection of the passengers (if any) and crew and cargo. In his role as
general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and
and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as
agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading
of the vessel, subkect to applicable limitations established by statute, contract or instructions and
regulations of the shipowner. To the captain is committed the governance, care and management of the
vessel. Clearly, the captain is veste with both management and fiduciary functions.
3. More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to
decide what the safety of the ship and its crew and cargo specifically requires on a stipulated ocean
voyage. The captain is held responsible, and properly so, for such safety.
4. Compagnie de Commerce v. Hamburg is instructive in this connection. In that case, the captain of a
German vessel at the port of Saigon decided to head for the port of Manila instead of the ports of Dunkirk
and Hamburg because of WWI has been declared and in his judgment, the vessel could not reach its
destination. The charterer sued for damages arising from the breach of the charter party, and unauthorized
sale of the Cargo. The SC held that the master of the vessel had reasonable grounds to apprehend that the
vessel was in danger of seizure of captur by the French authorities in Saigon and was justified by
necessity to elect the court which he took - to flee Saigon for the port of Manila - with the result that the
shipowner was relieved from liability for the deviation from the stipulated route and from liability for the
damage to the cargo.
(c) Prohibited acts and transactions
Art. 613. A captain who navigates for freight in common or on shares may not make any
separate transaction for his own account, and should he do so the profits shall belong to the other
persons interested, and the losses shall be borne by him alone.
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Art. 615. Without the consent of the ship agent, the captain may not have himself
substituted by another person; and should he do so, besides being liable for all the acts of the
substitute and bound to pay the indemnities mentioned in the foregoing article, the substitute as well
as the captain may be discharged by the ship agent.
Notes: The duties of a captain are essentially personal due to the confidence given to him arising from the
fact that he possesses the required technical ability and that he is a man worthy of trust of the shipowner
Art. 617. The captain may not contract loans on respondentia secured by the cargo, and
should he do so the contract shall be void.
Neither may he borrow money on bottomry for his own transactions, except on the portion
of the vessel he owns, provided no money has been previously borrowed on the whole vessel, and
provided there does not exist any other kind of lien or obligation chargeable against the vessel.
When he is permitted to do so, he must necessarily state what interest he has in the vessel.
In case of violation of this article the principal, interest, and costs shall be charged to the
private account of the captain, and the ship agent may furthermore discharge him.
Art. 621. A captain who borrows money on the hull, engine, rigging, or tackle of the vessel,
or who pledges or sells merchandise or provisions outside of the cases and without the formalities
prescribed in this Code, shall be liable for the principal, interest, and costs, and shall indemnify for
the damages he may cause.
He who commits fraud in his accounts shall reimburse the amount defrauded, and shall be
subject to the provisions of the Penal Code.
Art. 583. If the ship being on a voyage the captain should find it necessary to contract one
or more of the obligations mentioned in Nos. 8 and 9 of Article 580, he shall apply to the judge or
court if he is in Philippine territory, and otherwise to the Filipino consul, should there be one, and in
his absence to the judge or court or to the proper local authority, presenting the certificate of the
registry of the vessel treated of in Article 612, and the instruments proving the obligation
contracted.
The judge or court, the consul or the local authority as the case may be in view of the result
of the proceedings instituted, shall make a temporary memorandum in the certificate of their result,
in order that it may be recorded in the registry when the vessel returns to the port of her registry, or
so that it can be admitted as a legal and preferred obligation in case of sale before the return, by
reason of the sale of the vessel by virtue of a declaration of unseaworthiness.
The lack of this formality shall make the captain personally liable to the creditors who may
be prejudiced through his fault.
Notes: Obligations covered by this article : (1) price which has not been paid to the last vendor; (2) for
materials and labor in the construction of the vessel; (3) for the repair, equipment and provisioning with
the victuals and fuel; (4) loan on bottomry before departure of the vessel; (5) insurance premiums under
Art. 580 pars. 8 and 9.
3. Other Officers and Crew
notes:
Art. 626 - 631 : sailing mate or second in command
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Art. 632 - 633 : second mate or third in command
Complement of a vessel or crew - all the persons on board, from the captain to the cabin boy, necessary
for the management, maneuvers, and service; includes the sailing mates, engineers, stokers, and other
employees.
(a) Contracts and formalities
Art. 634. The captain may make up his crew with the number he may consider advisable,
and in the absence of Filipino sailors he may ship foreigners residing in the country, the number
thereof not to exceed one-fifth of the total crew. If in foreign ports the captain should not find a
sufficient number of Filipino sailors, he may make up the crew with foreigners, with the consent of
the consul or marine authorities.
The agreements which the captain may make with the members of the crew and others who
go to make up the complement of the vessels, to which reference is made in Article 612 (obligations
inherent in the office of captain) must be reduced to writing in the account book without the
intervention of a notary public or clerk of court, signed by the parties thereto, and vised by the
marine authority if they are executed in Filipino territory, or by the consuls or consular agents of the
Philippines if executed abroad, stating therein all the obligations which each one contracts and all
the rights they acquire, said authorities taking care that these obligations and rights are recorded in
a concise and clear manner, which will not give rise to doubts or claims.
The captain shall take care to read to them the articles of this Code which concern them,
stating in the said document that they were read.
If the book includes the requisites prescribed in Article 612, and there should not appear any
signs of alterations in its entries, it shall be admitted as evidence in questions which may arise
between the captain and the crew with regard to the agreements contained therein and the amounts
paid on account of the same.
Every member of the crew may demand of the captain a copy, signed by the latter, of the
agreement and of the liquidation of his wages, as they appear in the book.
Notes: The contract with a seaman has the nature of a lease of service, in virtue of which one person
binds himself to perform or to do the services or works for which he has signed himself in the vessel in
consideration of the compensation stipulated
(b) Duties and liabilities
Art. 635. A sailor who has been contracted to serve on a vessel cannot rescind his contract
nor fail to comply therewith except by reason of a legitimate impediment which may have occurred.
Neither can he pass from the service of one vessel to another without obtaining the written
consent of the vessel on which he may be.
If, without obtaining said permission, the sailor who has signed for one vessel should sign for
another one, the second contract shall be void, and the captain may choose between forcing him to
fulfill the service to which he first bound himself or look for a person to substitute him at his
expense.
Said sailor shall furthermore lose the wages earned on his first contract to the benefit of the
vessel for which he may have signed.
A captain who, knowing that a sailor is in the service of another vessel, should have made a
new agreement with him, without having requested the permission referred to in the foregoing
paragraphs, shall be personally liable to the captain of the vessel to which the sailor first belonged
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for that part of the indemnity, referred to in the third paragraph of this article, which the sailor may
not be able to pay.
(c) Rights
Art. 636. Should there be no fixed period for which a sailor has been contracted, he cannot
be discharged until the end of the return voyage to the port where he enlisted.
Art. 637. Neither may the captain discharge a sailor during the time of his contract except
for just cause, the following being considered as such:
1. The perpetration of a crime which disturbs order on the vessel.
2. Repeated insubordination, want of discipline, or nonfulfillment of the service.
3. Incapacity and repeated negligence in the fulfillment of the service which he should
render.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the sailor to perform the work entrusted to him, with
the exception of that provided in Article 644.
Art. 644. A seaman who falls sick shall not lose his right to wages during the
voyage, unless the sickness is the result of his own fault. At any rate, the costs of the
attendance and cure shall be defrayed from the common funds, in the form of a loan.
If the sickness should comee from an injury received in the service or defense of
the vessel, the seaman shall be attended and cured at the expense of the common funds
deducting, before anything else, from the proceeds of the freightage the cost of the
attendance and cure.
6. Desertion.
The captain may, however, before setting out on a voyage and without giving any reason
whatsoever, refuse to permit a sailor whom he may have engaged to go on board, and may leave him on
land, in which case his wages have to be paid as if he had rendered services.
The indemnity shall be paid from the funds of the vessel if the captain should have acted for
reasons of prudence and in the interest of the safety and good service of the vessel. Should this not be the
case, it shall be paid by the captain personally.
After the voyage has begun, and during the same and until the conclusion thereof, the captain
may not abandon any member of his crew on land or on the sea, unless, as the accused of a crime, his
imprisonment and delivery to the competent authority in the first port touched should be proper, which
shall be obligatory to the captain.
Art. 638. If, after the crew has been engaged, the voyage is revoked by the will of the ship
agent or of the charterers, before or after the vessel has put to sea, or if the vessel is for the same
reason given a different destination from that fixed in the agreement with the crew, the latter shall be
indemnified on account of the rescission of the contract, according to the following cases:
1. If the revocation of the voyage should be decided before departure of the vessel from the
port, each sailor engaged shall be given one month's salary, besides what may be due him, in
accordance with his contract, for the services rendered to the vessel up to the date of the revocation.
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2. If the agreement should have been for a fixed amount for the whole voyage, what may be
due for said month and days shall be determined in proportion to the approximate duration of the
voyage, in the judgment of the experts, in the manner established by the law of civil procedure; and
if the proposed voyage should be of such short duration that it is calculated at approximately one
month, the indemnity shall be fixed at fifteen days, discounting in all cases the sums advanced.
3. If the revocation should take place after the vessel has put to sea, the sailors engaged for
a fixed amount for the voyage shall receive the entire salary which may have been offered them if the
voyage had terminated; and those engaged by the month shall receive the amount corresponding to
the time they might have been on board and to the time they may require to arrive at the port of
destination, the captain being obliged, furthermore, to pay said sailors in both cases the passage to
the said port or to the port of sailing of the vessel, as may be convenient for them.
4. If the ship agent or the charterers of the vessel should give it a destination different from
that fixed in the agreement, and the members of the crew should not agree thereto, they shall be
given by way of indemnity half the amount fixed in the first case, in addition to what may be due
them for the part of the monthly wages corresponding to the days which may have elapsed from the
date of their agreements.
If they accept the change, and the voyage, on account of greater distance or of other reasons,
should give rise to an increase of wages, the latter shall be adjusted privately, or through friendly
adjusters in case of disagreement. Even if the voyage should be shortened to a nearer point, this
shall not give rise to a reduction in the wages agreed upon.
Should the revocation or change of the voyage originate from the shippers or charterers, the
ship agent shall have a right to demand of them the indemnity which may be justly due.
Art. 639. Should the revocation of the voyage arise from a just cause independent of the will
of the ship agent and the charterers, and the vessel should not have left the port, the members of the
crew shall no other right than to collect the wages earned up to the day the revocation was made.
Art. 640. The following shall be just causes for the revocation of the voyage:
1. A declaration of war or interdiction of commerce with the power to whose territory the
vessel was bound.
2. The blockade of the port of its destination or the breaking out of an epidemic after the
agreement.
3. The prohibition to receive in said port the goods which make up the cargo of the vessel.
4. The detention or embargo of the same by order of the government, or for any other
reason independent of the will of the agent.
5. The inability of the vessel to navigate.
Art. 641. If, after a voyage has been begun, and any of the first three causes mentioned in
the foregoing article should occur, the sailors shall be paid at the port which the captain may deem
advisable to make for the benefit of the vessel and cargo, according to the time they may have
served thereon; but if the vessel is to continue its voyage, the captain and the crew may mutually
demand the enforcement of the contract.
In case of the occurrence of the fourth cause, the crew shall continue to be paid half wages, if
the agreement is by month; but if the detention should exceed three months, the contract shall be
rescinded and the crew shall be paid what they should have earned according to the contact, as if the
voyage had been made. And if the agreement should be for a fixed sum for the voyage, the contract
must be complied with in the terms agreed upon.
In the fifth case, the crew shall have no other right than to collect the wages earned; but if
the disability of the vessel should have been caused by the negligence or lack of skill of the captain,
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engineer, or sailing mate, they shall indemnify the crew for the damages suffered, always without
prejudice to the criminal liability which may be proper.
Art. 642. If the crew has been engaged on shares it shall not be entitled, by reason of the
revocation, delay, or greater extension of the voyage, to anything but the proportionate part of the
indemnity which may be paid to the common funds by the persons responsible for said occurrences.
Art. 643. If the vessel and her cargo should be totally lost by reason of capture or
shipwreck, all rights shall be extinguished, both as regards the right of the crew to demand any
wages and as regards the right of the ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be saved, the crew engaged on
wages, including the captain, shall retain their rights on the salvage, as far as possible, on the
remainder of the vessel as well as on the value of the freightage or the cargo saved; but sailors who
are engaged on shares shall have no right on the salvage of the hull, but only on the portion of the
freightage saved. (If they should have worked to recover the remainder of the shipwrecked vessel,
they shall be given from the amount of the salvage an award in proportion to the efforts made and
to the risks encountered in order to accomplish the salvage.)
Art. 644. A sailor who falls sick shall not lose his right to wages during the voyage, unless
his sickness is the result of his own fault. At any rate, the costs of medical attendance and treatment
shall be defrayed from the common funds, in the form of a loan.
If the sickness should be caused by an injury received in the service or defense of the vessel,
the sailor shall be attended and treated at the expense of the common funds, deducting, before
anything else, from the proceeds of the freightage, the cost of the attendance and treatment.
Art. 645. If a sailor should die during the voyage, his heirs shall be given the wages earned
and not received, according to his contract and the cause of his death, namely --If he died a natural death and was engaged on wages, that which may have been earned up
to the date of his death shall be paid.
If the contract was for a fixed sum for the whole voyage, half the amount earned shall be
paid if the sailor died on the voyage out, and the whole amount if he died on the return voyage.
And if the contract was on shares and the death occurred after the voyage was begun, the
heirs shall be paid the entire portion due the sailor; but if the latter died before the departure of the
vessel from the port, the heirs shall not be entitled to claim anything.
If death occurred in the defense of the vessel, the sailor shall be considered as living, and his
heirs shall be paid, at the end of the voyage, the full amount of wages or the entire part of the profits
which may be due him as others of his class.
The sailor shall likewise be considered as present if he was captured while defending the
vessel, in order to enjoy the benefits as the rest; but should he have been captured on account of
carelessness or other accident not related to the service, he shall only receive the wages due up to
the day of his capture.
Art. 646. The vessel with her engines, rigging, equipment, and freightage shall be liable for
the wages earned by the crew engaged per month or for the trip, the liquidation and payment to
take place between one voyage and the other. // After a new voyage has been undertaken, credits of
such kind pertaining to the preceding voyage shall lose the preference.
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Art. 647. The officers and the crew of the vessel shall be exempted from all obligations
contracted, if they deem if proper, in the following cases;
1. If, before the beginning of the voyage, the captain attempts to change it, or there occurs a
naval war with the power to which the vessel was destined.
2. If a disease should break out and be officially declared epidemic in the port of
destination.
3. If the vessel should change owner or captain.
4. Supercargoes
Art. 649. Supercargoes shall discharge on board the vessel the administrative duties which
the agent or shippers may have assigned them; they shall keep an account and record of their
transactions in a book which shall have the same conditions and requisites as required for the
accounting book of the captain, and shall respect the latter in his duties as chief of the vessel.
The powers and liabilities of the captain shall cease, when there is a supercargo, with regard
to that part of the administration legitimately conferred upon the latter, but shall continue in force
for all acts which are inseparable from his authority and office.
Supercargo: An agent of the owner of the goods shipped as cargo on a vessel, who has charge of the
cargo on board, sells the same to the best advantage in the foreign markets, buys cargo to be brought back
on the return voyage of the ship, and comes home with it
Art. 650. All the provisions contained in the second section of Title III, Book II, with regard
to qualifications, manner of making contracts, and liabilities of factors shall be applicable to
supercargoes.
Now governed by the provisions on agency
Art. 651. Supercargoes cannot, without special authorization or agreement, make any
transaction for their own account during the voyage, with the exception of the ventures which, in
accordance with the custom of the port of destination, they are permitted to do.
Neither shall they be permitted to invest in the return trip more than the profits from the
ventures, unless there is a special authorization therefor from the principals.
D. Accidents and Damages in Maritime Commerce
RISKS, DAMAGES, AND ACCIDENTS OF MARITIME COMMERCE
1. Averages
(a) Nature and Kinds
Art. 806. For the purposes of this Code the following shall be considered averages:
1. All extraordinary or accidental expenses which may be incurred during the voyage for
the preservation of the vessel or cargo, or both.
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2. All damages or deterioration which the vessel may suffer from the time it puts to sea at
the port of departure until it casts anchor at the port of destination, and those suffered by the
merchandise from the time they are loaded in the port of shipment until they are unloaded in the
port of their consignment.
Art. 807. The petty and ordinary expenses incident to navigation, such as those of pilotage
of coasts and ports, lighterage and towage, anchorage, inspection, health, quarantine lazaretto,
and other so-called port expenses, costs of barges, and unloading, until the merchandise is placed
on the wharf, and other usual expenses of navigation shall be considered ordinary expenses to be
defrayed by the shipowner, unless there is an express agreement to the contrary.
Art. 808. Averages shall be:
1. Simple or particular.
2. General or gross.
Averages consist of 2 items :
1. Expenses : to constitute an average, an expense must be:
a. extraordinary or accidental
b. incurred during the voyage
c. incurred in order to preserve the vessel, cargo or both
2. Damages or deterioration : to constitute an average, it must be:
a. have been suffered from the time the vessel puts to sea from
the port of departure until it casts anchor in the port of
destination
b. have been suffered by the merchandise from the time they are
loaded in the port of shipment until they are unloaded in the port
of consignment
(1) Simple or Particular
(a) Defined
Art. 809. As a general rule, simple or particular averages include all the expenses and
damages caused to the vessel or to her cargo which have not inured to the common benefit and
profit of all the persons interested in the vessel and her cargo, especially the following:
1. The losses suffered by the cargo from the time of its embarkation until it is unloaded,
either on account of the inherent defect of the goods or by reason of a marine accident or force
majeure, and the expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its hull, rigging, arms, and
equipments, for the same causes and reasons, from the time it puts to sea from the port of
departure until it anchors in the port of destination.
3. The losses suffered by the merchandise loaded on deck, except in coastwise navigation,
if the marine ordinances allow it.
4. The wages and victuals of the crew when the vessel is detained or embargoed by a
legitimate order or force majeure, if the charter has been contracted for a fixed sum for the voyage.
5. The necessary expenses on arrival at port, in order to make repairs or secure
provisions.
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6. The lowest value of the goods sold by the captain in arrivals under stress for the
payment of provisions and to save the crew, to meet any other need of the vessel against which the
proper amount shall be charged.
7. The victuals and wages of the crew while the vessel is in quarantine.
8. The loss inflicted upon the vessel or cargo by reason of an impact or collision with
another, if it is accidental and unavoidable. If the accident should occur through the fault or
negligence of the captain, the latter shall be liable for all the damage caused.
9. Any loss suffered by the cargo through the faults, negligence, or barratry of the captain
or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity
from the captain, the vessel, and the freight.
Distinguishing feature : an expense incurred or damage suffered which has not inured to the common
benefit and profit of all persons interested in the vessel and its cargo
(b) Effects
Art. 810. The owner of the goods which gave rise to the expense or suffered the damage
shall bear the simple or particular averages.
(2) Gross or General
(a) Defined
Art. 811. As a general rule, general or gross averages shall include all the damages and
expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same
time, from a real and known risk, and particularly the following:
1. The goods or cash invested in the redemption of the vessel or of the cargo captured by
enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained
during the time the settlement or redemption is being made.
2. The goods jettisoned to lighten the vessel, whether they belong to the cargo, to the
vessel, or to the crew, and the damage suffered through said act by the goods which are kept on
board.
3. The cables and masts which are cut or rendered useless, the anchors and the chains
which are abandoned, in order to save the cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of the cargo in order to lighten the
vessel and place it in condition to enter a port or roadstead, and the damage resulting therefrom to
the goods removed or transferred.
5. The damage suffered by the goods of the cargo by the opening made in the vessel in
order to drain it and prevent its sinking.
6. The expenses caused in order to float a vessel intentionally stranded for the purpose of
saving it.
7. The damage caused to the vessel which had to be opened, scuttled or broken in order to
save the cargo.
8. The expenses for the treatment and subsistence of the members of the crew who may
have been wounded or crippled in defending or saving the vessel.
9. The wages of any member of the crew held as hostage by enemies, privateers, or
pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to
the vessel or to his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel chartered by the month, during the
time that it is embargoed or detained by force majeure or by order of the Government, or in order
to repair the damage caused for the common benefit.
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11. The depreciation resulting in the value of the goods sold at arrivals under stress in
order to repair the vessel by reason of gross average.
12. The expenses of the liquidation of the average.
Art. 817. If in the lightening a vessel on account of a storm, in order to facilitate its entry
into a port or roadstead, part of her cargo should be transferred to lighters or barges and be lost,
the owner of said part shall be entitled to indemnity, as if the loss had originated from a gross
average, the amount thereof being distributed between the vessel and cargo from which it came.
If, on the contrary, the merchandise transferred should be saved and the vessel should be
lost, no liability may be demanded of the salvage.
Art. 818. If, as a necessary measure to extinguish a fire in port, roadstead, creek, or bay, it
should be decided to sink any vessel, this loss shall be considered gross average, to which the
vessels saved shall contribute.
Distinguishing feature: Expense or damage suffered deliberately in order to save the vessel, its cargo or
both from a real and known risk --> it is the deliverance from an immediate peril, by a common
sacrifice, that constitutes the essence of general average
Requisites for general average:
1. there must be a common danger --> the ship and cargo are subject to the same danger and
that the danger arises from accidents of the sea, dispositions of the authorities or faults of men, provided
that the circumstances producing the peril should be ascertained and imminent
2. for the common safety, part of the vessel or the cargo or both is sacrificed deliberately
3. from the expenses or damages caused follows the successful saving of the vessel and cargo
4. the expenses or damages should have been incurred or inflicted after taking legal steps and
authority
(b) Essential Requisites
Art. 813. In order to incur the expenses and cause the damages corresponding to gross
average, there must be a resolution of the captain, adopted after deliberation with the sailing mate
and other officers of the vessel, and after hearing the persons interested in the cargo who may be
present.
If the latter should object, and the captain and officers or a majority of them, or the
captain, if opposed to the majority, should consider certain measures necessary, they may be
executed under his responsibility, without prejudice to the right of the shippers to proceed against
the captain before the competent judge or court, if they can prove that he acted with malice, lack
of skill, or negligence.
If the persons interested in the cargo, being on board the vessel, have not been heard, they
shall not contribute to the gross average, their share being chargeable against the captain, unless
the urgency of the case should be such that the time necessary for previous deliberation was
wanting.
Art. 814. The resolution adopted to cause the damages which constitute general average
must necessarily be entered in the log book, stating the motives and reasons on which it is based,
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the votes against it and the reason for the dissent, should there be any, and the irresistible and
urgent causes which impelled the captain if he acted of his own accord.
In the first case the minutes shall be signed by all the persons present who could do so
before taking action, if possible; and if not, at the first opportunity. In the second case, it shall be
signed by the captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in detail all the goods jettisoned,
and mention shall be made of the injuries caused to those kept on board. The captain shall be
obliged to deliver one copy of these minutes to the maritime judicial authority of the first port he
may make, within twenty- four hours after his arrival, and to ratify it immediately under oath.
Formalities for incurring gross average :
1. there must be an assembly of the sailing mate and other officers with the captain including those with
interests in the cargo
2. there must be a resolution of the captain
3. the resolution shall be entered in the log book, with the reasons and motives and the votes for and
against the resolution
4. the minutes shall be signed by the parties
5. within 24 hours upon arrival at the first port the captain makes, he shall deliver one copy of these
minutes to the maritime judicial authority thereat
Art. 860. If, notwithstanding the jettison of the merchandise, breakage of masts, ropes, and
equipment, the vessel should be lost running same risk, no contribution whatsoever by reason of
gross average shall be proper.
The owners of the goods saved shall not be liable for the indemnification of those
jettisoned, lost or damaged.
The goods that were not sacrificed shall not be liable for the indemnification of those sacrificed - One
of the requisites of general average is lacking, that is, success in saving the vessel and remaining cargo
Magsaysay Inc. vs Agan 96 Phil. 504
F:
Plaintiff's vessel SS Antonio left for Manila for Basco, Batanes with general cargo owned by the
different shippers including that of the defendant. Upon reaching Aparri, it accidentally ran aground. Plaintiff
had it refloated by Luzteveco for compensation. After refueling, the vessel proceeded to Basco where the
cargoes were delivered. On the theory that the expenses incurred in floating the vessel constituted a general
average to which both the ship and cargo should contribute, plaintiff asked from the shippers a deposit or bond
to answer for contribution to the average. All shippers acceded except the defendant. In action to recover said
contribution, the Manila CFI decided for the plaintiff. Defendant appealed contending that the floating of a
vessel, unintentionally stranded inside a port and at the mouth of a river during a fine weather, does not
constitute general average expenses.
Held: In classifying averages into simple or particular and general or gross and defining each class, the
Code of Commerce at the same time enumerate certain specific cases as coming specially under one or
the other class. While the expenses incurred in putting the vessel afloat may well come under No. 2 of
Art. 809 - referring to expenses suffered by the vessel due to an accident of the sea or force majeuresaid expenses do not fit into any of the specific cases of general average enumerated in ART. 811. No. 6
of Art. 811 mentions expenses caused to afloat a vessel, but it specifically refers to a vessel intentionally
stranded for the purpose of saving it, and would have no application where the stranding was
unintentional.
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The following are the requisites for a general average: 1) there must be common danger, 2) for
the common safety part of the vessel or cargo or both is sacrificed deliberately, 3) from the expenses or
damages caused follows the successful saving of the vessel and cargo, and 4) the expenses or damages
should have been incurred or inflicted after taking the proper legal steps and authority.
It is the deliverance from an immediate peril, by reason of a common sacrifice, that constitutes
the essence of a general average. Where there is no proof that the stranded vessel had to be put afloat to
save it from imminent danger, and what does appear is that the vessel had to be salvaged in order to
enable it to proceed to its port of destination, the expenses incurred in floating the vessel do not
constitute general average. It is the safety of the property, and not of the voyage which constitutes the
true foundation of general average.
The expenses incurred for the common safety of the vessel and cargo in this case did not arise
from the imminent peril of both. The cargo could have been unloaded by the owners had they been
required to do so. The refloating was a success, but as the sacrifice was for the vessel's benefit -- to
enable it to proceed to its destination -- and not for the purpose of saving the cargo, the cargo owners
are not in law bound to contribute to expenses. The final requisite has not been proved for it does not
appear that the expenses in question were incurred after following the procedure laid down in Art. 913.
Decision reversed.
International Harvester vs Hamburg American Line 42 Phil 845

F:
In the spring of 1917, defendant undertook to carry agricultural machineries, belonging to the
plaintiff, from Hamburg to Vladivostok, Russia. Freight charges were prepaid to ultimate destination and
defendant reserved the right to forward the machineries at its own expense by some other means in case of its
inability to effect discharge at the port of destination. When the voyage was almost completed at the China Sea,
war broke out between Germany and Russia, and the ship put in to the port of Manila, where it was interned.
Captain of the vessel refused to surrender the machineries to the owner's agent unless the latter would agree to
subject said cargo to liability upon general average to satisfy the cost and expenses of the vessel incident to its
stay in Manila. Plaintiff did not assent and brought an action for recovery of the machineries plus damages.
The plaintiff later obtained said cargo by a writ of replevin and forwarded it to Vladivostok by another streamer.
Defendant denied liability asserting its lien on the cargo for general average. Trial court awarded the plaintiff
damages. Defendant appealed.
Held: It is clear that the cargo in question is not liable to a general average. It is not claimed that said
cargo was contraband of war and being neutral goods, they were not liable to forfeiture in the event of
capture by the enemies of the ship's flag. It follows that when the master of the vessel decided to take
refuge in Manila, he acted exclusively with a view to the vessel's protection. There was no common
danger to the ship and cargo; and, therefore, it was not a case for a general average.
The outbreak of the war between Germany and Russia absolved the defendant from conveying
the cargo to Russia, and no damage could be recovered by the plaintiff from the defendant for the latter's
failure to convey the cargo to the port of destination on that ship. But by the terms of the contract of
affreightment, the defendant was bound to forward the cargo to Vladivostok at its expense, not
necessarily by a streamer of defendant. It does not by any means follow that it is not liable for the
expenses incurred by the plaintiff in completing the unfinished portion of the voyage in another ship.
Defendant is, therefore, liable for the cost of forwarding the cargo by another line, the full freight having
been received by the ship at the commencement of the voyage.
Judgment affirmed.
Compagnie de Commerce vs Hamburg 36 Phil 590
F:
In July 1914, defendant's vessel undertook to carry a cargo of rice meal in the French port of Saigon
for delivery to Dunkirk under a contract of affreightment with a French shipper. While the loading of the cargo
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was made, rumors of the outbreak of war between French and Germany spread. The master of the German
vessel, after completion of the loading of the cargo and after being refused by the French Governor at Saigon
for a pass of safe-conduct, fled with his vessel and her cargo and took refuge in Manila. Considering the nature
of the cargo and its impossibility of being delivered to its destination within reasonable time, the master of the
vessel consulted the shipper's instruction as to the disposition of the cargo, but the shipper's agent refused to
assume responsibility. Defendant's agent in Manila, upon the court's authority secured by the master of the
vessel, sold said rice meal and deposited the proceeds thereof with the court minus the expenses incident to the
sale. Plaintiff filed an action for recovery of the proceeds of the sale and the resulting damages. Defendant also
claimed, in a cross-complaint, contribution from plaintiff for general average for the expenses incurred by the
vessel's stay in Manila. Trial court decided for the plaintiff including damages for the defendant's breach of the
charter party. Both parties appealed.
Held: The danger from which the master of the vessel fled was a real and not merely an imaginary one.
Seizure at the hands of the enemy, though not inevitable, was a possible outcome of a failure to leave the
port of Saigon; and it cannot be said that under the conditions existing at the time when the master
elected to flee from that port, there were no grounds for a reasonable apprehension of danger from
seizure by French authorities, and therefore no necessity for flight. The deviation of the vessel
therefore, from the route prescribed in her charter party, and the subsequent abandonment by the master
of the voyage contemplated in the contract of affreightment, must be held to have been justified by the
necessity under which the master was placed to elect that course which would remove and preserve the
vessel from danger of seizure by the public enemy of the flag which the vessel sailed; and that neither
the vessel nor her owners are liable for the resultant damages suffered by the owner of the cargo.
The claim for general average by the shipowner, however, cannot be sustained under the
provisions of the York-Antwerp Rules. An examination of the entire body of these rules discloses that
general average is never allowed thereunder unless the loss or damage sought to be made good as
general average has been incurred for the `common safety'. It is very clear that in fleeing from the port
of Saigon and taking refuge in Manila, the master of the vessel was not acting for the common safety of
the vessel and her cargo. The French cargo was absolutely secure from danger of seizure or
confiscation so long as it remained in the port of Saigon, and there can be no question that the flight of
the vessel was a measure of precaution adopted solely and exclusively for the preservation of the vessel
from danger of seizure or capture. Delivery of the net proceeds of the sale to plaintiff should be
affirmed, but recovery of damages by plaintiff should be reversed. Defendant cannot claim for general
average.
Judgment modified.
(c) Effects
Art. 812. In order to satisfy the amount of the gross or general averages, all the persons
having an interest in the vessel and cargo therein at the time of the occurrence of the average shall
contribute.
(d) Jettison
Art. 815. The captain shall direct the jettison, and shall order the goods cast overboard in
the following order:
1. Those which are on deck, beginning with those which embarrass the maneuver or
damage the vessel, preferring, if possible, the heaviest ones with the least utility and value.
2. Those which are below the upper deck, always beginning with those of the greatest
weight and smallest value, to the amount and number absolutely indispensable.
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Art. 816. In order that the goods jettisoned may be included in the gross average and the
owners thereof be entitled to indemnity, it shall be necessary in so far as the cargo is concerned
that their existence on board be proven by means of the bill of lading; and with regard to those
belonging to the vessel, by means of the inventory prepared before the departure, in accordance
with the first paragraph of Article 612.
(e) Jason Clause

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

Art. 850. If by reason of one or more accidents of the sea, particular and gross averages of
the vessel, of the cargo, or of both, should take place on the same voyage, the expenses and
damages corresponding to each average shall be determined separately in the port where the
repairs are made, or where the merchandise is discharged, sold, or utilized.
For this purpose the captains shall be obliged to demand of the expert appraisers and of
the contractors making the repairs, as well as of those appraising and taking part in the unloading,
repair, sale, or utilization of the merchandise, that in their appraisements or estimates and accounts
they set down separately and accurately the expenses and damages pertaining to each average,
and in those of each average those corresponding to the vessel and to the cargo, also stating
separately whether or not there are damages proceeding from inherent defect of the thing and not
from accident of the sea; and in case there should be expenses common to the different averages
and to the vessel and its cargo, the amount corresponding to each must be estimated and stated
distinctly.
Art. 851. At the instance of the captain, the adjustment, liquidation, and distribution of
gross averages shall be held privately, with the consent of all the parties in interest.
For this purpose, within forty-eight hours, following the arrival of the vessel at the port,
the captain shall convene all the persons interested in order that they may decide as to whether the
adjustment or liquidation of the gross average is to be made by experts and liquidators appointed
by themselves, in which case did shall be so done if the interested parties agree.
If an agreement is not possible, the captain shall apply to the competent judge or court,
who shall be the one in the port where these proceedings are to be held in accordance with the
provisions of this Code, or to the consul of the Philippines should there be one, and should there be
none, to the local authority when they are to be held in a foreign port.
Art. 852. If the captain does not comply with the provisions of the preceding article, the
ship agent or the shippers shall demand the liquidation, without prejudice to the action they may
bring to demand indemnity from him.
Under Art. 851, the captain is required to initiate the proceedings for the adjustment, liquidation and
distribution of any gross average; it is his duty to take the proper steps to protect any shipper whose
goods may have been jettisoned for the general safety ==> if the captain does not comply with his duty
under 851, the shipowner or shipper has the right to maintain an action against the captain for
indemnification for the loss --> this does not involve the suppression of the right of action of the shipper
against the shipowner
Art. 853. After the experts have been appointed by the persons interested, or by the court,
and after the acceptance, they shall proceed to the examination of the vessel and of the repairs
required and to the appraisal of their cost, separating these losses and damages from those arising
from the inherent defect of the things.
The experts shall also declare whether the repairs may be made immediately, or whether it
is necessary to unload the vessel in order to examine and repair it.
With regard to the merchandise, if the average should be visible at a mere glance, the
examination thereof must be made before they are delivered. Should it not be visible at the time of
unloading, said examination may be made after the delivery, provided that it is done within forty-
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eight hours from the unloading, and without prejudice to the other proofs which the experts may
deem proper.
Art. 854. The valuation of the objects which are to contribute to the gross average, and
that of those which constitute the average, shall be subject to the following rules:
1. The merchandise saved which is to contribute to the payment of the gross average shall
be valued at the current price at the port of unloading, deducting the freightage, customs duties,
and expenses of unloading, as may appear from a material inspection of the same, without taking
the bills of lading into consideration, unless there is an agreement to the contrary.
2. If the liquidation is to be made in the port of departure, the value of the merchandise
loaded shall be determined by the purchase price, including the expenses until they are placed on
board, the insurance premium excluded.
3. If the merchandise should be damaged, it shall be appraised at its true value.
4. If the voyage having been interrupted, the merchandise should have been sold in a
foreign port, and the average cannot be estimated, the value of the merchandise in the port of
arrival, or the net proceeds obtained at the sale thereof, shall be taken as the contributing capital.
5. Merchandise lost, which constitutes the gross average, shall be appraised at the value
which merchandise of its kind may have in the port of unloading, provided that its kind and quality
appear in the bill of lading; and should they not appear, the value shall be that stated in the
invoices of the purchase issued in the port of shipment, adding thereto the expenses and freightage
subsequently arising.
6. The masts cut down, the sails, cables, and other equipment of the vessel rendered
useless for the purpose of saving it, shall be appraised at the current value, deducting one-third by
reason of the difference between new and old.
This deduction shall not be made with respect to anchors and chains.
7. The vessel shall be appraised at its true value in the condition in which it is found.
8. The freightage shall represent 50 per cent by way of contributing capital.
Art. 855. The merchandise loaded on the upper deck of the vessel shall contribute to the
gross average should it be saved; but there shall be no right to indemnify if it should be lost by
reason of having been jettisoned for common safety, except when the marine ordinances allow its
shipment in this manner in coastwise navigation.
The same shall take place with that which is on board and is not included in the bills of
lading or inventories, according to the cases.
In any case the shipowner and the captain shall be liable to the shippers for the damages
from the jettison, if the storage on the upper deck was made without the consent of the latter.
The goods may be stowed on deck (1) with the consent of the shipper or (2) without his consent --> if
stowed on deck with his consent, he takes the risk upon himself of the perils arising from the dangers of
the sea and any damage will be borne by the owner [particular average]
--> if stowed on deck without his consent, the captain does so at his own risk; the captain
cannot protect himself by showing that they are damaged or lost by dangers of the sea
The carriage of gasoline on deck by coastwise or interisland vessels is allowed by marine
regulations --> the loss of petroleum for common safety and benefit will constitute a general average.
Art. 857. After the appraisement of the goods saved and of those lost which constitute the
gross average, has been concluded by the experts, the repairs, if any, made on the vessel, and, in
this case, the accounts of the same approved by the persons interested or by the judge or court, the
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entire record shall be turned over to the liquidator appointed, in order that he may proceed with
the distribution of the average.
(3) Liquidation of general average
Art. 858. In order to effect the liquidation, the liquidator shall examine the protest of the
captain, comparing it, if necessary, with the log book, and all the contracts which may have been
made among the persons interested in the average, the appraisements, expert examinations, and
accounts of repairs made. If, as a result of this examination, he should find any defect in the
procedure which might injure the rights of the persons interested or affect the liability of the
captain, he shall call attention thereto in order that it may be corrected, if possible, and otherwise
he shall include it in the exordial of the liquidation.
Immediately thereafter he shall proceed with the distribution of the amount of the average,
for which purpose he shall fix:
1. The contributing capital, which he shall determine by the value of the cargo, in
accordance with the rules established in Article 854.
2. That of the vessel in its actual condition, according to a statement of experts.
3. The 50 per cent of the amount of the freightage, deducting the remaining 50 per cent for
wages and maintenance of the crew.
After the amount of the gross average has been determined in accordance with the
provisions of this Code, it shall be distributed pro rata among the goods which are to cover the
same.
Art. 865. The distribution of the gross average shall not be final until it has been agreed
to, or in the absence thereof, until it has been approved by the judge or court, after an examination
of the liquidation and a hearing of the persons interested who may be present or of their
representatives.
Art. 866. After the liquidation has been approved, it shall be the duty of the captain to
collect the amount of the contribution, and he shall be liable to the owners of the goods averaged
for the damages they may suffer through his delay or negligence.
Art. 867. If the persons contributing should not pay the amount of the contribution at the
end of the third day after having been required to do so, the goods saved shall be proceeded
against, at the request of the captain, until payment has been made from their proceeds.
Art. 868. If the person interested in receiving the goods saved should not give security
sufficient to answer for the amount corresponding to the gross average, the captain may defer the
delivery thereof until payment has been made.
Art. 869. The experts whom the court or the persons interested may appoint, as the case
may be, shall proceed with the examination and appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7, in so far as they are applicable.
(4) Liquidation of particular average
PAGE 139
Art. 869. The experts whom the court or the persons interested may appoint, as the case
may be, shall proceed with the examination and appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7, in so far as they are applicable.
2. Arrivals Under Stress
(a) Causes
Art. 819. If during the voyage the captain should believe that the vessel cannot continue
the trip to the port of destination on account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea disabling it to navigate, he shall
assemble the officers and shall summon the persons interested in the cargo who may be present,
and who may attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reason should be considered well-founded, the arrival at the nearest
and most convenient port shall be agreed upon, drafting and entering the proper minutes, which
shall be signed by all, in the log book.
The captain shall have the deciding vote, and the persons interested in the cargo may make
the objections and protests they may deem proper, which shall be entered in the minutes in order
that they may make use thereof in the manner they may consider advisable.
Art. 820. An arrival shall not be considered lawful in the following cases:
1. If the lack of provisions should arise from the failure to take the necessary provisions
for the voyage according to usage and custom, or if they should have been rendered useless or lost
through bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have been well known, manifest,
and based on positive and provable facts.
3. If the defector the vessel should have arisen from the fact that it was not repaired,
rigged, equipped, and prepared in a manner suitable for the voyage, or from some erroneous order
of the captain.
4. Whenever malice, negligence, want of foresight, or lack of skill on the part of the
captain exists in the act causing the damage.
Arrival under stress: Arrival of a vessel at the nearest and most convenient port, if during the voyage
the vessel cannot continue the trip to the port of destination due to : (1) lack of provisions, (2) wellfounded fear of seizure, privateers, or pirates, (3) by reason of any accident of the sea disabling it to
navigate
(b) Formalities
Art. 819. If during the voyage the captain should believe that the vessel cannot continue
the trip to the port of destination on account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea disabling it to navigate, he shall
assemble the officers and shall summon the persons interested in the cargo who may be present,
and who may attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reason should be considered well-founded, the arrival at the nearest
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and most convenient port shall be agreed upon, drafting and entering the proper minutes, which
shall be signed by all, in the log book.
The captain shall have the deciding vote, and the persons interested in the cargo may make
the objections and protests they may deem proper, which shall be entered in the minutes in order
that they may make use thereof in the manner they may consider advisable.
Formalities : 1. assembly of the officers including all interested parties
2. drafting and entering in the log book the proper minutes, which shall be signed by all
3. entry in the log book of the objections and protests of the persons interested in the cargo
Art. 822. If in order to make repairs to the vessel or because there is danger that the cargo
may suffer damage, it should be necessary to unload, the captain must request authorization from
the competent judge or court for the removal, and carry it out with the knowledge of the person
interested in the cargo, or his representative, should there be any.
In a foreign port, it shall be the duty of the Filipino consul, where there is one, to give the
authorization.
In the first case, the expenses shall be for the account of the ship agent or owner, and in the
second, they shall be chargeable against the owners of the merchandise for whose benefit the act
was performed.
If the unloading should take place for both reasons, the expenses shall be divided
proportionately between the value of the vessel and that of the cargo.
(c) Expenses
Art. 821. The expenses of an arrival under stress shall always be for the account of the
shipowner or agent, but they shall not be liable for the damages which may be caused the shippers
by reason of the arrival, provided the latter is legitimate.
Otherwise, the ship agent and the captain shall be jointly liable.
Art. 822. If in order to make repairs to the vessel or because there is danger that the cargo
may suffer damage, it should be necessary to unload, the captain must request authorization from
the competent judge or court for the removal, and carry it out with the knowledge of the person
interested in the cargo, or his representative, should there be any.
In a foreign port, it shall be the duty of the Filipino consul, where there is one, to give the
authorization.
In the first case, the expenses shall be for the account of the ship agent or owner, and in the
second, they shall be chargeable against the owners of the merchandise for whose benefit the act
was performed.
If the unloading should take place for both reasons, the expenses shall be divided
proportionately between the value of the vessel and that of the cargo.
Requisites for the captain to unload the cargo arriving under stress:
1. the unloading must be necessary to make repairs or there must be danger that the cargo may suffer
damage
2. the captain must be authorized by either a competent court or the Phil. consul, depending on the port
of arrival
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(d) Responsibility of Captain
Art. 823. The custody and preservation of the cargo which has been unloaded shall be
entrusted to the captain, who shall be responsible for the same, except in cases of force majeure.
Art. 824. If the entire cargo or part thereof should appear to be damaged, or there should
be imminent danger of its being damaged, the captain may request of the competent judge or
court, or of the consul in a proper case, the sale of all or of part of the former, and the person
taking cognizance of the matter shall authorize it, after an examination and declaration of experts,
advertisements, and other formalities required by the case, and an entry in the book, in accordance
with the provisions of Article 624.
The captain shall, in a proper case, justify the legality of his conduct, under the penalty of
answering to the shipper for the price the merchandise would have brought if it had arrived in
good condition at the port of destination.
Art. 825. The captain shall be responsible for the damages caused by his delay, if after the
cause of the arrival under stress has ceased, he should not continue the voyage.
If the cause of the arrival should have been the fear of enemies, privateers, or pirates, a
deliberation and resolution in a meeting of the officers of the vessel and persons interested in the
cargo who may be present, in accordance with the provisions contained in Article 819, shall
precede the departure.
The captain has the duty to continue the voyage without delay after the cause of the arrival under stress
has ceased--> otherwise, he shall be liable for damages caused by the delay
3. Collisions
Collision: impact of two vessels both of which are moving
Allision: striking of a moving vessel against one that is stationary
Cases of collision :
1. due to the fault, negligence or lack of skill of the captain, sailing mate or the complement of the vessel
--> under 826, the shipowner shall be liable for the losses and damages
2. due to the fault of both vessels --> under 827, each vessel shall suffer its own losses, but as regards
the owners of the cargoes, both vessels shall be jointly and severally liable
3. where it cannot be determined which of the 2 vessels is at fault --> under 828, each vessel shall
suffer its own losses, and both shall also be solidarily responsible for the losses and damages caused to
their cargoes
4. collision due to fortuitous event or force majeure --> under 830, each vessel shall bear its own
damages
5. where two vessels collide with each other without their fault but by reason of the fault of a third
vessel --> under 831, the owner of the third vessel causing the collision shall be liable for the losses and
damages 6. a vessel which is properly anchored and moored may collide with those nearby by reason of
a storm or other cause of force majeure --> under 832, the vessel run into shall suffer its own damages
and expenses
Nautical Rules to determine negligence :
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1. When 2 vessels are about to enter a port, the farther one must allow the nearer to enter first;
if they collide, the fault is presumed to be imputable to the one who arrived later, unless it can be proved
that there was no fault on its part.
2. When 2 vessels meet, the smaller should give the right of way to the larger one.
3. A vessel leaving port should leave the way clear for another which may be entering the same
port.
4. The vessel which leaves later is presumed to have collided against one who has left earlier.
5. There is also a presumption against the vessel which sets sail at night.
6. The presumption also works against the vessel with spread sails which collides with another
which is at anchor, and cannot move, even when the crew of the latter has received word to lift anchor,
when there was not sufficient time to do so or there was fear of a greater damage or other legitimate
reason.
7. The vessel which is not properly moored or does not observe the proper distances, has the
presumption against itself.
8. The vessel which is moored at a place not used for the purpose, or which is improperly
moored or does not have sufficient cables, or which has been left without watch, has also against itself
the presumption.
9. The same rule applies to those vessels which do not have buoys to indicate the location of its
anchors to prevent damage to these vessels which may approach it.
Zones in time of collisions (3 time zones):
1. all the time up to the moment when the risk of collision may have said to have begun
--> within this zone, no rule is applicable because none is necessary. Each vessel is free to
direct its course as it deems best with reference to the movements of the other vessel.
2. the time between the moment when the risk of collission begins and the moment when it has
become a practical necessity.
3. the time between the moment when collission has become a practical certainty and the
moment of actual contact
Effect of fault of privileged vessel during third zone :
If a vessel having a right of way suddenly changes its course during the third zone, in an effort
to avoid an imminent collision due to the fault of another vessel, such act may be said to be done in
extremis, and even if wrong, cannot create responsibility on the part of said vessel with the right of way.
Thus, it has been held that fault on the part of the sailing vessel at the moment preceding a collission,
that is, during the third division of time, does not absolve the steamship which has suffered herself and a
sailing vessel to get into such dangerous proximity as to cause inevitable harm and confusion, and a
collision results as a consequence. The steamer having a far greater fault in allowing such proximity to
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be brought about is chargeable with all the damages resulting from the collission; and the act of the
sailing vessel having been done in extremis and even wrong, is not responsible for the result.
(a) Classes and Effects
(1) Fortuitous
Art. 830. If a vessel should collide with another through fortuitous event or force majeure,
each vessel and its cargo shall bear its own damages.
Art. 832. If, by reasons of a storm or other cause of force majeure, a vessel which is
properly anchored and moored should collide with those nearby, causing them damages, the injury
occasioned shall be considered as particular average of the vessel run into.
Each to his own damage --> particular damage
(2) Culpable
Art. 826. If a vessel should collide with another, through the fault, negligence, or lack of
skill of the captain, sailing mate, or any other member of the complement, the owner of the vessel
at fault shall indemnify the losses and damages suffered, after an expert appraisal.
Where the obligation arises from tortious act and not from contract, both the owner and the shipagent
should be declared liable
Art. 827. If the collision is imputable to both vessels, each one shall suffer its own
damages, and both shall be solidarily responsible for the losses and damages occasioned to their
cargoes.
Defense of due diligence of a good father of a family in the selection and vigilance of the officers and
crew cannot be used to render nugatory the solidary liability under 827
Under the express provisions of 827, the shipowners cannot successfully maintain an action against the
other for the loss or injury to his vessel
Art.831. If a vessel should be forced by a third vessel to collide with another, the owner of
the third vessel shall indemnify the losses and damages caused, the captain thereof being civilly
liable to said owner.
(3) Inscrutable Fault
Art. 828. The provisions of the preceding article are applicable to the case in which it
cannot be determined which of the two vessels has caused the collision.
Relation of Art. 827 to Art. 828
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Art. 828 must be considered an extension of Art. 827
The rule of liability under Art. 827 is applicable not only to the case where both vessels may be
shown to be actually blameworthy but also to the case where it is obvious that only one was at fault but
the proof does not show which
Under Arts. 827 and 828, in case of collision between two vessels at sea, both are solidarily
liable for the loss of cargo carried by either to the full extent of the value thereof, not only in the cse
where both vessels may be shown to be actually blameworthy but also in the case where it is shown that
only one ws at fault but the proof does not show it --> it makes no difference that the negligence
imputable to the two vessels may have differed somewhat in character and degree and that the
negligence of the sunken ship was somewhat more marked than that of the ther
The doctrine of last clear chance cannot be raised --> under the express provisions of Art. 827,
under which the evidence disclosing that both vessels are blameworthy, the owners of neither can
successfully maintain an action against the other for the loss or injury to his vessel
(b) Presumption of loss by collision
Art.833. A vessel which, upon being run into, sinks immediately, as well as that which,
having been obliged to make a port to repair the damages caused by the collision, is lost during the
voyage or is obliged to be stranded in order to be saved, shall be presumed as lost by reason of
collision.
(c) Liabilities
(1) Shipowner or agent
Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this
section, shall be understood as limited to the value of the vessel with all its appurtenances and
freightage earned during the voyage.
Art. 838. When the value of the vessel and her appurtenances should not be sufficient to
cover all the liabilities, the indemnity due by reason of the death or injury of persons shall have
preference.
Limited liability : limited to the value of the vessel and the freight earned during the voyage [provided
for in Arts. 587, 590 and 837]
Damages may be recovered to the extent of what may be salvaged or of the freightage received
or of the value of the insurance recoverable
(2) Captain, pilot, others

Art. 829. In the cases above mentioned the civil action of the owner against the person
causing the injury as well as the criminal liabilities, which may be proper, are reserved.
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Art. 834. If the vessels colliding with each other should have pilots on board discharging
their duties at the time of the collision, their presence shall not exempt the captains from the
liabilities they incur, but the latter shall have the right to be indemnified by the pilots, without
prejudice to the criminal liability which the latter may incur.
(3) conditions; protests
Art. 835. The action for the recovery of losses and damages arising from collisions cannot
be admitted if a protest or declaration is not presented within twenty-four hours before the
competent authority of the point where the collision took place, or that of the first port of arrival
of the vessel, if in Philippine territory and to the consul of the Philippines, if it occurred in a
foreign country.
Art. 836. With respect to damages caused to persons or to the cargo, the absence of a
protest may not prejudice the persons interested who were not on board or were not in a condition
to make known their wishes.
Art. 835 establishes a condition precedent before any action for the recovery of damages arising from
collisions may be admitted --> presentation of a protest or declaration within 24 hours before the proper
authorities [competent authority at the point where the collision took place or of the first port of arrival
of the vessel or to the consul of the Philippines if it occurred in a foreign country]
The requirement of protest is not necessary with respect to small boats engaged in river and bay traffic
and boats manned by a group of fishermen
Reason for requiring protest: Neccesity of preventing fictitious collisions and improper indemnities
Summary of cases where protest is required:
1. under 612, when the vessel makes an arrival under stress
2. under 612, 624 and 843, where the vessel is shipwrecked
3. under 624, where the vessel has gone through a hurricane or when the captain believes that the cargo
has suffered damages or averages
4. under 835, in case of maritime collisions
Art. 839. If the collision should take place between Philippine vessels in foreign waters, of
if having taken place in the open seas, and the vessels should make a foreign port, the Filipino
consul in said port shall hold a summary investigation of the accident, forwarding the proceedings
to the Secretary of the Department of Foreign Affairs for continuation and conclusion.
4. Shipwrecks
Art. 840. The losses and deteriorations suffered by a vessel and her cargo by reason of
shipwreck or stranding shall be individually for the account of the owners, the part which may be
saved belonging to them in the same proportion.
Art. 841. If the wreck or standing should be caused by the malice,e negligence, or lack of
skill of the captain, or because the vessel put to sea insufficiently repaired and equipped, the ship
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agent or the shippers may demand indemnity of the captain for the damages caused to the vessel or
to the cargo by the accident, in accordance with the provisions contained in Articles 610, 612, 614,
and 621.
Shipwreck: Loss of a vessel at sea, either by being swallowed up by the waves, by running against
another vessel or thing at sea, or on coast --> renders the ship incapable of navigation
Under 841, in case the wreck or stranding is due to the (1) malice, negligence, or lack of skill of
the captain, or (2) because the vessel put to sea was insufficiently repaired and equipped, the captain
shall be liable
Art. 842. The goods saved from the wreck shall be specially bound for the payment of the
expenses of the respective salvage, and the amount thereof must be paid by the owners of the
former before they are delivered to them, and with preference over any other obligation if the
merchandise should be sold.
Where a ship and its cargo are saved together, the salvage allowance should be charged against the ship
and cargo in proportion of their respective values, the same as in general averages and neither is liable
for the salvage due from the other
Where a personal action is brought by the salvor against the owner of the ship, the liability of
the latter is limited to such part of the salvage compensation due for the entire service as is
proportionate to the value of the ship
Art. 843. If several vessels sail under convoy, and any of them should be wrecked, the
cargos saved shall be distributed among the rest in proportion to the amount which each one is
able to take.
If any captain should refuse, without sufficient cause, to receive what may correspond to
him, the captain of the wrecked vessels shall enter a protest against him, before two sea officials, of
the losses and damages resulting therefrom, ratifying the protest within twenty-four hours after
arrival at the first port, and including it in the proceedings he must institute in accordance with the
provisions contained in Article 612.
If it is not possible to transfer to the other vessels the entire cargo of the vessel wrecked,
the goods of the highest value and smallest volume shall be saved first, the designation thereof to
be made by the captain with the concurrence of the officers of his vessel.
Salvage Law (Act No. 2616)
Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of
the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by
other persons, the latter shall be entitled to a reward for the salvage.
Those who, not being included in the above paragraph, assist in saving a vessel or its cargo
from shipwreck, shall be entitled to a like reward.
Salvage.-- The compensation allowed to persons by whose voluntary assistance a ship at sea or her
cargo or both have been saved in whole or in part from impending sea peril, or such property recovered
from actual peril or loss, as in cases of shipwrecks, derelict or recapture -- a service which one person,
renders to the owner of a ship or goods by his own labor, preserving the goods or ship which the owner
or those entrusted with the care of them either abandoned in distress at sea or are unable to protect and
secure ---> a permit is required to engage in salvage business
PAGE 147
Shipwreck-- means a ship which has received injuries rendering her incapable by navigation; loss of a
vessel at sea, either by being swallowed up by the waves, running against a thing at sea, or on the coast
Derelict.-- A ship or her cargo which is abandoned and deserted at sea by those who are in charge of it,
without any hope of recovering it, or without any intention of returning it --> if those in charge of the
property left it with the intention of finally leaving it, it is a derelict and the change of their intention and
an attempt to return to it will not change its nature
ex. a schooner which has capsized in the high seas, deserted by her captain with no intention to
return, is a derelict
a vessel, though not abandoned, may be the subject of salvage, if at the time the services were
rendered, there was a probable, threatening danger to the vessel or its cargo --> if the vessel towed is
aided in escaping present or prospective danger, the service is one of salvage an the towage is merely
incidental
Rights of finder of derelict: The finder who takes possession with the intention of saving her,
gains a right of possession which he can maintain against the true owners. The owner does not renounce
his right of property. This is not presumed to be intentional, nor does the finder acquire any such right.
But the owner thus abandons temporarily, his right of possession, which is transferred to the finder who
becomes bound to preserve the property with GF and bring it to a place of safety for the owner's use; in
return, he acquires a right to be paid for his service a reasonable and proper compensation out of the
property itself. He is not bound to part with the possession until he is paid or the property is taken into
the possession of the law preparatory to the amount of salvage being legally asserted
Elements of a valid salvage:
1. a marine peril
2. service voluntarily rendered when not required as an existing duty or from special contract
3. success, in whole or in part, or that the services rendered contributed to such success
Distinction between salvage and towage is of importance to the crew of the salvaging ship : if
the contract for towage is in fact towage, then the crew does not have any interest or rights with the
renumeration pursuant to the contract; BUT if the owners of the respective vessels are of a salvage
nature, the crew of the salvaging ship is entitled to salvage, and can look to the salvaged vessel for its
share
Captain towing vessel cannot invoke equity in quasi-contract of towage --> there is an express
provision of law (Art. 2142, NCC) applicable to the relationship of quasi-contract of towage, where
the crew is not entitled to compensation separate from that of the vessel
Section 2. If the captain of the vessel, or the person acting in his stead, is present, no one
shall take from the sea, or from the shores, or coast merchandise or effects proceeding from a
shipwreck or proceed to the salvage of the vessel, without the consent of such captain or person
acting in his stead.
Section 3. He who shall save or pick up a vessel or merchandise at sea, in the absence of
the captain of the vessel, owner or a representative of either of them, they being unknown, shall
convey and deliver such vessel or merchandise, as soon as possible, to the Collector of Customs, if
the port has a collector, and otherwise to the provincial treasurer or municipal mayor.
Section 4. After the salvage is accomplished, the owner or his representative shall have the
right to the delivery of the vessel or the things saved, provided that he pays or gives a bond to
secure the expenses and the proper reward.
PAGE 148
Salvor has an interest in the property; this is called a lien, but it is not a debt due by the owner to the
salvor for services rendered but upon the principle that the service creates a property in the thing saved
--> he is, to all intents and purposes, a joint owner and if, the property is lost he must bear his share like
other joint owners.
Payment of compensation where vessel and cargo salvage : where a ship and its cargo are saved
together, the salvage allowance should be charged against the ship and cargo in the proportion of their
respective values, as in the case of general average
Section 5. The Collector of Customs, provincial treasurer, or municipal mayor, to whom a
salvage is reported, shall order:
a. That the things saved be safeguarded and inventoried.
b. The sale at public auction of the things saved which may be in danger of immediate loss
or those whose conservation is evidently prejudicial to the interests of the owner, when no
objection is made to such sale.
c. The advertisement within the 30 days subsequent to the salvage, in one of the local
newspapers or in the nearest newspaper published, of all the details of the disaster, with a
statement of the mark and number of the effects requesting all interested persons to make their
claims.
Section 6. If, while the vessel or thing saved are at the disposition of the authorities, the
owner or his representative shall claim them, such authorities shall order their delivery to such
owner or his representative, provided that there is no controversy over their value, and a bond is
given by the owner or his representative to secure the payment of the expenses and the proper
reward. Otherwise, the delivery shall not be made until the matter is decided by the CFI (RTC) of
the province.
Section 7. No claim being presented in the three months subsequent to the publication of
the advertisements prescribed in subsection (c) of Section 5, the things saved shall be sold at public
auction, and their proceeds, after deducting the expenses and the proper reward shall be deposited
in the insular treasury. If three years shall pass without anyone claiming it, one-half of the deposit
shall be adjudged to him who saved the things, and the other half to the insular government.
Section 8. The following shall have no right to a reward for salvage or assistance:
a. The crew of the vessel shipwrecked or which was in danger of shipwreck;
b. He who shall have commenced the salvage in spite of opposition of the captain or his
representative; and
c. He who shall have failed to comply with the provisions of Section 3.
Section 9. If, during the danger, an agreement is entered into concerning the amount of the
reward for salvage or assistance, its validity may be impugned because it is excessive, and it may
be required to be reduced to an amount proportionate to the circumstances.
Kinds of salvage service:
(1) voluntary - wherein the compensation is dependent upon success
(2) rendered under a contract for a pier diem or per horam wage, payable at all events
Where the compensation is dependent upon success, it may be very much larger than mere quantum
meruit --> as a reward for perilous services
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Such contracts for salvage will not be set aside unless corruptly entered into, or made under
fraudulent representations, a clear mistake or suppression of important facts, under compulsion or
contrary to equity and good conscience
Section 10. In a case coming under the last preceding section, as well as in the absence of
an agreement, the reward for salvage or assistance shall be fixed by the RTC of the province where
the things salvaged are found, taking into account principally the expenditures made to recover, or
save the vessel or the cargo or both, the zeal demonstrated, the time employed, the services
rendered, the excessive expenses occasioned, the number of persons who aided, the danger to
which they and their vessels were exposed as well as that which menaced the things recovered or
salvaged, and the value of such things after deducting the expenses.
Reasons for allowing salvage compensation to salving vessel:
(1) to reward promptness, energy, efficiency, and heroic endeavor in saving life and property in peril;
(2) to compensate the use and service of the vessel as an indispensable instrument for the salvage;
(3) recognizes the danger and risk to which the crew and the vessel were exposed to in saving the ship
and property and life.
The amount should be liberal enough to cover the expenses and to give an extra sum as a reward for the
services rendered; should be liberal enough to offer an inducement to others to render like services in
similar emergencies in the future; BUT should not be so high as to cause vessels in need of assistance to
hesitate because of ruinous cost
"Public policy encourages the hardy and adventurous mariner to engage in these laborious
and sometimes dangerous enterprises, and with a view to withdraw from him every
temptation to embezzlement and dishonesty, the law allows him, in case he is successful, a
liberal compensation."
Section 11. From the proceeds of the sale of the things saved shall be deducted, first, the
expenses of their custody, conversation, advertisement, and auction, as well as whatever taxes or
duties they should pay for their entrance; then there shall be deducted the expenses of salvage; and
from the net amount remaining shall be taken the reward for the salvage or assistance which shall
not exceed 50% of such amount remaining.
Section 12. If in the salvage or in the rendering of assistance different persons shall have
intervened the reward shall be divided between them in proportion to the services which each one
may have rendered, and in case of doubt, in equal parts.
Those who, in order to save persons, shall have been exposed to the same dangers shall also
have a right to participation in the reward.
No other person has the right to interfere with the salvage of a vessel or cargo if the salvor is able to effect
the salvage with fidelity and vigor --> if their means are inadequate, they are bound to accept additional
assistance if offered
Taking passengers from a sinking ship, without rendering any service in rescuing the vessel, is not a
salvage service, being a duty of humanity and not for reward --> the Salvage Act, giving salvors of
human life a fair share or remuneration offered to salvors of the vessel, refers to a situation where both
lives and property were simultaneously imperiled and both are rescued at the same time
Section 13. If a vessel or its cargo shall have been assisted or saved, entirely or partially, by
another vessel, the reward for salvage or for assistance shall be divided between the owner, the
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captain, and the remainder of the crew of the latter vessel, so as to give the owner a half, the captain
a fourth, and all the remainder of the crew the other fourth of the reward, in proportion to their
respective salaries, in the absence of an agreement to the contrary. The expenses of salvage, as well
as the reward for salvage or assistance, shall be a charge on the thing salvaged or their value.
The owner of the salving vessel has always been considered as entitled to salvage reward for the use of
his vessel in rendering salvage services, though he was not present when the salvage service was rendered
--> remuneration is awarded on account of the danger to which the service exposes their property and the
risk which they run of loss in suffering their vessels engaged in such perilous undertaking.
Section 14. This Act shall take effect on its passage. Enacted 2/4/16.
MRR vs Macondray 37 Phil 850
F:
On April 6, 1915 the steamer Seward owned by Macondray & Co. left Saigon for the Philippine Islands,
encountering a moderately high sea. Laden with a cargo of rice, the weight of which, taken with the condition of
the sea, caused the vessel to spring a leak, and her master felt compelled to return to Saigon. At this juncture, the
steamship Hondagua owned by plaintiff, was sighted, whereupon the Seward flew the international distress signal
asking for assistance. The Hondagua changed her course and approached the Seward. Seward had indicated that
it had sprung a leak and wished to be taken in tow. In response to signals from the Hondagua, the Seward sent
her boat to the Hondagua for a heaving line, by means of which a hawser was passed from the Hondagua to the
Seward and the former, with the latter in tow, then proceeded at half speed towards Saigon. Shortly afterwards,
the Seward signaled that the leak was gaining rapidly. The Hondagua went full speed ahead, until their arrival at
Cape St. James, at the mouth of the Saigon River. The towing occupied some 4 or 5 hours and covered a distance
of 20 to 30 miles.
The court found that the value of the Seward upon her arrival at Cape St. James did not exceed P 20,000
and that the value of the cargo was approximately P 54,000. The defendant company had no interest in the cargo,
other than that of the carrier, and the cargo was owned by shippers whose names do not appear of record.
Plaintiff filed an action in the CFI of Manila, seeking to recover from defendant P 75,000, the alleged
value of the salvage service. The CFI ordered the defendant to pay P 4,000 to the plaintiff. Both appealed.
Issues : Is the plaintiff entitled to recover renumeration for saving the cargo as well as for saving the ship?
What is the reasonable compensation which should be allowed?
Held : There is no question as to the liability of defendant for the service rendered by plaintiff. Nor is
there any dispute over the fact that the service rendered was a salvage service and renumerable as such.
Where a ship and its cargo are saved together, as a result of services carried on with a view to saving
both, the salvage allowance should be apportioned between the ship and cargo in the proportion of their
respective values, the same as in a case of general average; and neither is liable for the salvage due from
the other. If one who have salved both ship and cargo brings before the court in his salvage action only the
ship, or only the cargo, he will get judgment only for such amount of reward as the court finds to be due
in respect of the value of that property which is before the court. Not only is the salvage charge a separate
and divisible burden as between ship and cargo, but also as between portions of the cargo belonging to
different owners. There is no common liability for the amounts due from the ship or other portions of the
cargo when the ship and cargo, or either, are brought into the custody of the court as a result of a
proceeding in rem. The rule of liability must be the same where a personal action is instituted against the
owners of the one or the other. The personal liability of each must be limited to the portion of the salvage
charge which should be borne by his own property.
If it had been alleged and proved that the ship was unseaworthy when she put to sea or that the
necessity for the salvage service was due to the negligence of the master, or of the ship's owner, the latter
might have been liable, at least between himself and the shipper, for the entire cost of the service. But
when the claim is put upon the basis of salvage, the fixing of the compensation goes beyond the limits of a
quantum meruit for the work and labor done and involves the assessment of a bounty. The amount to be
allowed is in part determined upon considerations of equity and public policy; and it is not proper to make
the ship or the ship's owner liable for the whole amount. But where the owner of the cargo has not been
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made a party to the action, no recovery can be had in this action in regard to the service rendered to the
cargo.
In fixing the compensation, the ff. circumstances are taken into consideration: (1) the labor
expended by the salvors in rendering the salvage service; (2) the promptitude, skill and energy displayed
in rendering the service and saving the property; (3) the value of the property employed by the salvors,
and the danger to which such property was exposed; (4) the risk incurred by the salvors in rescuing the
property from the impending peril; (5) the value of the property salved; and (6) the degree of danger from
which the property was rescued.
In applying these criteria to this case, the ff. circumstances are pertinent : the Hondagua was
delayed in her voyage about nine hours. This delay caused her to enter Iloilo, the port of destination, in
the early hours of the morning instead of the late afternoon of the previous day; but the unloading of her
cargo was not thereby retarded. Under the charter party contract under which she was operating, the
Hondagua was earning about P 300/day, which was considered reasonable compensation for her use,
including the services of officers and crew. The service rendered did not involve any further expenditure of
labor on the part of the salvors, no unusual display of skill and energy and the condition of the sea was
not such as to involve any special risk either to Hondagua or her crew. Finally, the danger from which the
Seward was rescued was real since the ship was confronted by a serious peril.
In determining the
amount of the award, the aim should be to hold out to seafaring men a fair inducement to the performance
of salvage service without fixing a scale of compensation so high as to cause vessels in need of such
services to hesitate and decline to receive them because of the ruinous cost. That the salvor is entitled, as
of bounty, to something more than mere renumeration for his own work and the risk incurred by him is
conceded; but the interests of commerce should also be considered. Towage is not considered a salvage
service of high order of merit and where the risk is inconsiderable and other conditions favorable, the
compensation to be allowed should be modest in its amount.
In this case, the sum of P 1,000 is adequate for the service rendered.
Barrios vs Go Thong 7 SCRA 535
F:
Plaintiff Barrios was the captain of MV Henry I, a vessel of William Lines, Inc. At about 8:00 p.m. of
May 1, 1958, plaintiff as captain received an SOS or distress signal by blinkers from the MV Alfredo, owned by
the defendant Carlos Go Thong & Co. Answering the SOS call, the plaintiff as captain of MV Henry, which was
then sailing from Dumaguete City, altered the course of said vessel, and headed towards the MV Don Alfredo,
which plaintiff found to be in trouble, due to engine failure and the loss of her propeller, for which reason, it was
drifting slowly southward from Negros Island towards Borneo in the open China Sea, at the mercy of a moderate
easterly wind. At about 8:25 p.m. on the same day, May 1, 1958, the MV Henry, under the command of the
plaintiff, succeeded in getting near the MV Don Alfredo -- in fact as near as about 7 meters from the latter ship -and with the consent and knowledge of the captain and/or master of the MV Don Alfredo, the plaintiff caused the
latter vessel to be tied to, or well-secured and connected with two lines from the MV Henry; and the latter had the
MV Don Alfredo in tow and proceeded towards the direction of Dumaguete City, as evidenced by a written
certificate to this effect executed by the Master, the Chief Engineer, the Chief Officers, and the Second Engineer
of the MV Don Alfredo, who were then on board the latter ship at the time of the occurrence. When both vessels
were approaching the vicinity of Negros Oriental, the MV Lux, a sister ship of MV Don Alfredo, was sighted
heading towards the two vessels. At the request and instance of the captain of MV Don Alfredo, the plaintiff
caused the tow lines to be released, thereby also releasing the MV Don Alfredo.
Issue: WON the service rendered by plaintiff constituted salvage or towage, and if so, WON plaintiff may
recover from defendant compensation for such service.
Held :(1) According to Sec. 1 of the Salvage Law, those who assist in saving a vessel or its cargo from
shipwreck, shall be entitled to a reward (salvage). "Salvage" has been defined as the compensation
allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part, form
impending peril on the sea, or in recovering such property from actual loss, as in case of shipwreck,
derelict or recapture. There was no marine peril in this case. Although defendant's vessel was in a
helpless condition due to engine failure, it did not drift too far from the place where it was. As found by
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the LC, the weather was fair, clear and good. The waves were small and too slight, so much so, that there
were only ripples on the sea, which was quite smooth. During the towing of the vessel on the same night,
there was moonlight. Although said vessel was drifting towards the open sea, there was no danger of its
foundering or being stranded, as it was far from any island or rocks. In case of danger of stranding, its
anchor could be released, to prevent such occurrence. There was no danger that defendant's vessel would
sink, in view of the smoothness of the sea and the fairness of the weather. That there was absence of
danger is shown by the fact that said vessel or its crew did not even find it necessary to lower its launch
and two motor boats, in order to evacuate its passengers no were the cargo in danger of perishing. All
that the vessel's crew members could no do was to move the vessel on its own power. That did not make
the vessel a quasi-derelict, considering that even before the plaintiff-appellant extended the help to the
distressed ship, a sister vessel was known to be on its way to succor it.
(2) But plaintiff's service can be considered as a quasi- contract of towage. In consenting to
plaintiff's offer to tow the vessel, the defendant through its captain, thereby impliedly entered into a
juridical relation of towage with the owner of the MV Henry. If the contract thus created is one for
towage, then only the owner of the towing vessel , to the exclusion of the crew of the said vessel, may be
entitled to renumeration. And as the vessel-owner, William Lines, had expressly waived its claim for
compensation for the towage service rendered to defendant, it is clear that plaintiff, whose right if at all
depends upon and not separate from the interest, is not entitled to payment for such towage services.
Neither may the plaintiff captain invoke equity in support of his claim for compensation against
defendant. There being an express provision of law (Art. 2142, NCC) applicable to the relationship
created in this case, that is, that of a quasi-contract of towage where the crew is not entitled to
compensation separate from that of the vessel, there is no occasion to resort to equitable considerations.
E. SPECIAL CONTRACTS OF MARITIME COMMERCE

1. Charter Parties
a. Definition; as common carrier
A charter party is a contract by virtue of which the owner or agent of a vessel binds himself to
transport merchandise or persons for a fixed price. It is a contract by which the owner or agent of the
vessel leases for a certain price the whole or a portion of the vessel for the transportation of goods or
persons from one port to another.
Towage is not a charter party; instead it is a contract for the hire of services by virtue of which
a vessel is engaged to tow another vessel from one port to another for a consideration
Planters Products vs CA G.R. 101503 (Sept. 15, 1993)
F:
Planters purchased urea fertilizer from Mitsubishi,New York. The fertilizer was shipped on MV Sun
Plum, which is owned by KKKK, from Alaska to San Fernando, La Union. A time charter party was entered
into between Mitsubishi as shipper/charterer and KKKK as shipowner. Upon arrival in the port, PPI unloaded
the cargo. It took PPI 11 days to unload the cargo. PPI hired a marine and cargo surveyor to determine if there
was any shortage. A shortage and contamination of the fertilizer was discovered. PPI sent a claim letter to
SSA, the resident agent of KKKK for the amount of the loss. An action for damages was filed. SSA contended
that the provisions on CC do not apply to them because they have become private carriers by reason of the
charter-party. The TC awarded damages. The CA reversed.
Issue : Does a charter party between a shipowner and a charterer transform a CC into a private one as
to negate the civil law presumption of negligence in case of loss or damage to its cargo? NO.
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Held : A charter-party is a contract by which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use. There are 2 kinds : (1) contract of affreightment
which involves the use of shipping space or vessels leased by the owner in part or as a whole, to carry
goods for others; and (2) charter by demise or bareboat charter where the whole vessel is let to the
charterer with a transfer to him of its entire command and possession and consequent control over its
navigation, including the master and the crew, who are his servants.
It is not disputed that the carrier operates as a CC in the ordinary course of business. When
PPI chartered the vessel, the ship captain, its officers and crew were under the employ of the shipowner
and therefore continued to be under its direct supervision and control. Thus it continued to be a public
carrier.
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel, provided the charter is limited to the ship only, as in the case of a timecharter or a voyage-charter. It is only when the charter includes both the vessel and the crew, as in a
bareboat or demise that a CC becomes private, insofar as such particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of respondent carrier has been overcome by the
showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. On the
other hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exercise
of due diligence in order to minimize the loss or damage to the goods it carried.
b. Kinds
Classes of charter party:
(1) as to extent of vessel hired
(a) total
(b) partial - the charterer does not as a rule acquire the right to fix the date when the
vessel should depart, unless such right is expressly granted in the contract
(2) as to time
(a) until a fixed day or for a determined number of days or month
(b) for a voyage
(3) as to freightage
(a) for a fixed amount for the whole cargo
(b) for a fixed rate per ton
(c) for so much per month
Maritime Agencies vs CA 187 SCRA 346
F:
Transcontinental Fertilizer Co. of London chartered from Hongkong Island Shipping Co. the motor
vessel Hongkong Island for the shipment of bagged urea from Odessa, USSR to the Philippines. The parties
signed a Uniform General Charter dated August 1979. The consignee was Atlas Fertilizer Co. while the insurer
was the Union Insurance Society of Canton. Maritime Agencies was appointed as the charterer's agent and
Macondray as the owner's agent. The vessel arrived in Manila to unload part of its cargo and then proceeded to
Cebu to discharge the rest of the cargo. The consignee filed a formal claim for shortlanded bags. The
consignee also filed a claim against Viva Customs Brokerage for the unrecovered spillage. These claims having
been rejected, the consignee went to Union, which paid the total indemnity of P 113,123.86 pursuant to the
insurance contract. As subrogee of the consignee, Union filed a claim for reimbursement against Hongkong
Island Co., Maritime Agencies and/or Viva Customs Brokerage. Viva was dropped from the complaint while
Macondray Co. was impleaded.
The RTC found Hongkong Island liable for the shortlanded bags while Maritime Agencies was held
liable for the spillage during discharge. The RTC ordered Hongkong Island and its local agent Macondray to
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pay P 87,000+ and Maritime Agencies to pay P 36,000+ to Union Insurance. CA exempted Hongkong Island
and Macondray exempt from liability. Thus this petition. Maritime pleads non-liability on the ground that it
was only the charterer's agent and should not answer for whatever responsibility might have attached to the
principal. Union asked that Maritime should be made solidarily liable since its principal had not been
impleaded.
Held : There are 3 general categories of charters:

1. Demise or bareboat charter - involves the transfer of full possession and control of the vessel
for the period covered by the contract, the charterer obtaining the right to use the vessel and carry
whatever cargo it chooses, while manning and supplying the ship as well
2. Time Charter - contract to use a vessel for a particular period of time, the charterer obtaining
the right to direct the movements of the vessel during the chartering period, although the owner retains
possession and control
3. Voyage Charter - contract for the hire of a vessel for one or a series of voyages usually for
the purpose of transporting goods for the charterer; the voyage charter is a contract of affreightment and
is considered a private carriage
- being a private carriage, the parties may freely contract respecting liability for damages to the
goods and other matters; responsibility for the cargo loss falls on the one who agreed to perform the
duty involved in accordance with the terms of the voyage charter
This case involves a voyage charter.In the present case, the charterer was responsible for
loading, stowage and discharging at the ports visited, while the owner was responsible for the care of the
cargo. Par. 2 of the Uniform General Charter provided that the owner shall be responsible for loss or
damage or delay in the delivery of goods caused by improper or negligent stowage of the goods or by
personal want of due diligence in making the vessel seaworthy and properly manned. However, the
owner shall not be liable for any other cause, even from the neglect of the captain or the crew or any
other person employed by the owner on board, or for any unseaworthiness of the vessel on loading or
commencement of the voyage.
In cases at bar, the TC found that there were shortlanded bags, which could only mean that they
were damaged or lost on board the vessel before unloading of the shipment. The entire cargo was
covered by a clean B/L. As the bags were in good order when received by the vessel, the presumption is
that they were damaged or lost during the voyage as a result of their negligent improper storage. The
shipowner should be held liable.
The filing of the claim must be within one year, in accordance with the COGSA. Otherwise, the
carrier and the ship shall be discharged from liability. The one year period should commence from Oct.
20, 1979, the date when the last item was delivered to the consignee. Union filed the complaint against
Hongkong within the one year period but tardily against Macondray. The action has prescribed with
respect Macondray but not against the principal, Hongkong Island.
As regards the goods damaged or lost during unloading, the charterer is liable thereof, having
assumed this activity under the charter party free of expense to the vessel. The difficulty is that
Transcontinental has not been impleaded and so is beyond the court's jurisdiction. The liability imposed
on it cannot be borne by Maritime which is a mere agent and is not answerable for the injury caused by
its principal (unless the principal is undisclosed).
In this case, the charterer did not represent itself as a carrier and indeed assumed responsibility
only for the unloading of the cargo. Maritime acted in representation of the charterer and not of the
vessel. As a mere charterer's agent, it cannot be held solidarily liable with Transcontinental for the
losses/damages to the cargo outside the custody of the vessel. Transcontinental was disclosed as the
charterer's principal and Maritime only acted within the scope of its authority.
The TC's findings were upheld except for some modifications. The liability of Macondray can
no longer be enforced because of prescription. Maritima cannot be held liable for the principal's acts.
c. Forms and Effects
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Art. 652. A charter party must be drawn in duplicate and signed by the contracting
parties, and when either does not know how or is not able to do so, by two witnesses at his request.
The charter party shall include, besides the condition stipulated, the following
circumstances:
1. The kind, name, and tonnage of the vessel.
2. Her flag and port or registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the agent, if the latter should make the charter
party.
5. The name, surname, and domicile of the charterer, and if he states that he is acting by
commission, that of the person for whose account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or weight, or measure which they respectively bind
themselves to load and transport, or whether it is the total cargo.
8. The freightage to be paid, stating whether it is to be a fixed amount for the voyage
or so much per month, or for the space to be occupied, or for the weight or measure of the goods of
which the cargo consists, or in any other manner whatsoever agreed upon.
9. The amount of primage to be paid the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the rate of demurrage.
Art. 653. If the freight should be received without the charter party having been signed,
the contract shall be understood as executed in accordance with what appears in the bill of lading,
which shall be the only instrument with regard to the freight to determine the rights and
obligations of the ship agent, of the captain, and of the charterer.
If the cargo is received without a charter party, the B/L shall be considered the contract of the parties
Q: If there is no charter party and B/L, would there be a valid contract?
A: Taking Art. 653 literally, the answer is no. However, if we take into account the fact that delivery of
the cargo does not constitute the making of a contract but rather the partial performance thereof, the
mere fact of delivery and receipt of such cargo, the GF and mutual consent with which they have been
made, should be a better substitute for the charter party than is the B/L which is nothing more than the
proof of such delivery.
Primage.-- Formerly, a small allowance or compensation payable to the master and marines of a ship;
to the former for the use of his cables and ropes to discharge the goods of the merchant; to the latter for
lading and unlading in any port of haven
Primage, at present, it is no longer a gratuity to the master, unless especially stipulated; but it
belongs to owners or freighters and is nothing but an increase of the freight rate.
Demurrage.-- Sum which is fixed by the contract of carriage, or which is allowed, as remuneration to
the owner of a ship for the detention of his vessel beyond the number of days allowed by the charter
party for loading and unloading or for sailing; it is an extended freight or reward to the vessel in
compensation for the earnings she is improperly caused to lose
Lay days.-- Days allowed to charter parties for loading and unloading the cargo
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Art. 654. The charter parties executed with the intervention of a broker, who certifies to
the authenticity of the signatures of the contracting parties made in his presence, shall be full
evidence in court; and, if they should be conflicting, that which agrees with the one which the
broker must keep in his registry, if kept in accordance with law, shall govern.
The contracts shall also be admitted as evidence, even though a broker has not taken part
therein, if the contracting parties acknowledge the signatures of the same as their own.
Should no broker have taken part in the charter party and the signatures be not
acknowledged, doubts shall be decided by what is provided for in the bill of lading, and, in the
absence thereof, by the proofs submitted by the parties.
Art. 655. Charter parties executed by the captain in the absence of the ship agent shall be
valid and effective, even though in executing them he should have acted in violation of the orders
and instructions of the agent or shipowner; but the latter shall have a right of action against the
captain to recover damages.
Art. 656. If in the charter party the time in which the loading and unloading are to take
place is not stated, the usages of the port where these acts take place shall be observed. After the
stipulated or customary period has passed, and should there not be in the freight contract an
express provision fixing the indemnification for the delay, the captain shall be entitled to demand
demurrage for the lay days and extra lay days which may have elapsed in loading and unloading.
Art. 657. If during the voyage the vessel should be rendered unseaworthy the captain shall
be obliged to charter at his expense another one in good condition, to carry the cargo to its
destination, for which purpose he shall be obliged to look for a vessel not only at the port of arrival
but also in the neighboring ports within a distance of 150 kilometers.
If the captain, through indolence or malice, should not furnish a vessel to take the cargo to
its destination, the shippers, after requesting the captain to charter a vessel within an unextendible
period, may charter one and apply to the judicial authority for the summary approval of the
charter party which they may have made.
The same authority shall judicially compel the captain to carry out for his account and
under his responsibility the charter made by the shippers.
If the captain, notwithstanding his diligence, should not find a vessel to charter, he shall
deposit the cargo at the disposal of the shippers, to whom he shall communicate the facts on the
first opportunity, the freight being adjusted in such cases by the distance covered by the vessel,
with no right to any indemnification whatsoever.
Articles 659 to 664 : Some of the goods being transported may : (1) be sold by the captain to pay for
necessary repairs; (2) be jettisoned for the common safety; (3) be lost by reason of shipwreck or
stranding; (4) be seized by pirates or enemies; (5) suffer deteriorations or dimunitions; or (6) increase by
natural cause in weight or size
** Goods that shall not pay freightage:
(1) Art. 660 - goods jettisoned for the common safety but the amount of freightage that should have been
paid shall be considered as a general average and shall be computed in proportion to the distance
covered when they were jettisoned
(2) Art. 661 - merchandise lost by reason of shipwreck or stranding; if freight had been paid in advance,
it shall be returned
(3) Art. 661 - goods seized by pirates or enemies; freight paid in advance shall be returned
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** Goods required to pay freightage:
(1) Art. 659 - goods sold by the captain to pay for the necessary repairs to the hull, machinery or
equipment or for unavoidable and urgent needs --> but the freight may not be required to be paid in full
(2) Art. 663 - goods which suffer deterioration or dimunition on account of (a) inherent defects or bad
quality of packing, or of (b) fortuitous event
(3) Art. 644 - goods that increase in size or weight by natural cause
d. Rights and Obligations of Shipowners
Art. 669. The shipowner of the captain shall observe in charter parties the capacity of the
vessel or that expressly designated in its registry, a difference greater than 2 per cent between that
registered and her true capacity not being permissible.
If the shipowner or the captain should contract to carry a greater amount of cargo than the
vessel can carry, in view of her tonnage, they shall indemnify the shippers whose contracts they do
not fulfill for the losses they may have caused them by reason of their default, according to the
cases, viz:
If the vessel has been chartered by one shipper only, and there should appear to be an
error or fraud in her capacity, and the charterer should not wish to rescind the contract, when he
has a right to do so, the freightage shall be reduced in proportion to the cargo the vessel cannot
receive, the person from whom the vessel is chartered being furthermore obliged to indemnify the
charterer for the losses he may have caused him.
If, on the contrary, there should be several charter parties, and by reason of the want of
space all the cargo contracted for cannot be received, and none of the charterers desires to rescind
the contract, preference shall be given to the person who has already loaded and arranged the
cargo in the vessel, and the rest shall take the place corresponding to them in the order of the dates
of their contracts.
Should there be no priority, the charterers may load, if they wish, in proportion to the
weight or space they may have engaged, and the person from whom the vessel was chartered shall
be obliged to indemnify them for losses and damages.
Art. 670. If the person from whom the vessel is chartered, after receiving a part of the
cargo, should not find sufficient to make up at least three fifths of the amount the vessel can hold,
at the price he may have fixed, he may substitute for that transportation another vessel inspected
and declared suitable for the same voyage, the expenses of transfer, and the increase in the price of
the charter, should there be any, being for his account. Should he not be able to make this change,
the voyage shall be undertaken at the time agreed upon; and should no time have been fixed,
within fifteen days from the time the loading began, should nothing to the contrary have been
stipulated.
If the owner of the part of the cargo already loaded should procure some more at the same
price and under similar or proportionate conditions to those accepted for the freight received, the
person from whom the vessel is chartered or the captain may not refuse to accept the rest of the
cargo; and should he do so, the charterer shall have a right to demand that the vessel put to sea
with the cargo she may have on board.
Art. 671. After three-fifths of the vessel is loaded, the person from whom she is chartered
may not, without the consent of the charterers or shippers, substitute the vessel designated in the
charter party with another one, under the penalty of making himself thereby liable for all the losses
and damages occurring during the voyage to the cargo of those who did not consent to the change.
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Art. 672. If the vessel has been chartered in whole, the captain may not, without the
consent of the person chartering her, accept cargo from any other person; and should he do so,
said charterer may oblige him to unload it and to indemnify him for the losses suffered thereby.
Art. 673. The person from whom the vessel is chartered shall be liable for all the losses
caused the charterer by reason of the voluntary delay of the captain in putting to sea, according to
the rules prescribed, provided he has been requested to put to sea at the proper time through a
notary or judicially.
Art. 674. If the charterer should carry to the vessel more cargo than that contracted for,
the excess may be admitted in accordance with the price stipulated in the contract if it can be well
stowed without incurring the other shippers, but if in order to stow said cargo it should be
necessary to stow it in such manner as to throw the vessel out of trim the captain must refuse it or
unload it at the expense of its owner.
The captain may likewise, before leaving the port, unload the merchandise clandestinely
placed on board, or transport it, it he can do so and keep the vessel in trim, demanding by way of
freightage the highest price which may have been stipulated for said voyage.
Art. 675. If the vessel has been chartered to receive the cargo in another port, the captain
shall appear before the consignee designated in the charter party, and should the latter not deliver
the cargo to him, he shall inform the charterer and await his instructions, the lay days agreed
upon, or those allowed by custom in the port, beginning to run in the meantime, unless there is an
express agreement to the contrary.
Should the captain not receive an answer within the time necessary therefore, he shall
make efforts to find cargo; and should he not find any after the lay days and extra lay days have
elapsed, he shall make a protest and return to the port where the charter was made.
The charterer shall pay the freightage in full, discounting that which may have been earned
on the merchandise which may have been carried on the voyage out or on the return trip, if
carried for the account of third persons.
The same shall be done if a vessel, having been chartered for the round trip, should not be
given any cargo for her return.
Art. 676. The captain shall lose the freightage and shall indemnify the charterers if the
latter should prove, even against the certificate of inspection, if one has been made at the port of
departure, that the vessel was not in a condition to navigate at the time of receiving the cargo.
Art. 677. The charter party shall subsist if the captain should not have any instructions
from the charterer, and a declaration of war or a blockade should take place during the voyage.
In such case the captain must proceed to the nearest safe and neutral port, requesting and
awaiting orders from the shipper; and the expenses and salaries accruing during the detention
shall be paid as general average.
If, by orders of the shipper, the cargo should be discharged at the port of arrival, the
freightage for the voyage out shall be paid in full.
Art. 678. If the time necessary, in the opinion of the judge or court, to receive orders from
the shippers should have elapsed without the captain having received any instructions, the cargo
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shall be deposited, and it shall be liable for the payment of the freightage and expenses incurred by
reason of the delay, which shall be paid from the proceeds of the part first sold.
Obligations of shipowner:
1. Art. 669 - to observe in the charter parties, the capacity of the vessel, and to indemnify the shippers
whose contracts are not fulfilled for the losses they may have suffered by the failure of the shipowner to
observe the capacity of the vessel
2. Art. 670 - to undertake a voyage at the time agreed upon or within 15 days from loading if no time is
stipulated, even if the shipowner should not find cargo sufficient to make up at least 3/5 of the amount
which the vessel may hold, where he fails to exercise his right to change vessel
3. Art. 670 - where the shipowner should not find cargo sufficient to make up at least 3/5 of the amount
which the vessel may hold, to accept other cargo procured by the owner of the freight already loaded
under the same price and conditions
4. Art. 671- not to change the vessel after 3/5 of the vessel has been loaded, without the consent of the
charterers or shippers
5. Art. 672 - if the vessel has been chartered in whole, not to accept cargo from any other person
without the consent of the charterer
6. Art. 673 - to answer for losses arising from delay in putting to sea
7. Art. 676 - to have the vessel in a condition to navigate at the time of receiving the cargo
8. Art. 677 - in case of declaration of war or blockade during the voyage, where the captain has not
received any instructions from the charterer, for the captain to proceed to the nearest safe and neutral
port, requesting and awaiting orders from the shippers
Rights of Shipowner:
1. Art. 670 - where the cargo is not sufficient to make up at least 3/5 of the amount which the vessel
may hold, he may substitute anohter vessel inspected and declared suitable for the voyage --> expenses
of transfer and increase in price of the charter shall be paid by him
2. Art. 674 - to collect the freight in accordance with the price stipulated for cargo in excess of that
agreed upon is such excess can be properly stowed 3. Art. 674 - to refuse and unload at the expense of
the owner excess cargo that cannot be properly stowed
4. Art. 674 - to unload merchandise clandestinely placed on board, or to transport them if he can do so,
demanding the highest freightage
5. Art. 675- to find freight to take place of freight not received, if the vessel has been chartered to
receive cargo in another port, after he receives no cargo from the consignee and after he receives no
answer from the charterer
6. Art. 675 - to receive freight in full, discounting that which may have been earned on the merchandise
carried as substitute
7. Art. 677 - to have the charter party subsist notwithstanding the declaration of war or a blockade
during the voyage, and to receive in such cases, the freightage in full where the shipper orders that the
cargo should be discharged at the port of arrival
e. Obligations of charterers
Art. 679. The charterer of an entire vessel may subcharter the whole or part thereof for
the amounts he may consider most convenient, the captain not being allowed to refuse to receive on
board the cargo delivered by the second charterers, provided the conditions of the first charter are
not changed, and that the price agreed upon is paid in full, even though the full cargo is not
loaded, with the limitation established in the next article.
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Art. 680. A charterer who does not complete the full cargo he bound himself to ship shall
pay the freightage of the amount he fails to load, if the captain does not take other freight to
complete the load of the vessel, in which case he shall pay the first charterer the difference should
there be any.
Art. 681. If the charterer should ship goods different from those indicated at the time of
executing the charter party, without the knowledge of the person from whom the vessel was
chartered or of the captain, and should thereby give rise to losses, by reason of confiscation,
embargo, detention, or other causes, to the person from whom the vessel was chartered or to the
shippers, the person giving rise thereto shall be liable with the value of his shipment and
furthermore with his property, for the full indemnity to all those injured through his fault.
Art. 682. If the merchandise should have been shipped for the purpose of illicit commerce,
and was taken on board with the knowledge of the person from whom the vessel was chartered or
of the captain, the latter, jointly with the owner of the merchandise, shall be liable for all the losses
which may be caused to other shippers, and even though it may have been agreed, they cannot
demand any indemnity whatsoever from the charterer for the damage caused the vessel.
Art. 683. In case of making a port to repair the hull, machinery, or equipment of the
vessel, the shippers must wait until the vessel is repaired, being permitted to unload her at their
own expense should they deem it advisable.
If, for the benefit of cargo which runs the risk of
deterioration, the shippers or the court, or the consul, or the competent authority in a foreign land
should order the merchandise to be unloaded, the expenses of unloading and reloading shall be for
the account of the former.
Art. 684. If the charterer, without the occurrence of any
of the cases of force majeure mentioned in the foregoing article, should wish to unload his
merchandise before arriving at the port of destination, he shall pay the full freightage, the expenses
of the arrival made at his request, and the losses and damages caused the other shippers, should
there be any.
Art. 685. In charters for transportation of general freight any of the shippers may unload
the merchandise before the beginning of the voyage, paying one half the freightage, the expense of
stowing and restoring the cargo, and any other damage which may be caused the other shippers.
Art. 686. After the vessel has been unloaded and the cargo placed at the disposal of the
consignee, the latter must immediately pay the captain the freightage due and the other expenses
for which the cargo may be liable.
The primage must be paid in the same proportion and at the same time as the freightage,
all the changes and modifications to which the latter should be subject also governing the former.
Art. 687. The charterers and shippers may not abandon merchandise damaged on account
of its own inherent defect or of fortuitous event for the payment of the freightage and other
expenses.
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The abandonment shall be proper, however, if the cargo should consist of liquids which
may have leaked out, there remaining in the containers not more than one-fourth of their contents.
Obligations of the charterer:
1. Art. 680 - to pay the freight in full even if the charterer does not complete the full cargo he bound
himself to ship
2. Art. 681- to answer with the value of his shipment and other property for the losses suffered by the
shipowner, captain or other shippers arising from confiscation, embargo, detention, or other causes,
where the charterer loads goods different from those stated at the time of the execution of the charter
party
3. Art. 682 - to be jointly liable with the captain for losses which may be caused to the other shippers
where the charterer ships goods for illicit commerce with the knowledge of the shipowner or captain
4. Art. 682 - in case of making a port to repair the hull, machinery or equipment of the vessel, to wait
until the vessel is repaired or to pay for the expenses of unloading should the charterer choose to unload
5. Art. 684 - where the charterer unloads goods before arriving at port of destination without any force
majeure occurring, to pay (1) expenses of arrival, (2) full freight and (3) for the damages and losses
caused to other shippers, if any
6. Art. 685 - where the charterer unloads before the beginning of the voyage, (1) to pay 1/2 of the
freight, (2) to pay for the expenses of stowing and restowing the cargo, (3) to pay any other damage
which he may have caused other shippers
7. Art. 686 - to pay for freight, other expenses and the primage after the vessel has been unloaded and
the cargo placed at the disposal of the consignee
8. Art. 687 - not to abandon merchandise damaged on account of inherent defect or fortuitous event,
for the payment of the freight and other expenses
f. Rescission
Art. 688. A charter party may be annulled at the request of the charterer:
1. If before loading the vessel he should abandon the charter, paying half the freightage
agreed upon.
2. If the capacity of the vessel should not agree with that stated in the certificate of
tonnage, or if there be an error in the statement of the flag under which she sails.
3. If the vessel should not be placed at the disposal of the charterer within the period and
in the manner agreed upon.
4. If, after the vessel has put to sea, she should return to the port of departure, on account
of risk from pirates, enemies, or bad weather, and the shippers should agree to unload her.
In the second and third cases the person from whom the vessel was chartered shall
indemnify the charterer for the losses he may suffer.
In the fourth case the person from whom the vessel was chartered shall have a right to the
freightage in full for the voyage out.
If the charter should have been made by the month, the charterers shall pay the full
freightage for one month, if the voyage is for a port in the same waters; and two months, if for a
port in different waters.
(From one port to another of the Peninsula (Philippines) and adjacent islands, the
freightage for one month only shall be paid.)
5. If a vessel should make a port during the voyage in order to make urgent repairs and
the charterers should prefer to dispose of the merchandise.
When the delay does not exceed thirty days, the shippers shall pay the full freightage for
the voyage out.
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Should the delay exceed thirty days, they shall pay the freight in proportion to the distance
covered by the vessel.
Art. 689. At the request of the person from whom the vessel is chartered the charter party
may be rescinded:
1. If the charterer at the termination of the extra lay days does not place the cargo
alongside the vessel.
In such case the charterer must pay half of the freightage stipulated besides the demurrage
due for the lay days and extra lay days.
2. If the person from whom the vessel was chartered should sell it before the charterer has
begun to load it and the purchaser should load it for his own account.
In such case the vendor shall indemnify the charterer for the losses he may suffer.
If the new owner of the vessel should not load it for his own account the charter party shall
be respected, and the vendor shall indemnify the purchaser if the former did not inform him of the
charter pending at the time of making the sale.
Art. 690. The charter party shall be rescinded and all action arising therefrom shall be
extinguished if, before the vessel puts to sea from the port of departure, any of the following cases
should occur:
1. A declaration of war or interdiction of commerce with the power to whose ports the
vessel was to make its voyage.
2. A condition of blockage of the port of destination of said vessel, or the breaking out of
an epidemic after the contract was executed.
3. The prohibition to receive at the said port the merchandise constituting the cargo of
the vessel.
4. An indefinite detention, by reason of an embargo of the vessel by order of the
government, or for any other reason independent of the will of the ship agent.
5. The inability of the vessel to navigate, without fault of the captain or ship agent.
The unloading shall be made for the account of the charterer.
Art. 691. If the vessel cannot put to sea on account of the closing of the port of departure,
or any other temporary cause, the charter shall remain in force without right of either of the
contracting parties to claim damages.
The subsistence and wages of the crew shall be considered as general average.
During the interruption the charterer may, at the proper timer and for his own account,
unload and load the merchandise, paying demurrage if the reloading should continue after the
cause for the detention has ceased.
Art. 692. A charter party shall be partially rescinded, unless there is an agreement to the
contrary, and the captain shall only be entitled to the freightage for the voyage out, if, by reason of
a declaration of war, closing of ports, or interdiction of commercial relations during the voyage,
the vessel should make the port designated for such a case in the instructions of the charterer.
2. Loans on Bottomry and Respondentia
a. Loan on Bottomry, defined
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A contract in the nature of a mortgage, by which the owner of the ship borrows money for the
use, equipment and repair of the vessel and for a definite term, and pledges the ship (or the keel or
bottom of the ship) as a security for its repayment, with maritime or extraordinary interest on account of
the maritime risks to be borne by the lender, it being stipulated that if the ship be lost in the course of
the specific voyage or during the limited time, by any of the perils enumerated in the contract, the lender
shall also lose his money.
b. Loan on Respondentia, defined
One made on the goods laden on board the ship, and which are to be sold or exchanged in the
course of the voyage, the borrower's personal responsibility being deemed the principal security for the
performance of the contract, which is therefore called respondentia. The lender must be paid his
principal and interest, thought the ship perishes, provided that the goods are saved.
c. Character of Loan
Art. 719. A loan in which, under any condition whatever, the repayment of the sum loaned
and of the premium stipulated depends upon the safe arrival in port of the goods on which it is
made, or of the price they may receive in case of accident, shall be considered a loan on bottomry
or respondentia.
Real, unilateral, aleatory contract:
1. delivery of the amount loaned is necessary for the perfection of the contract
2. although there are reciprocal benefits, the contract produces obligations only for one party,
the borrower who must return the amount borrowed plus premium
3. lender really runs known risks
Distinguished from ordinary loans:
Ordinary loan
1. first lender has preference
over subsequent lenders
loan on bottomry and respondentia

last lender has preference over
previous ones
2. must be paid absolutely

at all events, WON thing
given as security is lost or
destroyed
loan is required to be paid only upon

safe arrival of the thing given as
security at port of destination
3. subject to Usury Law
no limit as to rate of interest in

view of diff. classes and various
risks in a maritime voyage
Marine insurance vs Bottomry and Respondentia Loans:

The borrower is in effect indemnified for his loss, at least, to the extent of the loan --> in case of loss of
the thing given as security, the borrower is under no obligation to pay the loan
Marine insurance
1. indemnity is paid after the
loss has occurred
bottomry/respondentia loans
indemnity is paid in advance by way of loan
PAGE 164
2. when marine peril occurs,

the obligation of the insurer
becomes absolute
3. consensual contract
* governed by Insurance Act
when marine peril causes the loss of the

vessel or cargo, the obligation of the
borrower to pay is extinguished
real contract --perfected from the
moment of delivery of the thing loaned
When loss does not extinguish loan: (Art. 731)

1. where the loss is caused by inherent defect of the thing
2. where the loss is caused by fault or malice of borrower
3. where loss is caused by barratry on the part of the captain
4. where loss is caused by damage to the vessel as a consequence of its
engaging in contraband
5. where loss arose from having loaded the merchandise on a vessel different from that designated in the
contract, except if change is due to force majeure
d. Forms and Requisites
Art. 720. Loans on bottomry or respondentia may be executed:
1. By means of a public instrument.
2. By means of a policy signed by the contracting parties and the broker taking part
therein.
3. By means of a private instrument.
Under whichever of these forms the contract is executed, it shall be entered in the
certificate of the registry of the vessel and shall be recorded in the registry of vessels, without
which requisites the credits of this kind shall not have, with regard to other credits, the preference
which, according to their nature, they should have, although the obligation shall be valid between
the contracting parties.
The contracts made during a voyage shall be governed by the provisions of Articles 583
and 611, and shall be effective with regard to third persons from the date of their execution, if they
should be recorded in the registry of vessels of the port of registry of the vessel before the lapse of
eight days following its arrival. If said eight days should elapse without the record having been
made in the registry of vessels, the contracts made during the voyage of a vessel shall produce no
effect with regard to third persons, except from the day and date of their inscription.
In order that the policy of the contracts executed in accordance with No.2 may have
binding force, they must conform to the registry of the broker who took part therein. With respect
to those executed in accordance with No. 3 the acknowledgment of the signature shall be required.
Contracts which are not reduced in writing shall not give rise to judicial action.
Effect of registration:
1. the loan shall have, with regard to other credits, the preference which, according to its nature, it
should have (Art. 580 - 8th in the order of preference)
2. effective against third persons from the time of execution/registration
Art. 721. In a contract on bottomry or respondentia the following must be stated:
1. The kind, name, and registry of the vessel.
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2. The name, surname, and domicile of the captain.
3. The names, surnames, and domiciles of the person giving and the person receiving the
loan.
4.
5.
6.
7.
The amount of the loan and the premium stipulated.

The time for repayment.
The goods pledged to secure repayment.
The voyage during which the risk is run.
Art. 722. The contracts may be made to order, in which case they shall be transferable by
indorsement, and the indorsee shall acquire all the rights and shall incur all the risks corresponding to the indorser.
e. On What Constituted
Art. 724. The loans may be constituted jointly or separately:
1. On the hull of the vessel.
2. On the rigging.
3. On the equipment, provisions, and fuel.
4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
If the loan is constituted on the hull of the vessel, the rigging, equipment and other goods,
provisions, fuel, steam engines, and the freightage earned during the voyage on which the loan is
made, shall also be considered as included in the liability for the loan.
If the loan is made on the cargo, all that which constitutes the same shall be subject to the
repayment; and if on a particular object of the vessel or of the cargo, only the object concretely
and specifically mentioned shall be liable.
Art. 725. No loans on bottomry may be made on the salaries of the crew or on the profits
expected.
f. Amount
Art. 723. Loans may be made in goods and in merchandise, fixing their value in order to
determine the principal of the loan.
Art. 726. If the lender should prove that he loaned an amount larger than the value of the
object liable for the bottomry loan, on account of fraudulent measures employed by the borrower,
the loan shall be valid only for the amount at which said object is appraised by experts.
The surplus principal shall be returned with legal interest for the entire time required for
repayment.
Art. 727. If the full amount of the loan contracted in order to load the vessel should not be
used for the cargo, the balance shall be returned before clearing.
The same procedure shall be observed with regard to the goods taken as loan, if they were
not loaded.
The excess shall be valid only as an ordinary loan
PAGE 166
g. By whom
Art. 728. The loan which the captain takes at the point of residence of the owners of the
vessel shall only affect that part thereof which belongs to the captain, if the other owners or their
agents should not have given their express authorization therefor or should not have taken part in
the transaction.
If one or more of the owners should be requested to furnish the amount necessary to repair
or provision the vessel, and they should not do so within twenty-four hours, the interest which the
parties in default may have in the vessel shall be liable for the loan in the proper proportion.
Outside of the residence of the owners, the captain may contract loans in accordance with
the provisions of Articles 583 and 611.
Art. 617. The captain may not contract loans on respondentia secured by the cargo, and
should he do so the contract shall be void.
Neither may he borrow money on bottomry for his own transactions, except on the portion
of the vessel he owns, provided no money has been previously borrowed on the whole vessel, and
provided there does not exist any other kind of lien or obligation chargeable against the vessel.
When he is permitted to do so, he must necessarily state what interest he has in the vessel.
In case of violation of this article the principal, interest, and costs shall be charged to the
private account of the captain, and the ship agent may furthermore discharge him.
Art. 611. In order to comply with the obligations mentioned in the foregoing article, and
when he has no funds and does not expect to receive any from the agent, the captain shall procure
the same in the successive order stated below:
1. By requesting said funds of the consignees of the vessel or the correspondents of the
ship agent.
2. By applying to the consignees of the cargo or to the persons interested therein.
3.
By drawing on the ship agent.
4. By borrowing the amount required by means of a bottomry loan.
5. By selling a sufficient amount of the cargo to cover the amount absolutely necessary to
repair the vessel and to equip her to pursue the voyage.
In the two last cases he must apply to the judicial authority of the port, if in the Philippines
and to the Filipino consul, if in a foreign country; and where there should be none, to the local
authority, proceeding in accordance with the prescriptions of Article 583, and with the provisions
of the law of civil procedure.
Art. 583. If the ship being on a voyage the captain should find it necessary to contract one
or more of the obligations mentioned in Nos. 8 and 9 of Article 580, he shall apply to the judge or
court if he is in Philippine territory, and otherwise to the Filipino consul, should there be one, and
in his absence to the judge or court or to the proper local authority, presenting the certificate of the
registry of the vessel treated of in Article 612, and the instruments proving the obligation contracted.
The judge or court, the consul or the local authority as the case may be in view of the
result of the proceedings instituted, shall make a temporary memorandum in the certificate of their
result, in order that it may be recorded in the registry when the vessel returns to the port of her
registry, or so that it can be admitted as a legal and preferred obligation in case of sale before the
return, by reason of the sale of the vessel by virtue of a declaration of unseaworthiness.
PAGE 167

The lack of this formality shall make the captain personally liable to the creditors who may
be prejudiced through his fault.
h. Effects of Contract
Art. 719. A loan in which, under any condition whatever, the repayment of the sum loaned
and of the premium stipulated depends upon the safe arrival in port of the goods on which it is
made, or of the price they may receive in case of accident, shall be considered a loan on bottomry
or respondentia.
Art. 729. Should the goods on which money is taken not be subjected to risk, the contract
shall be considered a simple loan, with the obligation on the part of the borrower to return the
principal and interest at the legal rate, if that agreed upon should not be lower.
Art. 726. If the lender should prove that he loaned an amount larger than the value of the
object liable for the bottomry loan, on account of fraudulent measures employed by the borrower,
the loan shall be valid only for the amount at which said object is appraised by experts.
The surplus principal shall be returned with legal interest for the entire time required for
repayment.
Art. 727. If the full amount of the loan contracted in order to load the vessel should not be
used for the cargo, the balance shall be returned before clearing.
The same procedure shall be observed with regard to the goods taken as loan, if they were
not loaded.
Art. 730. Loans made during the voyage shall have preference over those made before the
clearing of the vessel, and they shall be graduated in the inverse order of their dates.
The loans for the last voyage shall have preference over prior ones.
Should several loans have been made at the same port of arrival under stress and for the
same purpose, all of them shall be paid pro rata.
F. BILL OF LADING
B/L operates both as a receipt and as a contract; it is a receipt for the goods shipped and a contract to
transport and deliver the same as stipulated
A stipulation that a CC's liability is limited to the value of the goods appearing in the B/L,
unless the owner declares a greater value, is valid and binding
Bill of Lading vs Charter party
1. Charter party - entire or complete contract
B/L - private receipt which the captain gives to accredit that such goods belong to such persons
2. Charter party - consensual party, which can be dissolved by means of indemnity for losses and
damages
B/L - real contract; exists only after delivery of the goods to be transported is made
PAGE 168

1. Contents
Art. 706. The captain and the shipper shall have the obligation of drawing up the bill of
lading, in which shall be stated:
1. The name, registry, and tonnage of the vessel.
2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued in the name of a specified
person.
6. The quantity, quality, number of packages, and marks of the merchandise.
7. The freightage and the primage stipulated.
The bill of lading may be issued to bearer, to order, or in the name of a specified person,
and must be signed within twenty- four hours after the cargo has been received on board, the shipper being entitled to demand the unloading at the expense of the captain should the latter not sign
it, and, in any case, the losses and damages suffered thereby.
Art.707. Four true copies of the original bill of lading shall be made, and all of them shall
be signed by the captain and by the shipper. Of these copies the shipper shall keep one and send
another to the consignee; the captain shall take two, one for himself and the other for the ship
agent.
There may also be drawn as many copies of the bill of lading as may be considered
necessary by the parties; but, when they are issued to order or to bearer, there shall be stated in all
the copies, be they the first four or the subsequent ones, the destination of each one, stating
whether it is for the ship agent, for the captain, for the shipper, or for the consignee. If the copy
sent to the latter should have a duplicate, this circumstance and the fact that it is not valid except
in default of the first one must be stated therein.
Art. 713. If before the delivery of the cargo a new bill of lading should be demanded of the
captain, on the allegation that the failure to present the previous ones is on account of their loss or
for any other just cause, he shall be obliged to issue it, provided that security for the value of the
cargo is given to his satisfaction; but without changing the consignment and stating therein the
circumstances prescribed in the last paragraph of Article 707, when dealing with the bills of lading
referred to therein, under penalty, should he not do so, of being liable for said cargo if improperly
delivered through his fault.
Art. 714. If before the vessel puts to sea the captain should die or should cease to hold his
position through any cause, the shipper shall have the right to demand of the new captain the
ratification of the first bills of lading, and the latter must do so, provided that all the copies
previously issued be presented or returned to him, and it should appear from an examination of the
cargo that they are correct.
The expenses arising from the examination of the cargo shall be for the account of the ship
agent, without prejudice to his right of action against the first captain, if he ceased to be such
through his own fault. Should said examination not be made, it shall be understood that the new
captain accepts the cargo as it appears from the bills of lading.
2. Probative Value
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Art. 709. A bill of lading drawn up in accordance with the provisions of this title shall be
proof as between those interested in the cargo and between the latter and the insurers, evidence to
the contrary being reserved by the latter.
Art. 710. If the bills of lading do not agree, and no change or erasure appears in any of
them, those in the possession of the shipper or consignee signed by the captain shall be proof
against the latter or ship agent in favor of the consignee or the shipper; and those possessed by the
captain or ship agent signed by the shipper shall be proof against the shipper or consignee in favor
of the captain or ship agent.
B/L - proof of the agreement between the parties
Issuance of B/L is merely prima facie evidence of the receipt of the merchandise by the carrier
or his agent; not conclusive evidence
Defective and irregular B/L may be cured by other complementary documents
G. PASSENGERS ON SEA VOYAGE
1. Nature of Contract
Art. 695. The right to passage, if issued to a specified person, may not be transferred
without the consent of the captain or of the consignee.
2. Obligations of Passengers
Art. 693. If the passage price has not been agreed upon, the judge or court shall
summarily fix it, after a statement of experts.
Art. 699. If the contract is rescinded, before or after the commencement of the voyage, the
captain shall have a right to claim payment for what he may have furnished the passengers.
Art. 704. In order to collect the fare and expenses of sustenance, the captain may retain
the goods belonging to the passenger, and in case of their sale, he shall be given preference over
other creditors, acting in the same way as in the collection of freightage.
Art. 694. Should the passenger not arrive on board at the time fixed, or should he leave
the vessel without permission from the captain, when the latter is ready to leave the port, the
captain may continue the voyage and demand the full passage price.
Art. 700. In all that pertains to the preservation of order and discipline on board the
vessel, the passengers shall be subject to the orders of the captain, without any distinction
whatsoever.
3. Rights of Passengers
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Art. 697. If before beginning the voyage it should be suspended through the sole fault of
the captain or ship agent, the passengers shall be entitled to have their passage refunded and to
recover for losses and damages; but if the suspension was due to an accidental cause, or to force
majeure, or to any other cause beyond the control of the captain or ship agent, the passengers shall
only be entitled to the return of the passage money.
Art. 698. In case a voyage already begun should be interrupted, the passengers shall be
obliged to pay only the fare in proportion to the distance covered, and without right to recover for
losses and damages if the interruption is due to a fortuitous event or to force majeure, but with a
right to indemnify if the interruption should have been caused by the captain exclusively. If the
interruption should be by reason of the disability of the vessel, and the passenger should agree to
await the repairs, he may not be required to pay any increased price of passage, but his living
expenses during the delay shall be for his own account.
In case of delay in the departure of the vessel, the passengers have a right to remain on
board and to be furnished food for the account of the vessel, unless the delay is due to an
accidental cause or to force majeure. If the delay should exceed 99ten days, the passengers
requesting the same shall be entitled to the return of the fare; and if it is due exclusively to the
captain or ship agent they may furthermore demand indemnity for losses and damages.
A vessel exclusively destined to the transportation of passengers must take them directly to
the port or ports of destination, no matter what the number of passengers may be, making all the
stops indicated in its itinerary.
In the Philippines, there is no law which requires shipowners to publish a schedule of the arrivals and
departures of their vessels in the different ports of call, and which holds them liable in damages to
passengers for any deviation from said schedule
Sweet Lines vs CA 121 SCRA 769
F:
Private respondents purchased first-class tickets from petitioner in Cebu City. They were to board
petitioner's vessel M/V Sweet Grace, bound for Catbalogan, Western Samar. Instead of departing at the
scheduled hour of about midnight, the vessel sailed at around 3 A.M. only to be towed back to Cebu due to
engine trouble, arriving back at Cebu at about 4 PM. After repairs, the vessel was only able to leave around 8
A.M. of the next day.
Instead of docking at Catbalogan, which was the first port of call, the vessel proceeded directly to
Tacloban. Private respondents had no recourse but to disembark and board a ferryboat to Catbalogan. Hence
this suit for damages for breach of contract of carriage. The TC and CA decided in favor of plaintiffs.
Issue: WON defendant is liable.

Held: The governing provisions are found in the Code of Commerce. Art. 614 provides that a captain
who agreed to make a voyage and who fails to fulfill his undertaking, without being prevented by
fortuitous event or force majeure, shall indemnify all the losses which his failure may cause, without
prejudice to criminal penalties which may prosper. Art. 698 also provides for the captain's liability.
The crucial factor then is the existence of a fortuitous event or force majeure. Without it, the
right to damages and indemnity exists against a captain who fails to fulfill his undertaking or where the
interruption has been caused by the captain exclusively.
As found by both courts below, there was no fortuitous event or force majeure which prevented
the vessel from fulfilling its undertaking of taking private respondents to Catbalogan. Mechanical
defects in the CC are not considered caso fortuito that exempts the CC from responsibility. Even
granting that the engine failure was a fortuitous event, it accounted only for the delay in the departure.
When the vessel left Cebu, there was no longer any force majeure that justified the by-passing a port of
PAGE 171

call. The vessel was completely repaired when it left Cebu for Samar and Leyte. In fact, after docking
at Tacloban City, the vessel left for Manila to complete its voyage.
Petitioner cannot rely on the conditions in small bold print at the back of the ticket reading:
"The passenger's acceptance of this ticket shall be considered as an acceptance of the ff. conditions:
3. In case the vessel cannot continue or complete the trip for any cause whatsoever, the carrier
reserves the right to bring the passenger to his/her destination at the expense of the carrier or to cancel
the tickets and refund the passenger the value of his/her ticket.
11. The sailing schedule of the vessel xxx is subject to change without previous notice."
Even assuming that those conditions are applicable to case at bar, petitioner did not comply
with the same. It did not cancel the ticket nor did it refund the value of the tickets to private
respondents. Besides, it was not the vessels' sailing schedule that was involved. The complaint is
directed not at the delayed departure the next day but at the by-passing of Catbalogan, their destination.
Had petitioner notified them previously and offered to bring them to their destination at its expense or
refunded the value of the tickets purchased, perhaps this controversy would not have arisen.
Furthermore, the conditions relied upon by petitioner cannot prevail over Arts. 614 and 698 of
the Code of Commerce.
The voyage to Catbalogan was interrupted by the captain upon instruction of management. The
interruption was not due to fortuitous event or force majeure nor to disability of the vessel. Having been
caused by the captain upon instructions of management, the passengers' right to indemnity is evident.
The owner of a vessel and the ship agent shall be civilly liable for the acts of the captain under Art. 586
of the Code of Commerce.
The passengers are also entitled to moral damages on account of the BF on the part of the
carrier. They did not give notice of the change of schedule. Knowing fully well that it would take 15
hours to repair the vessel, they informed the passengers that it would take only a few hours. They did
not offer to refund the tickets of the passengers nor provide them transportation from Bacolod City to
Catbalogan.
4. Responsibilities of Captain
Art. 701. The convenience or the interest of the passengers shall not obligate nor empower
the captain to stand in-shore or enter places which may take the vessel out of her course, nor to
remain in the ports he must or is under the necessity of touching for a period longer than that
required by the needs of navigation.
Art. 702. In the absence of an agreement to the contrary, the subsistence of the passengers
during the voyage shall be deemed included in the price of the passage; but should it be for their
account, the captain shall be under the obligation, in case of necessity, to supply the food necessary
for their sustenance at a reasonable price.
Art. 705. In case of the death of a passenger during the voyage the captain shall be
authorized, with respect to the body, to take the steps required by the circumstances, and shall
carefully take care of the papers and goods of said passenger which may be on board, complying
with the provisions of case No. 10 of Article 612 with regard to members of the crew.
Art. 612. The following duties are inherent in the office of captain:
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1. To have on board before starting on a voyage a detailed inventory of the hull, engines,
rigging, tackle, stores, and other equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts entered into with the crew; the list
of passengers; the health certificate; the certificate of the registry proving the ownership of the
vessel; and all the obligations which encumber the same up to that date; the charters or
authenticated copies thereof; the invoices or manifest of the cargo, and the instrument of the expert
visit or inspection, should it have been made at the port of departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing at the beginning of each one a note of
the number of folios it contains, signed by the marine official, and in his absence by the competent
authority.
In the first book, which shall be called "log book," he shall enter every day the condition
of the atmosphere, the prevailing winds, the course sailed, the rigging carried, the horsepower of
the engines, the distance covered, the maneuvers executed, and other incidents of navigation. He
shall also enter the damage suffered by the vessel in her hull engines, rigging, and tackle, no matter
what is its cause, as well as the imperfections and averages of the cargo, and the effects and
consequence of the jettison, should there be any; and in cases of grave resolutions which require
the advice or a meeting of the officers of the vessel, or even of the passengers and crew, he shall
record the decision adopted. For the informations indicated he shall make use of the binnacle
book, and of the steam or engine book kept by the engineer.
In the second book, called the "accounting book", he shall enter all the amounts collected
and paid for the account of the vessel, entering specifically article by article, the sources of the
collection, and the amounts invested in provisions, repairs, acquisition of rigging or goods, fuel,
outfits, wages, and all other expenses. He shall furthermore enter therein a list of all the members
of the crew, stating their domiciles, their wages and salaries, and the amounts they may have
received on accounts, either directly or by delivery to their families.
In the third book, called "freight book," he shall record the entry and exit of all the goods,
stating their marks and packages, names of the shippers and of the consignees, ports of loading
and unloading, and the freight earned. In the same book he shall record the names and places of
sailing of the passengers and the number of packages of which their baggage consists, and the
price of the passage.
4. To make, before receiving the freight, with the officers of the crew, and the two experts,
if required by the shippers and passengers, an examination of the vessel, in order to ascertain
whether she is watertight, and whether the rigging and engines are in good condition; and if she
has the equipment required for good navigation, preserving a certificate of the memorandum of
this inspection, signed by all the persons who may have taken part therein, under their liability.
The experts shall be appointed one by the captain of the vessel and the other one by the
persons who request the examination, and in case of disagreement a third shall be appointed by the
marine authority of the port.
5. To remain constantly on board the vessel with the crew during the time the freight is
taken on board and carefully watch the stowage thereof; not to consent to any merchandise or
goods of a dangerous character to be taken on, such as inflammable or explosive substances,
without the precautions which are recommended for their packing, management and isolation; not
to permit that any freight be carried on deck which by reason of its disposition, volume, or weight
makes the work of the sailors difficult, and which might endanger the safety of the vessel; and if,
on account of the nature of the merchandise, the special character of the shipment, and principally
the favorable season it takes place, he allows merchandise to be carried on deck, he must hear the
opinion of the officers of the vessel, and have the consent of the shippers and of the agent.
6. To demand a pilot at the expense of the vessel whenever required by navigation, and
principally when a port, canal, or river, or a roadstead or anchoring place is to be entered with
which neither he, the officers nor the crew are acquainted.
PAGE 173

7. To be on deck at the time of sighting land and to take command on entering and leaving
ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. He
shall not spend the night away from the vessel except for serious causes or by reason of official
business.
8. To present himself, when making a port in distress, to the maritime authority if
in the Philippines and to the Filipino consul if in a foreign country, before twenty-four hours have
elapsed, and make a statement of the name, registry, and port of departure of the vessel, of its
cargo, and reason of arrival, which declaration shall be vised by the authority of by the consul if
after examining the same it is found to be acceptable, giving the captain the proper certificate in
order to show his arrival under stress and the reasons therefor. In the absence of marine officials
or of the consul, the declaration must be made before the local authority.
9. To take the steps necessary before the competent authority in order to enter in the
certificate of the vessel in the registry of the vessels, the obligations which he may contract in
accordance with Article 583.
10. To put in a safe place and keep all the papers and belongings of any members of the
crew who might die on the vessel, drawing up a detailed inventory, in the presence of passengers as
witnesses, and, in their absence, of members of the crew.
11. To conduct himself according to the rules and precepts contained in the instructions of
the agent, being liable for all that he may do in violation thereof.
12. To give an account to the agent from the port where the vessel arrives, of the reason
therefor, taking advantage of the semaphore, telegraph, mail, etc., according to the cases; notify
him the freight he may have received, stating the name and domicile of the shippers, freight
earned, and amounts borrowed on bottomry bond, advise him of his departure, and give him any
information and date which may be of interest.
13. To observe the rules on the situation of lights and evolutions to prevent collisions.
14. To remain on board in case of danger to the vessel, until all hope to save her is lost,
and before abandoning her to hear the officers of the crew, abiding by the decision of the majority;
and if he should have to take a boat he shall take with him, before anything else, the books and
papers, and then the articles of most value, being obliged to prove in case of the loss of the books
and papers that he did all he could to save them.
15. In case of wreck he shall make the proper protest in due form at the first port reached,
before the competent authority or Filipino consul, within twenty-four hours, stating therein all the
incidents of the wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and rules of navigation, customs,
health, and others.
Art. 703. A passenger shall be considered a shipper of the goods he carries on board, and
the captain shall not be responsible for what the former may keep under his immediate and special
custody, unless the damage arises from an act of the captain or of the crew.
Art. 1754. The provisions of Arts. 1733 to 1753 shall apply to the passenger's baggage
which is not in his personal custody or in that of his employee. As to the other baggage, the rules
in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be
applicable. (New Civil Code.)
J. Carriage of Goods by Sea Act (Commonwealth Act. No. 65, Public Act No. 521, 74the US Congress)
Sec. 1. That the provisions of Public Act No. 521 of the 74th Congress of the United States,
approved on April 16, 1936, be accepted, as it is hereby accepted to be made applicable to all
contracts for the carriage of goods by sea to and from Philippine ports in foreign trade: Provided,
that nothing in this Act shall be construed as repealing any existing provision of the Code of
Commerce which is not in force, or as limiting its application.
PAGE 174
Notes: In relation to Civil Code :

Art. 1753 - governed by law of place of destination, if shipped to a foreign country, governed by law of
foreign country
Art. 1766 - goods from foreign country shipped to the Philippines, governed by the Civil Code
COGSA - applicable to all transportation of goods by sea in foreign trade to and from Philippine ports
- does not apply to purely domestic transport
- Laws applicable to a contract for the carriage of goods by sea:
1. Distinguish - common carrier (Civil Code)
- private carrier
2. Where is the vessel going?
a. Common carrier coming to the Phils. = what law applies?
1st: Civil Code
2nd: COGSA (it's more specific than Code of Commerce)
- in foreign trade
3rd: Code of Commerce
b. Private carrier coming to the Phils. in foreign trade
1st: COGSA (because it's more specific)
2nd: Code of Commerce
3rd: Civil Code (provisions not on common carriers e.g. torts, contracts)
c. From the Phils. to a foreign country: apply laws of such foreign country (Art. 1753)
- with respect to vessels destined for foreign ports, the COGSA doesn't apply unless parties make it
applicable.
Q: In what situations does COGSA primarily apply?
A: Where the parties expressly stipulate that COGSA shall govern their respective rights and
obligations.
Q: Can the COGSA apply in domestic shipping?
A: Generally, NO.
EXCEPTION: when parties agree to make it apply.
Q: What application does COGSA have in carriage of passengers?
A: None. Applies only to carriage of goods.
Sec. 2. This Act shall take effect upon its approval. (Approved October 22, 1936).
TITLE I
Sec. 1. When used in this Act(a) The term "carrier" includes the owner or the charterer
who enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to contracts of carriage covered by a
bill of lading or any similar document of title, insofar as such document relates to the carriage of
PAGE 175

goods by sea, including any bill of lading or any similar document as aforesaid issued under or
pursuant to a charter party from the moment at which such bill of lading or similar document of
title regulates the relations between a carrier and a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and articles of ever kind
whatsoever, except live animals and cargo which by the contract of carriage is stated as being
carried on deck and is so carried.
(d) The term "ship" means any vessel used for the carriage
of goods by sea.
(e) The term "carriage of goods" covers the period from the time when the goods are
loaded to the time when they are discharged from the ship
RISKS
Sec. 2. Subject to the provisions of Section 6, under every contract of carriage of goods by
sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge
of such goods shall be subject to the responsibilities and liabilities and entitled to the rights and
immunities hereinafter set forth.
RESPONSIBILITIES AND LIABILITIES

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers, and all other
parts of the ship in which goods are carried, fit and safe for their reception,
carriage, and preservation
(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or the master or agent of the
carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other
things(a) The loading marks necessary for identification of the goods as the same are
furnished in writing by the shipper before the loading of such goods starts,
provided such marks are stamped or otherwise shown clearly upon the goods if
uncovered, in such a manner as should ordinarily remain legible until the end of
the voyage.
(b) Either the number of packages or pieces, or the quantity or weight, as the case
may be, as furnished in writing by the shipper.
(c) The apparent order and conditions of the goods: Provided, that no carrier, master, or
agent of the carrier, shall be bound to state or show in the bill of lading any marks, number,
quantity, or weight which he has reasonable ground for suspecting not accurately to
represent the goods actually received or which he has had no reasonable means of checking.
PAGE 176

(4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the
goods as therein described in accordance with paragraphs (3) (a), and (c), of this section: (The rest
of the provision is not applicable to the Philippines).
(5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time
of shipment of the marks, number, quantity, and weight, as furnished by him; and the shipper shall
indemnify the carrier against all loss, damages, and expenses arising or resulting from inaccuracies
in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility
and liability under the contract of carriage to any person other than the shipper.
(6) Unless notice of loss or damage and the general nature of such loss or damage be given
in writing to the carrier or his agent at the port of discharge or at the time of the removal of the
goods into the custody of the person entitled to delivery thereof under the contract of carriage, such
removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the
bill of lading. If the loss or damage is not apparent, the notice must be given within three days of
the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given by the
person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered: Provided, that, if a notice of loss or damage, either apparent or
concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right
of the shipper to bring suit within one year after the deliver of the goods or the date when the goods
should have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver shall
give all reasonable facilities to each other for inspecting and tallying the goods
(7) After the goods are loaded the bill of lading to be issued by the carrier, master, or agent
of the carrier to the shipper shall if the shipper so demands, be a "shipped" bill of lading: Provided,
that if the shipper shall have previously taken up any document of title to such goods, he shall
surrender the same as against the issue of the "shipped" bill of lading, but at the option of the
carrier such document of title may be noted at the port of shipment by the carrier, master, or agent
with the name or names of the ship or ships upon which the goods have been shipped and the date or
dates of shipment, and when so noted the same shall for the purpose of this section be deemed to
constitute a "shipped" bill of lading.
(8) Any clause, covenant, or agreement in a contract of carriage relieving the carrier of the
ship from liability for loss or damage to or in connection with the goods, arising from negligence,
fault, or failure in the duties and obligations provided in this section, or lessening such liability
otherwise than as provided in this Act, shall be null and void and of no effect. A benefit of insurance
in favor of the carrier, or similar clause, shall be deemed to be a clause relieving the carrier from
liability.
Notes: Prescriptive period under Section 3(6). - the carrier and the agent shall be discharged form
liability in respect of loss or damage unless suit is brought within 1 year from:
(1) in case of damaged goods: from the time delivery of the goods was made
PAGE 177

(2) in case of non-delivery (i.e., lost goods): from the date the goods should have been delivered
Cases of misdelivery or conversion not covered.
1 year-prescriptive period in Sec. 3 (6) applies only where there is loss or damage.
Loss contemplates only where no delivery at all was made by the carrier of the goods because the same
had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered
Hence, in case of misdelivery (delivery to wrong person) or conversion of the goods, the rules on
prescription found in the Civil Code shall apply (10 years for contracts; 4 years for tortious obligations)
Shipper, consignee or legal holder of B/L may invoke the prescriptive period and have the right to file suit
within one year after delivery of the goods or failure to deliver.
Mere proposal for arbitration or fact that there have been initial negotiations does not suspend the running
of the period for prescription
NOTE: Prof. Quimbo does not agree with this SC ruling. If there is a misdelivery or conversion, there is
a case of loss from the point of view of the consignee or shipper.
Q: Is the prescriptive period under the COGSA interrupted from the time of the making of extra-judicial
demand or filing of judicial action as provided in Art. 1155, NCC?
A: No. 1 year period is a special prescriptive period, uniform worldwide
Rationale behind the 3-day notice and relatively short prescriptive period:
- to provide carrier an opportunity to look for the lost goods
- to discover who was at fault
- in case of transshipment, to determine, when and where damage occurred
Shipper, consignee or legal holder of bill may invoke prescriptive period although the proviso in Sec. 3
(6) gives the impression that it is the shipper alone who can invoke the same.
But prescriptive period does not apply to the action by an insurer as subrogee of the consignee.
Stipulation in bill limiting carrier's liability contrary to sec. 3(8) is void; e.g. provision in the bill
excepting th owner form liability for loss or damage of cargo unless written notice is thereof was given to
the carrier within 30 days; such a provision is contrary to a provision of the COGSA since Sec. 3
provides that even if a notice of loss or damage is not given as required, that fact shall not prejudice the
right of the shipper to bring suit within 1 year after delivery of the goods.
Notice requirements:
COGSA: Sec. 3(6)
If loss or damage is apparent - protest as soon as receipt of goods
If not apparent -> within 3 days of delivery
Code of Commerce: Art. 366
apparent - protest at time of receipt
non-apparent - within 24 hours after receipt
WARSAW: Art. 26
in case of damage:
of baggage - within 3 days from receipt
PAGE 178

of goods - within 7 days
in case of delay: within 14 days from receipt
failure to comply with the 3-days notice requirement under COGSA does not affect the right of the
shipper to bring action provided he brings the same within 1 year
To be distinguished from the notice requirement in the WARSAW convention and Code of
Commerce, where the notice requirement is a condition precedent for the right of action against the
shipowner to accrue.
RIGHTS AND IMMUNITIES
Sec. 4. (1) Neither the carrier not the ship shall be liable for loss or damage arising or
resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to
make the ship seaworthy and to secure that the ship is properly manned, equipped, and supplied,
and to make the holds, refrigerating and cooling chambers, and all other parts of the ship in which
goods are carried fit and safe for their reception, carriage, and preservation, in accordance with the
provisions of paragraph (1) of Section (3). Whenever loss or damage has resulted from
unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other
person claiming exemption under this section.
(2) Neither the carrier not the ship shall be responsible for loss or damage arising or
resulting from(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the
carrier in the navigation or in the management of the ship;
(b) Fire, unless caused by the actual fault or privity of the carrier;
(c) Perils, dangers, and accidents of the sea or other navigable water;
(d) Act of God;
(e) Act of war;
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or seizure under legal process;
(h) Quarantine restrictions;
(i)
Act or omission of the shipper or owner of the goods, his agent or
representative;;
(j) Strikes or lockouts or stoppage or restraint of labor from whatever cause,
whether partial or general: Provided, that nothing herein contained shall be
construed to relive a carrier from responsibility for the carrier's own acts:
(k) Riots and civil commotions;
(l) Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage arising from inherent
defect, quality, or vice of the goods;
(n) Insufficiency of packing;
(o) Insufficiency or inadequacy of marks;
(p) Latent defects not discoverable by due diligence; and
(q) Any other cause arising without the actual fault and privity of the carrier
and without the fault or neglect of the agents or servants of the carrier, but the
burden of proof shall be on the person claiming the benefit of this exception to
show that neither the actual fault or privity of the carrier not the fault or neglect of
the agents or servants of the carrier contributed to the loss or damage.
PAGE 179
(3) The shipper shall not be responsible for loss or damage sustained by the carrier or the
ship arising or resulting from any cause without the act, or neglect of the shipper, his agents, or his
(4) An deviation in saving or attempting to save life or property at sea, or any reasonable
deviation shall not be deemed to be an infringement or breach of this Act or of the contract of
carriage, and carrier shall not be liable for any loss or damage resulting therefrom: Provided,
however, that if the deviation is for the purpose of loading or unloading cargo or passengers it shall,
prima facie, be regarded as unreasonable.
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding $500 per
package of lawful money of the United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency, unless the nature and value
of such goods have been declared by the shipper before shipment and inserted in the bill of lading.
This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another
maximum amount than that mentioned in this paragraph may be fixed: Provided, that such
maximum shall not be less than the figure above named. In no event shall the carrier be liable for
more than the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in
connection with the transportation of the goods if the nature or value thereof has been knowingly
and fraudulently mis-stated by the shipper in the bill of lading.
(6) Goods of an inflammable, explosive, or dangerous nature to the shipment whereof, the
carrier, master or agent of the carrier, has not consented with knowledge of their nature and
character, may at any time before discharge be landed at any place or destroyed or rendered
innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all
damages and expenses directly or indirectly arising out of or resulting from such shipment. If any
such goods shipped with such knowledge and consent shall become a danger to the ship or cargo,
they may in like manner be landed at any place, or destroyed or rendered innocuous by the carrier
without liability on the part of the carrier except to general average if any.
Notes: Amount recoverable in case of loss: $500/package, even if not stipulated
The plaintiff cannot dispute said limitation on the ground that it was not freely and fairly agreed upon or
that it is against public policy, since the LAW ITSELF PROVIDES FOR SAID LIMITATION; THE
SAME IS DEEMED READ INTO THEIR CONTRACT
Package - means individual packaging of the goods
- does not cover 1 container van
Parties may agree to amount of liability less than $500 under Sec. 4(5). By providing that $500 is the
maximum liability, the law does not disallow an agreement for liability at a lesser amount. Moreover,
Art. 1749 of the NCC expressly allows th limitation of the carrier's liability. (Eastern v. Great American)
PAGE 180

SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF RESPONSIBILITIES
AND LIABILITIES
Sec. 5. A carrier shall be at liberty to surrender in whole or in part all or any of his rights
and immunities or to increase any of his responsibilities and liabilities under this Act, provided such
surrender or increase shall be embodied in the bill of lading issued to the shipper.
The provisions of this Act shall not be applicable to charter parties; but if bills of lading are
issued in the case of a ship under a charter party, they shall comply with the terms of this Act.
Nothing in this Act shall be held to prevent the insertion in a bill of lading of any lawful provisions
regarding general average.
SPECIAL CONDITIONS
Sec. 6. Notwithstanding the provisions of the preceding section, a carrier, master or agent of
the carrier, and a shipper shall, in regard to any particular goods be at liberty to enter into any
agreement in any terms as to the responsibility and liability of the carrier for such goods, and as to
the rights and immunities of the carrier in respect to such goods, or his obligation as to
seaworthiness, (so far as the stipulation regarding seaworthiness is not contrary to public policy), or
the care or diligence of his servants or agents in regard to the loading, handling, stowage, carriage,
custody, care and discharge of the goods carried by sea; provided, that in this case no bill of lading
has been or shall be issued and that the terms agreed shall be embodied in a receipt which shall be a
non-negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal effect: Provided, that this section shall
not apply to ordinary commercial shipments made in the ordinary course of trade but only to other
shipments where the character or condition of the property to be carried or the circumstances,
terms and conditions under which the carriage is to be performed are such as reasonable to justify a
special agreement.
Sec. 7. Nothing contained in this Act shall prevent a carrier or a shipper from entering into
any agreement, stipulation, condition, reservation, or exemption as to the responsibility and liability
of the carrier or the ship for the loss or damage to or in connection with the custody and care and
handling of goods prior to the loading on and subsequent to the discharge from the ship on which
the goods are carried by sea.
Sec. 8. The provisions of this Act shall not affect the rights and obligations of the carrier
under the provisions of the Shipping Act, 1916, or under the provisions of Section 4281 to 4292,
inclusive, of the Revised Statutes of the United States, or of any amendments thereto, or under the
provisions of any other enactment for the time being in force relating to the limitation of the liability
of the owners of seagoing vessels.
TITLE II
Sec. 9. Nothing contained in this Act shall be construed as permitting a common carrier by
water to discriminate between competing shippers similarly placed in time and circumstances, either
(a) with respect to their right to demand and receive bills of lading subject to the provisions
of this Act; or
PAGE 181

(b) when issuing such bills of lading either in the surrender of any of the carrier's rights and
immunities or in the increase of any of the carrier's responsibilities and liabilities pursuant to
Section 5, Title I, of this Act;
(c) in any other way prohibited by the Shipping Act, 1916, as amended.
Sec. 10. (Not applicable to the Philippines.)
Sec. 11. When under the custom of any trade the weight of any bulk cargo inserted in the
bill of lading is a weight ascertained or accepted by a third party other than the carrier or the
shipper and the fact that the weight as ascertained or accepted is stated in the bill of lading, then
notwithstanding anything in this Act, the bill of lading shall not be deemed to be prima facie
evidence against the carrier of the receipt of goods of the weight so inserted in the bill of lading, and
the accuracy thereof at the time of shipment shall not be deemed to have been guaranteed by the
shipper.
Sec. 12. (Not applicable to the Philippines.)
Sec. 13. This act shall apply to all contracts for carriage of goods by sea to or from ports of
the United States in foreign trade. As used in this Act the term "United States" includes its
districts, territories, and possessions: Provided, however, that the Philippine Legislature may by
law exclude its application to transportation to or from ports of the Philippine Islands. The term
"foreign trade" means the transportation of goods between the ports of the United States and ports
of foreign countries. Nothing in this Act shall be held to apply to contracts for carriage of goods by
sea between any port of the United States or its possession: Provided, however, that any bill of
lading or similar document of the title which is evidence of a contract for the carriage of goods by
sea between such ports, containing an express statement that it shall be subject to the provisions of
this Act, shall be subjected hereto as fully as if subject hereto by the express provisions of this Act:
Provided, further, that every bill of lading or similar document of title which is evidence of a
contract for the carriage of goods by sea from ports of the United States in foreign trade, shall
contain a statement that it shall have effect subject to the provisions of this Act.
Notes: American Insurance vs Cia Maritima : contract of carriage from NY with final destination in
Cebu. COGSA is applicable despite the fact that from Manila to Cebu, the goods were transshipped on an
interisland vessel. Transshipment was not a separate transaction from that originally entered into by the
parties but was part of the carrier's contractual obligation.
Sec. 14. Upon the certification of the Secretary of Commerce that the foreign commerce of
the United States in its competition with that of foreign nations is prejudiced by the provisions, or
any of them, of the Title I of this Act, or by the laws of any foreign country or countries relating to
the carriage of goods by sea, the President of the United States may, from time to time by
proclamation, suspend any or all provisions of Title I of this Act for such periods of time or
indefinitely as may be designated in the proclamation., The President may at any time rescind such
suspension of Title I hereof, and any time rescind such suspension of Title I hereof, and any
provisions thereof which may have been thereafter made for carriage of goods by sea. Any
proclamation of suspension or rescission of any such suspension shall take effect on the date named
therein, which date shall be not less than ten days from the issue of the proclamation.
PAGE 182

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

A. The Warsaw Convention, 51 O.G. 5084 (October 1955);
Presidential Proclamation No. 201, 51 O.G. 4933 (October 1955)
MAKING PUBLIC THE ADHERENCE OF THE R.P. TO THE CONVENTION FOR THE
UNIFICATION OF CERTAIN RULES RELATING TO INTL. TRANSPORTATION BY AIR
AND THE ADDITIONAL PROTOCOL THERETO, 1929
WHEREAS, a Convention for the Unification of Certain Rules Relating to International
Transportation by Air & an Additional Protocol thereto relating to Article 2 of the Convention were
signed at Warsaw by the plenipotentiaries of 32 countries;
WHEREAS, Article 38 of the aforesaid Convention provides that a Government on behalf
of which this Convention has not been signed, shall be allowed to adhere thereto at any time after
the Convention has come into force, by means of a notification addressed to the Government of the
Republic of Poland;
WHEREAS, the Senate of the Congress of the Philippines, by its Resolution No. 19 adopted
on May 16, 1950, concurred in the adherence by the Republic of the Philippines Government to the
said Convention & the said Protocol in accordance with the Philippine Constitution, subject to the
reservation, as provided in the Additional Protocol, that the 1st paragraph of Art. 2 of the
PAGE 183

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

HELD: No. Art. 28 (1) of Warsaw Con. is constitutional. Although the case can be decided on other
grounds without resolving the constitutional question, the Warsaw Convention is a treaty commitment
voluntarily assumed by the Philippine Government and as such, has the force and effect of law. The
presumption is that this joint legislative-executive act was first carefully studied and determined to be
PAGE 184

constitutional before it was adopted. Petitioner's allegation have not overcome this presumption.
Moreover, the treaty since 1950 has not been rejected by the Philippine Government.
SECOND ISSUE: W/NOT THE WC SHOULD BE RENDERED IRRELEVANT BY THE DOCTRINE
OF REBUS SIC STANTIBUS?
HELD: No. The circumstance that the airline industry was still in infancy when the Convention was
made, alone, is not sufficient justification for the rejection of the treaty at this time. The changes recited
by petitioner were not entirely unforeseen although they were expected in a general sense only. (Check
Art.41).
THIRD ISSUE: W/NOT THE REQUISITS OF THE WC IS MERELY A MATTER OF VENUE OR
JURISDICTION?
HELD: Jurisdiction
(1) The wording of Art. 32, which indicates the places where the action for damages "must" be brought,
underscores the mandatory nature of Art. 28 (1).
(2) This characterization is consistent with one of the objectives of the convention, which is to regulate in
a uniform manner the conditions of international transportation by air.
FOURT ISSUE: W/NOT PHILIPPIN COURTS HAVE JURISDICTION OVER THIS CASE?
HELD: No. Art. 28 (1) provides that an action for damage must be brought at the option of the plaintiff:
(a) before the court of the domicile of the carrier;
(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c the contract had been made;
(d) the court of the place of destination.
In this case, the ff. were not followed, and hence the Philippines, not being one of the courts
mentioned in Art.28 (1), does not have jurisdiction over the case.
(1) court of domicile is Minnesota, U.S.A;
(2) principal place of business of carrier is also U.S.A;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a round trip-ticket from SFOTYO-MNL, then back to TYO- SFO. The "ultimate destination" being San Francisco.
The court called upon to determine the applicability of the limitation provision must first be
vested with the appropriate jurisdiction. If the carrier is indeed is indeed not guilty of WILLFUL
MISCONDUCT, it can avail itself of the limitations set forth in this article. But it can be done only if the
action has first been commenced properly under the rules set forth in Art.28 (1).
Notes: The enumeration of the causes of action in the WC is not an exclusive list. You can have a cause
of action even if it is not:
(a) death or wounding of passenger;
(b) damage or loss or destruction of checked baggage;
(c) delay in transportation of passengers, luggage and goods.
The case of Northwest is actually overbooking. Delay still a cause of action under WC.
Note however, that the limitations of liability in the Convention favors the carrier.
PAGE 185

C. When Applicable
Art. 1. (1) This convention shall apply to all international transportation of persons,
baggage, or goods performed by aircraft for hire. It shall apply equally to gratuitous transportation
by aircraft performed by an air transportation enterprise.
(2) For the purpose of this convention the expression "international transportation" shall
mean any transportation in which, according to the contract made by the parties, the place of
departure and the place of destination, whether or not there be a break in the transportation or a
transshipment, are situated either within the territories of two High Contracting Parties, or within
the territory of a single High Contracting Party, if there is an agreed stopping place within a
territory subject to the sovereignty, suzerainty, mandate, or authority of another power, even though
that power is not a party to this convention. Transportation without such an agreed stopping place
between territories subject to the sovereignty, suzerainty, mandate, or authority of the same High
Contracting Party shall not be deemed to be international for the purposes of this Convention.
(3) Transportation to be performed by several successive air carriers shall be deemed, for
the purposes of this Convention, to be one undivided transportation, if it has been rendered by the
parties as a single operation, whether it has been agreed upon under the form of a single contract or
of a series of contracts is to be performed entirely w/in a territory subject to the sovereignty,
suzerainty, mandate, or authority of the same High Contracting Party.
Art. 2. (1) This convention shall apply to transportation performed by the state or by legal
entities constituted under public law provided it falls within the conditions laid down in Art .1.
(2) This convention shall not apply to transportation performed under the terms of any
international postal convention.
D. Liabilities Under the Convention
Art. 17. The carrier shall be liable for damage sustained in the event of the death or
wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which
caused the damage so sustained took place on board the aircraft or in the course of any of the
operations of embarking or disembarking.
Art. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction
or loss of, or of damage to, any checked baggage, or any goods, if the occurrence which caused the
damage so sustained took place during the transportation by air.
(2) The transportation by air within the meaning of the proceeding paragraph shall
comprise the period during which the baggage or the goods are in charge of the carrier, whether in
an airport or on board an aircraft, or in the case of a landing outside an airport, in any place
whatsoever.
(3) The period of the transportation by air shall not extend to any transportation by land, by
sea, or by river performed outside of an airport. If however, such transportation takes place in the
performance of a contract for transportation by air, for the purpose of loading, delivery, or
transshipment,any damage is presumed, subject to proof to the contrary, to have been the result of
an event which took place during the transportation by air.
Art. 19. The carrier shall be liable for damage occasioned by delay in the transportation by
air of passengers,baggage, or goods.
PAGE 186
NORTHRWEST V. CUENCA [14 S 1063 (1965)]

F:
Nicolas Cuenca, an official delegate of Philippines to a conference in Tokyo, was transferred from first
class to tourist class despite his first class ticket. The Northwest agent also treated him rudely in front of other
passengers. Northwest argues that according to the Warsaw Convention, Arts. 17, 18, 19, an air carrier is liable
only in the event of (a) death of a passenger or injury suffered by him; (b) of destruction or loss of, or damage
to any checked baggage/goods; & (c) delay in the transportation by air of passengers, baggage or goods.
ISSUE: W/NOT CUENCA HAS A CAUSE OF ACTION THOUGH NOT AMONG THOSE
MENTIONED IN THE WC?
HELD: Yes. The said articles merely declare the carrier liable for damages in the enumerated cases, if the
conditions therein specified are present. Neither the provisions of said articles nor others regulate or
exclude liability for other breaches of contract by the carrier. Under petitioner's theory, an air carrier
would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to
comply with a contract of carriage, which is absurd.
ALITALIA V. IAC [192 SCRA 10 (1990)]
F:
Dr. Felipa Pablo, an Associate UP Professor and research grantee of the Philippine Atomic Energy
Agency was scheduled to speak in a UN meeting in Ispra, Italy. She arrived in Milan a day before the meeting,
but her luggage (where her speech was) was delayed, and arrived a day after the meeting. She returned to
Manila before the meeting.
ISSUE: W/NOT THE WC SHOULD APPLY TO LIMIT ALITATLIA'S LIABILITY?

HELD: No. The WC does not operate as an absolute limit of the extent of an airline's liability. It does not
regulate or exclude liability for other breaches of contract by the carrier.
Under the WC, an air carrier is made liable for damages for delay in the transportation by air of
passengers, luggage or goods. The WC also limits the liability of the carrier to 250 francs per kilo of the
total weight of the package. The WC denies to the carrier availment of the provisions which exclude or
limit his liability, if the damage is caused by his willful misconduct or by such default on his part as,
in accordance with the law of the court seized of the case, is considered as willful misconduct, or if the
damage is caused by any agent of the carrier acting w/in the scope of his employment.
2. The WC does not regulate or exclude liability for other breaches of contract by the carrier or
misconduct of its officers and employees or for some particular or exceptional damage. The WC has been
held inapplicable where there was proof of malice or bad faith attributable to its officers and employees.
Here, however, there was no bad faith on the part of the employees.
Nominal damages however, was awarded because of the presence of some special species of injury caused
to Dr. Pablo.
E. Limitations on Liability
RE: PASSENGERS
PAGE 187

Art.22. (1) In the transportation of passengers the liability of the carrier for each passenger
shall be limited to the sum of 125,000 francs. (Now $100,000) Where, in accordance w/ the law of
the court to w/c the case is submitted, damages may be awarded in the form of periodical payments,
the equivalent capital value of the said payments shall not be exceed 125,000 francs. Nevertheless,
by special contract, the carrier and the passenger may agree to a higher limit of liability.
RE: BAGGAGE/GOODS
(2) In the transportation of checked baggage and of goods, the liability of the carrier shall be
limited to a sum of 250 francs per kilogram (Now $20 per kilo), unless the consignor has made, at
the time when the package was handed over to the carrier, a special declaration of the value of the
delivery and has paid a supplementary sum if the case so requires. In that case, the carrier will be
liable to pay a sum not exceeding the declared sun, unless he proves that the sum is grater that the
actual value to the consignor at delivery.
(3) As regards objects of w/c the passenger takes charge himself, the liability of the carrier
shall be limited to 5,000 francs per passenger.
(4) The sums mentioned above shall be deemed to refer to the French franc consisting of 65
1/2 milligrams of gold at the standard of fineness of nine hundred thousandths. These sums may be
converted into any national currency in round figures.
Art. 23. Any provision tending to relieve the carrier of liability or to fix a lower limit that
which is laid down in this convention shall be null and void, but the nullity of any such provision
shall not involve the nullity of the whole contract, which shall remain subject to the provisions of this
convention.
Art. 24. (1) In the cases covered by Arts.18 & 19 any action for damages, HOWEVER
FOUNDED, can only be brought subject to the conditions and limit set out in this convention.
(2) In the case covered by Art.17, the provisions of the preceding paragraph shall also
apply,w/o prejudice to the question as to who are the persons who have the right to bring suit and
what are their respective rights.
NOTES: Even if you base your claim on quasi-delict, you can still sue under Warsaw, invoking Art.24
(1).
PAN AM v. IAC (164 SCRA)
F:
Pangan's luggages didn't arrive w/ his flight. As a consequence the film exhibitions he set up &
promoted for, was cancelled. CFI ordered PanAm to pay for P83,000 for actual damages. PanAm contended that
such award was beyond the limitation of liability set forth in the Warsaw Con., the provisions of such being
found at the back of the ticket.
ISSUE: WON Pangan is bound by such Warsaw provisions & hence is entitled only to $600 ($20
standard X 30 kilos) ---- YES.
Such provisions have been held to be a part of the contract of carriage, & is valid & binding upon
the passenger regardless of the latter's lack of knowledge or assent to the regulation.
A contract limiting liability upon an agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence. Inasmuch as Pangan failed to declare any
higher value for his luggage & to pay add'l charges, PanAm's liability is limited to $600, as stipulated at
the back of the ticket.
PAGE 188
FELICIANO v. PAN AM (CA CASE)

F:
Feliciano, & her Co. asked P182,000 for the value of the contents of her lost luggage (including loss of
possible opportunities). PanAm contends its liability if limited by the Warsaw Con. to not more than $20 per
kilo. TC held that there was no issue of fact except as to amount& awarded $600 ($20 X 30 kgs).
Was TC correct? --- YES.

Indeed, SC has granted damages on the ground of fraud or bad faith due to the personal
misconduct of airline employees. This case, however, the contract of carriage of PET's baggage is based
on the conditions in the airline. Such contract is governed by Art.22(2). Since there is no evidence that
PET had declared a higher value for her lost luggage for w/c the corresponding value, the Warsaw Con.
should apply.
F. When limitations unavailable
Art. 3. (1) For the transpo. of passengers the carrier must deliver a passenger ticket w/c
shall contain the ff. particulars:
(a) The place & date of issue;
(b) The place of departure & of destination;
(c) The agreed stopping places, provided that the carrier may reserve the right to
alter the stopping places in case of necessity, and that if he exercises that right, the
alteration shall not have the effect of depriving the transportation of its intl.
character;
(d) The name & address of the carrier/s;
(e) A statement that the transpo. is subject to the rules relating to liability
established by this convention.
(2) The absence, irregularity, or loss of the passenger ticket shall not affect the existence or
the validity of the contract of transportation, w/c shall none the less be subject to the rules of this
convention. Nevertheless, if the carrier accepts a passenger w/o a passenger ticket having been
delivered he shall not be entitled to avail himself of those provisions of this Convention w/c exclude
or limit his liability.
Art.25. (1) The carrier shall not be entitled to avail himself of the provisions of this
convention w/c exclude or limit his liability, if the damage is caused by his wilful misconduct or by
such default on his part as, in accordance w/ the law of the court to w/c the case is submitted, is
considered to be equivalent to wilful misconduct.
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, is the
damage is caused under the same circumstances by any agent of the carrier acting w/in the scope of
his employment.
NOTES: Q: In what cases can carrier NOT invoke limitations?
A: 1. wilfull misconduct (Art.25)
2. default amounting to wilful misconduct accdg. to court where action is brought;
3. accepting passengers w/o passenger ticket (Art.3-2);
4. accepting goods w/o air waybill/baggage w/o baggage check.
Q: Can carrier rely on WC if it was guilty of wilfull misconduct?
PAGE 189

A: YES. It just can't avail of the limitation on liability. Thus it can still invoke the provisions on
NOTICE or PRESCRIPTION/LACK OF CAUSE OF ACTION.
e.g. If damage wasn't one of the enumerations in the WC, & case was filed beyond the 2 year
requirement. The carrier can invoke prescription. But if suit is brought w/in 2 years, carrier may be liable
for a higher amount than the limitation.
The only time when WC isn't applicable is when it's not intl. air transport. There is nothing in
Art.25 w/c says that the WC doesn't apply entirely.
ALITALIA v.IAC (supra)
The Convention does not regulate or exclude liability for other breaches of contract by the
carrier or misconduct of its officers and employees or for some particular or exceptional damage. The
Con. has been held inapplicable where there was proof of malice or bad faith attributable to its officers &
employees. HERE, HOWEVER, no bad faith of EES. Nominal damages however, was awarded because
of the presence of some special species of injury caused to Dr. Pablo.
TWA v. CA (165 SCRA)
F:
Vinluan, ACCRA lawyer, was downgraded from 1st class to economy & was issued refund
application, in his MNL-Europe-NYK- SFO-MNL flight. (His NYK-SFO flight particularly) He also noticed that
white Caucasian passengers who checked in later than him were given preference in 1st class seats, w/c became
available due to "no show" passengers. He sued in CFI for breach of contract & bad faith.
ISSUE: WON Warsaw Con. limit on liability can be availed of --- NO.
There was obvious discrimination & humiliation to w/c Vinluan was subjected. Such inattention
& lack of care for interest of its passengers amount to bad faith w/c entitles passenger to moral damages.
NOTES: His entire trip, even though he availed of the services of other airlines, is equal to one
transport.
E.g. MNL-SFO via PAL } one continuing
SFO-NYK via United }
ticket
Hence, if injury appears in SFO-NYK, Warsaw can be applied.
F. Conditions of Liability
Art.26. (1) Receipt by the person entitled to the delivery of baggage of goods w/o complaint
shall be prima facie evidence that the same have been delivered in good condition & in accordance
w/ the document of transpo.
(2)In case of damage, the person entitled to delivery must complain to the carrier forthwith
after the discovery of the damage, and at the latest, within 3 days from the date of receipt in the case
of BAGGAGE and 7 days from the date of receipt in the case of GOODS. In case of DELAY the
complaint must be made at the latest w/in 14 days from the date on w/c the baggage or goods have
been placed at his disposal.
(3) Every complaint must be made in writing upon the document of transportation or by
separate notice in writing dispatched w/in the times aforesaid.
(4) Failing complaint w/in the times aforesaid, no action shall lie against the carrier, save in
the case of fraud on his part.
NOTE: No notice requirement in case or a person's death or injury.
PAGE 190
Art. 27. In the case of death of the person liable, an action for damages lies in accordance w/
th terms of this convention against those legally representing his estate.
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the
territory of one of the High Contracting Parties, either before the court of the domicile of the
carrier or of his principal place of business , or where he has a place of business through w/c the
contract has been made, or before the court at the place of destination.
(2) Questions of procedure shall be governed by the law of the court to w/c the case is submitted.
SANTOS v. NORTHWEST (supra)
Art. 28(1) provides that an action for damage must be brought at the option of the plaintiff:
(a) before the court of the domicile of the carrier;
(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c the contract had been made;
(d) the court of the place of destination.
xxx
In this case, the ff. were not followed, and hence the Phils., not being one of the courts mentioned
in Art.28 (1), does not have jurisdiction over the case.
(1) court of domicile is U.S., Minnesota;
(2) principal place of business of carrier is also US;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a round trip-ticket from SFOTYO-MNL, then back to TYO- SFO. The "ultimate destination" being San Francisco.
Art. 32. Any clause contained in the contract an all special agreements entered into before
the damage occurred by which the parties purport to infringe the rules laid down by this
convention, whether by deciding the law to be applied or by altering the rules as to jurisdiction,
shall be null and void. Nevertheless, for the transportation of goods, arbitration clauses shall be
allowed, subject to this convention, if the arbitration is to take place within one of the jurisdictions
referred to in the first paragraph of Article 28.
PAGE 191

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TRANSPORTATION AND MARITIME LAW

Based on the outline of Prof. Rodrigo Quimbo

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Issue : WON a legislative franchise is necessary.

TRANSPORTATION AND MARITIME LAW

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TRANSPORTATION AND MARITIME LAW

TRANSPORTATION AND MARITIME LAW

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Section 17. Proceedings of commission without previous hearing:

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Batangas Transportation Co. vs Orlanes 52 Phil 455

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San Pablo vs Pantranco South Express, Inc. 153 SCRA 199

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Administrative Code, Title XV

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II. Common Carriers

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(1) the private carrier agrees

(2) a common carrier is bound to

(2) a private carrier is not

(3) a common carrier is a public service

(3) a private carrier does not

Test for a common carrier:

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Issue: WON defendant operated a public utility. NO.

Issue : Is the stipulation valid? YES.

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Issue : WON Cendana is a common carrier. YES.

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TRANSPORTATION AND MARITIME LAW

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Eastern Shipping Lines vs IAC 150 SCRA 463

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Issue : Is Ynchausti liable for the loss? YES.

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Issue : WON Dollar may be held liable. YES.

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Issue: WON petitioner is liable for the loss or shortage. YES.

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