INSPECTION

Case: Saludo Jr. vs CA

Facts:
Crispina Galdo Saludo, mother of the petitioners, died in
Chicago, Illinois. Pomierski and Son Funeral Home of
Chicago, made the necessary preparations and
arrangements for the shipment of the remains from
Chicago to the Philippines. Pomierski brought the remains
to Continental Mortuary Air Services (CMAS) at the
Chicago Airport which made the necessary arrangements
such as flights, transfers, etc. CMAS booked the shipment
with PAL thru the carriers agent Air Care International.
PAL Airway Bill Ordinary was issued wherein the requested
routing was from Chicago to San Francisco on board Trans
World Airline (TWA) and from San Francisco to Manila on
board PAL.
Salvacion (one of the petitioners), upon arrival at San
Francisco, went to the TWA to inquire about her mothers
remains. But she was told they did not know anything
about it. She then called Pomierski that her mothers
remains were not at the West Coast terminal. Pomierski
immediately called CMAS which informed that the remains
were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched.
CMAS called and told Pomierski that they were sending
the remains back to California via Texas.
Petitioners filed a complaint against TWA and PAL fir the
misshipment and delay in the delay of the cargo
containing the remains of the late Crispina Saludo.
Petitioners alleged that private respondents received the
casketed remains of Crispina on October 26, 1976, as
evidenced by the issuance of PAL Airway Bill by Air Care
and from said date, private respondents were charged
with the responsibility to exercise extraordinary diligence
so much so that the alleged switching of the caskets on
October 27, 1976, or one day after the private
respondents received the cargo, the latter must
necessarily be liable.
Issues:
Whether or not there was delivery of the cargo upon mere
issuance of the airway bill
Whether or not the delay in the delivery of the casketed
remains of petitioners mother was due to the fault of
respondent airline companies
Held:
NO to both, but TWA was held to pay petitioners nominal
damages of P40,000 for its violation of the degree of
diligence required by law to be exercised by every
common carrier
Ordinarily, a receipt is not essential to a complete delivery
of goods to the carrier for transportation but, when
issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when
properly executed and delivered to a shipper, is evidence

that the carrier has received the goods described therein

for shipment. Except as modified by statute, it is a general
rule as to the parties to a contract of carriage of goods in
connection with which a bill of lading is issued reciting that
goods have been received
for transportation, that the recital being in essence a
receipt alone, is not conclusive, but may be explained,
varied or contradicted by parol or other evidence.
In other words, on October 26, 1976 the cargo containing
the casketed remains of Crispina Saludo was booked for
PAL Flight Number PR-107 leaving San Francisco for Manila
on October 27, 1976, PAL Airway Bill No. 079-01180454
was issued, not as evidence of receipt of delivery of the
cargo on October 26, 1976, but merely as a confirmation
of the booking thus made for the San Francisco-Manila
flight scheduled on October 27, 1976. Actually, it was not
until October 28, 1976 that PAL received physical delivery
of the body at San Francisco, as duly evidenced by the
Interline Freight Transfer Manifest of the American Airline
Freight System and signed for by Virgilio Rosales at 1945H,
or 7:45 P.M. on said date.
Explicit is the rule under Article 1736 of the Civil Code that
the extraordinary responsibility of the common carrier
begins from the time the goods are delivered to the
carrier. This responsibility remains in full force and effect
even when they are temporarily unloaded or stored in
transit, unless the shipper or owner exercises the right of
stoppage in transitu, and terminates only after the lapse of
a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them.
And, there is delivery to the carrier when the goods are
ready for and have been placed in the exclusive
possession, custody and control of the carrier for the
purpose of their immediate transportation and the carrier
has accepted them. Where such a delivery has thus been
accepted by the carrier, the liability of the common carrier
commences eo instanti.
Hence, while we agree with petitioners that the
extraordinary diligence statutorily required to be observed
by the carrier instantaneously commences upon delivery
of the goods thereto, for such duty to commence there
must in fact have been delivery of the cargo subject of the
contract of carriage. Only when such fact of delivery has
been unequivocally established can the liability for loss,
destruction or deterioration of goods in the custody of the
carrier, absent the excepting causes under Article 1734,
attach and the presumption of fault of the carrier under
Article 1735 be invoked.
As already demonstrated, the facts in the case at bar belie
the averment that there was delivery of the cargo to the
carrier on October 26, 1976. Rather, as earlier explained,
the body intended to be shipped as agreed upon was
really placed in the possession and control of PAL on
October 28, 1976 and it was from that date that private

respondents became responsible for the agreed cargo

under their undertakings in PAL Airway Bill No. 07901180454. Consequently, for the switching of caskets prior
thereto which was not caused by them, and subsequent
events caused thereby, private respondents cannot be
held liable.
The oft-repeated rule regarding a carrier's liability for
delay is that in the absence of a special contract, a carrier
is not an insurer against delay in transportation of goods.
When a common carrier undertakes to convey goods, the
law implies a contract that they shall be delivered at
destination within a reasonable time, in the absence, of
any agreement as to the time of delivery. But where a
carrier has made an express contract to transport and
deliver property within a specified time, it is bound to
fulfill its contract and is liable for any delay, no matter
from what cause it may have arisen. This result logically
follows from the well-settled rule that where the law
creates a duty or charge, and the party is disabled from
performing it without any default in himself, and has no
remedy over, then the law will excuse him, but where the
party by his own contract creates a duty or charge upon
himself, he is bound to make it good notwithstanding any
accident or delay by inevitable necessity because he might
have provided against it by contract. Whether or not there
has been such an undertaking on the part of the carrier to
be determined from the circumstances surrounding the
case and by application of the ordinary rules for the
interpretation of contracts.
Echoing the findings of the trial court, the respondent
court correctly declared that
In a similar case of delayed delivery of air cargo under a
very similar stipulation contained in the airway bill which
reads: "The carrier does not obligate itself to carry the
goods by any specified aircraft or on a specified time. Said
carrier being hereby authorized to deviate from the route
of the shipment without any liability therefor", our
Supreme Court ruled that common carriers are not
obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery,
unless such common carriers previously assume the
obligation. Said rights and obligations are created by a
specific contract entered into by the parties (Mendoza vs.
PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or
specific contract had been entered into between them and
the defendant airline companies.
And this special contract for prompt delivery should call
the attention of the carrier to the circumstances
surrounding the case and the approximate amount of
damages to be suffered in case of delay (See Mendoza vs.
PAL, supra). There was no such contract entered into in
the instant case.

A common carrier undertaking to transport property has

the implicit duty to carry and deliver it within reasonable
time, absent any particular stipulation regarding time of
delivery, and to guard against delay. In case of any
unreasonable delay, the carrier shall be liable for damages
immediately and proximately resulting from such neglect
of duty. As found by the trial court, the delay in the
delivery of the remains of Crispina Saludo, undeniable and
regrettable as it was, cannot be attributed to the fault,
negligence or malice of private respondents, a conclusion
concurred in by respondent court and which we are not
inclined to disturb.
REASONABLE TIME
Case: Maeskline v. CA
Facts:
Petitioner Maersk Line is engaged in the transportation of
goods by sea, doing business in the Philippines through its
general agent Compania de Tabacos de Filipinas, while
private respondent Efren Castillo is the proprietor of
Ethegal Laboratories, a firm engaged in the manufacture
of pharmaceutical products.
On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of
Puerto Rico 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. The capsules
were placed in 6 drums of 100,000 capsules each valued at
US$1,668.71. Shipper Eli Liily,Inc. advised Castillo through
a Memorandum of Shipment that the products were
already shipped on board MV Anders Maesrkline and
date of arrival to be April 3, 1977.
However, for unknown reasons, said cargoes of capsules
were diverted to Richmond, VA and then transported back
to Oakland, CA and with the goods finally arriving in the PI
on June 10, 1977. Consignee Castillo refused to take
delivery of the goods on account of its failure to arrive on
time, and filed an action for rescission of contract with
damages against Maersk and Eli Lilly alleging gross
negligence and undue delay.
Maersk contends that it is liable only in case of loss,
destruction or deterioration of goods under Art 1734 NCC
while Eli Lilly in its cross claim argued that the delay was
due solely to the negligence of Maersk Line. Trial Court
dismissed the complaint against Eli Lilly and the latter
withdrew cross claim but TC still held Maersk liable and CA
affirmed with modifications.

ISSUES
1.

2.

W/N a cause of action exists against Maersk Line given

that there was a dismissal of the complaint against Eli
Lilly? Yes, but not under the cross claim rather because
Maersk was an original party.
W/N Castillo is entitled to damages resulting from delay in
the delivery of the shipment in the absence in the bill of
lading of a stipulation on the delivery of goods? Yes.

RULING
The complaint was filed originally against Eli Lilly, Inc. as
shipper-supplier and petitioner as carrier. Petitioner
Maersk Line being an original party defendant upon whom
the delayed shipment is imputed cannot claim that the
dismissal of the complaint against Eli Liily inured to its
benefit.
Petitioner contends as well that it cannot be held liable
because there was no special contract under which the
carrier undertook to deliver the shipment on or before a
specific date and that the Bill of Lading provides that The
Carrier does not undertake that the Goods shall arrive at1.
port of discharge or the place of delivery at any particular 2.
time. However, although the SC stated that a bill of
lading being a contract of adhesion will not be voided on
that basis alone, it did declare that the questioned
provision to be void because it has the effect of practically
1.
leaving the date of arrival of the subject shipment on the
sole determination and will of the carrier. It is established
that without any stipulated date, the delivery of shipment
or cargo should be made within a reasonable time. In the
case at hand, the SC declared that a delay in the delivery
of the goods spanning a period of 2 months and 7 days
falls way beyond the realm of reasonableness.

RIGHT TO ABANDON
Magellan v. CA
Doctrine:
The holding in most jurisdictions has been that a shipper
who receives a bill of lading without objection after an
opportunity to inspect it, and permits the carrier to act on
it by proceeding with the shipment is presumed to have
accepted it as correctly stating the contract and to have
assented to its terms
Facts:
Plaintiff-appellant Magellan Manufacturers Marketing
Corp. (MMMC) entered into a contract with Choju Co. of
Yokohama, Japan, on May 20, 1980, to export 136,000
anahaw fans for and in consideration of $23,220.00. A
letter of credit was issued to plaintiff MMMC by the buyer
as payment. James Cu, the president of MMMC then
contracted F.E. Zuellig, a shipping agent, through its
solicitor, one Mr. King, to ship the anahaw fans through
the other appellee, Orient Overseas Container Lines, Inc.,
(OOCL) specifying that he needed an on-board bill of
lading and that transhipment is not allowed under the
letter of credit. Appellant MMMC paid F.E. Zuellig the
freight charges and secured a copy of the bill of lading
which was presented to Allied Bank on June 30, 1980. The
bank then credited the amount of US$23,220.00 covered
by the letter of credit to appellant's account.
When appellant's president James Cu, went back to the
bank later, he was informed that the payment was refused
by the buyer because there was no on-board bill of lading,
and there was a transhipment of goods. The anahaw fans
were shipped back to Manila by appellees, for which the
latter demanded from appellant payment of P246,043.43

2.

as a result of the refusal of the buyer to accept, and upon

appellants request. Appellant abandoned the whole cargo
and asked appellees for damages.
The petitioner filed the complaint praying that private
respondents be ordered to pay whatever petitioner was
not able to earn from Choju Co., Ltd. The lower court
decided the case in favor of private respondents. It
dismissed the complaint on the ground that petitioner had
given its consent to the contents of the bill of lading where
it is clearly indicated that there will be transshipment. On
appeal to the respondent court, the finding of the lower
(court) that petitioner agreed to a transhipment of the
goods was affirmed.
Issues:
Whether or not there was transshipment YES
Whether or not the bill of lading which reflected the
transshipment against the letter of credit is consented by
MMMC YES
Ratio:
Transhipment, in maritime law, is defined as "the act of
taking cargo out of one ship and loading it in another," or
"the transfer of goods from the vessel stipulated in the
contract of affreightment to another vessel before the
place of destination named in the contract has been
reached," or "the transfer for further transportation from
one ship or conveyance to another." Clearly, either in its
ordinary or its strictly legal acceptation, there is
transhipment whether or not the same person, firm or
entity owns the vessels. In other words, the fact of
transhipment is not dependent upon the ownership of the
transporting ships or conveyances or in the change of
carriers, as the petitioner seems to suggest, but rather on
the fact of actual physical transfer of cargo from one
vessel to another.
It appears on the face of the bill of lading the entry "Hong
Kong" in the blank space labeled "Transhipment," which
can only mean that transhipment actually took place. This
fact is further bolstered by the certification issued by
private respondent F.E. Zuellig, Inc. dated July 19, 1980,
although it carefully used the term "transfer" instead of
transhipment. No amount of semantic juggling can mask
the fact that transhipment in truth occurred in this case.
It is a long standing jurisprudential rule that a bill of lading
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 therein stipulated.
As a contract, it names the parties, which includes the
consignee, fixes the route, destination, and freight rates or
charges, and stipulates the rights and obligations assumed
by the parties. Being a contract, it is the law between the
parties who are bound by its terms and conditions
provided that these are not contrary to law, morals, good
customs, public order and public policy. A bill of lading
usually becomes effective upon its delivery to and
acceptance by the shipper. It is presumed that the
stipulations of the bill were, in the absence of fraud,
concealment or improper conduct, known to the shipper,
and he is generally bound by his acceptance whether he
reads the bill or not.
The petitioner had full knowledge of, and actually
consented to, the terms and conditions of the bill of lading

thereby making the same conclusive as to it, and it cannot

now be heard to deny having assented thereto. Based
from the records, James Cu himself, in his capacity as
president of MMMC, personally received and signed the
bill of lading. There is no better way to signify consent
than by voluntary signing the document which embodies
the agreement.
An on board bill of lading is one in which it is stated that
the goods have been received on board the vessel which is
to carry the goods, whereas a received for shipment bill of
lading is one in which it is stated that the goods have been
received for shipment with or without specifying the
vessel by which the goods are to be shipped. Received for
shipment bills of lading are issued whenever conditions
are not normal and there is insufficiency of shipping
space.
An on board bill of lading is issued when the goods have
been actually placed aboard the ship with every
reasonable expectation that the shipment is as good as on
its way. It is, therefore, understandable that a party to a
maritime contract would require an on board bill of lading
because of its apparent guaranty of certainty of shipping
as well as the seaworthiness of the vessel which is to carry
the goods.
The certification of F.E. Zuellig, Inc. can qualify the bill of
lading, as originally issued, into an on board bill of lading
as required by the terms of the letter of credit issued in
favor of petitioner. The certification was issued only on
July 19, 1980, way beyond the expiry date of June 30, 1980
specified in the letter of credit for the presentation of an
on board bill of lading. Thus, even assuming that by a
liberal treatment of the certification it could have the
effect of converting the received for shipment bill of lading
into an on board of bill of lading, as petitioner would have
us believe, such an effect may be achieved only as of the
date of its issuance, that is, on July 19, 1980 and onwards.
The fact remains, though, that on the crucial date of June
30, 1980 no on board bill of lading was presented by
petitioner in compliance with the terms of the letter of
credit and this default consequently negates its
entitlement to the proceeds thereof. Said certification, if
allowed to operate retroactively, would render illusory the
guaranty afforded by an on board bill of lading, that is,
reasonable certainty of shipping the loaded cargo aboard
the vessel specified, not to mention that it would
indubitably be stretching the concept of substantial
compliance too far.

DELAY TO TRANSPORT PASSENGERS: Effect of decision of

passenger to disembark.
Trans-Asia Shipping Lines vs. CA
FACTS:
Respondent Atty. Renato Arroyo, a public attorney, bought
a ticket from herein petitioner for the voyage of M/V Asia
Thailand vessel to Cagayan de Oro City from Cebu City on
November 12, 1991.
At around 5:30 in the evening of November 12, 1991,
respondent boarded the M/V Asia Thailand vessel during

which he noticed that some repairs were being

undertaken on the engine of the vessel. The vessel
departed at around 11:00 in the evening with only one (1)
engine running.
After an hour of slow voyage, the vessel stopped near
Kawit Island and dropped its anchor thereat. After half an
hour of stillness, some passengers demanded that they
should be allowed to return to Cebu City for they were no
longer willing to continue their voyage to Cagayan de Oro
City. The captain acceded to their request and thus the
vessel headed back to Cebu City.
In Cebu City, plaintiff together with the other passengers
who requested to be brought back to Cebu City, were
allowed to disembark. Thereafter, the vessel proceeded to
Cagayan de Oro City. Petitioner, the next day, boarded the
M/V Asia Japan for its voyage to Cagayan de Oro City,
likewise a vessel of defendant.
On account of this failure of defendant to transport him to
the place of destination on November 12, 1991,
respondent Arroyo filed before the trial court an action
for damage arising from bad faith, breach of contract and
from tort, against petitioner. The trial court ruled only for
breach of contract. The CA reversed and set aside said
decision on appeal.
ISSUE: Whether or not the petitioner Trans-Asia was
negligent?
HELD:
Yes.
Before commencing the contracted voyage, the petitioner
undertook some repairs on the cylinder head of one of the
vessels engines. But even before it could finish these
repairs, it allowed the vessel to leave the port of origin on
only one functioning engine, instead of two. Moreover,
even the lone functioning engine was not in perfect
condition as sometime after it had run its course, it conked
out. This caused the vessel to stop and remain adrift at
sea, thus in order to prevent the ship from capsizing, it had
to drop anchor. Plainly, the vessel was unseaworthy even
before the voyage began. For a vessel to be seaworthy, it
must be adequately equipped for the voyage and manned
with a sufficient number of competent officers and
crew.[21] The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of
carriage is a clear breach of is duty prescribed in Article
1755 of the Civil Code.
The carrier would not have been liable for loss or income if
the plaintiff was unable to report to his office on the day
he was supposed to arrive were it not for delay.

EXTRA-ORDINARY DILIGENCE
Doctrines:
Aboitiz to prove extraordinary diligence, the carrier
must do more than merely show the possibility that some
other party should be responsible for the damage. It must
prove that it used all reasonable means to ascertain the

nature and characteristics of the goods tendered for the

transport and its exercise of due care in handling them.
Picart a man must use common sense, and exercise due
reflection in all his acts; it is his duty to be cautious, careful
and prudent, if not from instinct, then through fear of
recurring punishment. He is responsible for such results as
anyone might foresee and for such acts which no one
would have performed except through culpable abandon.
Otherwise, his own person, rights and property, and those
of his fellow beings, would ever be exposed to all manner
of danger and inquiry.

Aboitiz refused to settle the claim

ICNA paid the amount of P280,176.92 to consignee and
a subrogation receipt was duly signed by Willig.

ICNA then advised Aboitiz of the receipt signed in its favor

but received no reply so it filed for collection at the RTC.

RTC: against ICNA - subrogation Form is self-serving and

has no probative value since Wellig was not presented to
the witness stand

CA: reversed RTC ruling - right of subrogation accrues

Case: Aboitiz Shipping Corp. vs Insurance Co. of North

America

simply upon payment by the insurance company of the

FACTS:

foreign corporation

insurance claim even assuming that it is an unlicensed

June 20, 1993: MSAS Cargo International Limited and/or

ISSUE: W/N ICNA can claim under the right of subrogation

Associated and/or Subsidiary Companies (MSAS) procured

an "all-risk" marine insurance policy from ICNA UK Limited

HELD: YES. CA affirmed.

of London for wooden work tools and workbenches

purchased by consignee Science Teaching Improvement

Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City.

"doing business" in the country will a license be necessary

July 26, 1993: the cargo was received by Aboitiz Shipping

before it can institute suits. It may, however, bring suits

Corporation (Aboitiz) through its duly authorized booking

on isolated business transactions, which is not prohibited

representative, Aboitiz Transport System

under Philippine law

August 1, 1993: container van was loaded on board MV

The policy benefits any subsequent assignee, or holder,

Super Concarrier I

including the consignee, who may file claims on behalf of

The vessel left Manila en route to Cebu City

the assured.

August 3, 1993: shipment arrived in Cebu City

Insurance Code
Sec. 57
Sec. 57. A policy may be so framed that it will inure to the
benefit of whomsoever, during the continuance of the risk,
may become the owner of the interest insured.

August 5, 1993: Stripping Report, checker noted that the

crates were slightly broken or cracked at the bottom

Only when that foreign corporation is "transacting" or

August 11, 1993: cargo was withdrawn by the

representative of the consignee, Science Teaching
Improvement Project (STIP) and delivered to Don Bosco

Civil Code
Art. 2207
Art. 2207. If the plaintiff's property has been insured, and
he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be
subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully
cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing
the loss or injury.

Technical High School, Punta Princesa, Cebu City

August 13, 1993: Mayo B. Perez, Head of Aboiti received a

call from the receiver Mr. Bernhard Willig that the cargo
sustained water damage so he checked the other cargo
but they were dry

In a letter dated August 15, 1993, Willig informed Aboitiz

that the damage was caused by water entering through
the broken bottom parts of the crate

Consignee filed a claim against ICNA

CAC reported to ICNA that the shipment was placed
outside the warehouse when it was delivered on July 26,
1993 and it was only on July 31, 1993 when the shipment

was stuffed inside another container van for shipment to

Cebu. Weather report shows that the heavy rains on July
28 and 29, 1993 caused the damages.

This right of subrogation, however, has its limitations.

First, both the insurer and the consignee are bound by the
contractual stipulations under the bill of lading

Second, the insurer can be subrogated only to the rights as

the insured may have against the wrongdoer. If by its own

acts after receiving payment from the insurer, the insured

releases the wrongdoer who caused the loss from liability,
the insurer loses its claim against the latter.
Civil Code
Art. 366
Article 366. Within twenty four hours following the receipt
of the merchandise, the claim against the carrier for
damages or average which may be found therein upon
opening the packages, may be made, provided that the
indications of the damage or average which give rise to the
claim cannot be ascertained from the outside part of such
packages, in which case the claim shall be admitted only at
the time of receipt.
After the periods mentioned have elapsed, or the
transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in
which the goods transported were delivered.

pony closely up against the railing on the right side of the

bridge instead of going to the left. He says that the reason
he did this was that he thought he did not have sufficient
time to get over to the other side. As the automobile
approached, Smith guided it toward his left, that being the
proper side of the road for the machine. In so doing the
defendant assumed that the horseman would move to the
other side. Seeing that the pony was apparently quiet, the
defendant, instead of veering to the right while yet some

The call was made 2 from delivery, a reasonable period

considering that the goods could not have corroded

distance away or slowing down, continued to approach

instantly overnight such that it could only have sustained

directly toward the horse without diminution of speed.

the damage during transit.

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

apparition or the rapidity of the approach, he pulled the

the shipment delivered to the consignee sustained water

When he had gotten quite near, there being then no

possibility of the horse getting across to the other side, the
defendant quickly turned his car sufficiently to the right to
escape hitting the horse; but in so doing the automobile
passed in such close proximity to the animal that it
became frightened and turned its body across the bridge,

damage. We agree with the findings of the CA that

petitioner failed to overturn this presumption

got hit by the car and the limb was broken. The horse fell
and its rider was thrown off with some violenceAs a result

Case: Picart v. Smith

FACTS: On the Carlatan Bridge in La Union. Picart was
riding on his pony over said bridge. Before he had gotten
half way across, Smith approached from the opposite
direction in an automobile. As the defendant neared the
bridge he saw a horseman on it and blew his horn to give
warning of his approach. He continued his course and after
he had taken the bridge he gave two more successive
blasts, as it appeared to him that the man on horseback
before him was not observing the rule of the road.
Picart saw the automobile coming and heard the warning
signals. However, being perturbed by the novelty of the

of its injuries the horse died. The plaintiff received

contusions which caused temporary unconsciousness and
required medical attention for several days.
From a judgment of the CFI of La Union absolving Smith
from liability Picart has appealed.
ISSUE: WON Smith was guilty of negligence such as gives
rise to a civil obligation to repair the damage done
HELD: the judgment of the lower court must be reversed,
and judgment is here rendered that the Picart recover of
Smith damages
YES. The test by which to determine the existence of
negligence in a particular case may be stated as follows:

Did the defendant in doing the alleged negligent act use

these circumstances the law imposed on the Smith the

that person would have used in the same situation? If not,

duty to guard against the threatened harm.

then he is guilty of negligence. The existence of negligence

It goes without saying that the plaintiff himself was not

in a given case is not determined by reference to the

free from fault, for he was guilty of antecedent negligence

personal judgment of the actor in the situation before him.

in planting himself on the wrong side of the road. But as

The law considers what would be reckless, blameworthy,

we have already stated, Smith was also negligent; and in

or negligent in the man of ordinary intelligence and

such case the problem always is to discover which agent is

prudence and determines liability by that. The question as

immediately and directly responsible. It will be noted that

to what would constitute the conduct of a prudent man in

the negligent acts of the two parties were not

a given situation must of course be always determined in

contemporaneous, since the negligence of the defendant

the light of human experience and in view of the facts

succeeded the negligence of the plaintiff by an appreciable

involved in the particular case.

interval. Under these circumstances the law is that the

Could a prudent man, in the case under consideration,

person who has the last fair chance to avoid the

foresee harm as a result of the course actually pursued? If

impending harm and fails to do so is chargeable with the

so, it was the duty of the actor to take precautions to

consequences, without reference to the prior negligence

guard against that harm. Reasonable foresight of harm,

of the other party.

followed by ignoring of the suggestion born of this

prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion
for determining the existence of negligence in a given case
is this: Conduct is said to be negligent when a prudent man
in the position of the tortfeasor would have foreseen that
an effect harmful to another was sufficiently probable to
warrant his foregoing conduct or guarding against its
consequences.
Applying this test to the conduct of the defendant in the
present case we think that negligence is clearly
established. A prudent man, placed in the position of the
defendant, would in our opinion, have recognized that the
course which he was pursuing was fraught with risk, and
would therefore have foreseen harm to the horse and the
rider as reasonable consequence of that course. Under

NON-DELEGABLE DUTY
Doctrine: The duty of Seaworthiness, the duty of care of
the cargo is non-delegable, and the carrier is accordingly
responsible for the acts of the master, the crew, the
stevedore, and his other agents.
Case: Westwind Shipping Corporation v. UCPB General
Insurance Co.

1.
Presumption of Negligence
DELSAN TRANSPORT vs. CA
2.
FACTS
Caltex engaged into a contract of affreightment with the
petitioner, Delsan Transport Lines, Inc.(Delsan), for a
period of one year whereby the said common carrier
agreed to transport Caltexs industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country.
Under the contract, petitioner took on board its vessel, MT
Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex
to be delivered to the Caltex Oil Terminal in Zamboanga
City. The shipment was insured with private respondent,
American Home Assurance Corporation (American Home)
The vessel sank in the early morning of August 15, 1986
near Panay Gulf in the Visayas taking with it the entire
cargo of fuel oil.
Subsequently, American Home paid Caltex the sum of Php
5,096,635.57 representing the insured value of the cargo.
Exercising its right to subrogation under Article 2207 of the
New Civil Code, the American Home demanded the Delsan
the same amount it paid to Caltex.
Due to its failure to collect from Delsan despite prior
demand, American Home filed a complaint with the RTC
of Makati for collection of a sum of money.
The trial court dismissed the complaint against Delsan. It
ruled that the vessel, MT Maysun, was seaworthy and that
the incident was caused by unexpected inclement weather
condition or force majeure, thus exempting the common
carrier from liability for the loss of its cargo.
The CA reversed. It gave credence to the weather report
issued by PAGASA which stated that the waves were only
.7 to 2 meters in height in the vicinity of the Panay Gulf at
the day the ship sank, in contrast to the claim of the crew
of the ship that the waves were 20 feet high.

1.

2.

Delsan contends the following

Delsan theorized that when the American Home paid
Caltex the value of its lost cargo, the act of American
Home is equivalent to a tacit recognition that the ill-fated
vessel was seaworthy; otherwise, American Home was not
legally liable to Caltex due to the latters breach of implied
warranty under the marine insurance policy that the vessel
was seaworthy.
Delsan avers that although chief officer had merely a 2nd
officers license, he was qualified to act as the vessels
chief officer. In fact, all the crew and officers of MTT
Maysun were exonerated in the administrative
investigation.

ISSUES

W/N the payment made by American Home to Caltex for

the insured value of the lost cargo amounted to an
admission that the vessel was seaworthy, thus precluding
any action for recovery against the petitioner. NO
W/N the non-presentation of the marine insurance policy
bars the complaint for recovery of sum of money for lack
of cause of action. NO
RULING
First Issue:
The payment made by American Home for the insured
value of the lost cargo operates as waiver of its right to
enforce the term of the implied warranty against Caltex
under the marine insurance policy. However, the same
cannot be validly interpreted as an automatic admission of
the vessels seaworthiness by American Home as to
foreclose recourse against Delsan for any liability under its
contractual obligation as a common carrier. The fact of
payment grants American Home subrogatory right which
enables it to exercise legal remedies that would otherwise
be available to Caltex as owner of the lost cargo against
Delsan, the common carrier.
From the nature of their business and for reasons of public
policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods and
for the safety of passengers transported by them,
according to all the circumstances of each case. In the
event of loss, destruction or deterioration of the insured
goods, common carriers shall be responsible unless the
same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or calamity.
In all other cases, if the goods are lost, destroyed or
deteriorated, common carriers
are presumed to have been at fault or to have acted
negligently, unless they prove they observed extraordinary
diligence.
In order to escape liability for the loss of its cargo of
industrial fuel oil belonging to Caltex, Delsan attributes the
sinking of MT Maysun to fortuitous event or force
majeure. Although the testimony of the captain and chief
mate that there were strong winds and waves 20 feet high
was effectively rebutted and belied by the weather report
of PAGASA. Thus, as the CA correctly ruled, Delsans
vessel, MT Maysun, sank with its entire cargo for the
reason that it was not seaworthy. There was no squall or
bad weather or extremely poor sea condition in the
vicinity where the said vessel sank.
Additionally, the exoneration of MT Maysuns officers and
crew merely concern their respective administrative
liabilities. It does not in any way operate to absolve Delsan
the common carrier from its civil liability arising from its
failure to observe extraordinary diligence in the vigilance
over the goods it was transporting and for the negligent
acts or omissions of its employees, the determination of
which properly belongs to the courts. In the case at bar,
Delsan is liable for the insured value of the lost cargo of

industrial fuel oil belonging to Caltex for its failure to rebut

the presumption of fault or negligence as common carrier
occasioned by the unexplained sinking of its vessel, MT
Maysun, while in transit.

agent Inter-Asia Marine Transport, Inc., and petitioner

ATIs case remaining. The RTC has ruled that the
defendants be solidarily liable for the damages incurred by
Simon.

Second Issue:

Unsatisfied with the RTC ruling, the owner of the M/V

It is the view of the SC that the presentation in evidence of

the marine insurance policy is not indispensable in this
case before the insurer may recover from the common
carrier the insured value of the lost cargo in the exercise of
its subrogatory right. The subrogation receipt, by itself, is
sufficient to establish not only the relationship of
American Home as insurer and Caltex, as the assured
shipper of the lost cargo of industrial fuel oil, but also the
amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the
insurance company of the insurance claim.

Tern, and Inter-Asia Marine Transport, Inc. appealed to CA

on the issue whether RTC has erred in finding that they did
not exercise extraordinary diligence in the handling of the
goods. On the other hand, the petitioner ATI has also
appealed to CA on the issue that the RTC, the court-a-quo,
committed serious and reversible error in holding ATI
solidarily liable with co-defendant appellant Inter-Asia
Marine Transport, Inc.

contrary to the

evidence

presented. The CA ruled that the RTC ruling be assailed

with some modifications on the basis that M/V Tern and

Asian Terminals, Inc., Petitioner vs.

Inter-Asia Marine Transport, Inc. have failed to establish

Simon Enterprises, Inc., Respondent

that they exercised extraordinary diligence in transporting

the goods or exercised due diligence to forestall or lessen

Facts:

the loss as provided in Article 1742 of the Civil Code. And

Simon Enterprise Inc. (Simon) has entered into contract

on ATIs RTC ruling, it was assailed as well on the basis that

with

Company

the stevedore of the M/V Tern has witnessed that during

(Contiquincybunge) as its consignee of the shipped

the dischargement of the cargo, there has been spillage

Soybean Meal. On October 25, 1995 and on November 25,

done by the stevedores of ATI which is an evidence that

1995 Contiquincybunge has made a shipment through

ATI has been negligible in handling the goods.

M/V Sea Dream and M/V Tern respectively at the Port of

ATI filed a motion for reconsideration at CA but was

Darrow, Louisiana, U.S.A. For the first shipment,

denied. It then filed a petition for certiorari with the sole

Contiquincybunge made a shipment of 6,825.144 metric

issue of whether the appellate court erred in affirming the

tons of U.S. Soybean Meal which when the M/V Sea

decision of the trial court holding petitioner ATI solidarily

Dream arrived at the Port of Manila the bulk of soybean

liable with its co-defendants for the shortage incurred in

meal was received by the Asian Terminals, Inc. (ATI), for

the shipment of the goods to respondent.

shipment to Simon. However, when it reached its receiver

The issue involves questions of facts which cannot be

Simon, it was already short by 18.556 metric tons. For the

entertained by SC for it is not a trier of facts under rule 45

second shipment, Contiquincybunge made shipment,

of the 1997 rules of civil procedure. However, the said rule

through M/V Tern, of 3,300.000 metric tons of U.S.

45 is not ironclad and has certain exceptions. The issue

Soybean Meal in Bulk for delivery to Simon at the Port of

raised by ATI was merited to be entertained by SC under

Manila. The shipment was received by ATI again for

the rule 4, when the judgment is based on a

delivery to Simon. However, the shipped cargos were

misapprehension of facts.

found lacking 199.863 metric tons.

Issue

Simon has filed an action for damages against the

Whether the appellate court erred in affirming the

unknown owner of the vessels M/V Sea Dream and M/V

decision of the trial court holding petitioner ATI solidarily

Tern, its local agent Inter-Asia Marine Transport, Inc., and

liable with its co-defendants for the shortage incurred in

petitioner ATI alleging that it suffered the losses through

the shipment of the goods to respondent.

the fault or negligence of the said defendants. The case of

Ruling

the unknown owner of the vessel M/V Sea Dream has

The petition for review on certiorari was granted to ATI.

been settled in release and quitclaim and therefore has

The SC agreed to ATIs claim that the CA erred in affirming

been stricken out of the case, leaving M/V Tern, its local

the decision of the trial court holding petitioner ATI

Contiquincybunge

Export

solidarily liable with its co-defendants for the shortage

incurred in the shipment of the goods to respondent. The
CA misapprehended the following facts:
First, petitioner ATI is correct in arguing that the
respondent failed to prove that the subject shipment
suffered actual shortage, as there was no competent

goods because of a custom regulation and it is unfair that

it be made responsible for what may happen during the
interregnum. And this is precisely what was done by the
parties herein. In the bill of lading that was issued covering
the shipment in question, both the carrier and the
consignee have stipulated to limit the responsibility of the
carrier for the loss or damage that may be caused to the
goods before they are actually delivered.

evidence to prove that it actually weighed 3,300 metric

tons at the port of origin.
Second, as correctly asserted by petitioner ATI, the
shortage, if any, may have been due to the inherent
nature of the subject shipment or its packaging since the
subject cargo was shipped in bulk and had a moisture
content of 12.5%.
Third, SC agreed with the petitioner ATI that respondent
has not proven any negligence on the part of the former.
Ludo & Luym Corp. vs. I.V. Binamira
Facts:
Delta Photo Supply Company of New York shipped on
board the M/S FERNSIDE at New York, U.S.A., 6 cases of
films and/or photographic supplies consigned to the order
of I. V. Binamira. A Bill of Lading was issued where the
carrier and the consignee have stipulated to limit the
responsibility of the carrier for the loss or damage that
may be caused to the goods before they are actually
delivered. The films were discharged at the port of Cebu
by the stevedoring company hired by petitioner as agent
of the carrier. The cargo was received by the Visayan Cebu
Terminal Company, Inc., the arrastre operator appointed
by the Bureau of Customs. During the discharge, the cargo
was inspected by both the stevedoring company and the
arrastre operator, and the films were found to be in good
condition. But after it was delivered to respondent after 3
days, the same was examined by a surveyor and found out
that some films and supplies were missing.
Issue: WON the carrier is responsible for the loss though
the films were lost after the shipment was discharged
from the ship and placed in the possession and custody of
the customs arrastre.
Held:
NO. It is true that, as a rule, a common carrier is
responsible for the loss, destruction or deterioration of the
goods it assumes to carry from one place to another
unless the same is due to any to any of the causes
mentioned in Article 1734 on the new Civil Code. But
this shall only apply when the loss, destruction or
deterioration takes place while the goods are in the
possession of the carrier, and not after it has lost control
of them.
The parties may 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 is a situation
where we may say that the carrier losses control of the

Victory Liner, Inc. v Rosalito Gammad, et al., November 25,

2004
Facts:
Gammad showed that his wife Marie Grace was on board
a Victory Liner bus running at high speed when it fell on a
ravine, which resulted to her death and physical injuries to
other passengers. The heirs of the deceased filed a
complaint for damages arising from culpa contractual. the
petitioner claimed that the incident was purely accidental
and that it has always exercised extraordinary diligence.
The trial court ordered Victory Liner to pay actual
damages, death indemnity, exemplary and moral
damages, compensatory damages, attorneys fees and
cost of the suit. The CA affirmed the trial courts decision
but reduced the actual and exemplary damages. The CA
denied the MR. Hence, the present petition wherein VL
argues that the award of damages were without basis and
should be deleted.
Issue: Whether the award of damages was proper
Ruling: Petitioner was correctly found liable for breach of
contract of carriage. A common carrier is bound to carry its
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with due regard to all the circumstances. In a
contract of carriage, it is presumed that the common
carrier was at fault or was negligent when a passenger dies
or is injured. Unless the presumption is rebutted, the court
need not even make an express finding of fault or
negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence.
There is no evidence to rebut the statutory presumption
that the proximate cause of Marie Graces death was the
negligence of petitioner. Nevertheless, the award of
damages should be modified. Article 1764 in relation to
Article 2206 of the Civil Code, holds the common carrier in
breach of its contract of carriage that results in the death
of a passenger liable to pay the following: (1) indemnity
for death, (2) indemnity for loss of earning capacity, and
(3) moral damages. In the present case, respondent heirs
of the deceased are entitled to indemnity for the death of
Marie Grace which under current jurisprudence is fixed at
P50,000. The award of compensatory damages for the loss
of the deceaseds earning capacity should be deleted for
lack of basis. As a rule, documentary evidence should be
presented to substantiate the claim for damages for loss of
earning capacity. By way of exception, damages for loss of
earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is selfemployed earning less than the minimum wage under

current labor laws, and judicial notice may be taken of the

fact that in the deceaseds line of work no documentary
evidence is available; or (2) the deceased is employed as a
daily wage worker earning less than the minimum wage
under current labor laws. Rosalito did not present
evidence attesting to Marie Graces earning capacity as BIR
Section Chief. However, the fact of loss having been
established, temperate damages in the amount of
P500,000.00 should be awarded to respondents. Under
Article 2224 of the Civil Code, 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. Anent the award of moral damages, the
same cannot be lumped with exemplary damages because
they are based on different jural foundations. These
damages are different in nature and require separate
determination. In culpa contractual or breach of contract,
moral damages may be recovered when the defendant
acted in bad faith or was guilty of gross negligence
(amounting to bad faith) or in wanton disregard of
contractual obligations and, as in this case, when the act of
breach of contract itself constitutes the tort that results in
physical injuries. By special rule in Article 1764 in relation
to Article 2206 of the Civil Code, moral damages may also
be awarded in case the death of a passenger results from a
breach of carriage. On the other hand, exemplary
damages, which are awarded by way of example or
correction for the public good may be recovered in
contractual obligations if the defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner.
Respondents in the instant case should be awarded moral
damages to compensate for the grief caused by the death
of the deceased resulting from the petitioners breach of
contract of carriage. Furthermore, the petitioner failed to
prove that it exercised the extraordinary diligence
required for common carriers, it is presumed to have
acted recklessly. Thus, the award of exemplary damages is
proper. Under the circumstances, we find it reasonable to
award respondents the amount of P100,000.00 as moral
damages and P100,000.00 as exemplary damages. These
amounts are not excessive. Actual damages should be
further reduced to P78,160.00, which was the amount
supported by official receipts. Pursuant to Article 2208 of
the Civil Code, attorneys fees may also be recovered in
the case at bar where exemplary damages are awarded.
The Court finds the award of attorneys fees equivalent to
10% of the total amount adjudged against petitioner
reasonable. In the instant case, petitioner should be held
liable for payment of interest as damages for breach of
contract of carriage. Considering that the amounts payable
by petitioner has been determined with certainty only in
the instant petition, the interest due shall be computed
upon the finality of this decision at the rate of 12% per
annum until satisfaction

Commencement of Duty in Carriage of Passengers

TRAINS: Del Prado v. Meralco
Facts:
Teodorico Florenciano, Meralcos motorman, was driving
the companys street car along Hidalgo Street. Plaintiff
Ignacio Del Prado ran across the street to catch the car.
The motorman eased up but did not put the car into
complete stop. Plaintiff was able to get hold of the rail and
step his left foot when the car accelerated. As a result,
plaintiff slipped off and fell to the ground. His foot was
crushed by the wheel of the car. He filed a complaint for
culpa contractual.
Issues:
(1) Whether the motorman was negligent
(2) Whether Meralco is liable for breach of contract of
carriage
(3) Whether there was contributory negligence on the part
of the plaintiff
Held:
(1) We may observe at the outset that there is no
obligation on the part of a street railway company to stop
its cars to let on intending passengers at other points than
those appointed for stoppage. Nevertheless, although the
motorman of this car was not bound to stop to let the
plaintiff on, it was his duty to do no act that would have
the effect of increasing the plaintiff's peril while he was
attempting to board the car. The premature acceleration
of the car was, in our opinion, a breach of this duty.
(2) The relation between a carrier of passengers for hire
and its patrons is of a contractual nature; and a failure on
the part of the carrier to use due care in carrying its
passengers safely is a breach of duty (culpa contractual).
Furthermore, the duty that the carrier of passengers owes
to its patrons extends to persons boarding the cars as well
as to those alighting therefrom.
Where liability arises from a mere tort (culpa aquiliana),
not involving a breach of positive obligation, an employer,
or master, may exculpate himself by proving that he had
exercised due diligence to prevent the damage; whereas
this defense is not available if the liability of the master
arises from a breach of contractual duty (culpa
contractual). In the case before us the company pleaded
as a special defense that it had used all the diligence of a
good father of a family to prevent the damage suffered by
the plaintiff; and to establish this contention the company
introduced testimony showing that due care had been
used in training and instructing the motorman in charge of
this car in his art. But this proof is irrelevant in view of the
fact that the liability involved was derived from a breach of
obligation.
(3) It is obvious that the plaintiff's negligence in attempting
to board the moving car was not the proximate cause of
the injury. The direct and proximate cause of the injury
was the act of appellant's motorman in putting on the
power prematurely. Again, the situation before us is one
where the negligent act of the company's servant
succeeded the negligent act of the plaintiff, and the
negligence of the company must be considered the
proximate cause of the injury. The rule here applicable
seems to be analogous to, if not identical with that which

is sometimes referred to as the doctrine of "the last clear

chance." In accordance with this doctrine, the contributory
negligence of the party injured will not defeat the action if
it be shown that the defendant might, by the exercise of
reasonable care and prudence, have avoided the
consequences of the negligence of the injured party. The
negligence of the plaintiff was, however, contributory to
the accident and must be considered as a mitigating
circumstance.

LAND TRANSPORTATION
Dangwa Transco. Co. Inc. v. CA
Facts:
Private respondents filed a complaint for damages against
petitioners for the death of Pedrito Cudiamat. The
deceased was attempting to board a bus, but it suddenly
accelerated forward. He fell off and the bus ran over him,
resulting to his death.
Issue:
Whether the bus is liable as a common carrier to the
deceased who was still attempting to board
Held:
It is the duty of common carriers of passengers to stop
their conveyances a reasonable length of time in order to
afford passengers an opportunity to board and enter, and
they are liable for injuries suffered by boarding passengers
resulting from the sudden starting up or jerking of their
conveyances while they are doing so.

ACCOMODATION PASSENGERS (Diligence of Carrier)

LARA V. VALENCIA
FACTS

Lara was an inspector for the Bureau of Forestry. The

defendant is engaged in the business of exporting logs
from his lumber concession in Cotabato. Lara went to said
concession upon instructions of his chief to classify the
logs of defendant which were about to be loaded on a ship
anchored in the port of Parang. The work of Lara lasted
for six days during which he contracted malaria fever. On
a later date, Lara who then in a hurry to return to Davao
asked defendant if he could if he could take him in his
pick-up as there was then no other means of
transportation, to which defendant agree, and in that
same morning the pick-up left Parang bound for Davao
taking along six passengers, including Lara.
The pick-up has a front seat where the driver and two
passengers can be accommodated and the back has a steel
flooring enclosed with a steel walling of 16 to 17 inches tall
on the sides and with a 19 inches tall walling at the back.
In the middle Lara sat on a bag. Before leaving, Parang,
defendant invited Lara to sit with him on the front seat but
Lara declined.
It was their understanding that upon
reaching barrio Samoay, Cotabato, the passengers would
alight and take a passenger bus bound for Davao, but
when they arrived at that place, only one alighted and the

other passengers requested defendant to allow them to

ride with him up to Davao because there was then no
available bus that they could take in going to that place.
Defendant again accommodated the passengers.
When they continued their trip, the sitting arrangement of
the passengers remained the same, Lara being seated on a
bag in the middle with his arms on a suitcase and his head
covered by a jacket. Upon reaching Km. 96, barrio
Catidtuan, Lara accidentally fell from the pick-up and as a
result he suffered serious injuries. Valencia stopped the
pick-up to see what happened to Lara. He sought the help
of the residents of that place and applied water to Lara but
to no avail. They brought Lara to the nearest place where
they could find a doctor and not having found any they
took him to St. Josephs clinic of Kidapwan. But when Lara
arrived, he was already dead. From there they proceeded
to Davao City and immediately notified the local
authorities.
ISSUES & ARGUMENTS

W/N defendant is duty bound to exercise extraordinary

diligence as required of a common carrier by our law?
HOLDING & RATIO DECIDENDI
No. Defendant is only required to observe ordinary care,
and is not in duty bound to exercise extraordinary
diligence

It therefore appears that the deceased, as well his

companions who rode in the pick-up of defendant, were
merely accommodation passengers who paid nothing for
the service and so they can be considered as invited guests
within the meaning of the law. As accommodation
passengers or invited guests, defendant as owner and
driver of the pick-up owes to them merely the duty to
exercise reasonable care so that they may be transported
safely to their destination. Thus, "The rule is established by
the weight of authority that the owner or operator of an
automobile owes the duty to an invited guest to exercise
reasonable care in its operation, and not unreasonably to
expose him to danger and injury by increasing the hazard
of travel. This rule, as frequently stated by the courts, is
that 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 as in the case
of one expressly invited to ride" (5 Am. Jur., 626-627).
Defendant, therefore, is only required to observe ordinary
care, and is not in duty bound to exercise extraordinary
diligence as required of a common carrier by our law
(Articles 1755 and 1756, new Civil Code).

SEAWORTHINESS
Caltex [Philippines], Inc. vs. Sulpicio Lines, Inc.
Facts:
On December 20, 1987, motor tanker MV Vector, carrying
petroleum products of Caltex, collided in the open sea
with passenger ship MV Doa Paz, causing the death of all
but 25 of the latters passengers. Among those who died
were Sebastian Canezal and his daughter Corazon Canezal.
On March 22, 1988, the board of marine inquiry found
that Vector Shipping Corporation was at fault. On February
13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian
Caezals wife and mother respectively, filed with the
Regional Trial Court of Manila a complaint for damages
arising from breach of contract of carriage against Sulpicio
Lines. Sulpicio filed a third-party complaint against Vector
and Caltex. The trial court dismissed the complaint against
Caltex, but the Court of Appeals included the same in the
liability. Hence, Caltex filed this petition.
Issue:
Is the charterer of a sea vessel liable for damages resulting
from a collision between the chartered vessel and a
passenger ship?
Held:
First: The charterer has no liability for damages under
Philippine Maritime laws.
Petitioner and Vector entered into a contract of
affreightment, also known as a voyage charter.
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; a contract of
affreightment is one by which the owner of a ship or other
vessel lets the whole or part of her to a merchant or other
person for the conveyance of goods, on a particular
voyage, in consideration of the payment of freight. A
contract of affreightment may be either time charter,
wherein the leased vessel is leased to the charterer for a
fixed period of time, or voyage charter, wherein the ship is
leased for a single voyage. In both cases, the charter-party
provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive
voyage, the ship owner to supply the ships store, pay for
the wages of the master of the crew, and defray the
expenses for the maintenance of the ship. If the charter is
a contract of affreightment, which leaves the general
owner in possession of the ship as owner for the voyage,
the rights and the responsibilities of ownership rest on the
owner. The charterer is free from liability to third persons
in respect of the ship.
Second: MT Vector is a common carrier
The charter party agreement did not convert the common
carrier into a private carrier. The parties entered into a
voyage charter, which retains the character of the vessel
as a common carrier. It is imperative that a public carrier
shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons,
provided the charter is limited to the ship only, as in the
case of a time-charter or voyage charter. It is only when
the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes

private, at least insofar as the particular voyage covering

the charter-party is concerned. Indubitably, a ship-owner
in a time or voyage charter retains possession and control
of the ship, although her holds may, for the moment, be
the property of the charterer. A common carrier is a
person or corporation whose regular business is to carry
passengers or property for all persons who may choose to
employ and to remunerate him. 16 MT Vector fits the
definition of a common carrier under Article 1732 of the
Civil Code.
The public must of necessity rely on the care and skill of
common carriers in the vigilance over the goods and safety
of the passengers, especially because with the modern
development of science and invention, transportation has
become more rapid, more complicated and somehow
more hazardous. For these reasons, a passenger or a
shipper of goods is under no obligation to conduct an
inspection of the ship and its crew, the carrier being
obliged by law to impliedly warrant its seaworthiness.
Third: Is Caltex liable for damages under the Civil Code?
The charterer of a vessel has no obligation before
transporting its cargo to ensure that the vessel it chartered
complied with all legal requirements. The duty rests upon
the common carrier simply for being engaged in "public
service." The relationship between the parties in this case
is governed by special laws. Because of the implied
warranty of seaworthiness, shippers of goods, when
transacting with common carriers, are not expected to
inquire into the vessels seaworthiness, genuineness of its
licenses and compliance with all maritime laws. To
demand more from shippers and hold them liable in case
of failure exhibits nothing but the futility of our maritime
laws insofar as the protection of the public in general is
concerned. Such a practice would be an absurdity in a
business where time is always of the essence. Considering
the nature of transportation business, passengers and
shippers alike customarily presume that common carriers
possess all the legal requisites in its operation.

PROPER MANNING
Coastwise Lighterage Corporation v. CA
Facts:
Pag-asa Sales Inc. entered into a contract to transport
molasses from the province of Negros to Manila with
Coastwise Lighterage Corporation (Coastwise for brevity),
using the latter's dumb barges. The barges were towed in
tandem by the tugboat MT Marica, which is likewise
owned by Coastwise. Upon reaching Manila Bay, one of
the barges, "Coastwise 9", struck an unknown sunken
object. The forward buoyancy compartment was
damaged, and water gushed in through a hole "two inches
wide and twenty-two inches long". As a consequence, the
molasses at the cargo tanks were contaminated. Pag-asa
filed a claim against Philippine General Insurance
Company, the insurer of its cargo. Philgen paid P700,000
for the value of the molasses lost.
Philgen then filed an action against Coastwise to recover
the money it paid, claiming to be subrogated to the claims
which the consignee may have against the carrier. Both
the trial court and the Court of Appeals ruled against
Coastwise.

Issues:
(1) Whether Coastwise was transformed into a private
carrier by virtue of the contract it entered into with Pagasa, and whether it exercised the required degree of
diligence
(2) Whether Philgen was subrogated into the rights of the
consignee against the carrier

OVERLOADING
FACTS:

Held:
(1) Pag-asa Sales, Inc. only leased three of petitioner's
vessels, in order to carry cargo from one point to another,
but the possession, command mid navigation of the
vessels remained with petitioner Coastwise Lighterage.
Coastwise Lighterage, by the contract of affreightment,
was not converted into a private carrier, but remained a
common carrier and was still liable as such. The law and
jurisprudence on common carriers both hold that the
mere proof of delivery of goods in good order to a carrier
and the subsequent arrival of the same goods at the place
of destination in bad order makes for a prima facie case
against the carrier. It follows then that the presumption of
negligence that attaches to common carriers, once the
goods it is sports are lost, destroyed or deteriorated,
applies to the petitioner. This presumption, which is
overcome only by proof of the exercise of extraordinary
diligence, remained unrebutted in this case. Jesus R.
Constantino, the patron of the vessel "Coastwise 9"
admitted that he was not licensed. Coastwise Lighterage
cannot safely claim to have exercised extraordinary
diligence, by placing a person whose navigational skills are
questionable, at the helm of the vessel which eventually
met the fateful accident. It may also logically, follow that a
person without license to navigate, lacks not just the skill
to do so, but also the utmost familiarity with the usual and
safe routes taken by seasoned and legally authorized ones.
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 18. As a common carrier,
petitioner is liable for breach of the contract of carriage,
having failed to overcome the presumption of negligence
with the loss and destruction of goods it transported, by
proof of its exercise of extraordinary diligence.
(2) Article 2207 of the Civil Code is founded on the wellsettled principle of subrogation. If the insured property is
destroyed or damaged through the fault or negligence of a
party other than the assured, then the insurer, upon
payment to the assured will be subrogated to the rights of
the assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay. Payment by the
insurer to the assured operated as an equitable
assignment to the former of all remedies which the latter
may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is
not dependent upon, nor does it grow out of, any private
of contract or upon written assignment of, claim. It
accrues simply upon payment of the insurance claim by
the insurer.

Bacolod City to attend a family reunion. The tickets were

In April of 1980, private respondent Ramon Miranda

purchased from the Negros Navigation Co., Inc. four
special cabin tickets (#74411, 74412, 74413 and 74414) for
his wife, daughter, son and niece who were going to
for Voyage No. 457-A of the M/V Don Juan, leaving Manila
at 1:00 p.m. on April 22, 1980. The ship sailed from the
port of Manila on schedule.
At about 10:30 in the evening of April 22, 1980, the Don
Juan collided off the Tablas Strait in Mindoro, with the
M/T Tacloban City, an oil tanker owned by the Philippine
National Oil Company (PNOC) and the PNOC Shipping and
Transport Corporation (PNOC/STC). As a result, the M/V
Don Juan sank. Several of her passengers perished in the
sea tragedy. The bodies of some of the victims were found
and brought to shore, but the four members of private
respondents families were never found.
Private respondents filed a complaint on July 16, 1980 in
the Regional Trial Court of Manila, Branch 34, against the
Negros Navigation, the Philippine National Oil Company
(PNOC), and the PNOC Shipping and Transport Corporation
(PNOC/STC), seeking damages for the death of Ardita de la
Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V.
Miranda, Jr., 16, and Elfreda de la Victoria, 26. In its
answer, petitioner admitted that private respondents
purchased ticket numbers 74411, 74412, 74413 and
74414; that the ticket numbers were listed in the
passenger manifest; and that the Don Juan left Pier 2,
North Harbor, Manila on April 22, 1980 and sank that night
after being rammed by the oil tanker M/T Tacloban City,
and that, as a result of the collision, some of the
passengers of the M/V Don Juan died. Petitioner, however,
denied that the four relatives of private respondents
actually boarded the vessel as shown by the fact that their
bodies were never recovered. Petitioner further averred
that the Don Juan was seaworthy and manned by a full
and competent crew, and that the collision was entirely
due to the fault of the crew of the M/T Tacloban City.
On January 20, 1986, the PNOC and petitioner Negros
Navigation Co., Inc. entered into a compromise agreement
whereby petitioner assumed full responsibility for the
payment and satisfaction of all claims arising out of or in

connection with the collision and releasing the PNOC and

or at least delay the sinking of the ship and supervise the

the PNOC/STC from any liability to it. The agreement was

abandoning of the ship.

subsequently held by the trial court to be binding upon

Third. The next issue is whether petitioner is liable to pay

petitioner, PNOC and PNOC/STC. Private respondents did

damages notwithstanding the total loss of its ship. The

not join in the agreement.

issue is not one of first impression. The rule is well-

ISSUES
1.

Whether the members of private respondents families

were actually passengers of the Don Juan;

2.

Whether the ruling in Mecenas v. Court of Appeals, finding

the crew members of petitioner to be grossly negligent in
the performance of their duties, is binding in this case;

3.

Whether the total loss of the M/V Don Juan extinguished

petitioners liability; and

4.

Whether the damages awarded by the appellate court are

excessive, unreasonable and unwarranted.
RULING
First. The trial court held that the fact that the victims

entrenched in our jurisprudence that a ship-owner may be

held liable for injuries to passengers notwithstanding the
exclusively real and hypothetic nature of maritime law if
fault can be attributed to the ship-owner.
Fourth. Petitioner contends that, assuming that the
Mecenas case applies, private respondents should be
allowed to claim only P43,857.14 each as moral damages
because in the Mecenas case, the amount of P307,500.00
was awarded to the seven children of the Mecenas couple.
Under petitioners formula, Ramon Miranda should
receive P43, 857.14, while the De la Victoria spouses
should receive P97, 714.28.

were passengers of the M/V Don Juan was sufficiently

proven by private respondent Ramon Miranda, who

PROPER STORAGE
Philippine Home Assurance Corp (PHAC) vs. CA

testified that he purchased tickets numbered 74411,

74412, 74413, and 74414 at P131.30 each from the Makati
office of petitioner for Voyage No. 47-A of the M/V Don
Juan, which was leaving Manila on April 22, 1980. This was
corroborated by the passenger manifest (Exh. E) On which
the numbers of the tickets and the names of Ardita
Miranda and her children and Elfreda de la Victoria
appear.
Second. In finding petitioner guilty of negligence and in
failing to exercise the extraordinary diligence required of it
in the carriage of passengers, both the trial court and the
appellate court relied on the findings of this Court in
Mecenas v. Intermediate Appellate Court, which case was
brought for the death of other passengers. In that case it
was found that although the proximate cause of the
mishap was the negligence of the crew of the M/T
Tacloban City, the crew of the Don Juan was equally
negligent as it found that the latters master, Capt. Rogelio
Santisteban, was playing mahjong at the time of collision,
and the officer on watch, Senior Third Mate Rogelio De
Vera, admitted that he failed to call the attention of
Santisteban to the imminent danger facing them. This
Court found that Capt. Santisteban and the crew of the
M/V Don Juan failed to take steps to prevent the collision

Facts:
Eeastern Shipping Lines Inc. (ESLI) loaded on board a
vessel (SS Easter Explorer) several shipment for carriage to
several consignees. While the vessel was off Okinawa,
Japan, a small fire was detected on the acetylene cylinder
located in the accommodation area near the engine room.
This resulted in a flash of flame throughout the
accommodation area. The vessel was abandoned. All the
cargoes of ESLI were delivered to their respective
consignees but with corresponding additional freight and
salvage charges. All the charges were paid by PHAC. Thus,
PHAC now seeks recovery from ESLI alleging that they
were negligent. ESLI argues, among others, that the fire
was a fortuitous event.
Issue:
WON the fire was a fortuitous event.
WON ESLI should be held liable for the additional charges.
Held: No, the fire cannot be considered as a fortuitous
event. Thus, it is presumed that ESLI was negligent and
should be held liable to PHAC.
In our jurisprudence, fire may not be considered a natural
disaster or calamity since it almost always arises from
some act of man or by human means.
It cannot be an act of God unless caused by lightning or a
natural disaster or casualty not attributable to human
agency.
There is strong evidence indicating that the acetylene
cylinder caught fire because of the fault and negligence of
respondent ESLI, its captain and its crew:

(1) The acetylene cylinder which was fully loaded should

not have been stored in the accommodation area near the
engine room where the heat generated therefrom could
cause the acetylene cylinder to explode by reason of
spontaneous combustion;
(2) Respondent ESLI should have known that by storing the
acetylene cylinder in the accommodation area supposed
to be reserved for passengers, it unnecessarily exposed its
passengers to grave danger and injury.
(3) The fact that the acetylene cylinder was checked,
tested and examined and subsequently certified as having
complied with the safety measures and standards by
qualified experts before it was loaded in the vessel only
shows to a great extent that negligence was present in the
handling of the acetylene cylinder after it was loaded and
while it was on board the ship.

DECK CARGO (Improper Storage)

CENTRAL SHIPPING COMPANY, INC., petitioner, vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
Doctrine of Limited Liability does not apply to situations in
which the loss or the injury is due to the concurrent
negligence of the shipowner and the captain.
Facts:
1. On July 25, 1990 at Puerto Princesa, Palawan, the
petitioner received on board its vessel, the M/V Central
Bohol, 376 pieces of Philippine Apitong Round Logs and
undertook to transport said shipment to Manila for
delivery to Alaska Lumber Co., Inc.
2. During the voyage the degree of the position of the
ship would change due to the shifting of the logs inside.
Eventually at about 15 degrees the captain ordered for
everyone to abandon the ship.
3. Respondent alleged that the total loss of the shipment
was caused by the fault and negligence of the petitioner
and its captain. Petitioner while admitting the sinking of
the vessel, interposed the defense that the vessel was fully
manned, fully equipped and in all respects seaworthy; that
all the logs were properly loaded and secured; that the
vessels master exercised due diligence to prevent or
minimize the loss before, during and after the occurrence
of the storm.
4. It raised as its main defense that the proximate and
only cause of the sinking of its vessel and the loss of its
cargo was a natural disaster, a tropical storm which
neither [petitioner] nor the captain of its vessel could have
foreseen.
5. The RTC was unconvinced that the sinking of M/V
Central Bohol had been caused by the weather or any
other caso fortuito. It noted that monsoons, which were
common occurrences during the months of July to
December, could have been foreseen and provided for by
an ocean-going vessel. Applying the rule of presumptive

fault or negligence against the carrier, the trial court held

petitioner liable for the loss of the cargo.
6. The CA affirmed the trial courts finding that the
southwestern monsoon encountered by the vessel was
not unforeseeable. Given the season of rains and
monsoons, the ship captain and his crew should have
anticipated the perils of the sea. Citing Arada v. CA,7 it said
that findings of the BMI were limited to the administrative
liability of the owner/operator, officers and crew of the
vessel. However, the determination of whether the carrier
observed extraordinary diligence in protecting the cargo it
was transporting was a function of the courts, not of the
BMI.
Issue: Whether or not the Doctrine of Limited Liability
applies.
Held:
No it does not.
Common carriers are bound to observe extraordinary
diligence over the goods they transport, according to all
the circumstances of each case; In all other cases not
specified under Article 1734 of the Civil Code, common
carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence. From the nature of their business
and for reasons of public policy, common carriers are
bound to observe extraordinary diligence over the goods
they transport, according to all the circumstances of each
case. In the event of loss, destruction or deterioration of
the insured goods, common carriers are responsible; that
is, unless they can prove that such loss, destruction or
deterioration was brought aboutamong othersby
flood, storm, earthquake, lightning or other natural
disaster or calamity. In all other cases not specified under
Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence.
The doctrine of limited liability under Article 587 of the
Code of Commerce is not applicable to the present case.
This rule does not apply to situations in which the loss or
the injury is due to the concurrent negligence of the shipowner and the captain. It has already been established
that the sinking of M/V Central Bohol had been caused by
the fault or negligence of the ship captain and the crew, as
shown by the improper stowage of the cargo of logs.
Closer supervision on the part of the shipowner could
have prevented this fatal miscalculation. As such, the
shipowner was equally negligent. It cannot escape liability
by virtue of the limited liability rule.

DUTY TO TAKE PROPER ROUTE

Reardon Smith Line v Black Sea and Baltic General
Insurance (1939)
Under charterparties contracts there is an assumption that
that a direct geographical route will be taken. However,
deviation may occur where the route taken was a
customary route. In this case, a ship deviated from a direct

geographical route to pick up cheap fuel. The defendants

were able to show that their vessels generally made this
deviation and around a quarter of vessels on this route did
likewise to obtain this cheap fuel. The House of Lords held
that their had been no deviation in the circumstances.