Transportation

Law
Case Digests
Submitted to:
Atty. Timoteo Aquino
Professor
Commercial Law Review
San Beda University – Manila

Submitted by:
4F
AY 2019-2020
 TABLE OF CONTENTS

Case Title

1 First Philippines Industrial Corporation v. Court of Appeals, G.R. No. 125948, 1

December 29, 1988

2 Fabre, Jr. v. Court of Appeals, G.R. No. 111127, July 26, 1996 3

3 De Guzman v. Court of Appeals, G.R. No. L-47822, December 22, 1988 5

4 Spouses Perena v. Spouses Nicolas G.R. No. 157917, August 29, 2012, 679 SCRA 8
208

5 Spouses Cruz v. Sun Holidays, Inc, G.R. No. 186312, June 29, 2010 11

6 Torres-Madrid Brokerage, Inc. v. FEB Mitsui Marine Insurance Co., Inc. 13

7 Westwind Shipping Corp. v. UCPB General Insurance Co., Inc., G.R. No. 200289, 15
November 25, 2013

8 Sanico v. Colipano, G.R. No. 209969, September 27, 2017 17

9 Oriental Assurance Corp. v. Ong, G.R. No. 189524, October 11, 2017. 21

10 Philam Insurance Co. v. Heung-A Shipping Corp., G.R. No. 187701, July 23, 2014 24

11 Federal Phoenix Assurance Co., Ltd. v. Fortune Sea Carrier, Inc., G.R. No. 188118, 27
November 23, 2015

12 Asian Terminals, Inc. v. Allied Guarantee Insurance, Co., Inc. 28

13 LTFRB v. Valenzuela, G.R. No. 242860. March 11, 2019 30

14 Greenstar Express, Inc. v. Universal Robina Corporation, G.R. No. 205090, October 33
17, 2016

15 Light Rail Transit Authority v. Navidad, G.R. No. 145805, February 6, 2003 35

16 Annie Tan v. Great Harvest Enterprises, G.R. No. 220400. March 20, 2019 37

17 Manay, Jr. v. Cebu Air, Inc. 39

18 Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., G.R. No. 193986, January 41
15, 2014

19 Central Shipping Co., Inc. v. Insurance Co. of North America September 20, 2004, 43
438 SCRA 511

20 La Mallorca v. Court of Appeals, G.R. No. L-20761, July 27, 1966, 17 SCRA 739. 45
21 Aboitiz Shipping Corp., v. Court of Appeals, G.R. No. 84458, November 6, 1989 47

22 Regional Container Lines of Singapore v. The Netherlands Insurance Co. 49

(Philippines), Inc., G.R. No. 168151, September 4, 2009

23 Mariano, Jr. v. Callejas, G.R. No. 166640, July 31, 2009 51

24 Heirs of Jose Marcial K. Ochoa v. G.& S Transport Corp., G.R. No. 170071 & 53
170125, March 9, 2011

25 Asian Terminals, Inc. v. Simon Enterprises, G.R. No. 177116, February 27, 2013 55

26 G.V. Florida Transport, Inc. v. Heirs of Battung, Jr. 58

27 Sulpicio Lines v. Sesante 62

28 Loadstar Shipping Company v. Malayan Insurance Company, Inc., G.R. No. 185565, 64
April 26, 2017

29 Spouses Fernando v. Northwest Airlines, Inc., G.R. No. 212038, February 8, 2017 67

30 Cacho et. al. v. Manahan, et. al., G.R. No. 203081. January 17, 2018 70

31 Unitrans International Forwarder, Inc. v. Insurance Company of North America, G.R. 73

No. 203865. March 13, 2019

32 Transimex Co. v. Mafre Asian Insurance Corp. 75

33 Keihin Everett Forwarding Company, Inc. v. Tokio Marine Malayan Insurance Co., 78
Inc., G.R. No. 212107. January 28, 2019

34 Fortune Express, Inc. v. Court of Appeals 81

35 Gacal v. Philippine Airlines, Inc. 84

36 Pilapil v. Court of Appeals 86

37 People v. Go, G.R. No. 210816. December 10, 2018 88

38 Orient Freight International, Inc. v. Keihin-Everett Forwarding Company, G.R. No. 90

191937, August 9, 2017

39 Ace Navigation Co., Inc. v. FGU Insurance Corp., G.R. No. 171591, June 25, 2011 95

40 Designer Baskets, Inc. v. Air Sea Transport, Inc. 97

41 Tsuneishi Heavy Industries (Cebu) Inc. v. MIS Maritime Corp., G.R. No. 193572, April 100
4, 2018

42 UCPB General Insurance Co., Inc. v. Aboitiz Shipping Corp., et al., G.R. No. 168433, 103
February 10, 2009
43 Benjamin Cua v. Wallem Philippine Shipping, Inc., G.R. No. 171337, July 11, 2012 105

44 Insurance Company of North America v. Asian Terminals, Inc., G.R. No. 180784, 107
February 15, 2012

45 Vector Shipping Corp. v. American Home Assurance Co., G.R. No. 159213, July 3, 109
2013

46 Asian Terminals, Inc. v. Philam Insurance Co., Inc., G.R. Nos. 181163, 181262 & 111
181319, July 24, 2013

47 Pioneer Insurance v. APL Co. Pte. Ltd., G.R. No. 226345, August 2, 2017 113

48 Lhuillier v. British Airways, G.R. No. 171092, March 15, 2010 115

49 Northwest Airlines, Inc. v. Heshan, G.R. No. 179117, February 3, 2010 118

50 Cathay Pacific Airways v. Reyes, G.R. No. 185891, June 26, 2013 119

51 Spouses Fernando v. Northwest Airlines, G.R. Nos. 212038 and 212043, February 8, 123
2017.

52 Phil-Nippon Kyoei Corp., v. Gudelosao 124

53 De la Torre v. The Hon. Court of Appeals, G.R. No. 160088, July 13, 2011 126

54 LTFRB v. G.V. Florida Transport, Inc., G.R. No. 213088. June 28, 2017 128

55 Tawang Multi-Purpose Cooperative v. La Trinidad Water District, G.R. No. 166471, 130
March 22, 2011

56 ABS-CBN Broadcasting Corp. v. Philippine Multi-Media System, Inc., G.R. Nos. 132
175769-70, January 19, 2009

57 Surigao Del Norte Electric Coop., Inc. v. ERC, G.R. No. 183626, October 4, 2010. 135

58 Initiatives For Dialouge and Empowerment Through Alternative Legal Services, Inc. 138
(IDEALS, Inc.) v. Power Sector Assets and Liabilities Management Corp., G.R. No.
192088, October 9, 2012.
TRANSPORTATION LAW

First Philippines Industrial Corporation GR No.125948,

v. Court of Appeals Date: December 29, 1998
By: Almazar, Victor Emmanuel Ponente: Martinez, J

DOCTRINE:
The definition of “common carriers” in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not provide that the transportation of
passengers or goods should be by motor vehicle.

FACTS:
FPIC is a grantee of a pipeline concession under R.A. No. 387, as amended, to contract,
install and operate oil pipelines. Sometime in January 1995, FPIC applied for a mayor’s permit
with the Office of the Mayor of Batangas. However, before the permit could be issued, the City
Treasurer required FPIC to pay a local tax based on its gross receipts for the fiscal year of
1993 pursuant to the LGC. FPIC was assessed a business tax amounting to P956,076.04. In
order not to hamper its operations, FPIC paid the tax under protest.

On January 20, 1994, FPIC filed a letter-protest to the City Treasurer alleging that it is
engaged in the business of transporting petroleum products via pipelines as such is exempt
from paying tax on gross receipts under Sec. 133 of the LGC.

The treasurer alleged that pipelines are not included in the term “common carrier” which refers
solely to ordinary carriers such as trucks, trains, ships and the like.

ISSUE:
Whether or not FPIC is a common carrier?

HELD:
Yes, FPIC is a common carrier. A “common carrier” may be defined, broadly, as one who
holds himself out to the public as engaged in the business of transporting persons or property
from place to place, for compensation, offering his services to the public generally.

Art. 1732 of the Civil Code defines a “common carrier” as “any person, corporation, firm, or
association engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.”

The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of goods for
persons generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over
his established roads; and
4. The transportation must be for hire.
There is no doubt that FPIC is a common carrier. It is engaged in the business of transporting

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or carrying goods, i.e. petroleum products, for hire as a public employment. IT undertakes to
carry for all persons indifferently and transports the goods by land and for compensation. The
fact that the petitioner has limited clientele does not exclude it from the definition of common
carrier.

As correctly pointed out by FPIC, the definition of “common carriers” in the Civil Code makes
no distinction as to the means of transporting, as long as it is by land, water or air. It does not
provide that the transportation of passengers or goods should be by motor vehicle. In fact, in
the United States, oil pipe line operators are considered common carriers.
There is no doubt that FPIC is a common carrier and, therefore, exempt from the business tax
as provided for in Sec. 133 (j) of the LGC.

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TRANSPORTATION LAW

Mr. & Mrs. Engracio Fabre, Jr. vs. GR No. 111127

Court of Appeals Date:July 26, 1996
By: Almazar, Victor Emmanuel Ponente:Mendoza, J.:

DOCTRINE:
Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of
the general population.

FACTS:
The Fabres were owners of a 1982 model Mazda minibus. They used the bus principally in
connection with a bus service for school children which they operated in Manila. They had a
driver, Porfirio Cabil, whom they hired in 1981m after trying him out for 2 weeks.
On November 2, 1984, Word for the Worlds Christian Fellowship Inc. arranged with the
Fabres for the transportation of 33 members of its Young Adults Ministry from Manila to La
Union and back for P3,000.00.

The usuak route to Caba, La Union, was through Carmen, Pangasinan. However, the bridge
at Carmen was under repair, so that Cabil, who was unfamiliar with the area, was forced to
take a detour through the town of Baay in Lingayen, Pangasinan. At 11:30P.M., Cabil came
upon a sharp curve on the highway. The road was slippery because it was raining, causing
the bus, which was running at 50Kph, to skid to the left road shoulder. Several passengers
were injured.

Amyline Anotonio, who was seriously injured, brought this case in the RTC.

ISSUE:
Are the Fabres operating a common carrier?

HELD:
Yes. Petitioners, the Fabres, did not have to be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to apply to them. As the
Supreme Court has held:

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or

3
solicits business only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions.

As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof
that they exercise the diligence of a good father of the family in the selection and supervision
of their employee. As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through the negligence
or 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 carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.

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TRANSPORTATION LAW

Pedro De Guzman v. Court of Appeals, GR No. L-47822

Ernesto Cendaña Date: December 22, 1988
By: Angara, Patrick Alexis Ponente: Feliciano, J.

DOCTRINE:
Common carriers" as “persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public." The law makes no distinction between
one whose principal business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity(in local idiom, as "a sideline").

Common carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on the part of
private respondent.

FACTS:
Respondent Ernesto Cendaña, a junk dealer, was engaged in buying up used bottles and
scrap metal in Pangasinan. Respondent would bring such material to Manila for resale. He
utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the
return trip to Pangasinan, respondent would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan. For that service,
respondent charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman, a merchant, contracted with

respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General
Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970.
On December 1, 1970, respondent loaded in Makati the merchandise on to his trucks: 150
cartons were loaded on a truck driven by respondent himself; while 600 cartons were placed
on board the other truck which was driven by Manuel Estrada, respondent's driver and
employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with
them the truck, its driver, his helper and the cargo.

Petitioner filed a case against the respondent for the lost merchandise and damages on the
ground of its failure, as a common carrier, to exercise the diligence required by law in the
delivery of the goods. Respondent denied that he was a common carrier and that he cannot
be held liable of the lost because it was force majeure.

The RTC ruled that the respondent was a common carrier and therefore liable. However, this
was reversed by the CA which ruled that the respondent had been engaged in transporting
return loads of freight as a “sideline” and not as a common carrier.

Upon appeal to the SC petitioner also argues that respondent should have in the
circumstances of this case, private respondent should have hired a security guard presumably
to ride with the truck carrying the 600 cartons of Liberty filled milk.

5
ISSUE:
(1) Whether or not Private Respondent is a common carrier
(2) Whether or not respondent is liable for his failure to exercise extraordinary diligence

HELD:
(1) YES, the private respondent is a common carrier. The Civil Code, under Article 1732,
defines "common carriers" as “persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public." The law makes no distinction between
one whose principal business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity(in local idiom, as "a sideline").
Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of
the general population.

Furthermore, the concept of a “common carrier” may be seen to coincide with the notion of
“public service” under Section 13 of the Public Service Act (CA 1416, as amended) which
states:
". . . 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….(Emphasis supplied)

Lastly, a certificate of public convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers.

(2) NO, private respondent is not liable. Common carriers, "by the nature of their business
and for reasons of public policy," are held to a very high degree of care and diligence
("extraordinary diligence") in the carriage of goods as well as of passengers.

Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of
the 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 packing or in the containers;
(5) Order or act of competent public authority."

It is important to point out that the above list of causes of loss, destruction or deterioration
which exempt the common carrier for responsibility therefore, is a closed list. Causes falling
outside the foregoing list, even if they appear to constitute a species of force majeure, fall
within the scope of Article 1735, which provides as follows:

"In all cases other than those mentioned in numbers 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

6
at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733." (Emphasis supplied)

The hijacking of the carrier's truck - does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. It would follow, therefore, that the private respondent
as common carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on the
part of private respondent.

In the instant case, armed men held up the second truck owned by private respondent which
carried petitioner's cargo. The trial court (criminal case against robbers) shows that the
accused acted with grave, if not irresistible, threat, violence or force. Three (3) of the five (5)
hold-uppers were armed with firearms. The robbers not only took away the truck and its cargo
but also kidnapped the driver and his helper, detaining them for several days and later
releasing them in another province (in Zambales). These circumstances, we hold that the
occurrence of the loss must reasonably be regarded as quite beyond the control of the
common carrier and properly regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks of travel and of transport of
goods, and are not held 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.

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TRANSPORTATION LAW

Spouses Teodoro and Nanette Pereña GR No. 157917

v. Spouses Nicolas and Teresita Zarate Date: August 29, 2012
By: Angara, Patrick Alexis Ponente: Bersamin, J.

DOCTRINE:
A Common carrier is a person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering such services to the public. Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act, and other special
laws relating to transportation. A common carrier is required to observe extraordinary
diligence, and is presumed to be at fault or to have acted negligently in case of the loss
of the effects of passengers, or the death or injuries to passengers.

The true test for a common carrier is whether the undertaking is a part of the activity engaged
in by the carrier that he has held out to the general public as his business or occupation

FACTS:
The Pereñas (petitioners) were engaged in the business of transporting students from their
respective residences in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and
back. In their business, the Pereñas used a KIA Ceres Van which had the capacity to
transport 14 students at a time, two of whom would be seated in the front beside the driver,
and the others in the rear, with six students on either side. They employed Clemente Alfaro as
driver of the van.

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco.
On August 22, 1996 the van picked Aaron up around 6:00 a.m. from the Zarates' residence.
Considering that the students were due at Don Bosco by 7:15 a.m., and that they were
already running late because of the heavy vehicular traffic on the South Superhighway, Alfaro
took the van to an alternate route by traversing the narrow path underneath the Magallanes
Interchange that was then commonly used by Makati-bound vehicles as a shortcut into
Makati. At the time, the narrow path was marked by piles of construction materials and parked
passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning
signs, or watchmen, or other responsible persons manning the crossing. In fact, the bamboo
barandilla was up, leaving the railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Train operated by
Jhonny Alano, was in the vicinity of the Magallanes Interchange travelling northbound. As the
train neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks,
closely tailing a large passenger bus. His view of the oncoming train was blocked because he
overtook the passenger bus on its left side. The train blew its horn to warn motorists of its
approach. When the train was about 50 meters away from the passenger bus and the van,
Alano applied the ordinary brakes of the train. He applied the emergency brakes only when he
saw that a collision was imminent. The passenger bus successfully crossed the railroad
tracks, but the van driven by Alfaro did not. The train hit the rear end of the van, and the
impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed
in the path of the train, which dragged his body and severed his head, instantaneously killing
him. Alano fled the scene on board the train, and did not wait for the police investigator to
arrive.

8
The Zarates filed an action against Pereñas and PNR on the grounds of breach of contract of
carriage for the safe transport of Aaron and quasi-delict based on Article 2176 of the Civil
Code, respectively.The RTC ruled that both the Pereñas and PNR were liable which was
affirmed by the CA.

Petitioners argue that they have exercised the diligence of a good father of the family in the
selection and supervisor of Alfaro.

ISSUE:
Whether or not petitioners are liable for breach of contract of carriage as a common carrier

HELD:
YES, they are liable as common carrier. A carrier is a person or corporation who undertakes
to transport or convey goods or persons from one place to another, gratuitously or for hire.
The carrier is classified either as a private/special carrier or as a common/public carrier. A
private carrier is one who, without making the activity a vocation, or without holding himself
or itself out to the public as ready to act for all who may desire his or its services, undertakes,
by special agreement in a particular instance only, to transport goods or persons from one
place to another either gratuitously or for hire. The provisions on ordinary contracts of the Civil
Code govern the contract of private carriage. The diligence required of a private carrier is only
ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is
a person, corporation, firm or association engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering such services
to the public. Contracts of common carriage are governed by the provisions on common
carriers of the Civil Code, the Public Service Act, and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.

The true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier that he has
held out to the general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as advertised and
held out to the general public, the individual or the entity rendering such service is a private,
not a common, carrier.

Applying these considerations to the case before us, there is no question that the Pereñas as
the operators of a school bus service were: (a) engaged in transporting passengers generally
as a business, not just as a casual occupation; (b) undertaking to carry passengers over
established roads by the method by which the business was conducted; and (c) transporting
students for a fee. Despite catering to a limited clientèle, the Pereñas operated as a common
carrier because they held themselves out as a ready transportation indiscriminately to the
students of a particular school living within or near where they operated the service and for a
fee.

The common carrier's standard of care and vigilance as to the safety of the passengers is
defined by law. Given the nature of the business and for reasons of public policy, the common
carrier is bound "to observe extraordinary diligence in the vigilance over the goods and

9
for the safety of the passengers transported by them, according to all the
circumstances of each case." Article 1755 of the Civil Code specifies that the common
carrier should "carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for all the
circumstances." No device, whether by stipulation, posting of notices, statements on tickets,
or otherwise, may dispense with or lessen the responsibility of the common carrier as defined
under Article 1755 of the Civil Code.

The Pereñas were liable for the death of Aaron despite the fact that their driver might have
acted beyond the scope of his authority or even in violation of the orders of the common
carrier. In this connection, the records showed their driver's actual negligence. There was a
showing, to begin with, that their driver traversed the railroad tracks at a point at which the
PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although
that point had been used by motorists as a shortcut into the Makati area, that fact alone did
not excuse their driver into taking that route. On the other hand, with his familiarity with that
shortcut, their driver was fully aware of the risks to his passengers but he still disregarded the
risks. Compounding his lack of care was that loud music was playing inside the air-
conditioned van at the time of the accident. The loudness most probably reduced his ability to
hear the warning horns of the oncoming train to allow him to correctly appreciate the lurking
dangers on the railroad tracks. Also, he sought to overtake a passenger bus on the left side
as both vehicles traversed the railroad tracks. In so doing, he lost his view of the train that was
then coming from the opposite side of the passenger bus, leading him to miscalculate his
chances of beating the bus in their race, and of getting clear of the train. As a result, the bus
avoided a collision with the train but the van got slammed at its rear, causing the fatality.
Lastly, he did not slow down or go to a full stop before traversing the railroad tracks despite
knowing that his slackening of speed and going to a full stop were in observance of the right
of way at railroad tracks as defined by the traffic laws and regulations.

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TRANSPORTATION LAW

Spouses Cruz v. Sun Holidays GR No. 186312

By: Bongabong, Joshua James Date: June 29, 2010
Ponente: Carpio Morales, J.

DOCTRINE:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence for the safety of the passengers transported by
them, according to all the circumstances of each case.

FACTS:
Spouses Cruz files a complaint for damages against Sun Holidays arising from the death of
their son, who perished with his wife on board the boat M/B Coco Beach III that capsized en
route Batangas from Puerto Galera where the couple had stayed, specifically at Coco Beach
Island Resort owned and operated by respondent. Their stay was by virtue of a tour package-
contract with respondent that included transportation to and from the Resort and the point of
departure in Batangas. Eight of the passengers, including petitioners’ son and his wife, died
during the accident. Sun denied any responsibility for the incident which it considered to be a
fortuitous event. Petitioners allege that as a common carrier, Sun was negligent in allowing
the boat to sail despite the storm warning bulletins issued by PAGASA. Respondent denied
being a common carrier, alleging that its boats are not available to the public but are only
used as ferry resort carrier. It also claimed to have exercised the utmost diligence in ensuring
the safety of its passengers, and that contrary to petitioners’ allegation, there was no storm as
the Coast Guard in fact cleared the voyage. M/B Coco Beach III was not filled to capacity and
had sufficient life jackets for its passengers.

RTC dismissed the complaint. CA denied the appeal holding that Sun is a private carrier
which is only required to observe ordinary diligence and that the proximate cause of the
incident was a fortuitous event.

ISSUE:
Whether M/B Coco Beach III is a common carrier and has thus breached its contract of
carriage.

HELD:
Respondent is a common carrier. Its ferry services are so intertwined with its business as to
be properly considered ancillary thereto. The constancy of respondent’s ferry services in its
resort operations is underscored by its having its own Coco Beach boats. And the tour
packages it offers, which include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the public.

In the De Guzman case, Article 1732 of the Civil Code defining “common carriers” has
deliberately refrained from making distinctions on whether the carrying of persons or goods is
the carrier’s principal business, whether it is offered on a regular basis, or whether it is offered
to the general public. Also, under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary diligence for the
safety of the passengers transported by them, according to all the circumstances of each
case. They are 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 the

11
circumstances.

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed

that the common carrier is at fault or negligent. In fact, there is even no need for the court to
make an express finding of fault or negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence that the carrier exercised
extraordinary diligence.

4F AY 2019-2020

12
TRANSPORTATION LAW

Torres-Madrid Brokerage, Inc. v. FEB GR No. 194121

Mitsui Marine Insurance Co., Inc., Date: July 11, 2016
By: Angara, Patrick Alexis Ponente: Brion, J.

DOCTRINE:
Customs broker— whose principal business is the preparation of the correct customs
declaration and the proper shipping documents — is still considered a common carrier if it
also undertakes to deliver the goods for its customers. The law does not distinguish between
one whose principal business activity is the carrying of goods and one who undertakes this
task only as an ancillary activity.

FACTS:
On October 7, 2000, a shipment of various electronic goods from Thailand and Malaysia
arrived at the Port of Manila for Sony Philippines, Inc. Sony had engaged the services of TMBI
to facilitate, process, withdraw, and deliver the shipment from the port to its warehouse in
Biñan, Laguna. TMBI subcontracted the services of Benjamin Manalastas' company, BMT
Trucking Services (BMT), to transport the shipment from the port to the Biñan warehouse.
Four BMT trucks picked up the shipment from the port; however, only three arrived at the
warehouse.

The truck driven by Rufo Reynaldo Lapesura was found abandoned along the Diversion Road
in Filinvest, Alabang, Muntinlupa City. Both the driver and the shipment were missing and this
led to the filing of a complaint against Lapesura for “hijacking”.

Sony filed an insurance claim with Mitsui who later on paid the value of the goods and
subrogated the rights of Sony. Mitsui filed a case against TMBI. TMBI impleaded BMT, as a
third-party defendant.

RTC held that TMBI and BMI were common carriers and had acted negligently. CA affirmed
the decision.

TMBI insists that it is not a common carrier because it does not own a single truck to transport
its shipment and it does not offer transport services to the public for compensation. That the
service it offered was limited to the processing of paperwork attendant to the entry of Sony's
goods. It denies that delivery of the shipment was a part of its obligation. BMT, on the other
hand, argues that the hijacking was a fortuitous event and that it exercised extraordinary
diligence on the matter.

ISSUE:
Whether or not TMBI is a common carrier thus liable for the loss

HELD:
YES, TMBI is a common carrier. Common carriers are persons, corporations, firms or
associations engaged in the business of transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public. By the nature of their
business and for reasons of public policy, they are bound to observe extraordinary diligence in
the vigilance over the goods and in the safety of their passengers.

13
In A.F. Sanchez Brokerage, Inc. v. Court of Appeals , we held that a customs broker —
whose principal business is the preparation of the correct customs declaration and the proper
shipping documents — is still considered a common carrier if it also undertakes to deliver
the goods for its customers. The law does not distinguish between one whose principal
business activity is the carrying of goods and one who undertakes this task only as an
ancillary activity.

TMBI admitted that it was contracted to facilitate, process, and clear the shipments from the
customs authorities, withdraw them from the pier, then transport and deliver them to Sony's
warehouse in Laguna. Despite the subcontract, TMBI remained responsible for the cargo.
Under Article 1736, a common carrier's extraordinary responsibility over the shipper's goods
lasts from the time these goods are unconditionally placed in the possession of, and received
by, the carrier for transportation, until they are delivered, actually or constructively, by the
carrier to the consignee. That the cargo disappeared during transit while under the custody of
BMT — TMBI's subcontractor — did not diminish nor terminate TMBI's responsibility over the
cargo.

TMBI and BMT are liable for breach of contract for their failure to exercise the proper diligence
required. Theft or the robbery of the goods is not considered a fortuitous event or a
force majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting
loss: (1) if it proves that it exercised extraordinary diligence in transporting and safekeeping
the goods; or (2) if it stipulated with the shipper/owner of the goods to limit its liability for the
loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence.
Since, both were not able to refute their negligence and the subsequent filing of a case
against the driver shows that there was no violence involved in the case.

4F AY 2019-2020

14
TRANSPORTATION LAW

Westwind Shipping Corp. v. UCPB GR No. 200289

General Insurance Co., Inc Date: November 5, 2013
By: Bongabong, Joshua James Ponente: Peralta, J.

DOCTRINE:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

FACTS:
Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation The
shipment was loadaed and received clean on board M/V Golden Harvest Voyage No. 66, a
vessel owned and operated by Westwind Shipping Corporation. SMC insured the cargoes
against all risks with UCPB General Insurance Co., Inc.
The shipment arrived in Manila and was discharged in the custody of the arrastre operator,
Asian Terminals, Inc. During the unloading operation six containers/skids sustained dents and
punctures from the forklift used by the stevedores of Ocean Terminal Services, Inc. in
centering and shuttling the containers/skids. Orient Freight International, Inc., the customs
broker of SMC, withdrew from ATI the 197 containers/skids and delivered the same at SMC’s
warehouse. It was discovered upon discharge that additional nine containers/skids were also
damaged due to the forklift operations; thus, making the total number of 15 containers/skids in
bad order.

SMC filed complaints. The RTC opined that Westwind is not liable, since the discharging of
the cargoes were done by ATI personnel using forklifts. It likewise absolved OFII from any
liability, reasoning that it never undertook the operation of the forklifts which caused the dents
and punctures, and that it merely facilitated the release and delivery of the shipment as the
customs broker and representative of SMC. On appeal by UCPB, the CA reversed and set
aside the trial court. It concluded that the common carrier, not the arrastre operator, is
responsible during the unloading of the cargoes and is still bound to exercise extraordinary
diligence at the time. The CA also considered that OFII is liable, agreeing with UCPB’s
contention that OFII is a common carrier bound to observe extraordinary diligence and is
presumed to be at fault or have acted negligently for such damage.

ISSUE:
Whether Westwind and OFII are liable to exercise extraordinary diligence.

HELD:
YES. 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 transported by them.
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.

In this case, since the discharging of the containers/skids, which were covered by only one bill
of lading, had not yet been completed at the time the damage occurred, there is no reason to

15
imply that there was already delivery, actual or constructive, of the cargoes to ATI.

The mere proof of delivery of goods in good order to the carrier, and their arrival in the place
of destination in bad order, make 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
circumstances inconsistent with its liability.

The contention of OFII is likewise untenable. A customs broker has been regarded as a
common carrier because transportation of goods is an integral part of its business. Article
1732 does not distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The contention, therefore,
of petitioner that it is not a common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration. As the transportation of goods is an integral part of a customs broker, the
customs broker is also a common carrier. For to declare otherwise "would be to deprive those
with whom [it] contracts the protection which the law affords them notwithstanding the fact that
the obligation to carry goods for [its] customers, is part and parcel of petitioner’s business."

4F AY 2019-2020

16
TRANSPORTATION LAW

Sanico vs. Colipano GR No. . 209969

By: Camarao, Aeron Chua Date: September 27, 2017
Ponente: Caguioa, J.

DOCTRINE:
Specific to a contract of carriage, the Civil Code requires common carriers to observe
extraordinary diligence in safely transporting their passengers.

In case of death of or injury to their passengers, Article 1756 of the Civil Code provides that
common carriers are presumed to have been at fault or negligent, and this presumption can
be overcome only by proof of the extraordinary diligence exercised to ensure the safety of the
passengers

The only defenses available to common carriers are (1) proof that they observed extraordinary
diligence as prescribed in Article 1756, and (2) following Article 1174, of the Civil Code, proof
that the injury or death was brought about by an event which “could not be foreseen, or which,
though foreseen, were inevitable,” or a fortuitous event.

FACTS:
Colipano filed a complaint for breach of contract of carriage and damages against
Sanico and Castro. In her complaint, Colipano claimed that
• At 4:00PM more or less of December 25, 1993, Christmas Day, she and her
daughter were paying passengers in the jeepney operated by Sanico, which
was driven by Castrol;
• She was made to sit on an empty beer case at the edge of the rear
entrance/exit of the jeepney with her sleeping child on her lap;
• At an uphill incline in the road the jeepney slid backwards because it did not
have the power to reach the top;
• She pushed both her feet against the step board to prevent herself and her
child from being thrown out of the exit, but because the step board was wet,
her left foot slipped and got crushed between the step board and a coconut
tree which the jeepney bumped, causing the jeepney to stop its backward
movement; and
• Her leg was badly injured and was eventually amputated.

Sanico and Castro admitted that Colipano’s leg was crushed and amputated but
claimed that it was Colipano’s fault that her leg was crushed. They admitted that the jeepney
slid backwards because the jeepney lost power. Sanico claimed that he paid for all the
hospital and medical expenses of Colipano, and that Colipano eventually freely and
voluntarily executed an Affidavit of Desistance and Release of Claim.

RTC and CA both held Sanico and Castro liable and the waiver and release executed
by Colipano was not explained to her. Thus, the waiver is void.

ISSUE:
1 ISSUE: Whether or not Colipano has can hold the driver, Castro, liable based on culpa
ST

contractual.
2 ISSUE: Whether or not Sanico is liable.
ND

17
3 ISSUE: Whether or not the Affidavit of Desistance and Release of Claims is valid.
RD

HELD:
NO, Castro cannot be held liable under culpa contractual.

In Soberano v. Manila Railroad Co.,

the Court ruled that a complaint for breach of a contract of carriage is dismissible as against
the employee who was driving the bus because the parties to the contract of carriage are only
the passenger, the bus owner, and the operator

In this case, since Castro was not a party to the contract of carriage, Colipano had no
cause of action against him and the complaint against him should be dismissed. Although he
was driving the jeepney, he was a mere employee of Sanico, who was the operator and
owner of the jeepney. The obligation to carry Colipano safely to her destination was with
Sanico.

Therefore, Colipano had no cause of action against Castro

2 ISSUE:
ND

YES, Sanico is liable for failure to exercise extraordinary diligence, presumption of

negligence and contravention of tenor of Sanico’s obligation.

EXTRAORDINARY DILIGENCE and PRESUMPTION OF NEGLIGENCE.

Civil Code requires common carriers to observe extraordinary diligence in safely
transporting their passengers. Under Article 1733 of the Civil Code, “common carriers, from
the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence … for the safety of the passengers transported by them, according to
all the circumstances of each case.”
This extraordinary diligence, following Article 1755 of the Civil Code, means that
common carriers have the obligation to carry 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 case of death of or injury to their passengers, Article 1756 of the Civil Code
provides that common carriers are presumed to have been at fault or negligent, and this
presumption can be overcome only by proof of the extraordinary diligence exercised to ensure
the safety of the passengers

In this case, Sanico was required to observe extraordinary diligence in safely

transporting Colipano. When Colipano’s leg was injured while she was a passenger in
Sanico’s jeepney, the presumption of fault or negligence on Sanico’s part arose and he had
the burden to prove that he exercised the extraordinary diligence required of him. Such
diligence was not proven by Sanico.

As to being seated on a bear case.

In Calalas v. Court of Appeals, the Court found that allowing the respondent in that
case to be seated in an extension seat, which was a wooden stool at the rear of the jeepney,
“placed [the respondent] in a peril greater than that to which
the other passengers were exposed.” The Court further ruled that the petitioner in Calalas was
not only “unable to overcome the presumption of negligence imposed on him for the injury

18
sustained by [the respondent], but also, the evidence shows he was actually negligent in
transporting passengers.”

In this case, Calalas squarely applies. Sanico failed to rebut the presumption of fault or
negligence under the Civil Code. More than this, the evidence indubitably established
Sanico’s negligence when Castro made Colipano sit on an empty beer case at the edge of the
rear entrance/exit of the jeepney with her sleeping child on her lap, which put her and her
child in greater peril than the other passengers.

As to defense of engine failure.

The engine failure “hinted lack of regular check and maintenance to ensure that the
engine is at its best, considering that the jeepney regularly passes through a mountainous
area.”

In this case, the failure to ensure that the jeepney can safely transport passengers
through its route which required navigation through a mountainous area is proof of fault on
Sanico’s part. In the face of such evidence, there is no question as to Sanico’s fault or
negligence.

Available defenses for Sanico

The only defenses available to common carriers are (1) proof that they observed
extraordinary diligence as prescribed in Article 1756, and (2) following Article 1174 of the Civil
Code, proof that the injury or death was brought about by an event which “could not be
foreseen, or which, though foreseen, were inevitable,” or a fortuitous event.

In this case, none of these defenses was raised by Sanico. Thus, Sanico’s attempt to
evade liability by arguing that he exercised extraordinary diligence when he hired Castro, who
was allegedly an experienced and time-tested driver, whom he had even accompanied on a
test-drive and in whom he was personally convinced of the driving skills,are not enough to
exonerate him from liability — because the liability of common carriers does not cease upon
proof that they exercised all the diligence of a good father of a family in the selection and
supervision of their employees.

CONTRAVENTION OF TENOR OF OBLIGATION.

Article 1170 of the Civil Code states “those who in the performance of their obligations
are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor
thereof, are liable for damages.”

There is no question here that making Colipano sit on the empty beer case was a
clear showing of how Sanico contravened the tenor of his obligation to safely transport
Colipano from the place of departure to the place of destination as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, and with due
regard for all the circumstances.

3 ISSUE:
RD

NO, the Affidavit of Desistance and Release of Claim is void.

For there to be a valid waiver, the following requisites are essential: (1) that the person
making the waiver possesses the right, (2) that he has the capacity and power to dispose of

19
the right, (3) that the waiver must be clear and unequivocal although it may be made
expressly or impliedly, and (4) that the waiver is not contrary to law, public policy, public order,
morals, good customs or prejudicial to a third person with a right recognized by law.
In this case, the third and fourth are lacking. Both the CA and RTC made the factual
determination that Colipano was not able to understand English and that there was no proof
that the documents and their contents and effects were explained to her. Alsom Colipano
testified that she did not understand the document she signed. She also did not understand
the nature and extent of her waiver as the content of the document was not explained to her.

The waiver is therefore void because it is contrary to public policy.

4F AY 2019-2020

20
TRANSPORTATION LAW

Oriental Assurance Corporation vs. Ong GR No. 189524

By: Camarao, Aeron Chua Date: October 11, 2017
Ponente: Leonen, J.

DOCTRINE:
When arrastre operator, itself, requested for the survey over the goods, it can be held liable
even if there is no compliance with the notice requirement because the purpose of the notice
was already served.

This Court has ruled that the purpose of the time limitation for filing claims is “to apprise the
arrastre operator of the existence of a claim and enable it to check on the validity of the
claimant’s demand while the facts are still fresh for recollection of the persons who took part in
the undertaking and the pertinent papers are still available.

This Court, in a number of cases, has liberally construed the requirement for filing a formal
claim and allowed claims filed even beyond the 15-day prescriptive period after finding that
the request for bad order survey or the provisional claim filed by the consignee had sufficiently
served the purpose of a formal claim.

FACTS:
JEA Steel imported 72 aluminum-zinc-alloy-coated steel sheets in coils (coils). Upon arrival of
the vessel at the Manila South Harbor, the 72 coils were discharged and stored in Pier 9
under the custody of the arrastre contractor, Asian Terminals, Inc. (Asian Terminals). From
the storage compound of Asian Terminals, the coils were loaded on the trucks of Manuel Ong
(Ong) and delivered to JEA Steel’s plant in Barangay Lapidario, Trece Martirez, Cavite.

Eleven of these coils ‘‘were found to be in damaged condition, dented or their normal round
shape deformed.”

JEA Steel filed a claim with Oriental for the value of the 11 damaged coils, pursuant to Marine
Insurance Policy. Oriental paid JEA Steel the sum of P521,530.16 and subsequently
demanded indemnity from Ong and Asian Terminals (respondents), but they refused to pay.
Oriental filed a Complaint before the Regional Trial Court (RTC).

ISSUE:
1 ISSUE: Whether or not the Gate Pass and Management Contract is binding upon Oriental
ST

even if it is not a party.

2 ISSUE: Whether the claim of Oriental is already prescribed or there can be substantial
ND

compliance with the requirement of notice.

HELD:
1ST ISSUE:
YES, the Gate Pass and Management Contract is binding upon Oriental even if it was
not a party thereto.

In Government Service Insurance System v. Manila Railroad Company,

this Court held that the provisions of a gate pass or of an arrastre management contract are

21
binding on an insurer-subrogee even if the latter is not a party to it. In the performance of its
job, an arrastre operator is bound by the management contract it had executed with the
Bureau of Customs. However, a management contract, which is a sort of a stipulation pour
autrui within the meaning of Article 1311 of the Civil Code, is
also binding on a consignee because it is incorporated in the gate pass and delivery receipt
which must be presented by the consignee before delivery can be effected to it. The insurer,
as successor-in-interest of the consignee, is likewise bound by the management contract.
In this case, the fact that Oriental is not a party to the Gate Pass and the Management
Contract does not mean that it cannot be bound by their provisions. Oriental is subrogated to
the rights of the consignee simply upon its payment of the insurance claim. As subrogee,
petitioner merely stepped into the shoes of the consignee and may only exercise those rights
that the consignee may have against the wrongdoer who caused the damage

As to the extent of Asian Terminals’ liability, Section 7.01 of the Management Contract
provides that its liability is limited to the actual invoice value of each package which should not
be more than P5,000.00 each.
In this case, the records do not show that the value of the shipment was specified or
manifested to Asian Terminals before discharge from the vessel. There was no evidence
proving the amount of arrastre fees paid by the consignee to Asian Terminals so as to put the
latter on notice of the value of the cargo or that the invoice, packing list, and other shipping
documents were presented to the Bureau of Customs and to Asian Terminals for the proper
assessment of the arrastre charges and other fees. The Cargo Gate Passes issued by Asian
Terminals do not indicate the value of the cargo.

Hence, the total recoverable amount is P55,000.00 for the 11 damaged coils. This amount
shall earn a legal interest at the rate of 6% per annum from the date of finality of this judgment
until its full satisfaction pursuant to Nacar v. Gallery Frames.

2ND ISSUE:
NO, the action is not yet prescribed due to substantial compliance with the 15 day
notice.

This Court has ruled that the purpose of the time limitation for filing claims is “to apprise the
arrastre operator of the existence of a claim and enable it to check on the validity of the
claimant’s demand while the facts are still fresh for recollection of the persons who took part in
the undertaking and the pertinent papers are still available.
This Court, in a number of cases, has liberally construed the requirement for filing a formal
claim and allowed claims filed even beyond the 15-day prescriptive period after finding that
the request for bad order survey or the provisional claim filed by the consignee had sufficiently
served the purpose of a formal claim.
The arrastre operator had become aware of and had verified the facts giving rise to its liability.
Thus, the arrastre operator suffered no prejudice by the lack of literal compliance with the 15-
day limitation. Thus, in the foregoing cases, “substantial compliance with the 15-day time
limitation is allowed provided that the consignee has made a provisional claim thru a request
for bad order survey or examination report.”

In this case, however, the facts do not show that a provisional claim or a request for
bad order survey was made by the consignee. Even so, this Court adopts a reasonable
interpretation of the stipulations in the Management Contract and hold that petitioner’s
complaint is not time-barred. The following are the reasons:

22
First, under the express terms of the Management Contract, the consignee had thirty (30)
days from receipt of the cargo to request for a certificate of loss from the arrastreoperator.
Upon receipt of such request, the arrastreoperator would have 15 days to issue a certificate of
loss, either actually or constructively. From the date of issuance of the certificate of loss or
where no certificate was issued, from the expiration of the 15-day period, the consignee has
15 days within which to file a formal claim with the arrastre operator. In other words, the
consignee had 45 to 60 days from the date of last delivery of the goods within which to submit
a formal claim to the arrastre operator. The consignee’s claim letter was received by
respondent on July 4, 2002, or 17 days from the last delivery of the goods, still within the
prescribed 30-day period to request a certificate of loss, damage, or injury from the
arrastreoperator.

Second, evidence shows that upon Asian Terminals’ request, Ultraphil Marine and Cargo
Survey Corporation78conducted two (2) surveys.
The surveyor prepared and submitted to Asian Terminals a Final Report dated June 29, 2002.
Although its representative was not present during the inspections, the fact that Asian
Terminals requested for the cargo survey shows that it had knowledge of the damage of the
shipment while in its possession and that the survey was sought specifically to ascertain the
nature and extent of the damage. Thus, respondent cannot escape liability for the damaged
coils, simply by its own act of not sending a representative, after it had contracted for the
survey of the shipment.

Hence, the consignee’s claim letter is regarded as substantial compliance with the condition
precedent set forth in the Management Contract to hold the arrastre operator liable.

4F AY 2019-2020

23
TRANSPORTATION LAW

Philam Insurance Co. v. Heung-A GR No. 187701

Shipping Corp. Date: July 23, 2014
By: Capuchino, Mafel Ponente: Reyes, J.

DOCTRINE:
Common carriers, as a general rule, are presumed to have been at fault or negligent if the
goods they transported deteriorated or got lost or destroyed. That is, unless they prove that
they exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that they
observed such diligence.

FACTS:
Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported from Jinsuk Trading Co.
Ltd., (JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18 Glaminated plastic
packaging material. In order to ship the goods to the Philippines, JINSUK engaged the
services of Protop Shipping Corporation (PROTOP), a freight forwarder likewise based in
South Korea, to forward the goods to their consignee, NOVARTIS. Based on Bill of Lading
issued by PROTOP, the cargo was on freight prepaid basis and on "shipper’s load and count"
which means that the "container [was] packed with cargo by one shipper where the quantity,
description and condition of the cargo is the sole responsibility of the shipper." Likewise stated
in the bill of lading is the name Sagawa Express Phils., Inc., (SAGAWA) designated as the
entity in the Philippines which will obtain the delivery contract. PROTOP shipped the cargo
through Dongnama Shipping Co. Ltd. (DONGNAMA) which in turn loaded the same on M/V
Heung-A Bangkok V-019 owned and operated by Heung-A Shipping Corporation, (HEUNG-
A). Wallem Philippines Shipping, Inc. (WALLEM) is the ship agent of HEUNG-A in the
Philippines. NOVARTIS insured the shipment with Philam Insurance Company, Inc. The
shipment reached NOVARTIS’ premises and was thereupon inspected by the company’s
Senior Laboratory Technician.

Caparoso found the container van locked with its load intact. After opening the same, she
inspected its contents and discovered that the boxes of the shipment were wet and damp.
Caparoso rejected the entire shipment. All 17 pallets of the 184 cartons/rolls contained in the
sea van were found wet/water damaged. NOVARTIS demanded indemnification for the
lost/damaged shipment from PROTOP, SAGAWA, ATI and STEPHANIE but was denied.
Insurance claims were, thus, filed with PHILAM which paid the insured value of the shipment.
PHILAM sent a demand letter to WALLEM for reimbursement of the insurance claims paid to
NOVARTIS. When WALLEM ignored the demand, PHILAM impleaded it as additional
defendant in an Amended Complaint. PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and
HEUNG-A denied liability for the lost/damaged shipment.

RTC ruled that the damage to the shipment occurred onboard the vessel while in transit from
Korea to the Philippines. CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM
are liable for the damaged shipment and stated that by agreeing to transport the goods
contained in the sea van provided by DONGNAMA, HEUNG-A impliedly entered into a
contract of carriage with NOVARTIS with whom the goods were consigned. Hence, it
assumed the obligations of a common carrier to observe extraordinary diligence in the
vigilance over the goods transported by it. Further the Slot Charter Agreement did not change

24
HEUNG-A’s character as a common carrier.

ISSUE:
1. Is HEUNG-A still responsible as the carrier and should be held answerable for the damages
incurred by the goods received for transportation?
2. Did CA err in applying the provisions of the COGSA specifically, the rule on Package
Liability Limitation in determining the amount of damages?

HELD:
1. Yes. HEUNG-A is responsible as the carrier and should be held answerable for the
damages incurred by the goods received.

Common carriers, as a general rule, are presumed to have been at fault or negligent if the
goods they transported deteriorated or got lost or destroyed. That is, unless they prove that
they exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that they
observed such diligence. Further, under Article 1742 of the Civil Code, even if the loss,
destruction, or deterioration of the goods should be caused by the faulty nature of the
containers, the common carrier must exercise due diligence to forestall or lessen the loss.

Despite the contract of affreightment with DONGNAMA, HEUNG-A remained responsible as

the carrier, hence, answerable for the damages incurred by the goods received for
transportation. HEUNG-A failed to rebut this prima facie presumption when it failed to give
adequate explanation as to how the shipment inside the container van was handled, stored
and preserved to forestall or prevent any damage or loss while the same was in its
possession, custody and control.

By agreeing to transport the goods contained in the sea van provided by DONGNAMA,
HEUNG-A impliedly entered into a contract of carriage with NOVARTIS with whom the goods
were consigned. Hence, it assumed the obligations of a common carrier to observe
extraordinary diligence in the vigilance over the goods transported by it. Hence, HEUNG-A is
responsible as a common carrier for failure to prove that they exercise extraordinary diligence.

2. No. CA did not err in applying the provisions of the COGSA specifically, the rule on
Package Liability Limitation.

Under Article 1753 of the Civil Code, 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. Code of commerce provides that the value of the goods which the carrier must
pay in cases if loss or misplacement shall be determined in accordance with that declared in
the bill of lading, the shipper not being allowed to present proof that among the goods
declared therein there were articles of greater value and money. In relation, Cogsa further
provides, 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 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

25
bill of lading. This declaration, if embodied in the bill of lading shall be prima facie evidence,
but shall be conclusive on the carrier.

Since the subject shipment was being transported from South Korea to the Philippines, the
Civil Code provisions shall apply. In all matters not regulated by the Civil Code, the rights and
obligations of common carriers shall be governed by the Code of Commerce and by special
laws, such as the COGSA. While the Civil Code contains provisions making the common
carrier liable for loss/damage to the goods transported, it failed to outline the manner of
determining the amount of such liability. When there is a loss/damage to goods covered by
contracts of carriage from a foreign port to a Philippine port and in the absence a shipper's
declaration of the value of the goods in the bill of lading, as in the present case, the foregoing
provisions of the COGSA shall apply.

The CA, therefore, did not err in ruling that HEUNG-A, WALLEM and PROTOP's liability is
limited to $500 per package or pallet.

4F AY 2019-2020

26
TRANSPORTATION LAW

Federal Phoenix Assurance Co., Ltd. v. G.R. No. 188118

Fortune Sea Carrier, Inc. Date: November 23, 2015
By: Almazar, Victor Emmanuel Ponente: Reyes, J.

DOCTRINE: Conformably, M/V Ricky Rey was converted into a private carrier
notwithstanding the existence of the Time Charter Party agreement with Northern since the
said agreement was not limited to the ship only but extends even to the control of its crew.

FACTS: On March 9, 1994, Fortune agreed to lease its vessel M/V Ricky Rey to Northern
Mindanao Transport Co., Inc. The Time Charter Party agreement executed provided that the
vessel shall be leased to Northern for 90 days to carry bags of cement to different ports of
destination. Later on, the parties extended the period for another 90 days.

Sometime in June 1994, Northern ordered 2,069 bales of abaca fibers to be shipped by
shipper Manila Hemp Trading Corporation, for delivery to consignee Newtech Pulp Inc. in
Iligan City. The shipment was covered by Bill of Lading No. 1 and was insured by Federal.
Upon arrival at Iligan City port on June 16, 1994, the stevedores started to discharge the
abaca shipment the following day. At 3:00p.m. on June 18, 1994, the stevedores noticed
smoke coming out of the cargo haul. Immediately, the fire was put off. Upon investigation, it
was discovered that 60 bales of abaca were damaged.

Newtech filed an insurance claim for P260,000.00 with Federal who paid P162,419.25 for the
losses incurred. Upon payment, Federal was subrogated to the rights of Newtech and
pursued its claims against Fortune, which were not settled. As a result, Federal filed a
Complaint for Sum of Money against Fortune before the RTC of Makati.
Fortune insisted that it was acting as a private carrier at the time the incident occurred.

ISSUE: Was Fortune converted into a private carrier by virtue of the Time Charter Party
agreement?

HELD:
Yes, as correctly observed by the CA, the Time Charter Party agreement executed by Fortune
and Northern clearly shows that the charter includes both the vessel and its crew thereby
making Northern the owner pro hac vice of M/V Ricky Rey during the whole period of the
voyage. Conformably, M/V Ricky Rey was converted into a private carrier notwithstanding the
existence of the Time Charter Party agreement with Northern since the said agreement was
not limited to the ship only but extends even to the control of its crew. Despite the
denomination as Time Charter by the parties, their agreement undoubtedly reflected that their
intention was to enter into a Bareboat Charter Agreement.

As such, the master and all the crew of the ship were all made subject to the direct control
and supervision of the charterer. In fact, the instructions on the voyage and other relative
directions or orders were handed out by Northern. Thus, the CA correctly ruled that the nature
of the vessel’s charter is one of bareboat or demise charter.

4F AY 2019-2020

27
TRANSPORTATION LAW

Asian Terminals, Inc. v. Allied Guarantee G.R. No. 182208

Insurance, Co., Inc. Date: October 14, 2015
By: Aquino, Jenica Ponente: Peralta, J.

DOCTRINE:
The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and the warehouseman. Being the custodian of the goods discharged from a
vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to
the party entitled to their possession.

FACTS:
In 1989, a shipment of 72,322 lbs. of kraft linear board was loaded from the ports of USA for
transport to San Miguel Corp. (SMC) in Manila. The subject shipment was offloaded from the
vessel to the arrastre operator Marina Port Services. During shipping, 158 rolls of the goods
were damaged. Further, upon withdrawal from the arrastre and their delivery, first, to SMC's
customs broker, Dynamic Brokerage, and, eventually, to the consignee SMC, another 54 rolls
were found to have been damaged. Allied Guarantee Insurance, the insurer of the shipment,
paid SMC for the damaged goods, and filed a complaint for maritime damages.

The RTC found Marina and Dynamic solidarily liable for the additional 54 rolls. Asian
Terminals, Inc. (ATI), formerly Marina, submits that the Turn Over Survey of Bad Order
Cargoes and the Requests for Bad Order Survey help establish that damage to the additional
54 rolls did not happen in its custody. The Requests for Bad Order Survey, signed by
Dynamic representative, states that only 158 rolls were damaged as of the goods' transfer
from ATI to Dynamic. The CA affirmed the RTC and held that ATI failed to present the Turn
Over Inspector and Bad Order Inspector as witnesses to testify that no additional goods were
damaged during its custody.

ISSUE:
Was Marina (ATI) able to overcome the presumption of negligence in relation to the damage
of the additional 54 rolls?

HELD:
No, Marina (ATI) was not able to overcome the presumption of negligence in relation to the
damage of the additional 54 rolls.

In general, the nature of the work of an arrastre operator covers the handling of cargoes at
piers and wharves, which was what exactly defendant Marina's function entails in this case.
To carry out its duties, the arrastre is required to provide cargo handling equipment which
includes, among others, trailer, chassis for containers. Hence, the legal relationship between
the consignee and the arrastre operator is akin to that of a depositor and the warehouseman.
Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to
take good care of the goods and to turn them over to the party entitled to their possession.
With such a responsibility, the arrastre operator must prove that the losses were not due to its
negligence or to that of its employees.

Here, the Bad Order Cargo Receipts, the Turn Over Survey of Bad Order Cargoes and the
Request for Bad Order Survey did not establish that the additional 54 rolls were in good

28
condition while in the custody of the arrastre. Said documents proved only that indeed the 158
rolls were already damaged when they were discharged to the arrastre operator and when it
was subsequently withdrawn from the arrastre operator by the customs broker. Further, the
Turn Over Inspector and the Bad Order Inspector were not presented by Marina as witnesses
to verify the correctness of the document and to testify that only 158 rolls were reported and
no others sustained damage while the shipment was in its possession. Private documents
whose authenticity and due execution was not established may not be received in evidence.

Therefore, Marina (ATI) can be held solidarily liable for the additional 54 rolls of the goods.

Note:
Dynamic, which in its capacity as broker, withdrew the 357 rolls of kraft linear board from the
custody of Marina and delivered the same to the consignee, SMC's warehouse in Manila, is
considered a common carrier.

4F AY 2019-2020

29
TRANSPORTATION LAW

LTFRB v. Valenzuela GR No. 242860

By: Capuchino, Mafel M. Date: March 11, 2019
Ponente: Perlas-Bernabe, J.

DOCTRINE:
Article 1732 carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a narrow segment of the general
population.

The business of holding one's self out as a transportation service provider, whether done
through online platforms or not, appears to be one which is imbued with public interest and
thus, deserves appropriate regulations.

FACTS:
DOTC, issued DO 2015-11, amending DO 97-1097, which set the standard classifications for
public transport conveyances to be used as basis for the issuance of a Certificate of Public
Convenience (CPC) for PUVs. In recognition of technological innovations which allowed for
the proliferation of new ways of delivering and offering public transportation, the DOTC,
through DO 2015-11, created 2 new classifications, namely, Transportation Network
Companies (TNC) and Transportation Network Vehicle Service (TNVS). Under DO 2015-11, a
TNC is defined as an organization whether a corporation, partnership, sole proprietor, or other
form, that provides pre-arranged transportation services for compensation using an online-
enabled application or platform technology to connect passengers with drivers using their
personal vehicles. Subsequently, DO 2017-11 was issued defining TNVS as a PUV
accredited with a TNC, which is granted authority or franchise by the LTFRB to run a public
transport service. DO 2017-11 further provided that motorcycles are likewise not allowed as
public transport conveyance. In its issuances, LTFRB declared that a TNC is treated as a
transport provider, whose accountability commences from the acceptance by its TNVS while
online.

DBDOYC registered its business with SEC, and subsequently, launched "Angkas," an online
and on-demand motorcycle-hailing mobile application that pairs drivers of motorcycles with
potential passengers without, however, obtaining the mandatory certificate of TNC
accreditation from the LTFRB. DBDOYC accredited Angkas drivers were allowed to offer their
transport services to the public despite the absence of CPCs. Because of this, LTFRB issued
a press release informed the riding public that DBDOYC, a TNC, cannot legally operate.
Despite such warning, however, DBDOYC continued to operate without obtaining a certificate
of TNC accreditation and filed a Petition for Declaratory Relief with Application for Temporary
Restraining Order/Writ of Preliminary Injunction against petitioners before the RTC alleging
that:

a. it is not a public transportation provider since Angkas app is a mere tool that connects
the passenger and the motorcycle driver;

30
 b. Angkas and its drivers are not engaged in the delivery of a public service;

c. alternatively, should it be determined that it is performing a public service that requires

the issuance of a certificate of accreditation and/or CPC, then DO 2017-11 should be
declared invalid because it violates Section 7 of Land and Transportation Traffic Code,
which does not prohibit motorcycles from being used as a PUV; and

d. neither the LTFRB nor the DOTr has jurisdiction to regulate motorcycles for hire.

Petition was granted. Aggrieved, Petitioners sought before the SC the issuance of a TRO to
enjoin the RTC from enforcing its injunctive writ, which the it granted in favor of the private
respondents.

ISSUE:
Is DBDOYC a common carrier engaged in rendering public service which is subject to
regulation?

HELD:
Yes. DBDOYC is a common carrier. Its proffered operation is not enough to extricate its
business from the definition of common carriers, which fall under the scope of the term "public
service."

Under the Public Service Act, the term "public service" covers any person who owns,
operates, manages, or controls 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. In relation to this, Article 1732 of the New Civil Code provides
that Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public. Article 1732 carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services or
solicits business only from a narrow segment of the general population.

It seems that DBDOYC's proffered operations is not enough to extricate its business from the
definition of common carriers, which, as mentioned, fall under the scope of the term "public
service." As the DBDOYC itself describes, Angkas is a mobile application which seeks to "pair
an available and willing Angkas biker with a potential passenger, who requested for a
motorcycle ride, relying on geo-location technology." Accordingly, it appears that it is
practically functioning as a booking agent, or at the very least, acts as a third-party liaison for
its accredited bikers. Irrespective of the application's limited market scope, i.e., Angkas users,
it remains that, on the one hand, these bikers offer transportation services to wiling public
consumers, and on the other hand, these services may be readily accessed by anyone who
chooses to download the Angkas app. The fact that its drivers are not physically hailed on the
street does not automatically render Angkas-accredited drivers as private carriers. Moreover,
based on the way the app works, it appears that there is really no contractual discretion
between the Angkas bikers and would-be passengers because the app automatically pairs
them up based on algorithmic procedures. Verily, the absence of any true choice on these

31
material contractual points apparently contradicts the postulation that the Angkas app merely
facilitates a purely private arrangement between the biker and his passenger.

DBDOYC an online and on-demand motorcycle-hailing mobile application is a common carrier

engaged in rendering public service which is subject to regulation as clearly provided in DO
2015-11 which is presumed to be valid until and unless they are set aside. The business of
holding one's self out as a transportation service provider, whether done through online
platforms or not, appears to be one which is imbued with public interest and thus, deserves
appropriate regulations.

4F AY 2019-2020

32
TRANSPORTATION LAW

Greenstar Express, Inc. v. Universal GR No. 205090

Robina Corporation and Nissin Universal Date: October 17, 2016
Robina Corporation Ponente: Del Castillo, J.
By: Clemente, Jellyn

DOCTRINE:
The law exacts from common carriers the highest degree of diligence (i.e., extraordinary
diligence) in ensuring the safety of its passengers. The collision was certainly foreseen and
avoidable but Sayson took no measures to avoid it.

FACTS:
Petitioner Greenstar is a domestic corporation engaged in the business of public
transportation, while petitioner Fruto L. Sayson, Jr. (Sayson) is one of its bus drivers.
Meanwhile, respondents Nissin Universal Robina Corporation (NURC) is a subsidiary of
Universal Robina Corporation (URC).

On February 25, 2003, which was then a declared national holiday, petitioner's bus, which
was then being driven towards Manila by Sayson, collided head-on with the URC owned-
L300 van bound to Quezon, driven by NURC 's Manager, Renante Bicomong. The vehicles
collided and Bicomong died on the spot while the colliding vehicles sustained considerable
damage. URC is the registered owner of a Mitsubishi L-300 van.

Petitioners filed a complaint for damages, premised on negligence of NURC and URC.
Petitioners argued respondents should be held liable under under Articles 2176, 2180, and
2185 of the Civil Code; that Article 2180 provides that employers shall be liable for the
damages caused by their employees acting within the scope of their assigned tasks; and that
Bicomong's negligence was the proximate cause of the collision, as the van he was driving
swerved to the opposite lane and hit the bus which was then traveling along its proper lane.
Respondents countered that Sayson had the last clear chance to avert collision but he failed
to take the necessary precaution under the circumstances, by reducing his speed and
applying the brakes on time to avoid collision.

The RTC and CA both denied the petitioner’s claim against the respondent. The accident,
having occurred outside Renante Bicomong's assigned tasks, both courts ruled that
defendant employers cannot be held liable.

ISSUE:
1. Whether or not respondents, as employers, are liable for damages for the acts of its
employees?
2. Did the petitioner exercised the diligence required at the time of the accident?

HELD:
1. No. The Court denied the petition. First, in cases where both the registered-owner rule and
Article 2180 apply, the plaintiff must first establish that the employer is the registered owner of
the vehicle in question. Once the plaintiff successfully proves ownership, there arises a
disputable presumption that the requirements of Article 2180 have been proven. As a

33
consequence, the burden of proof shifts to the defendant to show that no liability under Article
2180 has arisen. In the present case, it was established that URC was the registered owner of
the L-300 van, although it appears that it was designated for use by NURC, and that
Bicomong was the Operations Manager of NURC. It must be said that when by evidence the
ownership of the van and Bicomong's employment were proved, the presumption of
negligence on respondents' part attached, as the registered owner of the and as Bicomong's
employer.

Respondents succeeded in overcoming the presumption of negligence, having shown that

when the collision took place, Bicomong was not in the performance of his work; that he was
in possession of a service vehicle that did not belong to his employer NURC, but to URC; that
his use of the URC van was unauthorized - personal undertaking; that the accident occurred
on a holiday and while Bicomong was on his way home to his family in Quezon province; and
that Bicomong had no official business whatsoever in his hometown in Quezon, or in Laguna
where the collision occurred, his area of operations being limited to the Cavite area.

2. No, petitioners failed to exercise the diligence required by the law. The law exacts from
common carriers (i.e.,. those persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public) the highest degree of diligence (i.e.,
extraordinary diligence) in ensuring the safety of its passengers. The collision was certainly
foreseen and avoidable but Sayson took no measures to avoid it.

Moreover, the doctrine of last clear chance provides that where both parties are negligent but
the negligent act of one is appreciably later in point of time than that of the other, or where it is
impossible to determine whose fault or negligence brought about the occurrence of the
incident, the one who had the last clear opportunity to avoid the impending harm but failed to
do so, is chargeable with the consequences arising therefrom. Stated differently, the rule is
that the antecedent negligence of a person does not preclude recovery of damages caused
by the supervening negligence of the latter, who had the last fair chance to prevent the
impending harm by the exercise of due diligence.

Evidence suggests that the collision could have been avoided if Sayson exercised care and
prudencet. Despite having seen Bicomong drive the URC van in a precarious manner while
the same was still a good 250 meters away from his bus, Sayson did not take the necessary
precautions, as by reducing speed and adopting a defensive stance to avert any untoward
incident. The collision was certainly foreseen and avoidable but Sayson took no measures to
avoid it. Rather than exhibit concern for the welfare of his passengers and the driver of the
oncoming vehicle, who might have fallen asleep or suddenly fallen ill at the wheel, Sayson
coldly and uncaringly stood his ground;-dosed his eyes, and left everything to fate, without
due regard for the consequences. Such a suicidal mindset cannot be tolerated, for the grave
danger it poses to the public and passengers availing of petitioners' services.

4F AY 2019-2020

34
TRANSPORTATION LAW

Light Rail Transit Authority (LRTA) v. GR No. 145804

Navidad Date: February 6, 2003
By: Clemente, Jellyn Ponente: Vitug

DOCTRINE:
The law requires common carriers to carry passengers safely using the utmost diligence of
very cautious persons with due regard for all circumstances. Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to
the contract of carriage. The statutory provisions render a common carrier liable for death of
or injury to passengers (a) through the negligence or wilful acts of its employees or b) on
account of wilful acts or negligence of other passengers or of strangers if the common
carrier’s employees through the exercise of due diligence could have prevented or stopped
the act or omission.

FACTS:
About 7pm of 14 October 1993, Nicanor Navidad, then drunk, entered the EDSA LRT station
after purchasing a "token" (representing payment of the fare). While Navidad was standing on
the platform, Junelito Escartin, the security guard assigned to the area approached Navidad.
A misunderstanding or an altercation ensued that led to a fist fight. No evidence, however,
was adduced to indicate how the fight started or who delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he
was killed instantaneously.

Respondent Marjorie Navidad, along with her children, filed a complaint for damages against
Junelito Escartin, Rodolfo Roman, the LRTA, and Prudent Security Agency for the death of
her husband. Prudent denied liability and averred that it had exercised due diligence in the
selection and supervision of its security guards. The LRTA and Roman presented their
evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was negligent in his assigned task.

The appellate court exonerated Prudent from any liability for the death of Nicanor Navidad
and, instead, holding the LRTA and Roman jointly and severally liable.

ISSUE:
Is petitioner LRTA liable for the death of Nicanor Navidad?

HELD:
LRTA is liable. Law and jurisprudence dictate that a common carrier, both from the nature of
its business and for reasons of public policy, is burdened with the duty of exercising utmost
diligence in ensuring the safety of passengers.

The law requires common carriers to carry passengers safely using the utmost diligence of
very cautious persons with due regard for all circumstances. Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to
the contract of carriage. The statutory provisions render a common carrier liable for death of

35
or injury to passengers (a) through the negligence or wilful acts of its employees or b) on
account of wilful acts or negligence of other passengers or of strangers if the common
carrier’s employees through the exercise of due diligence could have prevented or stopped
the act or omission.
In case of such death or injury, a carrier is presumed to have been at fault or been negligent,
and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the carrier to prove
that the injury is due to an unforeseen event or to force majeure. In the absence of
satisfactory explanation by the carrier on how the accident occurred, which petitioners,
according to the appellate court, have failed to show, the presumption would be that it has
been at fault, an exception from the general rule that negligence must be proved.

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the high
diligence required of the common carrier. In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under the contract of carriage.

4F AY 2019-2020

36
TRANSPORTATION LAW

Annie Tan v Great Harvest Enterprises GR No. 220400

By: Crisostomo, Anna Camille Castro Date: Mar 20, 2019
Ponente: Leonen

DOCTRINE:
Common carriers are obligated to exercise extraordinary diligence over the goods entrusted to
their care. This is due to the nature of their business, with the public policy behind it geared
toward achieving allocative efficiency and minimizing the inherently inequitable dynamics
between the parties to the transaction

FACTS:
Great Harvest hired Tan to transport 430 bags of soya beans from Tacoma Integrated Port
Services, Inc. (Tacoma) in Port Area, Manila to Selecta Feeds in Camarin, Novaliches,
Quezon City.

That same day, the bags of soya beans were loaded into Tan's hauling truck. Her employee,
Rannie Sultan Cabugatan (Cabugatan), then delivered the goods to Selecta Feeds.

At Selecta Feeds, however, the shipment was rejected. Upon learning of the rejection, Great
Harvest instructed Cabugatan to deliver and unload the soya beans at its warehouse in
Malabon. Yet, the truck and its shipment never reached Great Harvest's warehouse.

Great Harvest demanded from Tan the payment of the value of the lost goods but Tan
refused to pay.

Tan opines that she is not liable for the value of the lost soya beans since the truck hijacking
was a fortuitous event and because "the carrier is not an insurer against all risks of travel.

ISSUE:
Whether or not the hijacking in this case is a fortuitous event?

HELD:
NO.

Article 1734 of the Civil Code holds a common carrier fully responsible for the goods entrusted
to him or her, unless there is enough evidence to show that the loss, destruction, or
deterioration of the goods falls under any of the enumerated exceptions:

ARTICLE 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;

37
 (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 packing or in the containers;

(5) Order or act of competent public authority.

Nothing in the records shows that any of these exceptions caused the loss of the soya
beans.

Further, petitioner's reliance on De Guzman v. Court of Appeals is misplaced. There, the

48

common carrier was absolved of liability because the goods were stolen by robbers who used
"grave or irresistible threat, violence[,] or force" to hijack the goods. De Guzman viewed the
armed hijack as a fortuitous event:

Under Article 1745 (6) above, a common carrier is held responsible — and will
not be allowed to divest or to diminish such responsibility — even for acts of
strangers like thieves or robbers, except where such thieves or robbers in fact
acted "with grave or irresistible threat, violence or force." We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the goods
carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence[,] or force."

In contrast to De Guzman, the loss of the soya beans here was not attended by grave or
irresistible threat, violence, or force. Instead, it was brought about by petitioner's failure to
exercise extraordinary diligence when she neglected vetting her driver or providing security for
the cargo and failing to take out insurance on the shipment's value. As the Court of Appeals
held:

Besides, as the records would show, appellant did not observe extra-ordinary
(sic) diligence in the conduct of her business as a common carrier. In breach of
their agreement, appellant did not provide security while the goods were in transit
and she also did not pay for the insurance coverage of said goods. These
measures could have prevented the hijacking (sic) or could have ensured the
payment of the damages sustained by the appellee.

4F AY 2019-2020

38
TRANSPORTATION LAW

Manay, Jr. v. Cebu Air, Inc. GR No. 210621

By: Bongabong, Joshua Date: April 4, 2016
Ponente: Leonen, J.

DOCTRINE:
Common carriers are required to exercise extraordinary diligence in the performance of its
obligations under the contract of carriage. This extraordinary diligence must be observed not
only in the transportation of goods and services but also in the issuance of the contract of
carriage, including its ticketing operations. The common carrier's obligation to exercise
extraordinary diligence in the issuance of the contract of carriage is fulfilled by requiring a full
review of the flight schedules to be given to a prospective passenger before payment.

FACTS:
Carlos S. Jose purchased 20 Cebu Pacific round-trip tickets from Manila to Palawan for
himself and on behalf of his relatives and friends. Jose alleged that he specified to "Alou," the
Cebu Pacific ticketing agent, that his preferred date and time of departure from Manila to
Palawan should be on July 20, 2008 at 8:20 a.m. and that his preferred date and time for their
flight back to Manila should be on July 22, 2008 at 4:15 p.m. He alleged that after paying for
the tickets, Alou printed the tickets, which consisted of three (3) pages, and recapped only the
first page to him. Since the first page contained the details he specified to Alou, he no longer
read the other pages of the flight information. On July 20, 2008, Jose and his 19 companions
boarded the 8:20am Cebu Pacific flight to Palawan and had an enjoyable stay.

On the afternoon of July 22, 2008, the group proceeded to the airport for their flight back to
Manila. During the processing of their boarding passes, they were informed by Cebu Pacific
personnel that nine (9) of them could not be admitted because their tickets were for the 10:05
a.m. flight earlier that day. Jose informed the ground personnel that he personally purchased
the tickets and specifically instructed the ticketing agent that all 20 of them should be on the
4:15 p.m. flight to Manila. Upon checking the tickets, they learned that only the first two (2)
pages had the schedule Jose specified. They were left with no other option but to rebook their
tickets.

Jose and his companions filed a Complaint for Damages against Cebu Pacific before the
Metropolitan Trial Court of Mandaluyong. The Metropolitan Trial Court rendered its Decision
ordering Cebu Pacific to pay Jose and his companions actual damages. Cebu Pacific
appealed to the Regional Trial Court, reiterating that its ticketing agent gave Jose a full recap
of the tickets he purchased. The Regional Trial Court affirmed the findings of the Metropolitan
Trial Court. Cebu Pacific appealed to the Court of Appeals, arguing that it was not at fault for
the damages caused to the passengers. On appeal, the Court of Appeals rendered the
Decision granting the appeal and reversing the Decisions of the Metropolitan Trial Court and
the Regional Trial Court.

ISSUE:
Whether or not Cebu Air is liable for damages to petitioners under the contract of carriage.

HELD:
No. Petitioners, in failing to exercise the necessary care in the conduct of their affairs, were
without a doubt negligent. Thus, they are not entitled to damages.

39
Common carriers are required to exercise extraordinary diligence in the performance of its
obligations under the contract of carriage. This extraordinary diligence must be observed not
only in the transportation of goods and services but also in the issuance of the contract of
carriage, including its ticketing operations. A contract of carriage is defined as "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." Once a plane ticket is issued, the common
carrier binds itself to deliver the passenger safely on the date and time stated in the ticket.
The contractual obligation of the common carrier to the passenger is governed principally by
what is written on the contract of carriage. In this case, both parties stipulated that the flight
schedule stated on the nine (9) disputed tickets was the 10:05 a.m. flight of July 22, 2008.
According to the contract of carriage, respondent's obligation as a common carrier was to
transport nine (9) of the petitioners safely on the 10:05 a.m. flight of July 22, 2008. Petitioners,
however, argue that respondent was negligent in the issuance of the contract of carriage
since the contract did not embody their intention. They insist that the nine (9) disputed tickets
should have been scheduled for the 4:15 p.m. flight of July 22, 2008. Respondent, on the
other hand, denies this and states that petitioner Jose was fully informed of the schedules of
the purchased tickets and petitioners were negligent when they failed to correct their ticket
schedule.

The common carrier's obligation to exercise extraordinary diligence in the issuance of the
contract of carriage is fulfilled by requiring a full review of the flight schedules to be given to a
prospective passenger before payment. Based on the information stated on the contract of
carriage, all three (3) pages were recapped to petitioner Jose. The only evidence petitioners
have in order to prove their true intent of having the entire group on the 4:15 p.m. flight is
petitioner Jose's self-serving testimony that the airline failed to recap the last page of the
tickets to him. They have neither shown nor introduced any other evidence before the
Metropolitan Trial Court, Regional Trial Court, Court of Appeals, or this Court. Even assuming
that the ticketing agent encoded the incorrect flight information, it is incumbent upon the
purchaser of the tickets to at least check if all the information is correct before making the
purchase. Once the ticket is paid for and printed, the purchaser is presumed to have agreed
to all its terms and conditions.

Most of the petitioners were balikbayans. It is reasonable to presume that they were
adequately versed with the procedures of air travel, including familiarizing themselves with the
itinerary before departure. Moreover, the tickets were issued days before their departure from
Manila and days from their departure from Palawan. There was more than enough time to
correct any alleged mistake in the flight schedule. Petitioners, in failing to exercise the
necessary care in the conduct of their affairs, were without a doubt negligent. Thus, they are
not entitled to damages. Before damages may be awarded, "the claimant should satisfactorily
show the existence of the factual basis of damages and its causal connection to defendant's
acts."

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TRANSPORTATION LAW

Eastern Shipping Lines Inc., v BPI/MS GR No. 193986

Insurance Corporation Date: January 15, 2014
By: Crisostomo, Anna Camille Castro Ponente: Villarama, Jr.

DOCTRINE:
Cargoes while being unloaded generally remain under the custody of the carrier

FACTS:
Sumitomo Corporation shipped various steel sheets in coil through petitioner Eastern
Shipping. The cargoes are then to be turned over to Asian Terminals, Inc. (ATI) for
stevedoring, storage and safekeeping pending the consignee's withdrawal of the goods.

Upon arrival in the port of Manila the steel sheets were found to be in bad condition. During
unloading of the vessel, ATI was negligent in the handling of the cargoes; the coils were not
properly laid down on the ground and were even dropped, while the other coils hit and
bumped each other while being arranged by forklift operators.

Thereafter, upon delivery to the consignee the goods were rejected because of the damage.

A claim for damages against both Eastern Shipping and ATI was subsequently filed.

ISSUE:
Whether or not petitioner and ATI are liable for damages because of their negligence in
handling the goods?

HELD:
YES

Cargoes while being unloaded generally remain under the custody of the carrier.

As herein before found by the RTC and affirmed by the CA based on the evidence presented,
the goods were damaged even before they were turned over to ATI. Such damage was even
compounded by the negligent acts of petitioner and ATI which both mishandled the goods
during the discharging operations.

Thus, it bears stressing unto petitioner that 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 transported by them.

Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the goods. 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.

41
Owing to this high degree of diligence required of them, common carriers, as a general rule,
are presumed to have been at fault or negligent if the goods they transported deteriorated or
got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such high level of diligence. In this case,
petitioner failed to hurdle such burden.

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42
TRANSPORTATION LAW

Central Shipping Company v. Insurance GR No. 150751

Company of North America Date: September 20, 2004
By: de Leon, Jea Belinda Ponente: Panganiban, J;

DOCTRINE:
A common carrier is presumed to be at fault or negligent. It shall be liable for the loss,
destruction or deterioration of its cargo, unless it can prove that the sole and proximate cause
of such event is one of the causes enumerated in Article 1734 of the Civil Code, or that it
exercised extraordinary diligence to prevent or minimize the loss.

FACTS:
On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received on board its vessel, the
M/V Central Bohol, 376 pieces of Round Logs and undertook to transport said shipment to
Manila for delivery to Alaska Lumber Co., Inc. The cargo is insured for P3, 000, 000.00
against total lost under respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After a few hours of the trip, the ship tilts
10 degrees to its side, due to the shifting of the logs in the hold. It continues to tilt causing the
captain and the crew to abandon ship. The ship sank.

Respondent alleged that the total loss of the shipment was caused by the fault and
negligence of the [petitioner] and its captain and as direct consequence thereof the consignee
suffered damage in the sum of P3,000,000.00. On the other hand, the petitioner 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.

ISSUE:
1. Whether or not the carrier is liable for the loss of the cargo.
2. Whether or not the doctrine of limited liability is applicable.

HELD:

1. Yes, petitioner Central Shipping Company is liable for the loss of the cargoes.

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.10 In the event of loss, destruction or deterioration of the insured
goods, common carriers are responsible; that is, unless they can prove that such loss,
destruction or deterioration was brought about - - among others - - by "flood, storm,
earthquake, lightning or other natural disaster or calamity." In all other cases not specified
under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed extraordinary diligence.

The contention of the petitioner that the loss is due to the occurrence of storm, which is a caso
fortuito and must exempt them from liability is untenable. For it to be considered as caso
fortuito, the following requisites must be complied with;

43
 a. The cause of the unforeseen and unexpected occurrence, or of the failure of the
debtor to comply with his obligation, must be independent of the human will;

b. It must be impossible to foresee the event which constitutes the caso fortuito, or if it
can be foreseen, it must be impossible to avoid;

c. The occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and

d. The obligor (debtor) must be free from any participation in or the aggravation of the
injury resulting to the creditor.

The court affirmed the ruling of the lower court and the Court of Appeals 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. Even if
the weather encountered by the ship is to be deemed a natural disaster under Article 1739 of
the Civil Code, petitioner failed to show that such natural disaster or calamity was the
proximate and only cause of the loss. Human agency must be entirely excluded from the
cause of injury or loss. In other words, the damaging effects blamed on the event or
phenomenon must not have been caused, contributed to, or worsened by the presence of
human participation. The defense of fortuitous event or natural disaster cannot be
successfully made when the injury could have been avoided by human precaution.

The monsoon is not the proximate cause of the sinking but is due to the improper stowage of
logs. The logs were not secured by cable wires, causing the logs to shift and later on the
sinking the ship.

2. The doctrine of limited liability under Article 587 of the Code of Commerce36 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 ship owner and the captain. It has already been established that the sinking
of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the
crew, as shown by the improper stowage of the cargo of logs. "Closer supervision on the part
of the ship owner could have prevented this fatal miscalculation." As such, the ship owner was
equally negligent. It cannot escape liability by virtue of the limited liability rule.

4F AY 2019-2020

44
TRANSPORTATION LAW

La Mallorca v. Hon. Court of Appeals, GR No. L-20761

Mariano Beltran, et al. Date: July 27, 1966
By: de Leon, Jea Belinda Ponente: Barrera, J.

DOCTRINE:
Once created, the relationship will not ordinarily terminate until the passenger has, after
reaching his destination, safely alighted from the carrier’s conveyance or has had a
reasonable opportunity to leave the carrier’s premises. All persons who remain on the
premises within a reasonable time after leaving the conveyance are to be deemed
passengers, and what is reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances, and includes reasonable time to look after his
baggage and prepare for his departure.

FACTS:
Spouses Beltran, together with their minor daughters, namely, Milagros who is 13 years old,
Raquel which is about 4½ years old, and Fe who is over 2 years old, boarded the Pambusco
bus, owned and operated by La Mallorca, at San Fernando, Pampanga, bound for Anao,
Mexico, Pampanga.

The bus reached Anao. Mariano Beltran, then carrying some of their baggages, led his family
members to a shaded spot on the left pedestrian side of the road about 4 or 5 meters away
from the vehicle. He returned to the bus to get his other bayong which he had left behind
without noticing that his daughter Raquel followed him. While Mariano was on the running
board of the bus waiting for the conductor to hand him his bayong, the bus, whose motor was
not shut off while unloading, suddenly started moving forward notwithstanding the fact that the
conductor has not given the driver the customary signal to start. The bus hit Racquel, his four-
year old child and her skull was crushed as a consequence.

La Mallorca claimed that there could not be a breach of contract in the case, for the reason
that when the child met her death, she was no longer a passenger of the bus involved in the
incident and, therefore, the contract of carriage had already terminated. On the other hand,
Mariano contended that he had to return to the vehicle (to get one of his bags or bayong that
was left under one of the seats of the bus. Thus, as far as Mariano is concerned, the relation
of passenger and carrier between him and the petitioner remained subsisting when he
returned to get his bayong. Hence, La Mallorca should be held liable for culpa contractual.

ISSUE:
Whether or not La Mallorca is guilty of breach of contract of carriage.

HELD:

Yes, petitioner La Mallorca is guilty of breach of contract of carriage since there was a breach
of its duty to exercise extraordinary diligence with respect to the four-year old child and hence,
the carrier is liable as a consequence.

There can be no controversy that as far as the father is concerned, when he returned to the
bus for his bayong which was not unloaded, the relation of passenger and carrier between
him and the petitioner remained subsisting. The relation of carrier and passenger does not

45
necessarily cease where the latter, after alighting from the car aids the carrier’s servant or
employee in removing his baggage from the car.

It is a rule that the relation of carrier and passenger does not cease the moment the
passenger alights from the carrier’s vehicle at a place selected by the carrier at the point of
destination but continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier’s premises.

The father returned to the bus to get one of his baggages which was not unloaded when they
alighted from the bus. Raquel must have followed her father. However, although the father
was still on the running board of the bus awaiting for the conductor to hand him the bag or
bayong, the bus started to run, so that even he had jumped down from the moving vehicle. It
was that this instance that the child, who must be near the bus, was run over and killed. In the
circumstances, it cannot be claimed that the carrier’s agent had exercised the “utmost
diligence” of a “very cautious person” required by Article 1755 of the Civil Code to be
observed by a common carrier in the discharge of its obligation to transport safely its
passengers. The driver, although stopping the bus, nevertheless did not put off the engine. He
started to run the bus even before the conductor gave him the signal to go and while the latter
was still unloading part of the baggage of the passengers Beltran and family. The presence of
the said passengers near the bus was not unreasonable and they are, therefore, to be
considered still as passengers of the carrier, entitled to the protection under their contract of
carriage.

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46
TRANSPORTATION LAW

Aboitiz Shipping Corp. v. CA GR No. 84458

By: Dela Cruz, Alyssa Christine C. Date: November 6, 1989
Ponente: Regalado, J.

DOCTRINE:
Passengers of vessels are given a longer period of time to disembark from ship than other
common carriers due to the very nature of its business. With respect to the bulk of cargoes
and the number of passengers it can load, such vessels are capable of accommodating a
bigger volume of both as compared to the capacity of a regular commuter bus. Consequently,
a ship passenger will need at least an hour as is the usual practice, to disembark from the
vessel and claim his baggage whereas a bus passenger can easily get off the bus and
retrieve his luggage in a very short period of time.

FACTS:
Upon arrival of the vessel M/V Antonia at its destination in Manila, passengers therein
disembarked, a gangplank having been provided connecting the side of the vessel to the pier.
Instead of using said gangplank, Anacleto Viana disembarked on the third deck which was on
the level with the pier. After said vessel had landed, the Pioneer Stevedoring Corporation took
over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum
of Agreement between the third party defendant Pioneer Stevedoring Corporation and
defendant Aboitiz Shipping Corporation.

The crane owned by the third party defendant and operated by its crane operator Alejo
Figueroa was placed alongside the vessel and one (1) hour after the passengers of said
vessel had disembarked, it started operation by unloading the cargoes from said vessel. While
the crane was being operated, Anacleto Viana who had already disembarked from said vessel
obviously remembering that some of his cargoes were still loaded in the vessel, went back to
the vessel, and it was while he was pointing to the crew of the said vessel to the place where
his cargoes were loaded that the crane hit him, pinning him between the side of the vessel
and the crane. He died subsequently thus private respondents Vianas filed a complaint for
damages against petitioner corporation for breach of contract of carriage.

ISSUE:
1. Whether or not Viana is still considered a passenger at the time of the incident?
2. Whether or not the petitioner is liable for the death of the victim despite the
contributory negligence of the latter?

HELD:
1. Yes, he is still considered a passenger at the time of the incident.

It is of common knowledge that, by the very nature of petitioner's business as a

shipper, the passengers of vessels are allotted a longer period of time to disembark
from the ship than other common carriers such as a passenger bus.

Here, at the time the victim was taking his cargoes, the vessel had already docked an
hour earlier. In consonance with common shipping procedure as to the minimum time
of one (1) hour allowed for the passengers to disembark, it may be presumed that the
victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even if

47
 he had already disembarked an hour earlier, his presence in petitioner's premises was
not without cause. The victim had to claim his baggage which was possible only one
(1) hour after the vessel arrived since it was admittedly standard procedure in the case
of petitioner's vessels that the unloading operations shall start only after that time.

Consequently, under the foregoing circumstances, the victim Anacleto Viana is still
deemed a passenger of said carrier at the time of his tragic death.
2. Yes, petitioner is still liable for the death of Viana despite his contributory negligence.
Under the law, common carriers are, from the nature of their business and for
reasons of public policy, bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case
In the present case, there was no cordon of drums around the perimeter of the crane
and visible warning signs in the vicinity. Thus, the victim and other passengers were
not sufficiently warned that merely venturing into the area in question was fraught
with serious peril. There is no showing that the petitioner was extraordinarily diligent
in requiring or seeing to it that said precautionary measures were strictly and actually
enforced to subserve their purpose of preventing entry into the forbidden area. By no
stretch of liberal evaluation can such perfunctory acts approximate the "utmost
diligence of very cautious persons" to be exercised "as far as human care and
foresight can provide" which is required by law of common carriers with respect to
their passengers.
Hence, while the victim was contributorily negligent, petitioner's aforesaid failure to
exercise extraordinary diligence was the proximate and direct cause of, because it
could definitely have prevented the former's death.

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48
TRANSPORTATION LAW

Regional Container Lines of Singapore v. GR No. 168151

The Netherlands Insurance Co. Date: September 4, 2009
(Philippines) Ponente: Brion, J.
By: dela Cruz, Alyssa Christine C.

DOCTRINE:
To overcome the presumption of negligence, the common carrier must establish by adequate
proof that it exercised extraordinary diligence over the goods. It must do more than merely
show that some other party could be responsible for the damage.

FACTS:
On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be
shipped from Singapore to Manila for Temic Telefunken Microelectronics Philippines (Temic).
U-Freight Singapore PTE Ltd. (U-Freight Singapore), a forwarding agent based in Singapore,
contracted the services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle) to transport the
subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in its Refrigerated
Container. As the cargo was highly perishable, the inside of the container had to be kept at a
temperature of 0º Celsius. Pacific Eagle then loaded the refrigerated container on board the
M/V Piya Bhum, a vessel owned by RCL, with which Pacific Eagle had a slot charter
agreement. Netherlands Insurance issued a Marine Open Policy in favor of Temic to cover all
losses/damages to the shipment.

On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the refrigerated
container, it was plugged to the power terminal of the pier to keep its temperature constant.
According to the conducted protective survey of the cargo, the temperature reading was
constant from October 18, 1995 to October 25, 1995 at 0º Celsius. However, at midnight of
October 25, 1995 — when the cargo had already been unloaded from the ship — the
temperature fluctuated with a reading of 33º Celsius. It was believed the fluctuation was
caused by the burnt condenser fan motor of the refrigerated container.

On November 9, 1995, Temic received the shipment and found the cargo completely
damaged. Temic filed a claim for cargo loss against Netherlands Insurance, which the latter
paid. Netherlands Insurance then filed a complaint for subrogation of insurance settlement
with the RTC of Manila against EDSA Shipping, RCL, Eagle Liner Shipping Agencies, U-
Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean). RCL and EDSA Shipping insisted
that Netherlands Insurance had (1) failed to prove any valid subrogation, and (2) failed to
establish that any negligence on their part or that the loss was sustained while the cargo was
in their custody.

ISSUE:
Whether or not RCL and EDSA Shipping are liable as common carriers under the theory of
presumption of negligence?

HELD:
Yes, RCL and EDSA Shipping are liable as common carriers under the theory of presumption
of negligence.

Under the law, to overcome the presumption of negligence, the common carrier must

49
establish by adequate proof that it exercised extraordinary diligence over the goods. It must
do more than merely show that some other party could be responsible for the damage.

In the present case, RCL and EDSA Shipping failed to prove that they did exercise that
degree of diligence required by law over the goods they transported. Indeed, there is sufficient
evidence showing that the fluctuation of the temperature in the refrigerated container van, as
recorded in the temperature chart, occurred after the cargo had been discharged from the
vessel and was already under the custody of the arrastre operator, ICTSI. This evidence,
however, does not disprove that the condenser fan — which caused the fluctuation of the
temperature in the refrigerated container — was not damaged while the cargo was being
unloaded from the ship. It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier.

Therefore, since RCL and EDSA Shipping failed to dispute this and they failed to prove that
they exercised the degree of diligence required, then they are liable in the present case.

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TRANSPORTATION LAW

Mariano, Jr. v. Callejas and de Borja GR No. 166640

By: Dolor, Lourdes Xylene Date: July 31, 2009
Ponente: Puno, C.J.

DOCTRINE:
It is clear that neither the law nor the nature of the business of a transportation company
makes it an insurer of the passenger's safety, but that its liability for personal injuries
sustained by its passenger rests upon its negligence, its failure to exercise the degree of
diligence that the law requires.

FACTS:
Dr. Frelinda Mariano (Frelinda) was a passenger of Celyrosa Express bus bound for
Tagaytay, when it collided with an Isuzu trailer truck coming from an opposite direction, which
caused her death. The trailer truck bumped the passenger bus on its left middle portion. Due
to the impact, the passenger bus fell on its right side on the right shoulder of the highway.
Petitioner Herminio Mariano, Jr. (Petitioner) is the surviving spouse of Frelinda. Said bus was
owned and driver by Illdefonso Callejas and Edgar de Borja (respondents), respectively.

Mariano, Jr. filed a complaint for breach of contract of carriage and damages against
respondents for their failure to transport his wife safely to her destination. Respondents
denied liability for the death of Dr. Mariano. They claimed that the proximate cause of the
accident was the recklessness of the driver of the trailer truck which bumped their bus while
allegedly at a halt on the shoulder of the road in its rightful lane. Thus, respondent Callejas
filed a third-party complaint against Liong Chio Chang, the owner of the trailer truck, for
indemnity in the event that he would be held liable for damages to petitioner.

The trial court found respondents, together with Liong Chio Chang, jointly and severally liable
to pay petitioner. Respondents appealed to CA which reversed the decision of the trial court.
Hence, this present petition.

ISSUE:
Whether or not Celyrosa Express committed breach of contract of carriage by failing to carry
the passengers, including Frelinda, in accordance with the extraordinary diligence required by
law.

HELD:
No, Celyrosa Express was not in breach of its contract of carriage with the passengers,
including Frelinda.

The SC interpreted Articles 1733, 1755, and 1756 of the Civil Code in the case of Pilapil v. CA
as follows:

While the law requires the highest degree of diligence from common carriers in the safe
transport of their passengers and creates a presumption of negligence against them, it does
not, however, make the carrier an insurer of the absolute safety of its passengers.

Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution
in the carriage of passengers by common carriers to only such as human care and foresight

51
can provide. What constitutes compliance with said duty is adjudged with due regard to all the
circumstances.

Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of
the common carrier when its passenger is injured, merely relieves the latter, for the time
being, from introducing evidence to fasten the negligence on the former, because the
presumption stands in the place of evidence. Being a mere presumption, however, the same
is rebuttable by proof that the common carrier had exercised extraordinary diligence as
required by law in the performance of its contractual obligation, or that the injury suffered by
the passenger was solely due to a fortuitous event.

Infering from the law, the intention of the Code Commission and Congress ia to curb the
recklessness of drivers and operators of common carriers in the conduct of their business.

Thus, it is clear that neither the law nor the nature of the business of a transportation company
makes it an insurer of the passenger's safety, but that its liability for personal injuries
sustained by its passenger rests upon its negligence, its failure to exercise the degree of
diligence that the law requires.

In the case at bar, petitioner cannot succeed in his contention that respondents failed to
overcome the presumption of negligence against them. The totality of evidence shows that
the death of petitioner’s spouse was caused by the reckless negligence of the driver of the
Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus, owned and
operated by respondents.

Thus, Celyrosa cannot be held liable for the death of Frelinda.

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TRANSPORTATION LAW

Heirs of Ochoa v. G & S Transport Corp. GR No. 170071 & 170125

By: Dolor, Lourdes Xylene Date: March 9, 2011
Ponente: Del Castillo, J.

DOCTRINE:
In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when
a passenger dies or is injured. In fact, there is even no need for the court to make an express
finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence.

FACTS:
At the Manila Domestic Airport, the Jose Marcial K. Ochoa (Ochoa) boarded and rode a
taxicab owned and operated by G & S Transport Corp. (G & S) and driven by its employee
and authorized driver Bibiano Padilla, Jr. (Padilla) on Ochoa’s way home to Quezon City. The
taxicab was then cruising along EDSA at high speed. While going up the Boni Serrano
(Santolan) fly-over, it overtook another cab and tried to pass another vehicle, a ten-wheeler
cargo truck. Because of its speed, Padilla was unable to control the cab. To avoid colliding
with the truck, Padilla turned the wheel to the left causing his taxicab to ram the railing
throwing itself off the fly-over and fell on the middle surface of EDSA below. The forceful drop
of the vehicle on the floor of the road broke and split it into two parts. Both driver Padilla and
passenger Ochoa were injured and rushed to the hospital. The hospital declared Ochoa was
declared dead on arrival from the accident. The death certificate issued by the Office of the
Civil Registrar of Quezon City cited the cause of his death as vehicular accident.

G & S argues that the proximate cause of the accident is a fortuitous event and that it
exercised the diligence of a good father of a family in the selection and supervision of its
employees. On the other hand, the heirs of Ochoa assert that fortuitous event was not the
proximate cause of the mishap. They point out that Padilla was running at an extremely high
speed and that is why the impact was so strong when the taxicab rammed the fly-over railings
and was split into two when it hit the ground. Also, in criminal case against Padilla, he was
acquitted for reckless imprudence resulting to homicide. However, this does not excuse G & S
from its liability to the heirs because its liability arises from its breach of contract of carriage
and from its negligence in the selection and supervision of its employees.

ISSUE:
Whether or not the proximate cause of death of Ochoa was the negligence of the Padilla,
driver of G & S.

HELD:
There is no need to establish the proximate cause of the death of Ochoa because there is
already statutory presumption that a common carrier is at fault or is negligent when a
passenger dies, which G & S failed to overcome.

There existed a contract of carriage between G & S, as the owner and operator of the taxicab,
and Ochoa, as the passenger of said vehicle. As a common carrier, G & S "is bound to carry
Ochoa 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” (Art. 1755 of the Civil Code).
In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when

53
a passenger dies or is injured. In fact, there is even no need for the court to make an express
finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence.
Unfortunately, G & S miserably failed to overcome this presumption. In this case, Ochoa was
not able to reach his destination safely as he died during the course of the travel. The
accident which led to Ochoa’s death was due to the reckless driving and gross negligence of
G & S’ driver, Padilla, thereby holding G & S liable to the heirs of Ochoa for breach of contract
of carriage.

It should be noted that the acquittal of Padilla in the criminal case is immaterial to the instant
case for breach of contract. It is an independent civil action arising from contract which is
separate and distinct from the criminal action for reckless imprudence filed by the heirs
against Padilla by reason of the same incident. Hence, regardless of Padilla’s acquittal or
conviction in said criminal case, same has no bearing in the resolution of the present case.

4F AY 2019-2020

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TRANSPORTATION LAW

Asian Terminals, Inc. v. Simon G.R. No. 177116

Enterprises Date: February 27, 2013
By: Gamo, Norenz Jacob Jr. Ponente: Villarama, Jr. J.

DOCTRINE:
Though it is true that common carriers are presumed to have been at fault or to have acted
negligently if the goods transported by them are lost, destroyed, or deteriorated, and that the
common carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption, the plaintiff must still, before the burden is shifted to the defendant, prove that
the subject shipment suffered actual shortage. This can only be done if the weight of the
shipment at the port of origin and its subsequent weight at the port of arrival have been
proven by a preponderance of evidence, and it can be seen that the former weight is
considerably greater than the latter weight, taking into consideration the exceptions provided
in Article 1734 of the Civil Code.

FACTS:
Simon Enterprise Inc. entered into contract with Contiquincybunge Export Company as its
consignee of the shipped US Soybean Meal in Bulk. The first shipment was on October 25,
1995, where Contiquincybunge loaded 6,843.700 metric tons on board the vessel MN "Sea
Dream" at Louisiana, U.S.A., for delivery to the Port of Manila to Simon Enterprises, Inc., as
consignee. When the vessel arrived at the South Harbor in Manila, the shipment was
discharged to the receiving barges of petitioner Asian Terminals, Inc. (ATI), the arrastre
operator. Respondent later claimed having received shipment but it was short by 18.556
metric tons. The second shipment was on November 25, 1995, loaded on board the vessel
M/V "Tern". The carrier issued its clean Berth Term Grain Bill of Lading. Simon reported
receiving only 3,100.137 metric tons instead of the manifested 3,300.000 metric tons of
shipment. Respondent filed against petitioner ATI and the carrier a claim for the shortage of
199.863 metric tons, estimated to be worth US$79,848.86 or ₱2,100,025.00, but its claim was
denied.

Respondent filed with the RTC of Manila an action for damages against the unknown owner of
the vessels M/V "Sea Dream" and M/V "Tern," its local agent Inter-Asia Marine Transport,
Inc., and petitioner ATI alleging that it suffered the losses through the fault or negligence of
the said defendants. Respondent sought to claim damages plus attorney’s fees and costs of
suit. Its claim against the unknown owner of the vessel M/V "Sea Dream," however, was later
settled in a Release and Quitclaim dated June 9, 1998, and only the claims against the
unknown owner of the M/V "Tern," Inter-Asia Marine Transport, Inc., and petitioner ATI
remained.

In their Answer, the unknown owner of the vessel M/V "Tern" and its local agent Inter-Asia
Marine Transport, Inc., prayed for the dismissal of the complaint essentially alleging lack of
cause of action and prescription. Petitioner ATI meanwhile alleged in its Answer that it
exercised the required diligence in handling the subject shipment.

The RTC of Manila rendered a Decision holding petitioner ATI and its co-defendants solidarily
liable to respondent for damages arising from the shortage. Not satisfied, the unknown owner
of the vessel M/V "Tern," Inter-Asia Marine Transport, Inc. and petitioner ATI respectively filed
appeals to the CA. The Ca affirmed the decision of the RTC.

55
ISSUE:
Whether petitioner ATI is solidarily liable with its codefendants for the shortage incurred in the
shipment of the goods to respondent?

HELD:
No. 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 evidence to prove that
it actually weighed 3,300 metric tons at the port of origin.

Though it is true that common carriers are presumed to have been at fault or to have acted
negligently if the goods transported by them are lost, destroyed, or deteriorated, and that the
common carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption, the plaintiff must still, before the burden is shifted to the defendant, prove that
the subject shipment suffered actual shortage. This can only be done if the weight of the
shipment at the port of origin and its subsequent weight at the port of arrival have been
proven by a preponderance of evidence, and it can be seen that the former weight is
considerably greater than the latter weight, taking into consideration the exceptions provided
in Article 1734 of the Civil Code.

In this case, respondent failed to prove that the subject shipment suffered shortage, for it was
not able to establish that the subject shipment was weighed at the port of origin at Darrow,
Louisiana, U.S.A. and that the actual weight of the said shipment was 3,300 metric tons.The
weight of the shipment as indicated in the bill of lading is not conclusive as to the actual
weight of the goods. Consequently, the respondent must still prove the actual weight of the
subject shipment at the time it was loaded at the port of origin so that a conclusion may be
made as to whether there was indeed a shortage for which petitioner must be liable. This, the
respondent failed to do.

The presumption that the Berth Term Grain Bill of Lading serves as prima facie evidence of
the weight of the cargo has been rebutted, there being doubt as to the weight of the cargo at
the time it was loaded at the port of origin. Further, the fact that the cargo was shipped with
the arrangement "Shipper’s weight, quantity and quality unknown," indeed means that the
weight of the cargo could not be determined using as basis the figures written on the Berth
Term Grain Bill of Lading.

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%.

As indicated in the Proforma Invoice mentioned above, the moisture content of the subject
shipment was 12.5%. Taking into consideration the phenomena of desorption, the change in
temperature surrounding the Soybean Meal from the time it left wintertime Darrow, Louisiana,
U.S.A. and the time it arrived in Manila, and the fact that the voyage of the subject cargo from
the point of loading to the point of unloading was 36 days, the shipment could have definitely
lost weight, corresponding to the amount of moisture it lost during transit.

Third, we agree with the petitioner ATI that respondent has not proven any negligence on the
part of the former.
Considering that respondent was not able to establish conclusively that the subject shipment
weighed 3,300 metric tons at the port of loading, and that it cannot therefore be concluded

56
that there was a shortage for which petitioner should be responsible; bearing in mind that the
subject shipment most likely lost weight in transit due to the inherent nature of Soya Bean
Meal; assuming that the shipment lost weight in transit due to desorption, the shortage of
199.863 metric tons that respondent alleges is a minimal 6.05% of the weight of the entire
shipment, which is within the allowable 10% allowance for loss; and noting that the
respondent was not able to show negligence on the part of the petitioner and that the
weighing methods which respondent relied upon to establish the shortage it alleges is
inaccurate, respondent cannot fairly claim damages against petitioner for the subject
shipment's alleged shortage.

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TRANSPORTATION LAW

G.V. Florida Transport, Inc. v. Heirs of GR No. 208802

Battung, Jr. Date: October 14, 2015
By: Camarao, Aeron Ponente: Perlas-Bernabe, J.

DOCTRINE:
There would be no issue regarding the common carrier’s negligence in its duty to provide safe
and suitable care, as well as competent employees in relation to its transport business where
the injury sustained by the passenger was in no way due (1) to any defect in the means of
transport or in the method of transporting, or (2) to the negligent or willful acts of the common
carrier’s employees with respect to the foregoing — such as when the injury arises wholly
from causes created by strangers which the carrier had no control of or prior knowledge to
prevent. As such, the presumption of fault/negligence foisted under Article 1756 of the Civil
Code should not apply.

If death was caused by a co-passenger, the applicable provision is Article 1763 of the Civil
Code, which states that “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.” Notably, for this obligation, the law provides a
lesser degree of diligence, i.e., diligence of a good father of a family, in assessing the
existence of any culpability on the common carrier’s part.

Nocum v. Laguna Tayabas Bus Company, has held that common carriers should be given
sufficient leeway in assuming that the passengers they take in will not bring anything that
would prove dangerous to himself, as well as his co-passengers, unless there is something
that will indicate that a more stringent inspection should be made.

FACTS:
Romeo Battung (Romeo) boarded Florida Bus on March 22, 2003 in in Delfin Albano, Isabela,
bound for Manila. Battung was seated at the first row behind the driver and slept during the
ride. When the bus reached the Philippine Carabao Center in Muñoz, Nueva Ecija, the bus
driver stopped the bus and alighted to check the tires.

At this point, a man who was seated at the fourth row of the bus stood up, shot Battung at his
head and left. The bus conductor notified the driver of the incident and thereafter, brought
Romeo to the hospital, but the latter was pronounced dead on arrival.

Romero’s Heirs (Heirs of Battung; respondent) filed a complaint for damages in the aggregate
amount of P1,826,000.00 based on a breach of contract of carriage against petitioner, driver
and conductor (petitioner, et al.) before the RTC.

ARGUMENTS:
Respondents contended that as a common carrier, petitioner and its employees are bound to
observe extraordinary diligence in ensuring the safety of passengers; and in case of injuries
and/or death on the part of a passenger, they are presumed to be at fault and, thus,
responsible therefor. As such, petitioner, et al. should be held civilly liable for Battung’s death.

In their defense, petitioner, et al. maintained that they had exercised the extraordinary

58
diligence required by law from common carriers. In this relation, they claimed that a common
carrier is not an absolute insurer of its passengers and that Battung’s death should be
properly deemed a fortuitous event. Thus, they prayed for the dismissal of the complaint, as
well as the payment of their counterclaims for damages and attorney’s fees.

RTC = ruled in favor of Heirs of Battung and awarded 1.586Million for Compensatory
Damages; 50,000 for actual damages; and 50,000 for moral damages; found that petitioner,
et al. were unable to rebut the presumed liability of common carriers in case of injuries/death
to its passengers due to their failure to show that they implemented the proper security
measures to prevent passengers from carrying deadly weapons inside the bus which, in this
case, resulted in the killing of Battung.

CA = A affirmed the ruling of the RTC in toto; It held that the killing of Battung cannot be
deemed as a fortuitous event, considering that such killing happened right inside petitioner’s
bus and that petitioner, et al. did not take any safety measures in ensuring that no deadly
weapon would be smuggled inside the bus.

ISSUE:
1. Whether or not FLORIDA is liable for the death of Battung on the ground of culpa
contractual.
2. Whether or not FLORIDA is liable for acts of co-passenger.

HELD:
1. NO, FLORIDA cannot be held liable for the death under culpa contractual. On liability as
common carrier for death of passenger; extraordinary diligence is required. The law exacts
from common carriers (i.e., those persons, corporations, firms, or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public) the highest degree of diligence (i.e.,
extraordinary diligence) in ensuring the safety of its passengers.
Articles 1733 and 1755 of the Civil Code state:

Art. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all the circumstances of each
case.

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

In this relation, Article 1756 of the Civil Code provides that “[i]n 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.” This disputable presumption may also be overcome by a showing
that the accident was caused by a fortuitous event.

The foregoing provisions notwithstanding, it should be pointed out that the law does not make
the common carrier an insurer of the absolute safety of its passengers.

In Pilapil v. CA, the Court clarified that where the injury sustained by the passenger was in no

59
way due (1) to any defect in the means of transport or in the method of transporting, or (2) to
the negligent or willful acts of the common carrier’s employees with respect to the foregoing
— such as when the injury arises wholly from causes created by strangers which the carrier
had no control of or prior knowledge to prevent — there would be no issue regarding the
common carrier’s negligence in its duty to provide safe and suitable care, as well as
competent employees in relation to its transport business; as such, the presumption of
fault/negligence foisted under Article 1756 of the Civil Code should not apply

In this case, Battung’s death was neither caused by any defect in the means of transport or in
the method of transporting, or to the negligent or willful acts of petitioner’s employees, namely,
that of Duplio and Daraoay, in their capacities as driver and conductor, respectively.

Instead, the case involves the death of Battung wholly caused by the surreptitious act of a co-
passenger who, after consummating such crime, hurriedly alighted from the vehicle.
Thus, there is no proper issue on petitioner’s duty to observe extraordinary diligence in
ensuring the safety of the passengers transported by it, and the presumption of
fault/negligence against petitioner under Article 1756 in relation to Articles 1733 and 1755 of
the Civil Code should not apply.

2. NO, FLORIDA is not liable for acts of co-passenger of Battung.

On liability of a common carrier for acts of co-passengers; only diligence of a good father of a
family is required. On the other hand, since Battung’s death was caused by a co-passenger,
the applicable provision is Article 1763 of the Civil Code, which states that “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.”

Notably, for this obligation, the law provides a lesser degree of diligence, i.e., diligence of a
good father of a family, in assessing the existence of any culpability on the common carrier’s
part.

In ruling on this case, the CA cited Fortune Express, Inc. v. Court of Appeals
Fortune) in ascribing negligence on the part of petitioner, ratiocinating that it failed to
implement measures to detect if its passengers were carrying firearms or deadly weapons
which would pose a danger to the other passengers. However, in Fortune, the common carrier
had already received intelligence reports from law enforcement agents that certain lawless
elements were planning to hijack and burn some of its buses; and yet, it failed to implement
the necessary precautions to ensure the safety of its buses and its passengers. A few days
later, one of the company’s buses was indeed hijacked and burned by the lawless elements
pretending as mere passengers, resulting in the death of one of the bus passengers.

Accordingly, the Court held that the common carrier’s failure to take precautionary measures
to protect the safety of its passengers despite warnings from law enforcement agents showed
that it failed to exercise the diligence of a good father of a family in preventing the attack
against one of its buses

Relevantly, the Court, in Nocum v. Laguna Tayabas Bus Company, has held that common
carriers should be given sufficient leeway in assuming that the passengers they take in will not

60
bring anything that would prove dangerous to himself, as well as his co-passengers, unless
there is something that will indicate that a more stringent inspection should be made

In contrast, no similar danger was shown to exist in this case so as to impel petitioner or its
employees to implement heightened security measures to ensure the safety of its
passengers. There was also no showing that during the course of the trip, Battung’s killer
made suspicious actions which would have forewarned petitioner’s employees of the need to
conduct thorough checks on him or any of the passengers.

In this case, records reveal that when the bus stopped at San Jose City to let four (4) men ride
petitioner’s bus (two [2] of which turned out to be Battung’s murderers), the bus driver, Duplio,
saw them get on the bus and even took note of what they were wearing. Moreover, Duplio
made the bus conductor, Daraoay, approach these men and have them pay the
corresponding fare, which Daraoay did. During the foregoing, both Duplio and Daraoay
observed nothing which would rouse their suspicion that the men were armed or were to carry
out an unlawful activity. With no such indication, there was no need for them to conduct a
more stringent search (i.e., bodily search) on the aforesaid men.

Therefore, FLORIDA is not liable on the ground of culpa contractual nor for acts of co-
passenger because it shows diligence of good father of a family.

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TRANSPORTATION LAW

Sulpicio Lines v. Sesante GR No. 172682

By: Capuchino, Mafel M. Date: July 27, 2016
Ponente: Bersamin, J.

DOCTRINE:
Even the mere proof of injury relieves the passengers from establishing the fault or negligence
of the carrier or its employees. The presumption of negligence applies so long as there is
evidence showing that: (a) a contract exists between the passenger and the common carrier;
and (b) the injury or death took place during the existence of such contract. In such an event,
the burden shifts to the common carrier to prove its observance of extraordinary diligence,
and that an unforeseen event or force majeure had caused the injury.

FACTS:
M/V Princess of the Orient, a passenger vessel owned and operated by the petitioner, sank
near Fortune Island in Batangas. Of the 388 recorded passengers, 150 were lost. Napoleon
Sesante, was one of the passengers who survived the sinking and sued the petitioner for
breach of contract and damages.

Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Manila
while Metro Manila was experiencing stormy weather. During the voyage big waves had
rocked the vessel, tossing him to the floor where he was pinned by a long steel bar and that
he had freed himself only after another wave had hit the vessel. He had managed to stay
afloat after the vessel had sunk and had suffered tremendous hunger, thirst, pain, fear, shock,
serious anxiety and mental anguish. He had sustained injuries, and had lost personal
properties and property issued to him by the PNP. He further alleged that because the
petitioner had committed bad faith in allowing the vessel to sail despite the storm signal, the
petitioner should pay him actual and moral damages of P500,000.00 and P1,000,000.00,
respectively.

In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient
due to its having been cleared to sail from the Port of Manila by the proper authorities and that
the sinking had been due to force majeure and that it had not been negligent nor its officers
and crew because they had made preparations to abandon the vessel because they had
launched life rafts and had provided the passengers assistance in that regard.

ISSUE:
Is the Petitioner, Sulpicio Lines Inc. liable?

HELD:
Yes. The petitioner is liable for breach of contract of carriage.

Article 1756 of the NCC provides that, 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. And the
Court provides that the presumption of negligence applies so long as there is evidence
showing that: (a) a contract exists between the passenger and the common carrier; and (b)
the injury or death took place during the existence of such contract. In such an event, the
burden shifts to the common carrier to prove its observance of extraordinary diligence, and

62
that an unforeseen event or force majeure had caused the injury.

Clearly, the trial court is not required to make an express finding of the common carrier's fault
or negligence. Even the mere proof of injury relieves the passengers from establishing the
fault or negligence of the carrier or its employees. In this case, Sesante sustained injuries due
to the buffeting by the waves and consequent sinking of M/V Princess of the Orient where he
was a passenger. Even assuming the seaworthiness of the M/V Princess of the Orient, the
petitioner could not escape liability considering that, as borne out by the aforequoted findings
of the BMI, the immediate and proximate cause of the sinking of the vessel had been the
gross negligence of its captain in maneuvering the vessel.

The petitioner was directly liable to Sesante and his heirs because it fails to prove that it did
not contribute to the occurrence of the incident due to its own or its employees' negligence.

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TRANSPORTATION LAW

Loadstar Shipping Company, Inc. vs. GR No. 185565,

Malayan Insurance Company, Inc. Date: April 26, 2017
By: Aquino, Jenica Ponente: Reyes, J.

DOCTRINE:
1. At the pain of being repetitive, the Court reiterates the principle that actual damages are not
presumed; it cannot be anchored on mere surmises, speculations or conjectures.
2. As common carriers, the petitioners are bound to observe extraordinary diligence in their
vigilance over the goods they transport, as required by the nature of their business and for
reasons of public policy.
3. The Court deems it proper to award nominal damages in recognition of breach of contract.

FACTS:
Loadstar International Shipping, Inc. and Philippine Associated Smelting and Refining Corp.
(PASAR) entered into a Contract of Affreightment for domestic bulk transport of the latter’s
copper concentrates. Then, 5,065.47 wet metric tons (WMT) of copper concentrates were
loaded in Cargo Hold Nos. 1 and 2 of MV "Bobcat", a marine vessel owned by Loadstar
International and operated by Loadstar Shipping under a charter party agreement. The cargo
was insured with Malayan Insurance.

After the vessel arrived at Isabel, Leyte, Elite Surveyor, confirmed that samples of copper
concentrates from Cargo Hold No. 2 were contaminated by seawater. Malayan paid PASAR
the amount of P32,351,102.32 for the damaged copper concentrates. To recover the amount
paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from
Loadstar Shipping, which refused to comply.

Consequently, Malayan instituted a complaint for damages with the RTC, which dismissed the
case. The CA however ruled that Malayan is entitled to actual damages plus legal interest,
less US$90,000.00 – the residual value of the subject copper concentrates it sold to PASAR.
In 2014, the SC Third Division reinstated the RTC decision and held that Malayan did not
adduce proof of pecuniary loss to PASAR for which the latter was questionably indemnified.

Hence, Malayan filed the instant motion for reconsideration, contending that Third Division
deviated from the doctrine enunciated in Delsan Transport Lines, Inc., v. CA where the Court
held that upon payment by the insurance company of the insurance claim, the insurance
company should be subrogated to the rights of the insured; it is not even necessary to present
the insurance policy because subrogation is a matter of equity.

ISSUE:
1. Is Malayan entitled to the recovery of the amount paid to PASAR without adducing proof of
pecuniary loss?
2. Is Loadstar remiss of its duty to observe extraordinary diligence?
3. Is Malayan, the subrogee of PASAR, entitled to nominal damages?

HELD:
1. No, Malayan is not entitled to the recovery of the amount paid to PASAR.

Delsan involved the sinking of a vessel which took down with it the entire cargo of fuel it was

64
carrying. Hence, the fact of total loss was completely and undisputedly established. The
burden of proof was upon the common carrier to prove that it was not liable for the loss, which
it failed to discharge. It was only but logical for the Court to hold the common carrier liable to
the insurance company that paid the insured owner of the lost cargo as the latter's subrogee.

In comparison with Delsan, the facts of the instant case are not as straightforward. Here, the
copper concentrates were delivered by the petitioners to the consignee PASAR although part
thereof was contaminated with seawater. To be clear, PASAR did not simply reject the
contaminated goods (on the basis that these were no longer fit for the intended purpose),
claim the value thereof from Malayan and leave things at that - it bought back the goods
which it had already rejected. Meanwhile, Malayan opted to cash in the situation by selling the
contaminated copper concentrates to the very same consignee who already rejected the
goods as total loss. After denying the petitioners of opportunity to participate in the disposal or
sale of the goods, Malayan sought to recover the total value of the wet copper concentrates
from them. Malayan and PASAR's extraneous actuations are inconsistent with the alleged fact
of total loss. Verily, Delsan cannot be applied given the contradistinctive circumstances
obtaining in this case.

Therefore, the SC declares that it is iniquitous to consider the value of the contaminated
copper concentrates as the amount of damages sustained by PASAR when there is no
evidence to that effect. At the pain of being repetitive, the Court reiterates the principle that
actual damages are not presumed; it cannot be anchored on mere surmises, speculations or
conjectures.

2. Yes, Loadstar is remiss of its duty to observe extraordinary diligence.

As common carriers, the petitioners are bound to observe extraordinary diligence in their
vigilance over the goods they transport, as required by the nature of their business and for
reasons of public policy. "Extraordinary diligence is that extreme measure of care and caution
which persons of unusual prudence and circumspection use for securing and preserving their
own property or rights."

Here, the copper concentrates delivered were contaminated with seawater.

Thus, the petitioners have failed to exercise extraordinary diligence in the carriage thereof.

3. Yes, Malayan is entitled to nominal damages.

Article 2221 of the Civil Code provides that 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. In addition, Article 2222 provides that the court may award nominal damages in every
obligation arising from any source enumerated in Article 1157, or in every case where any
property right has been invaded.

The SC notes that petitioners failed to comply with some of the terms of their contract of
affreightment with PASAR. It was stipulated that the vessel to be used must not exceed 25
years of age, yet the vessel, MV Bobcat, was more than that age when the subject copper
concentrates were transported. Additionally, the petitioners failed to keep the cargo holds and
hatches of MV Bobcat clean and fully secured as agreed upon, which resulted in the wettage

65
of the cargo.

In view of the foregoing, the Court deems it proper to award nominal damages to Malayan in
recognition of the breach of contract committed by the petitioners.

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TRANSPORTATION LAW

Spouses Fernando v. Northwest Airlines, G.R. No. 212038

Inc. Date: February 8, 2017
By: Gamo, Norenz Jacob Jr. Ponente: Peralta, J.

DOCTRINE:
Passengers do not contract merely for transportation. They have a right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are entitled
to be protected against personal misconduct, injurious language, indignities and abuses from
such employees. So it is, that any rule or discourteous conduct on the part of employees
towards a passenger gives the latter an action for damages against the carrier

In requiring compliance with the standard of extraordinary diligence, a standard which is, in
fact, that of the highest possible degree of diligence, from common carriers and in creating a
presumption of negligence against them, the law seeks to compel them to control their
employees, to tame their reckless instincts and to force them to take adequate care of human
beings and their property.

FACTS:
The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest
Airlines, Inc. and are holders of Elite Platinum World Perks Card, the highest category given
to frequent flyers of the carrier.

Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via Northwest
Airlines to join his family who flew earlier to the said place for a reunion for the Christmas
holidays.When Jesus presented his documents at the immigration counter, he was asked by
the Immigration Officer to have his return ticket verified and validated since the date reflected
thereon is August 2001. So he approached a Northwest personnel, Linda Puntawongdaycha,
but the latter merely glanced at his ticket and peremptorily said that the ticket has been used
and could not be considered as valid. He then explained to the personnel that he was about to
use the said ticket on August 20 or 21, 2001 on his way back to Manila from LA but he could
not book any seat because of some ticket restrictions so he, instead, purchased new business
class ticket on the said date. Hence, the ticket remains unused and perfectly valid.

Jesus gave the personnel the number of his Elite Platinum World Perks Card for the latter to
access the ticket control record. But Linda Puntawongdaycha refused to check, instead,
looked at Jesus Fernando with contempt, then informed the Immigration Officer that the ticket
is not valid because it had been used. The Immigration Officer brought Jesus to the
interrogation room where he was asked humiliating questions for more than 2 hours. When he
was finally cleared by the Immigration Officer, he was granted only a 12-day stay, instead of
the usual 6 months.

When Jesus Fernando was finally able to get out of the airport, to the relief of his family,
Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the status of the ticket.
The personnel manning the counter courteously assisted her and confirmed that the ticket
remained unused and perfectly valid. To avoid any future problems that may be encountered
on the validity of the ticket, a new ticket was issued to Jesus Fernando.
Since Jesus Fernando was granted only a twelve (12)-day stay in the US, his scheduled plans
with his family as well as his business commitments were disrupted

67
On January 29, 2002, the Fernandos were on their way back to the Philippines. When the
Fernandos reached the gate area where boarding passes need to be presented, Northwest
supervisor Linda Tang stopped them and demanded for the presentation of their paper tickets
(coupon type). They failed to present the same since, according to them, Northwest issued
electronic tickets (attached to the boarding passes) which they showed to the supervisor.
Exasperated and pressed for time, the Fernandos rushed to the Northwest Airline Ticket
counter to clarify the matter. To ensure that the Fernandos would no longer encounter any
problem with Linda Tang, Jeanne Meyer printed coupon tickets for them who were then
advised to rush back to the boarding gates since the plane was about to depart. But when the
Fernandos reached the boarding gate, the plane had already departed. They were able to
depart, instead, the day after, or on January 30, 2002, and arrived in the Philippines on
January 31,2002.

On April 30, 2002, a complaint for damages was instituted by the Fernandos against
Northwest before the RTC. The RTC ruled in favor of the spouses. Both parties appealed but
were dismissed by the CA.

ISSUE:
(1) Whether or not there was breach of contract of carriage and whether it was done in a
wanton, malevolent or reckless manner amounting to bad faith;
(2) Whether or not Northwest is liable for the payment of moral damages and attorney's fees
and whether it is liable to pay more than that awarded by the RTC;
(3) Whether or not Northwest is liable for the payment of exemplary damages.

HELD:
1. Yes, there was a breach of contract of carriage. In Alitalia Airways v. CA, et al., We held
that when an airline issues a ticket to a passenger confirmed for a particular flight on a certain
date, a contract of carriage arises. The passenger then has every right to expect that he
would fly on that flight and on that date. If he does not, then the carrier. opens itself to a suit
for breach of contract of carriage. When Northwest confirmed the reservations of the
Fernandos, it bound itself to transport the Fernandos on their flight on 29 January 2002.
In an action based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All that he has to prove is the
existence of the contract and the fact of its non-performance by the carrier. Therefore, having
proven the existence of a contract of carriage between Northwest and the Fernandos, and the
fact of non-performance by Northwest of its obligation as a common carrier, it is clear that
Northwest breached its contract of carriage with the Fernandos. Thus, Northwest opened itself
to claims for compensatory, actual, moral and exemplary damages, attorney's fees and costs
of suit.
Moreover, Article 1733 of the New Civil Code provides that common carriers, from the nature
of their business and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case. Also, Article 1755 of the same Code
states that 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 due
regard for all the circumstances.
We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of
contract "in failing to provide the spouses with the proper assistance to avoid any
inconvenience" and that the actuations of Northwest in both subject incidents "fall short of the

68
utmost diligence of a very cautious person expected of it". Both ruled that considering that the
Fernandos are not just ordinary passengers but, in fact, frequent flyers of Northwest, the latter
should have been more courteous and accommodating to their needs so that the delay and
inconveniences they suffered could have been avoided. Northwest was remiss in its duty to
provide the proper and adequate assistance to them.

2. Yes, Northwest is liable for moral damages and attorney fees. Under Article 2220 of the
Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in order
upon a showing that the defendant acted fraudulently or in bad faith. Clearly, in this case, the
Fernandos are entitled to an award of moral damages. The purpose of awarding moral
damages is to enable the injured party to obtain means, diversion or amusement that will
serve to alleviate the moral suffering he has undergone by reason of defendant's culpable
action.

We note that even if both the CA and the RTC ruled out bad faith on the part of Northwest, the
award of "some moral damages" was recognized. Both courts believed that considering that
the Fernandos are good clients of Northwest for almost ten (10) years being Elite Platinum
World Perks Card holders, and are known in their business circle, they should have been
given by Northwest the corresponding special treatment. They own hotels and a chain of
apartelles in the country, and a parking garage building in Indiana, USA. From this
perspective, We adopt the said view. We, thus, increase the award of moral damages to the
Fernandos in the amount of ₱3,000,000.00.

Attorney fees are also in order. Records show that the Fernandos demanded payment for
damages from Northwest even before the filing of this case in court.1âwphi1 Clearly, the
Fernandos were forced to obtain the services of counsel to enforce a just claim, for which they
should be awarded attorney's fees. We deem it just and equitable to grant an award of
attorney's fees equivalent to 10% of the damages awarded.

3. Yes, Northwest is liable for exemplary damages. Exemplary damages, which are awarded
by way of example or correction for the public good, may be recovered in contractual
obligations, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner. They are designed by our civil law to permit the courts to reshape behavior that is
socially deleterious in its consequence by creating negative incentives or deterrents against
such behavior. Hence, given the facts and circumstances of this case, We hold Northwest
liable for the payment of exemplary damages in the amount of ₱2,000,000.00.

4F AY 2019-2020

69
TRANSPORTATION LAW

Cacho et. al. v. Manahan, et. al. G.R. No. 203081

By: Gamo, Norenz Jacob Jr. January 17, 2018
Ponente: Marites, J.

DOCTRINE:
Under Article 2185 of the Civil Code, which provides: "unless there is proof to the contrary, it
is presumed that a person driving a motor vehicle has been negligent if at the time of the
mishap, he was [in violation of] any traffic regulation."

FACTS:
On 30 June 1999 a vehicular accident occurred along the national highway at Pogo,
Alaminos, Pangasinan, near the Embarcadero Bridge. At around 5:00 A.M. on the said date,
Cacho was driving a Nissan Sentra from Alaminos, Pangasinan to Bani, Pangasinan, when it
collided with a Dagupan Bus traversing on the opposite lane. The car had already crossed the
bridge when it collided with the bus which was just about to enter the bridge. The collision
caused heavy damage to the front of the bus, the total wreckage of the Nissan Sentra,
Cacho's instant death, and multiple injuries to three (3) passengers inside the car.

A complaint for damages was filed by wife and children of Bismark Cacho. Petitioners alleged
that Cacho's car was hit by the bus because the latter swerved to the left lane as it tried to
avoid a pile of boulders placed on the shoulder of the road. These boulders were negligently
placed by De Vera Construction contracted by the local government to do some work on the
Embarcadero Bridge.

Dagupan Bus, and Manahan, the bus driver, jointly filed their answer with counterclaim and
cross-claims. They claimed that it was Cacho who drove fast coming from the bridge and
bumped into the bus that was on full stop; and that Cacho had to swerve to the left because
there were boulders of rocks scattered on his lane.

In their cross-claims, Dagupan Bus and Manahan argued that the proximate cause of the
accident was because of De Vera Construction's negligence for leaving the boulders of rocks
on both shoulders of the national highway.

In his answer with counterclaim, De Vera maintained that he ensured the safety of the road by
piling the boulders in a safe place to make sure they did not encroach upon the road.

RTC held Dagupan Bus, Manahan, and De Vera jointly and severally liable to pay the
petitioners. The RTC explained that Manahan was negligent in driving the bus because it was
traversing at the speed of 80-100 KM/H and was about to enter a very narrow bridge.

The CA reversed the ruling. Contrary to the trial court's findings, the CA did not believe that
the bus was running very fast and that it suddenly swerved to the left to avoid the boulders.

ISSUE:
1. Whether or not the proximate cause of the incident was the negligence of Manahan.
2. Whether or not the bus company is liable.

70
HELD:
Yes. We can also say that Manahan was legally presumed negligent under Article 2185 of the
Civil Code, which provides: "unless there is proof to the contrary, it is presumed that a person
driving a motor vehicle has been negligent if at the time of the mishap, he was [in violation of]
any traffic regulation." Based on the place and time of the accident, Manahan was actually
violating a traffic rule found in R.A. No. 4136, otherwise known as the Land Transportation
and Traffic Code: CHAPTER VI TRAFFIC RULES, ARTICLE I, Speed Limit and Keeping to
the Right, Section 35. Restriction as to speed. –

(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and
prudent speed, not greater or less than is reasonable and proper, having due regard for
the traffic, the width of the highway, and of any other condition then and there existing;
and no person shall drive any motor vehicle upon a highway at such speed as to endanger
the life, limb and property of any person, nor at a speed greater than will permit him to
bring the vehicle to a stop within the assured clear distance ahead.

Considering that the bus was already approaching the Embarcadero Bridge, Manahan should
have already slowed down a few meters away from the bridge. Actually, he should have
stopped farther away from the bridge because he would have been able to see that Cacho's
car was already crossing the bridge. An experienced and competent bus driver would be able
to know how to properly react upon seeing another vehicle ahead that is about to exit a
narrow bridge. Obviously, Manahan failed to do so.

2. Yes, Dagupan Bus is liable. When an employee causes damage due to his own negligence
while performing his own duties, the juris tantum presumption arises that his employer is
negligent, rebuttable only by proof of observance of the diligence of a good father of a family.
In the selection of prospective employees, employers are required to examine them as to their
qualifications, experience, and service records. With respect to the supervision of employees,
employers must formulate standard operating procedures, monitor their implementation, and
impose disciplinary measures for breaches thereof. These facts must be shown by concrete
proof, including documentary evidence

A closer scrutiny of the evidence presented to overcome this presumption would show that
Dagupan Bus failed in this regard. It would seem that Manahan applied with Dagupan Bus
sometime in April 1999. In his application form, he stated that prior to his employment with
Dagupan Bus, he was a truck driver. Along with his application, Manahan was required to
submit the following documents: 2x2 ID pictures, recommendation letter, NBI clearance, SSS
E-1 form, TIN number, barangay clearance, residence certificate, driver's license, and birth
certificate.

Finding his requirements to be complete, Manahan was cleared for actual driving and a
written examination. On 10 May 1999, Manahan passed his driving examination, but the
examiner noted his slow reaction in stopping. Manahan's written examination also points out
that he cannot recognize traffic signs indicating a narrow road. After undergoing shop training,
[

Manahan underwent a seven (7)-day apprentice training which he completed on 7 June 1999.
A few days after, or on 21 June 1999, Dagupan Bus gave Manahan clearance to report for
duty as a bus driver.

On this point, we are surprised at how prompt Dagupan Bus had allowed Manahan to drive

71
one of its buses considering he had no prior experience driving one. The only time he was
actually able to drive a bus was probably during his driving examination and a few more times
while undergoing apprenticeship. We cannot simply brush aside and ignore Dagupan Bus'
haste to hire Manahan; to our mind, this is negligence on its part.

In addition, we noted that Manahan's apprenticeship record indicate that he is not fit to drive
aircon buses nor to drive at night. That the accident happened early in the morning, when the
visibility conditions are the same as driving at night, Manahan should not have been driving in
the first place. Once more, Dagupan Bus' negligence is clear.

While the immediate beneficiaries of the standard of extraordinary diligence are the
passengers, they are not the only persons the law seeks to benefit. If we were to solely
require this standard of diligence for a common carrier's passengers, this would be
incongruent to the State's responsibility to curb accidents on the road. That common carriers
should carefully observe the statutory standard of extraordinary diligence in respect of their
passengers, such diligence should similarly benefit pedestrians and the owners and
passengers of other vehicles who are equally entitled to the safe and convenient use of our
roads and highways.

All said, finding both Manahan and Dagupan Bus negligent in meeting their responsibilities,
the RTC was correct in awarding damages in favor of Cacho's heirs. Clearly, the CA
committed a reversible error.

4F AY 2019-2020

72
TRANSPORTATION LAW

Unitrans International Forwarder, Inc. v. GR No. 203865

Insurance Company of North America Date: March 13, 2019
By: Gomez, Donna Kris. B. Ponente: Caguioa, J.

DOCTRINE:
Jurisprudence holds that a common carrier is presumed to have been negligent if it fails to
prove that it exercised extraordinary vigilance over the goods it transported. When the goods
shipped are either lost or arrived in damaged condition, a presumption arises against the
carrier of its failure to observe that diligence, and there need not be an express finding of
negligence to hold it liable. To overcome the presumption of negligence, the common carrier
must establish by adequate proof that it exercised extraordinary diligence over the goods. It
must do more than merely show that some other party could be responsible for the damage.

FACTS:
In ICNA’s Amended Complaint for collection of sum of money arising from marine insurance
coverage on 2 musical instruments imported from Melbourne Australia instituted against
SEACOL and the unknown owner/charterer of the vessel M/S Buxcrown and against the
unknown charterer of M/S Doris Wullf, it alleged that SEACOL solicited and received shipment
of pieces of STC musical instruments from the shipper Dominant Musical Instrument for
transportation to and delivery at the port of Manila, complete and in good condition, as
evidenced by Bill of Lading. SEACOL then loaded the insured shipment on board M/S
Buxcrown for transportation from Melbourne Australia to Singapore. In Singapore, the
shipment was transferred from M/S Buxcrown to M/S Doris Wullf for final transportation to the
port of Manila. Upon its arrival in Manila, the container van was discharged from the vessel
and upon stripping the contents thereof, it was found that two of the cartons containing the
musical instruments were in bad order, per Turn Over Survey Report. Unitrans then delivered
the subject shipment to the consignee. After further inspection, it was found out that two units
of musical instruments were damaged and could no longer be used for their intended
purpose, hence were declared a total loss. It further alleged that it paid the sum of $22,657.83
and by reason of the said payment, ICNA was subrogated to the consignee's rights of
recovery against defendants.

In its Answer Unitrans denied being a ship agent of SEACOL and M/S Buxcrown's unknown
owner or charter. According to Unitrans, BTI Logistics, a foreign freight forwarder, engaged its
services as delivery or receiving agent in connection to the subject shipment. As such agent,
its obligation was limited to paying on behalf of San Miguel the necessary duties and kindred
fees, as well as to pick up the shipment and then transport and deliver the said shipment to
the consignee's premises in good condition.

On its part, TSA and the unknown charterer of M/S Doris Wullf alleged in their Amended
Answer that both parties are not parties whatsoever to the bill of lading and have no
connection in any way with SEACOL.

The RTC granted the Complaint and held Unitrans liable to ICNA. On appeal, the CA denied
the petition for lack of merit.

73
ISSUE:
Whether or not Unitrans is liable as a common carrier and agent of BTI Logistics

HELD:
Yes. Article 1735 of the Civil Code states that 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.
In turn, Article 1733 states that common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case. Jurisprudence holds that a common carrier is presumed to have
been negligent if it fails to prove that it exercised extraordinary vigilance over the goods it
transported. When the goods shipped are either lost or arrived in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable. To overcome the presumption of
negligence, the common carrier must establish by adequate proof that it exercised
extraordinary diligence over the goods. It must do more than merely show that some other
party could be responsible for the damage.

Unitrans' own witness testified in open court that Unitrans, as a freight forwarding entity and
an accredited non-vessel operating common carrier, was the one engaged by BTI Logistics as
its delivery agent in Manila. Del Rosario attested that BTI Logistics was the forwarding agent
in Australia who received the cargo shipment from the consignor" for shipment to Manila. Del
Rosario further testified that Unitrans acted as the delivery/forwarding agent of BTI Logistics
with respect to the subject shipment. Del Rosario unequivocally testified that under its
agreement with BTI Logistics, Unitrans engaged itself "to handle the cargo and to make sure
that it was delivered to the consignee from the port of Manila to the consignee.” Moreover, to
reiterate, in its Answer with Counterclaim, Unitrans had already expressly admitted that San
Miguel also engaged its services as customs broker for the subject shipment; one of its
obligations was to pick up the shipment and then transport and deliver the same to the
consignee's premises in good condition.

Emphasis must be placed on the fact that Unitrans itself admitted, through its own witness
and general manager, Del Rosario, that in handling the subject shipment and making sure
that it was delivered to the consignee's premises in good condition as the delivery/forwarding
agent, Unitrans was acting as a freight forwarding entity and an accredited non-vessel
operating common carrier.

In the instant case, considering that it is undisputed that the subject goods were severely
damaged, the presumption of negligence on the part of the common carrier, i.e., Unitrans,
arose. Hence, it had to discharge the burden, by way of adequate proof, that it exercised
extraordinary diligence over the goods; it is not enough to show that some other party might
have been responsible for the damage. Unitrans failed to discharge this burden. Hence, it
cannot escape liability.

4F AY 2019-2020

74
TRANSPORTATION LAW

Transimex Co. v. Mafre Asian Insurance G.R. No. 190271

Corp. Date: September 14, 2016
By: Crisostomo, Camille Ponente: SERENO, C.J.

DOCTRINE:
I. The phrase "perils of the sea" is generally limited the application of the phrase to weather
that is "so unusual, unexpected and catastrophic as to be beyond reasonable expectation."

Accordingly, strong winds and waves are not automatically deemed perils of the sea, if these
conditions are not unusual for that particular sea area at that specific time, or if they could
have been reasonably anticipated or foreseen.

II. A common carrier is not liable for loss only when (1) the fortuitous event was the only and
proximate cause of the loss and (2) it exercised due diligence to prevent or minimize the loss.

FACTS:
M/V Meryem Ana received a shipment consisting of 21,857 metric tons of fertilizer. The
shipment was covered by two separate bills of lading and consigned to Fertiphil for delivery to
two ports - one in La Union; and the other in Tabaco, Albay. Fertiphil insured the cargo
against all risks issued by respondent.

The fertilizer unloaded at Albay appeared to have a gross weight of 7,700 metric tons.12 The
present controversy involves only this second delivery.

As soon as the vessel docked at the Tabaco port, the fertilizer was bagged and stored inside
a warehouse by employees of the consignee. When the cargo was subsequently weighed, it
was discovered that only 7,350.35 metric tons of fertilizer had been delivered.14 Because of
the alleged shortage of 349.65 metric tons, Fertiphil filed a claim with respondent for
P1,617,527.37,15 which was found compensable.

After paying the claim of Fertiphil, respondent demanded reimbursement from petitioner on
the basis of the right of subrogation. The claim was denied, prompting respondent to file a
Complaint with the RTC for recovery of sum of money.

To support its claim Respondent presented the adjuster’s report which stated that the
shortage was attributable to the melting of the fertilizer while inside the hatches, when the
vessel took on water because of the bad weather experienced at sea.

Petitioner disputes the liability and claims that the loss or damage was caused by bad
weather. It then insists that the dispute is governed by Section 4 of COGSA, which exempts
the carrier from liability for any loss or damage arising from "perils, dangers and accidents of
the sea”.

ISSUE:
1.) Whether or not COGSA is the applicable law?
2.) Whether or not petitioner is liable for the alleged shortage in its shipment of fertilizers?

75
HELD:
I. COGSA is not applicable.

As expressly provided in Article 1753 of the Civil Code, "[t]he 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."

Since the cargo in this case was transported from Odessa, Ukraine, to Tabaco, Albay, the
liability of petitioner for the alleged shortage must be determined in accordance with the
provisions of the Civil Code on common carriers.

In Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., the Court declared:
According to the New Civil Code, 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 Code takes precedence as the primary law over
the rights and obligations of common carriers with the Code of Commerce and
COGSA applying suppletorily.

II. Petitioner is liable for the loss.

We emphasize that common carriers are automatically presumed to have been at fault or to
have acted negligently if the goods they were transporting were lost, destroyed or damaged
while in transit.

This presumption can only be rebutted by proof that the carrier exercised extraordinary
diligence and caution to ensure the protection of the shipment in the event of foul weather. As
this Court explained in Fortune Sea Carrier, Inc. v. BPI/MS Insurance Corp.:C

While the records of this case clearly establish that M/V Sea Merchant was
damaged as result of extreme weather conditions, petitioner cannot be absolved
from liability. As pointed out by this Court in Lea Mer Industries, Inc. v. Malayan
Insurance, Inc., a common carrier is not liable for loss only when (1) the fortuitous
event was the only and proximate cause of the loss and (2) it exercised due
diligence to prevent or minimize the loss. The second element is absent here. As
a common carrier, petitioner should have been more vigilant in monitoring
weather disturbances within the country and their (possible) effect on its routes
and destination. More specifically, it should have been more alert on the possible
attenuating and dysfunctional effects of bad weather on the parts of the ship. It
should have foreseen the likely prejudicial effects of the strong waves and winds
on the ship brought about by inclement weather and should have taken the
necessary precautionary measures through extraordinary diligence to prevent the
weakening or dysfunction of the parts of the ship to avoid or prune down the loss
to cargo.(citations omitted)

In the instant case, there is absolutely no evidence that petitioner satisfied the two requisites.
Before the trial court, petitioner limited itself to the defense of denial. The latter refused to
admit that the shipment sustained any loss or damage and even alleged overage of the cargo
delivered. As a result, the evidence it submitted was severely limited, i.e., the testimony of a
witness that supposedly confirmed the alleged excess in the quantity of the fertilizer delivered

76
to the consignee in Albay. No other evidence was presented to demonstrate either the
proximate and exclusive cause of the loss or the extraordinary diligence of the carrier.

4F AY 2019-2020

77
TRANSPORTATION LAW

Keihin Everett Forwarding Company, Inc. GR No. 212107

v. Tokio Marine Malayan Insurance Co., Date: January 28, 2019
Inc. Ponente: Reyes, J, JR.
By: Gomez, Donna Kris B.

DOCTRINE:
It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force
majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting loss
caused by robbery or hijacked if it is proven that the robbery or hijacking was attended by
grave or irresistible threat, violence or force.

FACTS:
Honda Trading ordered 80 bundles of Aluminum Alloy Ingots from PT Molten which were
loaded in two container vans which were, in turn, received in Jakarta, Indonesia by Nippon
Express Co., Ltd. for shipment to Manila.

Aside from insuring the entire shipment with Tokio Marine & Nichido Fire Insurance Co., Inc.
(TMNFIC) under Policy No. 83-00143689, Honda Trading also engaged the services of
Keihin-Everett to clear and withdraw the cargo from the pier and to transport and deliver the
same to its warehouse at the Laguna Technopark. Meanwhile, petitioner Keihin-Everett had
an Accreditation Agreement with respondent Sunfreight Forwarders whereby the latter
undertook to render common carrier services for the former and to transport inland goods
within the Philippines.

The shipment arrived in Manila and was, accordingly, offloaded from the ocean liner and
temporarily stored at the CY Area of the Manila International Port pending release. The
shipment was caused to be released from the pier by petitioner Keihin-Everett and turned
over to respondent Sunfreight Forwarders for delivery to Honda Trading. En route to the
latter's warehouse, the truck carrying the containers was hijacked and the container van with
Serial No. TEXU 389360-5 was reportedly taken away. Although said container van was
subsequently found in the vicinity of the Manila North Cemetery and later towed to the
compound of the MMDA, it appears that the contents thereof were no longer retrieved. Only
the container van with Serial No. GATU 040516-3 reached the warehouse. As a
consequence, Honda Trading suffered losses in the total amount of P2,121,917.04,
representing the value of the lost 40 bundles of Aluminum Alloy Ingots.

Claiming to have paid Honda Trading's insurance claim for the loss it suffered, Tokio Marine
commenced the instant suit alleging that it had been subrogated to all the rights and causes
of action pertaining to Honda Trading.

Served with summons, petitioner Keihin-Everett denied liability for the lost shipment on the
ground that the loss thereof occurred while the same was in the possession of respondent
Sunfreight Forwarders. Hence, petitioner Keihin-Everett filed a third-party complaint against
the latter, who, in turn, denied liability on the ground that it was not privy to the contract
between Keihin-Everett and Honda Trading. If at all, respondent Sunfreight Forwarders
claimed that its liability cannot exceed the P500,000.00 fixed in its Accreditation Agreement
with petitioner Keihin-Everett.

78
The RTC ruled in favor of Tokio Marine, holding Keihin-Everett and Sunfreight Forwarders
jointly and severally liable. The RTC found the driver of Sunfreight Forwarders as the cause of
the evil caused. Thus, Sunfreight Forwarders is held liable for the loss of the subject cargoes
with Keihin-Everett, being a common carrier. In case, Keihin-Everett pays for the amount, it
has a right of reimbursement from Sunfreight Forwarders. On appeal, the CA modified the
ruling of the RTC insofar as the solidary liability of Keihin-Everett and Sunfreight Forwarders is
concerned. The CA went to rule that solidarity is never presumed and because of the lack of
privity between Honda Trading and Sunfreight Forwarders, the latter cannot simply be held
jointly and severally liable with Keihin-Everett for Tokio Marine's claim as subrogee.

ISSUE:
Whether or not Keihin-Everett is liable to Tokio Marine

HELD:
Yes.
A common carrier is mandated to observe under Article 1733 of the Civil Code, extraordinary
diligence in the vigilance over the goods it transports according to all the circumstances of
each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to
have been at fault or to have acted negligently, unless it proves that it observed extraordinary
diligence. To be sure, under Article 1736 of the Civil Code, a common carrier's extraordinary
responsibility over the shipper's goods lasts from the time these goods are unconditionally
placed in the possession of, and received by, the carrier for transportation, until they are
delivered, actually or constructively, by the carrier to the consignee, or to the person who has
a right to receive them.

In this light, Keihin-Everett, as a common carrier, is mandated to observe extraordinary

diligence. Hence, at the time Keihin-Everett turned over the custody of the cargoes to
Sunfreight Forwarders for inland transportation, it is still required to observe extraordinary
diligence in the vigilance of the goods. Failure to successfully establish this carries with it the
presumption of fault or negligence, thus, rendering Keihin-Everett liable to Honda Trading for
breach of contract.

It bears to stress that the hijacking of the goods is not considered a fortuitous event or a force
majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting loss
caused by robbery or hijacked if it is proven that the robbery or hijacking was attended by
grave or irresistible threat, violence or force. In this case, Keihin-Everett failed to prove the
existence of the aforementioned instances.

We likewise agree with the CA that the liability of Keihin-Everett and Sunfreight Forwarders
are not solidary. There is solidary liability only when the obligation expressly so states, when
the law so provides, or when the nature of the obligation so requires. Thus, under Article 2194
of the Civil Code, liability of two or more persons is solidary in quasi-delicts. But in this case,
Keihin-Everett's liability to Honda Trading stemmed not from quasi-delict, but from its breach
of contract of carriage. Sunfreight Forwarders was only impleaded in the case when Keihin-
Everett filed a third-party complaint against it. As mentioned earlier, there was no direct
contractual relationship between Sunfreight Forwarders and Honda Trading. Accordingly,
there was no basis to directly hold Sunfreight Forwarders liable to Honda Trading for breach
of contract. If at all, Honda Trading can hold Sunfreight Forwarders for quasi-delict, which is

79
not the action filed in the instant case.

It is not expected however that Keihin-Everett must shoulder the entire loss. Keihin-Everett
has a right to be reimbursed based on its Accreditation Agreement with Sunfreight
Forwarders. By accrediting Sunfreight Forwarders to render common carrier services to it,
Keihin-Everett in effect entered into a contract of carriage with a fellow common carrier,
Sunfreight Forwarders.

It is undisputed that the cargoes were lost when they were in the custody of Sunfreight
Forwarders. Hence, under Article 1735 of the Civil Code, the presumption of fault on the part
of Sunfreight Forwarders arose. Since Sunfreight Forwarders failed to prove that it observed
extraordinary diligence in the performance of its obligation to Keihin-Everett, it is liable to the
latter for breach of contract. Consequently, Keihin-Everett is entitled to be reimbursed by
Sunfreight Forwarders due to the latter's own breach occasioned by the loss and damage to
the cargoes under its care and custody.

Wherefore, the Decision of the Court of Appeals is affirmed.

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TRANSPORTATION LAW

Fortune Express, Inc. v. Court of GR No. 119756

Appeals By: De Leon, Jea Date: March 18,1999
Ponente: Mendoza, J.

DOCTRINE:
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered
by a passenger on account of wilfull acts of other passengers, if the employees of the
common carrier could have prevented the act through the exercise of the diligence of a good
father of a family.

FACTS:
Petitioner Fortune Express, Inc. is a bus company in Northern Mindanao. N Nov. 18,1989,
one of its buses collided with a jeepney owned by a Maranao which resulted in the death of
several passengers of the jeepney including two Maranaos. In relation thereto, the Philippine
Constabulary of Cagayan de Oro warned the petitioner, through its operations manager
Diosdado Bravo, that the Maranaos were planning to take revenge on the petitioner by
burning some of its buses. Bravo assured them that the necessary precautions to ensure the
safety of lives and properties of the passengers would be taken.

On November 22,1989, three armed Maranaos who pretended to be passengers, seized and
burned the bus of petitioner at Linamon, Lanao del Norte while on its way to Iligan City. One
of the armed Maranaos started pouring gasoline inside the bus, he then ordered the
passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus
and went behind the bushes in a field some distance from the highway. However, Atty.
Caorong returned to the bus to retrieve something from the overhead rack. At that time, the
other armed men was pouring gasoline on the head of the driver. Atty. Caorong pleaded to
spare the driver as he was innocent. Heated conversation ensued between them and at that
time, the driver climbed out of the left window of the bus and crawled to the canal on the
opposite side of the highway. They heard shots from inside the bus, then one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the
passengers were able to pull Atty. Caorong out of the burning bus and rush him to the Mercy
Community Hospital in Iligan City, but he died while undergoing operation.

Thus the heirs of Atty. Caorong filed before the Regional Trial Court a complaint for damages
for breach of contract of carriage against the petitioner. The trial court dismissed the
complaint. However the Court of Appeals reversed the decision of the trial court. Hence, this
petition for review.

ISSUE:
1. Whether or not petitioner is liable for breach of contract of carriage and be held liable for
damages.
2. Whether or not the seizure of the bus was a fortuitous event hence exempts the petitioner
from liability.
3. Whether or not there is a contributory negligence on the part of deceased.

HELD:
1. Yes, petitioner is liable for breach of contract of carriage and is liable for actual, moral and

81
exemplary damages, attorney’s fees, compensation for loss of earning capacity and costs of
suits.

Article 1763 of the New Civil Code provides that a common carrier is responsible for injuries
suffered by a passenger on account of the willful acts of other passengers, if the employees of
the common carrier could have prevented the act through the exercised of the diligence of a
good father of a family.

In this case, it is clear that because of the negligence of petitioner's employees, the seizure of
the bus by Mananggolo and his men was made possible. Despite warning by the Philippine
Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the
petitioner by burning some of its buses and the assurance of petitioner's operation manager,
Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to
protect the safety of its passengers. Had petitioner and its employees been vigilant they would
not have failed to see that the malefactors had a large quantity of gasoline with them. Under
the circumstances, simple precautionary measures to protect the safety of passengers, such
as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets
such as metal detectors, before allowing them on board could have been employed without
violating the passenger's constitutional rights. As this Court amended in Gacal v. Philippine
Air Lines, Inc., a common carrier can be held liable for failing to prevent a hijacking by frisking
passengers and inspecting their baggages.

From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one
of petitioner's buses because they did not exercise the diligence of a good father of a family.
Hence, petitioner should be held liable for the death of Atty. Caorong.

2. No, the seizure of the bus was not a fortuitous event.

Art. 1174 of the Civil Code defines a fortuitous event as an occurrence which could not be
foreseen, is inevitable. In Yobido v. Court of Appeals, it was held that to considered as force
majeure, it is necessary that (1) the cause of the breach of the obligation must be
independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3)
the occurence must be render it impossible for the debtor to fulfill the obligation in a normal
manner; and (4) the obligor must be free of participation in, or aggravation of, the injury to the
creditor. The absence of any of the requisites mentioned above would prevent the obligor
from being excused from liability.

Thus, in Vasquez v. CA, it was held that the common carrier was liable for its failure to take
necessary precautions against an approaching typhoon, of which it was warned, resulting in
the loss of the lives of several passengers. The event was foreseeable, and thus, the second
requisite mentioned above was not fulfilled. This ruling applies by analogy to the present
case. Despite the report of PC agent that the Maranaos were going to attack its buses,
petitioner took no steps to safeguard the lives and properties of its passengers. The seizure of
the bus of petitioner was foreseeable and, therefore, was not a fortuitous event which would
exempt petitioner from liability.

3. No, the deceased is not guilty of contributory negligence for Atty. Caorong did not act
recklessly.
It should be pointed out that the intended targets of the violence were petitioners and its
employees, not its passengers. The assailant's motive was to retaliate for the loss of life of

82
two Maranaos as a result of the collision between petitioner's bus and the jeepney in which
the two Maranaos were riding. The armed men actually allowed Atty. Caorong to retrieve
something from the bus. What apparently angered them was his attempt to help the driver of
the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this
act cannot considered an act of negligence, let alone recklessness.

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Gacal v. Philippine Airlines, Inc. GR No. 55300

By: Dela Cruz, Alyssa Christine C. Date: March 15, 1990
Ponente: Paras, J.

DOCTRINE:
Caso fortuito or force majeure, by definition, are extraordinary events not foreseeable or
avoidable, events that could not be foreseen, or which, though foreseen, are inevitable. Under
normal circumstances, PAL might have foreseen the skyjacking incident which could have
been avoided had there been a more thorough frisking of passengers and inspection of
baggages as authorized by R.A No. 6235. But the incident in question occurred during Martial
Law where there was a military take-over of airport security including the frisking of
passengers and the inspection of their luggage preparatory to boarding domestic and
international flights.

FACTS:
Plaintiffs were then passengers boarding defendant's BAC 111 at Davao Airport for a flight to
Manila, not knowing that on the same flight, 6 members of the Moro National Liberation Front
(MNLF). Ten (10) minutes after take off, the hijackers brandishing their firearms announced
the hijacking of the aircraft and directed its pilot to fly to Libya. But because of the inherent
fuel limitations of the plane and that they are not rated for international flights, the hijackers
ultimately directed the pilot to fly to Zamboanga Airport. At Zamboanga Airport, the rebels
thru its commander demanded that a DC-aircraft take them to Libya with the President of the
defendant company as hostage and that they be given $375,000 and six (6) armalites,
otherwise they will blow up the plane if their demands will not be met by the government and
Philippine Air Lines. 2 days thereafter, the battle between the military and the hijackers led
ultimately to the liberation of the surviving crew and the passengers, with the final score of
ten (10) passengers and three (3) hijackers dead on the spot and three (3) hijackers
captured. The plaintiffs now filed a complaint for damages.

Petitioners alleged that the main cause of the unfortunate incident is the gross, wanton and
inexcusable negligence of respondent Airline personnel in their failure to frisk the
passengers adequately in order to discover hidden weapons in the bodies of the six (6)
hijackers. They claimed that despite the prevalence of skyjacking, PAL did not use a metal
detector which is the most effective means of discovering potential skyjackers among the
passengers.
Respondent Airline averred that in the performance of its obligation to safely transport
passengers as far as human care and foresight can provide, it has exercised the utmost
diligence of a very cautious person with due regard to all circumstances, but the security
checks and measures and surveillance precautions in all flights, including the inspection of
baggages and cargo and frisking of passengers at the Davao Airport were performed and
rendered solely by military personnel who under appropriate authority had assumed
exclusive jurisdiction over the same in all airports in the Philippines.

ISSUE:
Whether or not hijacking or air piracy during martial law and under the circumstances

84
obtaining herein, is a caso fortuito or force majeure which would exempt an aircraft from
payment of damages to its passengers whose lives were put in jeopardy and whose personal
belongings were lost during the incident.

HELD:
Yes, the existence of force majeure has been established exempting respondent PAL from
the payment of damages.

In order to constitute a caso fortuito or force majeure that would exempt a person from liability
under Article 1174 of the Civil Code, it is necessary that the following elements must concur:
(a) the cause of the breach of the obligation must be independent of the human will (the will of
the debtor or the obligor); (b) the event must be either unforeseeable or unavoidable; (c) the
event must be such as to render it impossible for the debtor to fulfill his obligation in a normal
manner; and (d) the debtor must be free from any participation in, or aggravation of the injury
to the creditor.

Applying the above guidelines to the case at bar, the failure to transport petitioners safely
from Davao to Manila was due to the skyjacking incident staged by six (6) passengers of the
same plane, all members of the Moro National Liberation Front (MNLF), without any
connection with private respondent, hence, independent of the will of either the PAL or of its
passengers.Under normal circumstances, PAL might have foreseen the skyjacking incident
which could have been avoided had there been a more thorough frisking of passengers and
inspection of baggages as authorized by R.A No. 6235. But the incident in question occurred
during Martial Law where there was a military take-over of airport security including the
frisking of passengers and the inspection of their luggage preparatory to boarding domestic
and international flights. In fact military take-over was specifically announced on October 20,
1973 by General Jose L. Rancudo, Commanding General of the Philippine Air Force in a letter
to Brig. Gen. Jesus Singson, then Director of the Civil Aeronautics Administration later
confirmed shortly before the hijacking incident of May 21, 1976 by Letter of Instruction No.
399 issued on April 28, 1976.
Thus, these events rendered it impossible for PAL to perform its obligations in a normal
manner and obviously it cannot be faulted with negligence in the performance of duty taken
over by the Armed Forces of the Philippines to the exclusion of the former.

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Pilapil v. Court of Appeals GR No. 52159

By: Dolor, Lourdes Xylene Date: December 22, 1989
Ponente: Padilla, J.

DOCTRINE:
While the law requires the highest degree of diligence from common carriers in the safe
transport of their passengers and creates a presumption of negligence against them, it does
not, however, make the carrier an insurer of the absolute safety of its passengers.

A tort committed by a stranger which causes injury to a passenger does not accord the latter a
cause of action against the carrier. The negligence for which a common carrier is held
responsible is the negligent omission by the carrier's employees to prevent the tort from being
committed when the same could have been foreseen and prevented by them. Further, under
Art. 1763, it is to be noted that when the violation of the contract is due to the willful acts of
strangers, as in the instant case, the degree of care essential to be exercised by the common
carrier for the protection of its passenger is only that of a good father of a family.

FACTS:
Jose Pilapil, a paying passenger, boarded the bus of Alatco Transportation Co. going to Naga
City. An unidentified man, a bystander along said national highway, hurled a stone at the left
side of the bus, which hit Pilapil above his left eye. Personnel of Alatco immediately brought
Pilapil to the hospital where he was confined and treated. Despite treatment accorded to him,
Pilapil partially lost his vision in his left eye and sustained a permanent scar above the left
eye. Pilapil instituted before the CFI an action for recovery of damages sustained as a result
of the stone-throwing incident. CFI ruled in favor of Pilapil but CA reversed such decision.

In the present petition, Pilapil argues that Alatco is liable because the nature of the business
of a transportation company requires the assumption of certain risks, and the stoning of the
bus by a stranger resulting in his injury to is one such risk from which the common carrier, like
Alatco, may not exempt itself from liability. He also contends that Alatco failed to rebut the
presumption of negligence against it by proof on its part that it exercised extraordinary
diligence for the safety of its passengers.

ISSUE:
Whether or not the Alatco can be held responsible for risk of stoning of the bus which caused
the damages suffered by Pilapil.

HELD:
No, Alatco cannot be held liable for said risk that caused damages to Pilapil

First, in consideration of the right granted to it by the public to engage in the business of
transporting passengers and goods, a common carrier does not give its consent to become
an insurer of any and all risks to passengers and goods. It merely undertakes to perform
certain duties to the public as the law imposes, and holds itself liable for any breach thereof.
The requirement of extraordinary diligence is stated in Articles 1733 and 1755 of the Civil
Code. While the law requires the highest degree of diligence from common carriers in the safe
transport of their passengers and creates a presumption of negligence against them, it does
not, however, make the carrier an insurer of the absolute safety of its passengers. Article

86
1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the
carriage of passengers by common carriers to only such as human care and foresight can
provide. what constitutes compliance with said duty is adjudged with due regard to all the
circumstances. Thus, it is clear that neither the law nor the nature of the business of a
transportation company makes it an insurer of the passenger's safety, but that its liability for
personal injuries sustained by its passenger rests upon its negligence, its failure to exercise
the degree of diligence that the law requires.

In the present case, the stoning of the bus by a stranger is not among the risks assumed by
Alatco.

Second, the presumption of fault or negligence against the carrier is only a disputable
presumption. It gives in where contrary facts are established proving either that the carrier had
exercised the degree of diligence required by law or the injury suffered by the passenger was
due to a fortuitous event. With the injury arising wholly from causes created by strangers over
which the carrier had no control or even knowledge or could not have prevented, the
presumption is rebutted and the carrier is not and ought not to be held liable. To rule
otherwise would make the common carrier the insurer of the absolute safety of its passengers
which is not the intention of the lawmakers.

Furthermore, while as a general rule, common carriers are bound to exercise extraordinary
diligence in the safe transport of their passengers, it would seem that this is not the standard
by which its liability is to be determined when intervening acts of strangers directly cause the
injury.

A tort committed by a stranger which causes injury to a passenger does not accord the latter a
cause of action against the carrier. The negligence for which a common carrier is held
responsible is the negligent omission by the carrier's employees to prevent the tort from being
committed when the same could have been foreseen and prevented by them. Further, under
Article 1763, it is to be noted that when the violation of the contract is due to the willful acts of
strangers, as in the instant case, the degree of care essential to be exercised by the common
carrier for the protection of its passenger is only that of a good father of a family.

Thus, Alatco is only required to prove that it exercised the diligence of a good father of a
family in transporting Pilapil.

In conclusion, the contentions of Pilapil are untenable. Hence, Alatco is not liable for the
damages that Pilapil suffered.

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TRANSPORTATION LAW

People v. Go GR No. 210816

By: Guerrero, Anna Charmaine P. Date: December 10, 2018
Ponente: Reyes, J. Jr. J.

DOCTRINE:
Shipowner's liability based on the contract of carriage is separate and distinct from the
criminal liability of those who may be found negligent.

FACTS:
On June 20, 2008, M/V Princess of the Stars (Stars), a passenger cargo owned and operated
by Sulpicio Lines, Inc. (SLI), was expected to depart at 8:00 p.m. from the Port of Manila for
Cebu City. On board the vessel were 709 passengers, 29 contractors and 111 crew members
or a total of 849 persons, which number was in compliance with the Minimum Safe Manning
Certificate and the PCG rules and regulations.

Prior to its voyage, Captain Marimon was already aware that Typhoon Frank might affect
Stars’ regular voyage and that Storm Warning Signal (SWS) No. 3 was hoisted over
Masbate, which was along the vessel's regular route. Captain Marimon showed Philippine
Coast Guard (PCG) Boarding Officer PO1 PO1 Sardan a new voyage plan and explained that
he would instead navigate the route west of Tablas below Panay Island which would not be
affected by SWS No. 3. After obtaining a clearance from the PCG, Stars departed at 8:04 p.m.
for its regular voyage to Cebu along its regular route. Stars eventually capsized and sank in
the Sibuyan Sea. The incident resulted to the death of 227 persons onboard, 592 missing and
damage to cargo and marine environment.

According to the investigation report conducted by the Board of Marine Inquiry (BMI), it was
found out that that SLI and its senior officers failed to ensure the safety of Stars, its
passengers and its cargo because it did not assess the potential danger of Typhoon Frank
before the vessel departed and while the vessel was in transit. It further noted that SLI could
have discouraged the Master from sailing in its intended voyage considering that SWS No. 3
was hoisted in the vessel's route. Thus, the Volunteers Against Crime and Corruption and the
heirs of the passengers of Stars instituted in the Department of Justice (DOJ) a complaint for
reckless imprudence resulting in multiple homicide, serious physical injuries, and damage to
property against SLI, its officers, one of which was respondent Go and Captain Marimon. The
Department of Justice (DOJ) Panel found probable cause to indict Captain Marimon and
respondent of the crime charged. This was affirmed by the DOJ Secretary. However, the
Court of Appeals dismissed the charge for reckless imprudence against the respondent.

The People maintained that the respondent was remiss in his duty as an officer of SLI to
exercise extraordinary care and precaution in securing the safety of the passengers and to
dictate upon Captain Marimon to cancel or discourage the voyage of the vessel. On the other
hand, respondent countered that that in a reckless imprudence case involving a common
carrier, it is the captain who should be subjected to criminal culpability; that the liability of the
common carrier or shipowner is merely civil in nature even if the accident results in the death
or injury of passengers, and even when the negligence of the shipowner concurs with the
negligence of the captain; and that respondent's duties as Vice-¬President for Administration
for Land-Based Personnel of the Manila Branch Office and the Head of the Crisis
Management Committee did not include the authority to control and supervise matters

88
pertaining to vessel movement and navigation.

ISSUE:
Can respondent Go, as the Vice--President for Administration for Land-Based Personnel of
the Manila Branch Office and the Head of the Crisis Management Committee of SLI be
subjected to criminal culpability in a reckless imprudence case involving a common carrier?

HELD:
Yes, respondent Go can be subjected to criminal culpability in a reckless imprudence case
involving a common carrier because a civil action based on the contractual liability of a
common carrier is distinct from an action based on criminal negligence.
Under Article 1755 of the Civil Code, 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 due regard for all the circumstances. Moreover, under Article 1756 of
the Civil Code, in case of death or injuries to passengers, a common carrier is presumed to
have been at fault or to have acted negligently, unless it proves that it observed extraordinary
diligence. In addition, pursuant to Article 1759 of the same Code, it is liable for the death of, or
injuries to passengers through the negligence or willful acts of the former's employees. These
provisions evidently refer to a civil action based not on the act or omission charged as a
felony in a criminal case, but to one based on an obligation arising from other sources, such
as law or contract. Thus, the obligation of the common carrier to indemnify its passenger or
his heirs for injury or death arises from the contract of carriage entered into by the common
carrier and the passenger.
On the other hand, "the essence of the quasi offense of criminal negligence under Article 365
of the RPC lies in the execution of an imprudent or negligent act that, if intentionally done,
would be punishable as a felony. The law penalizes, thus, the negligent or careless act, not
the result thereof. The gravity of the consequence is only taken into account to determine the
penalty; it does not qualify the substance of the offense."
Consequently, in criminal cases for reckless imprudence, the negligence or fault should be
established beyond reasonable doubt because it is the basis of the action, whereas in breach
of contract, the action can be prosecuted merely by proving the existence of the contract and
the fact that the common carrier failed to transport his passenger safely to his destination. The
first punishes the negligent act, with civil liability being a mere consequence of a finding of
guilt, whereas the second seeks indemnification for damages. Moreover, the first is governed
by the provisions of the RPC, and not by those of the Civil Code. Thus, it is beyond dispute
that a civil action based on the contractual liability of a common carrier is distinct from an
action based on criminal negligence.
In this case, the criminal action instituted against respondent involved exclusively the criminal
and civil liability of the latter arising from his criminal negligence as responsible officer of SLI.
It must be emphasized that there is a separate civil action instituted against SLI based on
culpa contractual incurred by it due to its failure to carry safely the passengers of Stars to their
place of destination. The civil action against a shipowner for breach of contract of carriage
does not preclude criminal prosecution against its employees whose negligence resulted in
the death of or injuries to passengers.
Hence, respondent Go can be subjected to criminal culpability in a reckless imprudence case
involving a common carrier as the civil action based on the contractual liability of a common
carrier is distinct from an action based on criminal negligence.

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Orient Freight International, Inc., V. Keihin- GR No. G.R. No. 191937

Everett Forwarding Company, Inc Date: August 9, 2017
By: Hornilla, Ariadne Kirsten E. Ponente: Leonen, J.

DOCTRINE:
Article 2176 of the Civil Code does not apply when the party's negligence occurs in the
performance of an obligation. The negligent act would give rise to a quasi-delict only when it
may be the basis for an independent action were the parties not otherwise bound by a
contract.

FACTS:
Keihin-Everett entered into a Trucking Service Agreement with Matsushita. Under the
Trucking Service Agreement, Keihin-Everett would provide services for Matsushita's trucking
requirements. These services were subcontracted by Keihin-Everett to Orient Freight, through
their own Trucking Service Agreement executed on the same day.

When the Trucking Service Agreement between Keihin-Everett and Matsushita expired,
Keihin-Everett executed an In-House Brokerage Service Agreement for Matsushita's
Philippine Economic Zone Authority export operations. Keihin-Everett continued to retain the
services of Orient Freight, which sub-contracted its work to Schmitz Transport and Brokerage
Corporation.

Matsushita called Keihin-Everett's Sales Manager regarding a column in the April 19, 2002
issue of the tabloid newspaper Tempo. This news narrated the April 17, 2002 interception by
Caloocan City police of a stolen truck filled with shipment of video monitors and CCTV
systems owned by Matsushita. They claimed that the incident simply involved the breakdown
and towing of the truck, which was driven by Cudas with truck helper, Aquino. The truck was
promptly released and did not miss the closing time of the vessel intended for the shipment.
Keihin-Everett directed Orient Freight to investigate the matter. During its meeting with Keihin-
Everett and Matsushita, as well as in its April 22, 2002 letter addressed to Matsushita, Orient
Freight reiterated that the truck merely broke down and had to be towed. However, when the
shipment arrived in Japan, it was discovered that 10 pallets of the shipment's 218 cartons,
worth US$34,226.14, were missing.

Keihin-Everett independently investigated the incident. During its investigation, it obtained a

police report from the Caloocan City Police Station. The report stated, among others, that at
around 2:00 p.m. on April 17, 2002, somewhere in Paco Street, Manila, Cudas told Aquino to
report engine trouble to Orient Freight. After Aquino made the phone call, he informed Orient
Freight that the truck had gone missing. When the truck was intercepted by the police along
C3 Road near the corner of Dagat-Dagatan Avenue in Caloocan City, Cudas escaped and
became the subject of a manhunt.

When confronted with Keihin-Everett's findings, Orient Freight wrote bac to admit that its
previous report was erroneous and that pilferage was apparently proven. Matsushita
terminated its In-House Brokerage Service Agreement with Keihin-Everett. Matsushita cited
loss of confidence for terminating the contract, stating that Keihin-Everett's way of handling
the April 17, 2002 incident and its nondisclosure of this incident's relevant facts "amounted to
fraud and signified an utter disregard of the rule of law.”

90
Keihin-Everett, by counsel, sent a letter to Orient Freight, demanding P2,500,000.00 as
indemnity for lost income. It argued that Orient Freight's mishandling of the situation caused
the termination of Keihin-Everett's contract with Matsushita. Since Orient Freight refused to
pay, Keihin-Everett filed a complaint in which they alleged hat Orient Freight's
"misrepresentation, malice, negligence and fraud" caused the termination of its In-House
Brokerage Service Agreement with Matsushita.

The Regional Trial Court rendered its Decision, in favor of Keihin-Everett. It found that Orient
Freight was "negligent in failing to properly investigate the incident and make a factual report
to Keihin[-Everett] and Matsushita," despite having enough time to properly investigate the
incident.

The trial court also ruled that Orient Freight's failure to exercise due diligence in disclosing the
true facts of the incident to Keihin-Everett and Matsushita caused Keihin-Everett to suffer
income losses due to Matsushita's cancellation of their contract. Orient Freight appealed the
Regional Trial Court Decision to the Court of Appeals. The Court of Appeals issued its
Decision affirming the trial court's decision.

ISSUE:
Whether the Court of Appeals, considering the existing contracts in this case, erred in
applying Article 2176 of the Civil Code?

Yes. CA erred in applying 2176 of the Civil Code.

Negligence may either result in culpa aquiliana or culpa contractual. Culpa aquiliana is the
"the wrongful or negligent act or omission which creates a vinculum juris and gives rise to an
obligation between two persons not formally bound by any other obligation, and is governed
by Article 2176 of the Civil Code.

Negligence in culpa contractual, on the other hand, is "the fault or negligence incident in the
performance of an obligation which already-existed, and which increases the liability from
such already existing obligation." This is governed by Articles 1170 to 1174 of the Civil Code.

In Huang v. Phil. Hoteliers, Inc. [T]his Court finds it significant to take note of the following
differences between quasi-delict (culpa aquilina) and breach of contract (culpa contractual). In
quasi-delict, negligence is direct, substantive and independent, while in breach of contract,
negligence is merely incidental to the performance of the contractual obligation; there is a pre-
existing contract or obligation, In quasi-delict, the defense of "good father of a family" is a
complete and proper defense insofar as parents, guardians and employers are concerned,
while in breach of contract, such is not a complete and proper defense in the selection and
supervision of employees. In quasi-delict, there is no presumption of negligence and it is
incumbent upon the injured party to prove the negligence of the defendant, otherwise, the
former's complaint will be dismissed, while in breach of contract, negligence is presumed so
long as it can be proved that there was breach of the contract and the burden is on the
defendant to prove that there was no negligence in the carrying out of the terms of the
contract; the rule of respondeat superior is followed.

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In Cangco v. Manila Railroad, this Court explained why a party may be held liable for either a
breach of contract or an extra-contractual obligation for a negligent act:

It is evident, therefore, that in its decision in the Yamada case, the court treated plaintiff's
action as though founded in tort rather than as based upon the breach of the contract of
carriage, and an examination of the pleadings and of the briefs shows that the questions of
law were in fact discussed upon this theory. Viewed from the standpoint of the defendant the
practical result must have been the same in any event. The proof disclosed beyond doubt that
the defendant's servant was grossly negligent and that his negligence was the proximate
cause of plaintiff's injury. It also affirmatively appeared that defendant had been guilty of
negligence in its failure to exercise proper discretion in the direction of the servant. Defendant
was, therefore, liable for the injury suffered by plaintiff, whether the breach of the duty were to
be regarded as constituting culpa aquilina or culpa contractual. As Manresa points out . . .
whether negligence occurs as an incident in the course of the performance of a contractual
undertaking or is itself (he source of an extra-contractual obligation, its essential
characteristics are identical. There is always an act or omission productive of damage due to
carelessness or inattention on the part of the defendant. Consequently, when the court holds
that a defendant is liable in damages for having failed to exercise due care, either directly, or
in failing to exercise proper care in the selection and direction of his servants, the practical
result is identical in either case.

The true explanation of such cases is to be found by directing the attention to the relative
spheres of contractual and extra-contractual obligations. The field of non-contractual
obligation is much broader [sic] than that of contractual obligation, comprising, as it does, the
whole extent of juridical human relations. These two fields, figuratively speaking, concentric;
that is to say, the mere fact that a person is bound to another by contract does not relieve him
from extra-contractual liability to such person. When such a contractual relation exists the
obligor may break the contract under such conditions that the same act which constitutes a
breach of the contract would have constituted the source of an extra-contractual obligation
had no contract existed between the parties.

If a contracting party's act that breaches the contract would have given rise to an extra-
contractual liability had there been no contract, the contract would be deemed breached by a
tort, and the party may be held liable under Article 2176 and its related provisions.

The Court has not in the process overlooked another rule that a quasi-delict can be the cause
for breaching a contract that might thereby permit the application of applicable principles on
tort even where there is a pre-existing contract between the plaintiff and the defendant (Phil.
Airlines vs. Court of Appeals, 106 SCRA 143; Singson vs. Bank of the Phil. Islands, 23 SCRA
1117; and Air France vs. Carrascoso, 18 SCRA 155). This doctrine, unfortunately, cannot
improve private respondents' case for it can aptly govern only where the act or omission
complained of would constitute an actionable tort independently of the contract. The test
(whether a quasi-delict can be deemed to underlie the breach of a contract) can be
stated thusly: Where, without a pre-existing contract between two parties, an act or
omission can nonetheless amount to an actionable tort by itself, the fact that the
parties are contractually bound is no bar to the application of quasi-delict provisions to
the case. Here, private respondents' damage claim is predicated solely on their contractual
relationship; without such agreement, the act or omission complained of cannot by itself be
held to stand as a separate cause of action or as an independent actionable tort.

92
Here, the petitioner denies that it was obliged to disclose the facts regarding the hijacking
incident since this was not among the provisions of its Trucking Service Agreement with the
respondent. There being no contractual obligation, respondent had no cause of action against
petitioner:

Applying said test, assuming for the sake of argument that petitioner indeed failed to inform
respondent of the incident where the truck was later found at the Caloocan Police station,
would an independent action prosper based on such omission? Assuming that there is no
contractual relation between the parties herein, would petitioner's omission of not informing
respondent that the truck was impounded gives [sic] rise to a quasi-delict? Obviously not,
because the obligation, if there is any in the contract, that is to inform plaintiff of said incident,
could have been spelled out in the very contract itself duly executed by the parties herein
specifically in the Trucking Service Agreement. It is a fact that no such obligation or provision
existed in the contract. Absent said terms and obligations, applying the principles on tort as a
cause for breaching a contract would therefore miserably fail as the lower Court erroneously
did in this case.

The obligation to report what happened during the hijacking incident, admittedly, does not
appear on the plain text of the Trucking Service Agreement. Petitioner argues that it is
nowhere in the agreement. Respondent does not dispute this claim. Neither the Regional Trial
Court nor the Court of Appeals relied on the provisions of the Trucking Service Agreement to
arrive at their respective conclusions. Breach of the Trucking Service Agreement was neither
alleged nor proved.
While petitioner and respondent were contractually bound under the Trucking Service
Agreement and the events at the crux of this controversy occurred during the performance of
this contract, it is apparent that the duty to investigate and report arose subsequent to the
Trucking Service Agreement. When the respondent discovered the news report on the
hijacking incident, it contacted the petitioner, requesting information on the incident.
Respondent then requested the petitioner to investigate and report on the veracity of the news
report. Pursuant to respondent's request, petitioner met with respondent and Matsushita on
April 20, 2002 and issued a letter dated April 22, 2002, addressed to Matsushita.
Respondent's claim was based on petitioner's negligent conduct when it was required to
investigate and report on the incident:

The defendant claimed that it should not be held liable for damages suffered by the plaintiff
considering that the proximate cause of the damage done to plaintiff is the negligence by
employees of Schmitz trucking. This argument is untenable because the defendant is being
sued in this case not for the negligence of the employees of Schmitz trucking but based on
the defendant's own negligence in failing to disclose the true facts of the hijacking incident to
plaintiff Keihin and Matsushita.

Both the Regional Trial Court and Court of Appeals erred in finding petitioner's negligence of
its obligation to report to be an action based on a quasi-delict Petitioner's negligence did not
create the vinculum juris or legal relationship with the respondent, which would have
otherwise given rise to a quasi-delict. Petitioner's duty to respondent existed prior to its
negligent act. When the respondent contacted the petitioner regarding the news report and
asked it to investigate the incident, the petitioner's obligation was created. Thereafter, the
petitioner was alleged to have performed its obligation negligently, causing damage to

93
respondent.

The doctrine "the act that breaks the contract may also be a tort," on which the lower courts
relied, is inapplicable here. Petitioner's negligence, arising as it does from its performance of
its obligation to respondent, is dependent on this obligation. Neither do the facts show that
Article 21 of the Civil Code applies, there being no finding that petitioner's act was a
conscious one to cause harm, or be of such a degree as to approximate fraud or bad faith:

To be sure, there was inaction on the part of the defendant which caused damage to the
plaintiff, but there is nothing to show that the defendant intended to conceal the truth or to
avoid liability. When the facts became apparent to the defendant, the latter readily apologized
to Keihin and Matsushita for their mistake.

Consequently, Articles 1170, 1172, and 1173 of the Civil Code on negligence in the
performance of an obligation should apply.

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TRANSPORTATION LAW

Ace Navigation, Co. vs. GR No. G.R. No. 171591

FGU Insurance Corporation Date: 25 June 2012
By: Icaro, Frederick R. Ponente:J. Perlas- Bernabe

DOCTRINE:
A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent,
describing the freight so as to identify it, stating the name of the consignor, the terms of the
contract for carriage, and agreeing or directing that the freight to be delivered to the order or
assigns of a specified person at a specified place." It operates both as a receipt and as a
contract. As a receipt, it recites the date and place of shipment, describes the goods as to
quantity, weight, dimensions, identification marks and condition, quality, and value. As a
contract, it names the contracting parties, which include the consignee, fixes the route,
destination, and freight rates or charges, and stipulates the rights and obligations assumed by
the parties. As such, it shall only be binding upon the parties who make them, their
assigns and heirs.

FACTS:
Cardia Limited shipped on board the vessel M/V Pakarti Tiga, 8,260 metric tons or 165,200
bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to its
consignee, Heindrich Trading Corp.The subject shipment was insured with respondents, FGU
Insurance Corp. (FGU) and Pioneer Insurance and Surety Corp. (PIONEER), against all risks.

The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa
Kaiun Kaisha Ltd. (SHINWA). Representing itself as owner of the vessel, SHINWA entered
into a charter party contract with Sky International, Inc. (SKY), an agent of Kee Yeh Maritime
Co. (KEE YEH), which further chartered it to Regency Express Lines S.A. (REGENCY).

The vessel arrived at the Port of Manila and the shipment was discharged. However, upon
inspection of HEINDRICH and petitioner Ace Navigation Co., Inc. (ACENAV), agent of
CARDIA, it was found that out of the 165,200 bags of cement, 43,905 bags were in bad order
and condition. Unable to collect the sustained damages in the amount of P1,423,454.60 from
the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the
cargo, each paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94,
respectively, 7 and consequently became subrogated to all the rights and causes of action
accruing to HEINDRICH.

Maintaining that it was not a party to the bill of lading, ACENAV asserts that it cannot be held
liable for the damages sought to be collected by the respondents. It also alleged that since its
principal, CARDIA, was not impleaded as a party-defendant/respondent in the instant suit, no
liability can therefore attach to it as a mere agent. Moreover, there is dearth of evidence
showing that it was responsible for the supposed defective packing of the goods upon which
the award was based.

ISSUE:
Whether or not an agent who is not a party to a bill of lading can be held liable under the said
agreement?

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HELD:
No. A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent,
describing the freight so as to identify it, stating the name of the consignor, the terms of the
contract for carriage, and agreeing or directing that the freight to be delivered to the order or
assigns of a specified person at a specified place." It operates both as a receipt and as a
contract. As a receipt, it recites the date and place of shipment, describes the goods as to
quantity, weight, dimensions, identification marks and condition, quality, and value. As a
contract, it names the contracting parties, which include the consignee, fixes the route,
destination, and freight rates or charges, and stipulates the rights and obligations assumed by
the parties. As such, it shall only be binding upon the parties who make them, their assigns
and heirs.

In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier
PAKARTI; and (c) the consignee HEINDRICH. However, by virtue of their relationship with
PAKARTI under separate charter arrangements, SHINWA, KEE YEH and its agent SKY
likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted agent of
CARDIA, also became a party to the said contract of carriage.

Article 586 of the Code of Commerce provides that the shipowner and the 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 creditor proves that the amount claimed was
invested therein.

Records show that the obligation of ACENAV was limited to informing the consignee
HEINDRICH of the arrival of the vessel in order for the latter to immediately take possession
of the goods. No evidence was offered to establish that ACENAV had a hand in the
provisioning of the vessel or that it represented the carrier, its charterers, or the vessel at any
time during the unloading of the goods. Clearly, ACENAV's participation was simply to
assume responsibility over the cargo when they were unloaded from the vessel. Hence, no
reversible error was committed by the courts a quo in holding that ACENAV was not a ship
agent within the meaning and context of Article 586 of the Code of Commerce, but a mere
agent of CARDIA, the shipper.

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TRANSPORTATION LAW

Designer Baskets, Inc. v. Air Sea GR No. 184513

Transport, Inc. Date: March 9, 2016
By: Gamo, Norenz Jacob Jr. O. Ponente: Jardeleza, J.

DOCTRINE:
A carrier is allowed by law to release the goods to the consignee even without the latter's
surrender of the bill of lading. Under Art. 353 of the Code of Commerce, the general rule is
that upon receipt of the goods, the consignee surrenders the bill of lading to the carrier and
their respective obligations are considered canceled. The law, however, provides two
exceptions where the goods may be released without the surrender of the bill of lading
because the consignee can no longer return it. These exceptions are when the bill of lading
gets lost or for other cause. In either case, the consignee must issue a receipt to the carrier
upon the release of the goods. Such receipt shall produce the same effect as the surrender of
the bill of lading.

FACTS:
DBI is a domestic corporation engaged in the production of housewares and handicraft items
for export. In October 1995, Ambiente, a foreign-based company, ordered from DBI 223
cartons of assorted wooden items worth US$12,590.87 and payable through telegraphic
transfer. Ambiente designated ACCLI as the forwarding agent that will ship out its order from
the Philippines to the United States (US). ACCLI is a domestic corporation acting as agent of
ASTI, a US based corporation engaged in carrier transport business, in the Philippines.

On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila and
delivery to Ambiente in California. ACCLI issued to DBI triplicate copies of ASTI Bill of Lading
No. AC/MLLA601317. DBI retained possession of the originals of the bills of lading pending
the payment of the goods by Ambiente.

On January 23, 1996, Ambiente and ASTI entered into an Indemnity Agreement (Agreement).
Under the Agreement, Ambiente obligated ASTI to deliver the shipment to it or to its order
"without the surrender of the relevant bill(s) of lading due to the non-arrival or loss thereof." In
exchange, Ambiente undertook to indemnify and hold ASTI and its agent free from any liability
as a result of the release of the shipment. Thereafter, ASTI released the shipment to
Ambiente without the knowledge of DBI, and without it receiving payment for the total cost of
the shipment.

DBI then made several demands to Ambiente for the payment of the shipment, but to no avail.
Thus, on October 7, 1996, DBI filed the Original Complaint against ASTI, ACCLI and ACCLFs
incorporators-stockholders for the payment of the value of the shipment, plus interest at the
legal rate from January 22, 1996, exemplary damages, attorney's fees and cost of suit.

In its Original Complaint, DBI claimed that under Bill of Lading Number, ASTI and/or ACCLI is
"to release and deliver the cargo/shipment to the consignee, x x x, only after the original copy
or copies of [the] Bill of Lading is or are surrendered to them; otherwise, they become liable to
the shipper for the value of the shipment." DBI also averred that ACCLI should be jointly and
severally liable with its co-defendants because ACCLI failed to register ASTI as a foreign
corporation doing business in the Philippines. In addition, ACCLI failed to secure a license to
act as agent of ASTI.

97
ISSUE:
1. Whether or not a common carrier may release the goods to the consignee even without the
surrender of the bill of lading?
2. Whether or not Articles 1733, 1734, and 1735 [on extraordinary diligence] of the Civil Code
are applicable?
3. Whether or not Art. 1503 of the Civil Code should apply in this case?

HELD:
1. Yes a common carrier may release the goods to the consignee even without the surrender
of the bill of lading. The language of the bill of lading shows no such requirement. There is no
obligation, therefore, on the part of ASTI and ACCLI to release the goods only upon the
surrender of the original bill of lading.

Further, a carrier is allowed by law to release the goods to the consignee even without the
latter's surrender of the bill of lading. Under Art. 353 of the Code of Commerce, the general
rule is that upon receipt of the goods, the consignee surrenders the bill of lading to the carrier
and their respective obligations are considered canceled. The law, however, provides two
exceptions where the goods may be released without the surrender of the bill of lading
because the consignee can no longer return it. These exceptions are when the bill of lading
gets lost or for other cause. In either case, the consignee must issue a receipt to the carrier
upon the release of the goods. Such receipt shall produce the same effect as the surrender of
the bill of lading.

Here, Ambiente could not produce the bill of lading covering the shipment not because it was
lost, but for another cause: the bill of lading was retained by DBI pending Ambiente's full
payment of the shipment. Ambiente and ASTI then entered into an Indemnity Agreement,
wherein the former asked the latter to release the shipment even without the surrender of the
bill of lading. The execution of this Agreement, and the undisputed fact that the shipment was
released to Ambiente pursuant to it, to our mind, operates as a receipt in substantial
compliance with the last paragraph of Article 353 of the Code of Commerce.

2. No. Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this case. Articles
1733, 1734, and 1735 speak of the common carrier's responsibility over the goods. They refer
to the general liability of common carriers in case of loss, destruction or deterioration of goods
and the presumption of negligence against them. This responsibility or duty 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.

It is, in fact, undisputed that the goods were timely delivered to the proper consignee or to the
one who was authorized to receive them. DBFs only cause of action against ASTI and ACCLI
is the release of the goods to Ambiente without the surrender of the bill of lading, purportedly
in violation of the terms of the bill of lading.

3. No. Articles 1523 and 1503, therefore, refer to a contract of sale between a seller and a
buyer. In particular, they refer to who between the seller and the buyer has the right of
possession or ownership over the goods subject of the sale. Articles 1523 and 1503 do not
apply to a contract of carriage between the shipper and the common carrier. The third
paragraph of Article 1503, upon which DBI relies, does not oblige the common carrier to

98
withhold delivery of the goods in the event that the bill of lading is retained by the seller.
Rather, it only gives the seller a better right to the possession of the goods as against the
mere inchoate right of the buyer. Thus, Articles 1523 and 1503 find no application here. The
case before us does not involve an action where the seller asserts ownership over the goods
as against the buyer. Instead, we are confronted with a complaint for sum of money and
damages filed by the seller against the buyer and the common carrier due to the non-payment
of the goods by the buyer, and the release of the goods by the carrier despite non-surrender
of the bill of lading. A contract of sale is separate and distinct from a contract of carriage. They
involve different parties, different rights, different obligations and liabilities.

The contract between DBI and ASTI is a contract of carriage of goods; hence, ASTI's liability
should be pursuant to that contract and the law on transportation of goods. Not being a party
to the contract of sale between DBI and Ambiente, ASTI cannot be held liable for the payment
of the value of the goods sold.

In view of the foregoing, we hold that under Bill of Lading No. AC/MLLA601317 and the
pertinent law and jurisprudence, ASTI and ACCLI are not liable to DBI. We sustain the finding
of the CA that only Ambiente, as the buyer of the goods, has the obligation to pay for the
value of the shipment.

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TRANSPORTATION LAW

Tsuneishi Heavy Industries, Inc., Vs. Mis G.R. No. 193572

Maritime Corporation Date: April 04, 2018
By: Icaro, Frederick R. Ponente: J. Jardaleza

DOCTRINE:
To be clear, we repeat that when a lien already exists, this is already equivalent to an
attachment. This is where Tsuneishi's argument fails. Clearly, because it claims a maritime
lien in accordance with the Ship Mortgage Decree, all Tsuneishi had to do is to file a proper
action in court for its enforcement. The issuance of a writ of preliminary attachment on the
pretext that it is the only means to enforce a maritime lien is superfluous. The reason that the
Ship Mortgage Decree does not provide for a detailed procedure for the enforcement of a
maritime lien is because it is not necessary.

FACTS:
Respondent MIS Maritime Corporation (MIS) contracted Tsuneishi to dry dock and repair its
vessel M/T MIS-1. The vessel dry docked in Tsuneishi's shipyard. Tsuneishi rendered the
required services. However, about a month later and while the vessel was still dry docked,
Tsuneishi conducted an engine test on M/T MIS-1. The vessel's engine emitted smoke. The
parties eventually discovered that this was caused by a burnt crank journal. The crankpin also
showed hairline cracks due to defective lubrication or deterioration. Tsuneishi insists that the
damage was not its fault while MIS insists on the contrary. Nevertheless, as an act of good
will, Tsuneishi paid for the vessel's new engine crankshaft, crankpin, and main bearings.

Tsuneishi billed MIS the amount of US$318,571.50 for payment of its repair and dry docking
services. MIS refused to pay this amount. Instead, it demanded that Tsuneishi pay
US$471,462.60 as payment for the income that the vessel lost in the six months that it was
not operational and dry docked at Tsuneishi's shipyard. It also asked that its claim be set off
against the amount billed by Tsuneishi. MIS further insisted that after the set off, Tsuneishi still
had the obligation to pay it the amount of US$152,891.Tsuneishi rejected MIS' demands. It
delivered the vessel to MIS in September 2006.
Tsuneishi claims that MIS also caused M/T White Cattleya, a vessel owned by Cattleya
Shipping Panama S.A. (Cattleya Shipping), to stop its payment for the services Tsuneishi
rendered for the repair and dry docking of the vessel.

Tsuneishi billed MIS the amount of US$318,571.50 for payment of its repair and dry docking
services. MIS refused to pay this amount. Instead, it demanded that Tsuneishi pay
US$471,462.60 as payment for the income that the vessel lost in the six months that it was
not operational and dry docked at Tsuneishi's shipyard. It also asked that its claim be set off
against the amount billed by Tsuneishi. MIS further insisted that after the set off, Tsuneishi still
had the obligation to pay it the amount of US$152,891.10. Tsuneishi rejected MIS' demands.
It delivered the vessel to MIS in September 2006.8 On November 6, 2006, MIS signed an
Agreement for Final Price. However, despite repeated demands, MIS refused to pay
Tsuneishi the amount billed under their contract.

Tsuneishi claims that MIS also caused M/T White Cattleya, a vessel owned by Cattleya
Shipping Panama S.A. (Cattleya Shipping), to stop its payment for the services Tsuneishi
rendered for the repair and dry docking of the vessel.

100
ISSUE:
Whether a maritime lien under Section 21 of the Ship Mortgage Decree may be enforced
through a writ of preliminary attachment under Rule 57 of the Rules of Court?

HELD:

No. Section 21 of the Ship Mortgage Decree establishes a lien. It states under Sec. 21.
Maritime Lien for Necessaries; Persons entitled to such Lien. – Any person furnishing repairs,
supplies, towage, use of dry dock or marine railway, or other necessaries to any vessel,
whether foreign or domestic, upon the order of the owner of such vessel, or of a person
authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by
suit in rem and it shall be necessary to allege or prove that credit was given to the vessel.

In practical terms, this means that the holder of the lien has the right to bring an action to seek
the sale of the vessel and the application of the proceeds of this sale to the outstanding
obligation. Through this lien, a person who furnishes repair, supplies, towage, use of dry dock
or marine railway, or other necessaries to any vessel, in accordance with the requirements
under Section 21, is able to obtain security for the payment of the obligation to him.

A party who has a lien in his or her favor has a remedy in law to hold the property liable for the
payment of the obligation. A lienholder has the remedy of filing an action in court for the
enforcement of the lien. In such action, a lienholder must establish that the obligation and the
corresponding lien exist before he or she can demand that the property subject to the lien be
sold for the payment of the obligation. Thus, a lien functions as a form of security for an
obligation.

Liens, as in the case of a maritime lien, arise in accordance with the provision of particular
laws providing for their creation, such as the Ship Mortgage Decree which clearly states that
certain persons who provide services or materials can possess a lien over a vessel. The
Rules of Court also provide for a provisional remedy which effectively operates as a lien. This
is found in Rule 57 which governs the procedure for the issuance of a writ of preliminary
attachment.

A writ of preliminary attachment is a provisional remedy issued by a court where an action is

pending. In simple terms, a writ of preliminary attachment allows the levy of a property which
shall then be held by the sheriff. This property will stand as security for the satisfaction of the
judgment that the court may render in favor of the attaching party. In Republic v. Mega Pacific
eSolutions (Republic), we explained that the purpose of a writ of preliminary attachment is
twofold:
First, it seizes upon property of an alleged debtor in advance of final judgment and holds it
subject to appropriation, thereby preventing the loss or dissipation of the property through
fraud or other means. Second, it subjects the property of the debtor to the payment of a
creditor's claim, in those cases in which personal service upon the debtor cannot be obtained.
This remedy is meant to secure a contingent lien on the defendant's property until the plaintiff
can, by appropriate proceedings, obtain a judgment and have the property applied to its
satisfaction, or to make some provision for unsecured debts in cases in which the means of
satisfaction thereof arc liable to be removed beyond the jurisdiction, or improperly disposed of
or concealed, or otherwise placed beyond the reach of creditors.

As we said, a writ of preliminary attachment effectively functions as a lien. This is crucial to

101
resolving Tsuneishi's alleged novel question of law in this case. Tsuneishi is correct that the
Ship Mortgage Decree does not provide for the specific procedure through which a maritime
lien can be enforced. Its error is in insisting that a maritime lien can only be operationalized by
granting a writ of preliminary attachment under Rule 57 of the Rules of Court. Tsuneishi
argues that the existence of a maritime lien should be considered as another ground for the
issuance of a writ of preliminary attachment under the Rules of Court.

Tsuneishi's argument is rooted on a faulty understanding of a lien and a writ of preliminary

attachment. As we said, a maritime lien exists in accordance with the provision of the Ship
Mortgage Decree. It is enforced by filing a proceeding in court. When a maritime lien exists,
this means that the party in whose favor the lien was established may ask the court to enforce
it by ordering the sale of the subject property and using the proceeds to settle the obligation.

On the other hand, a writ of preliminary attachment is issued precisely to create a lien. When
a party moves for its issuance, the party is effectively asking the court to attach a property and
hold it liable for any judgment that the court may render in his or her favor. This is similar to
what a lien does. It functions as a security for the payment of an obligation. In Quasha
Asperilla Ancheta Valmonte Peña & Marcos v. Juan, we held:
An attachment proceeding is for the purpose of creating a lien on the property to serve as
security for the payment of the creditors' claim. Hence, where a lien already exists, as in this
case a maritime lien, the same is already equivalent to an attachment. x x x
To be clear, we repeat that when a lien already exists, this is already equivalent to an
attachment. This is where Tsuneishi's argument fails. Clearly, because it claims a maritime
lien in accordance with the Ship Mortgage Decree, all Tsuneishi had to do is to file a proper
action in court for its enforcement. The issuance of a writ of preliminary attachment on the
pretext that it is the only means to enforce a maritime lien is superfluous. The reason that the
Ship Mortgage Decree does not provide for a detailed procedure for the enforcement of a
maritime lien is because it is not necessary. Section 21 already provides for the simple
procedure—file an action in rem before the court.

To our mind, this alleged novel question of law is a mere device to remedy the error
committed by Tsuneishi in the proceedings before the trial court regarding the issuance of a
writ of preliminary attachment. We note that the attachment before the trial court extended to
other properties other than the lien itself, such as bank accounts and real property. Clearly,
what was prayed for in the proceedings below was not an attachment for the enforcement of a
maritime lien but an attachment, plain and simple.

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TRANSPORTATION LAW

UCPB General Insurance Co. Inc. vs GR No. 168433

Aboitiz Shipping Corp. Date: February 10, 2009
By: Jimenez, Louisa Ysabel S. Ponente: Tinga, J.

DOCTRINE:
The 24-hour claim requirement is a condition precedent to the accrual of a right of action
against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege
and prove the fulfilment of the condition. Otherwise, no right of action against the carrier can
accrue.

FACTS:
San Miguel Corp (SMC) purchased from Tawian three units of wastewater treatment plant.
The goods came from the USA and arrived at the port of Manila and were transported to Cebu
on board MV Aboitiz Supercon II. After its arrival in Cebu, the goods were delivered to SMC
on August 2, 1991. It was then discovered that one electrical motor was damaged. SMC then
filed a claim on October 30, 1991.

Pursuant to an insurance agreement, UCPB General Insurance Co. Inc. (UCPB) paid SMC.
UCPB then filed a complaint as subrogee of SMC for the recovery of money against Aboitiz.
The RTC ruled in favor of UCPB, and declared Aboitiz solidarily liable to UCPB for the
damaged shipment. On appeal, the CA reversed the ruling of the RTC and ruled that UCPB’s
right of action did not accrue because of the failure to file a formal notice of claim within 24
hours from SMC’s receipt of the damaged merchandise as required by Art. 366 of the Code of
Commerce. UCPB asserts that the claim requirement under Art. 366 does not apply to this
case because the damage to the merchandise had already been known to the carrier as its
representative was present when the cargo was found damaged upon discharge from the
foreign carrier. Further, UCPB claims that under the Carriage of Goods by Sea Act (COGSA),
notice of loss need not be given if the condition of the cargo has been the subject of joint
inspection.

ISSUE:
Is the 24-hour claim requirement a condition precedent to the accrual of a right of action
against the carrier?

HELD:
Yes, the 24-hour claim requirement is a condition precedent.

According to Article 366 of the Code of Commerce, “within twenty-four hours following the
receipt of the merchandise, the claim against the carrier for damage or average which may be
found therein upon opening the packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be ascertained from the outside part
of such packages, in which case the claim shall be admitted only at the time of receipt.”
Moreover, according to jurisprudence, the requirement to give notice of loss or damage to the
goods is not an empty formalism. The fundamental reason or purpose of such a stipulation is
not to relieve the carrier from just liability, but reasonably to inform it that the shipment has
been damaged and that it is charged with liability therefor, and to give it an opportunity to
examine the nature and extent of the injury. The 24-hour claim requirement is a condition
precedent to the accrual of a right of action against a carrier for loss of, or damage to, the

103
goods. The shipper or consignee must allege and prove the fulfilment of the condition.
Otherwise, no right of action against the carrier can accrue.

In the case at bar, the shipment was received by SMC on August 2, 1991. However, the
claims were only made on October 30, 1991, more than two months from receipt of the
shipment and even after the extent of the loss had already been determined by SMC’s
surveyor. Thus, the claim was clearly filed beyond the 24-hour time frame prescribed by Art.
366 of the Code of Commerce.

Therefore, UCPB cannot claim from Aboitiz because the requirement of 24-hour claim is a
condition precedent for the accrual of action against the carrier, Aboitiz.

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TRANSPORTATION LAW

Benjamin Cua v. Wallem Philippine GR No. 171337

Shipping, Inc. Date: July 11, 2012
By: Jimenez, Louisa Ysabel S. Ponente: Brion, J.

DOCTRINE:
The carrier is discharged from liability for loss or damage to the cargo "unless the suit is
brought within one year after delivery of the one year after delivery of the goods or the date
when the goods should have been delivered." However, jurisprudence recognizes the validity
of an agreement between the carrier and the shipper/consignee extending the one-year
period to file a claim.

FACTS:
Advance Shipping, a foreign corporation, was the owner and manager of M/V Argo Trader
that carried the cargo of Benjamin Cua, while Wallem Philippines Shipping Inc. (Wallem), was
its local agent. On November 12, 1990, Cua filed an action for damages against Wallem and
Advance Shipping. He sought for the payment of P2,030,303.52 for damage to 218 tons and
for a shortage of 50 tons of shipment of Brazilian Soyabean consigned to him, as evidenced
by Bill of Lading No. 10. He claimed that the loss was due to Wallem and Advance Shipping’s
failure to observe extraordinary diligence in carrying the cargo.

Wallem then filed its own motion to dismiss on the ground of prescription. It argued that
Section 3(6) of the Carriage of Goods by Sea Act (COGSA) provides that "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." Wallem alleged that the goods were delivered to
Cua on August 16, 1989, but the damages suit was instituted only on November 12, 1990
more than one year than the period allotted under the COGSA. Since the action was filed
beyond the one year prescriptive period, the same action has been barred.

Cua, on the other hand, filed an opposition to Wallem's motion to dismiss, and denied that his
claim is already prescribed. Cua contended that on August 10, 1990, a telex message was
sent by the manager of the UK P&I Club, which stated that Advance Shipping agreed to
extend the commencement of suit for 90 days, from August 14, 1990 to November 12, 1990.
Said extension was made with the concurrence of the insurer of the vessel, the UK P&I Club.

ISSUE:
Was the claim of Cua for payment of damages prescribed?

HELD:
No, the claim of Cua has not prescribed.

According to Section 3 (6) of the COGSA, the carrier is discharged from liability for loss or
damage to the cargo "unless the suit is brought within one year after delivery of the one year
after delivery of the goods or the date when the goods should have been delivered." However,
jurisprudence recognizes the validity of an agreement between the carrier and the
shipper/consignee extending the one-year period to file a claim.

In the case at bar, goods were delivered on August 16, 1989, but the damages suit was
instituted only on November 12, 1990. Although the complaint was clearly led beyond the

105
one-year period, it was alleged that on August 10, 1990, the parties validly agreed for a 90-
day extension or up to November 12, 1990 on which a suit may be filed. And since Wallem
and Advance Shipping failed to specifically deny the agreement on the extension of the period
to file an action, such extension was considered as an admitted fact. Thus, the valid
agreement between the parties governs the period of prescription.

Therefore, the action for damages was timely filed.

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TRANSPORTATION LAW

Insurance Company of North America v. GR No. 180784

Asian Terminals, Inc. Date: February 15, 2012
By: Mallari, Hazel Marie Ponente: Peralta, J.

DOCTRINE:
The term “carriage of goods” in the Carriage of Goods by Sea Act (COGSA) covers the period
from the time the goods are loaded to the vessel to the time they are discharged therefrom.
The carrier and the ship may put up the defense of prescription if the action for damages is
not brought within one year after the delivery of the goods or the date when the goods should
have been delivered. It has been held that not only the shipper, but also the consignee or
legal holder of the bill may invoke the prescriptive period. However, the COGSA does not
mention that an arrastre operator may invoke the prescriptive period of one year; hence, it
does not cover the arrastre operator.

FACTS:
On November 2002, Macro-Lite Corporation shipped to San Miguel Corporation (SMC),
through M/V DIMI P vessel, 185 packages of electrolytic tin free steel, complete and in good
order condition and covered by Bill of Lading. The shipment had a declared value of US
$169,850.35 and was insured with petitioner against all risks under its marine policy.

The carrying vessel arrived at the port of Manila and when the shipment was discharged
therefrom, it was noted than 7 packages were damaged and in bad order. The shipment was
then turned over to the custody of respondent (as arrastre operator) for storage and
safekeeping pending its withdrawal by the consignee’s authorized customs broker, which was
later withdrawn by the customs broker from custody of the respondent. An examination report
was written and showed that an additional 5 packages were found to be damaged and in bad
order.
Consignee, SMC, filed separate claims against respondent and petitioner for the damage of
11,200 sheets of electrolytic tin free steel. Petitioner, as insurer of the cargo, paid the
consignee the amount of Php 431,592.14 for the damage caused to the shipment.
Thereafter, petitioner formally demanded reparation against respondent and as respondent
failed to satisfy its demand, petitioner filed an action for damages with the RTC.

The trial court dismissed the complaint because it was already barred by the statute of
limitations. It held that COGSA, embodied in CA 65, applies to this case since the goods
were shipped from a foreign port to the Philippines. Under the said law, particularly paragraph
4, Section 3(6), the shipper has the right to bring a suit within one year after the delivery of the
goods or the date when the goods should have been delivered.

Petitioner’s motion for recon was denied by the trial court. Petitioner asserts that since the
complaint was filed against respondent arrastre operator only, without impleading the carrier,
the prescriptive period under the COGSA is not applicable to this case.

Moreover, petitioner contends that the term carriage of goods in the COGSA covers the
period from the time the goods are loaded to the vessel to the time they are discharged
therefrom. It points out that it sued respondent only for the additional five (5) packages of the
subject shipment that were found damaged while in respondents custody, long after the
shipment was discharged from the vessel.

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ISSUE:
WON the one-year prescriptive period for filing a suit under the COGSA applies to this action
for damages against respondent arrastre operator

HELD:
NO. The COGSA was accepted to be made applicable to all contracts for the carriage of
goods by sea to and from the Philippine ports in foreign trade by virtue of CA 65. 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; thus, it can be inferred that the period of time when
the goods have been discharged from the ship and given to the custody of the arrastre
operator is not covered by the COGSA.

The prescriptive period for filing an action for the loss or damage of the goods under the
COGSA is found in paragraph 6, Section 3. It states that “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 delivery of the goods or the date when the goods
should have been delivered.”

However, the COGSA does not mention that an arrastre operator may invoke the prescriptive
period of 1 year; hence, it does not cover the arrastre operator.

In fact, respondent arrastre operator’s responsibility and liability for losses and damages are
set forth in Contract for Cargo between the Philippine Ports Authority and Asian Terminals,
Inc. which explicitly provides that the consignee has a period of thirty (30) days from the date
of delivery of the package to the consignee within which to request a certificate of loss from
the arrastre operator. From the date of the request for a certificate of loss, the arrastre
operator has a period of fifteen (15) days within which to issue a certificate of non-
delivery/loss either actually or constructively. Moreover, from the date of issuance of a
certificate of non-delivery/loss, the consignee has fifteen (15) days within which to file a formal
claim covering the loss, injury, damage or non-delivery of such goods with all accompanying
documentation against the arrastre operator.

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TRANSPORTATION LAW

Vector Shipping Corp. v. American GR No. 159213

Home Assurance Co., Date: July 3, 2013
By: Mallari, Hazel Marie Ponente: Bersamin, J.

DOCTRINE:
Subrogation under Article 2207 of the Civil Code gives rise to a cause of action created by
law. For purposes of the law on the prescription of actions, the period of limitation is ten years.

FACTS:
Soriano was the registered owner of the M/T Vector while Vector was the operator of the
same. Caltex entered into a contract of affreightment with Vector for the transport of Caltex's
petroleum cargo through the M/T Vector. Caltex insured the petroleum cargo with respondent
for P7,455,421.08 under a Marine Open Policy. In the evening of December 20, 1987, the M/T
Vector and the M/V Doña Paz, the latter a vessel owned and operated by Sulpicio Lines, Inc.,
collided in the open sea. The collision led to the sinking of both vessels. The entire petroleum
cargo of Caltex on board the M/T Vector perished. On July 12, 1988, respondent indemnified
Caltex for the loss of the petroleum cargo in the full amount of P7,455,421.08.

On March 5, 1992, respondent filed a complaint against Vector, Soriano, and Sulpicio Lines,
Inc. to recover the full amount it paid to Caltex. The RTC dismissed the case on the grounds
that the action is upon a quasi-delict and as such, it must be commenced within 4 years. The
tort complained of in this case occurred on 20 December 1987. The action arising therefrom
would under the law prescribe, unless interrupted, on 20 December 1991.

On appeal, the CA absolved Sulpicio Lines of any liability to the respondent, although in the
same decision, it was held that Vector and Soriano jointly and severally liable to respondent
for the reimbursement of the amount paid to Caltex. The appellate court ruled that the
relationship that existed between Caltex and M/V Dona Paz is that of a quasi-delict while that
between Caltex and M/T Vector is culpa contractual based on a Contract of Affreightment or
a charter party. And under Article 1144 of the New Civil Code, actions based on written
contract must be brought within 10 years from the time the right of action accrued.

Respondent sought the partial reconsideration of the decision of the CA, contending that
Sulpicio Lines, Inc. should also be held jointly liable with Vector and Soriano for the actual
damages awarded.

Vector and Soriano posit that the RTC correctly dismissed respondent's complaint on the
ground of prescription. They insist that this action was premised on a quasi-delict or upon an
injury to the rights of the plaintiff, which, pursuant to Article 1146 of the Civil Code, must be
instituted within four years from the time the cause of action accrued.

ISSUE:
WON the action of the respondent was already barred by prescription for bringing it only on
March 5, 1992.

HELD:
NO, the respondent’s action did not yet prescribe. The legal provision governing this case was

109
not Article 1146 of the Civil Code, but Article 1144 of the Civil Code, which states:

Article 1144. The following actions must be brought within ten years from the time the cause
of action accrues: (1) Upon a written contract; (2) Upon an obligation created by
law; and (3) Upon a judgment.

However, the Court clarified that CA's characterization of the cause of action as based on the
contract of affreightment between Caltex and Vector, with the breach of contract being the
failure of Vector to make the M/T Vector seaworthy, as to make this action come under Article
1144 (1) is erroneous. Instead, we find and hold that that the present action was not upon a
written contract, but upon an obligation created by law. Hence, it came under Article 1144 (2)
of the Civil Code. This is because the subrogation of respondent to the rights of Caltex as the
insured was by virtue of the express provision of law embodied in Article 2207 of the Civil
Code, to wit:

Article 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.

The payment made to Caltex as the insured being thereby duly documented, respondent
became subrogated as a matter of course pursuant to Article 2207 of the Civil Code. In legal
contemplation, subrogation is the "substitution of another person in the place of the creditor,
to whose rights he succeeds in relation to the debt;" and is "independent of any mere
contractual relations between the parties to be affected by it, and is broad enough to cover
every instance in which one party is required to pay a debt for which another is primarily
answerable, and which in equity and conscience ought to be discharged by the latter."

Note: The Court will not pass upon whether or not Sulpicio Lines, Inc. should also be held
jointly liable with Vector and Soriano for the actual damages claimed.

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TRANSPORTATION LAW

Asian Terminals, Inc. v. Philam GR No. G.R. Nos. 181163, 181262 & 181319
Insurance Co., Inc. Date: July 24, 2013
By: Mendiola, Glenn Mikko V. Ponente:Villarama, Jr., J.

DOCTRINE:
While it is true that an arrastre operator and a carrier may not be held solidarily liable at all
times, the facts of these cases show that apart from ATI’s stevedores being directly in charge
of the physical unloading of the cargo, its foreman picked the cable sling that was used to
hoist the packages for transfer to the dock. Moreover, the fact that 218 of the 219 packages
were unloaded with the same sling unharmed is telling of the inadequate care with which
ATI’s stevedore handled and discharged Case No. 03-245-42K/1 under the supervision of the
carrier.

FACTS:
On April 15, 1995, Nichimen Corporation shipped to Universal Motors Corporation 219
packages containing 120 units of brand new Nissan Pickup Truck Double Cab 4×2 model,
without engine, tires and batteries, on board the vessel S/S Calayan Iris from Japan to Manila.
The shipment, which had a declared value of US$81,368 or P29,400,000, was insured with
Philam against all risks under the marine Policy no. 708-8006717-4.

On April 20, 1995, the carrying vessel arrived at the port of Manila. When the shipment was
unloaded by the staff of Asian TerminaI Inc (ATI), it was found that the package marked as
03-245-42K/1 was in bad order. The Turn Over Survey of bad order cargoes dated April 21,
1995 identified two packages, labelled 03-245-42K/1 and 03/237/7CK/2, as being dented and
broken. Thereafter, the cargoes were stored for temporary safekeeping inside CFS
Warehouse in Pier No. 5.

On May 11, 1995, the shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the
authorized broker of Universal Motors, and delivered to the latter’s warehouse in
Mandaluyong City. Upon the request of Universal Motors, a bad order survey was conducted
on the cargoes and it was found that one Frame Axle Sub without LWR was deeply dented on
the buffle plate while six Frame Assembly with Bush were deformed and misaligned. Owing to
the extent of the damage to said cargoes, Universal Motors declared them a total loss.

On August 4, 1995, Universal Motors filed a formal claim for damages in the amount of
P643,963.84 against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. When
Universal Motors’ demands remained unheeded, it sought reparation from and was
compensated in the sum of P633,957.15 by Philam. Accordingly, Universal Motors issued a
Subrogation Receipt dated November 15, 1995 in favor of Philam.

On January 18, 1996, Philam, as subrogee of Universal Motors, filed a Complaint for
damages against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the
Regional Trial Court of Makati City. The trial court rendered judgment in favour of Philam
which ruling was affirmed by the Court of Appeals modifying the amount to be paid by
Westwind and ATI.

111
ISSUE:
Whether or not Westwind Shipping and Asian Terminals are liable for the damage to the
cargo with Steel Case No. 03-245-42K/1.

HELD:
YES. Westwind and ATI are both jointly and severally liable for the damage to the cargo with
Steel Case No. 03-245-42K/1.

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 transported by them.
Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the goods. 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.

As to the liability of ATI as an arrastre operator, well-established in the case of Philippines

First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., that the functions of an arrastre
operator involve the handling of cargo deposited on the wharf or between the establishment of
the consignee or shipper and the ship’s tackle. Being the custodian of the goods discharged
from a vessel, an arrastre operator’s duty is to take good care of the goods and to turn them
over to the party entitled to their possession. Moreover, handling cargo is mainly the arrastre
operator’s principal work so its drivers/operators or employees should observe the standards
and measures necessary to prevent losses and damage to shipments under its custody.

In this case, evidence sufficiently proved that Steel Case No. 03-245-42K/1 was partly torn
and crumpled on one side while it was being unloaded from the carrying vessel. The cargo
was damaged by ATI stevedores due to over tightening of a cable sling hold during discharge
from the vessel’s hatch to the pier. Since the damage to the cargo was incurred during the
discharge of the shipment and while under the supervision of the carrier, both are liable for the
damage caused to the cargo.

While it is true that an arrastre operator and a carrier may not be held solidarily liable at all
times, the facts of these cases show that apart from ATI’s stevedores being directly in charge
of the physical unloading of the cargo, its foreman picked the cable sling that was used to
hoist the packages for transfer to the dock. Moreover, the fact that 218 of the 219 packages
were unloaded with the same sling unharmed is telling of the inadequate care with which
ATI’s stevedore handled and discharged Case No. 03-245-42K/1 under the supervision of the
carrier.

Thus, Westwind and ATI are both jointly and severally liable for the damage to the cargo.

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TRANSPORTATION LAW

Pioneer Insurance v. APL Co. Pte. Ltd. GR No. G.R. No. 226345
By: Mendiola, Glenn Mikko V. Date: August 2, 2017
Ponente: Mendoza, J.

DOCTRINE:
It is well-entrenched in jurisprudence that in case of loss or damage of cargoes, the one-year
prescriptive period under the COGSA applies.

FACTS:

On January 13, 2012, the shipper, Chillies Export House Limited, turned over to respondent
APL Co. Pte. Ltd. (APL) 250 bags of chili pepper for transport from the port of Chennai, India,
to Manila. The shipment, with a total declared value of $12,272.50, was loaded on board M/V
Wan Hai 262. In turn, BSFIL Technologies, Inc. (BSFIL), as consignee, insured the cargo with
petitioner Pioneer Insurance and Surety Corporation (Pioneer Insurance).

On February 2, 2012, the shipment arrived at the port of Manila and was temporarily stored at
North Harbor, Manila. On February 6, 2012, the bags of chili were withdrawn and delivered to
BSFIL. Upon receipt thereof, it discovered that 76 bags were wet and heavily infested with
molds. The shipment was declared unfit for human consumption and was eventually declared
as a total loss.

As a result, BSFIL made a formal claim against APL and Pioneer Insurance. The latter hired
an independent insurance adjuster, which found that the shipment was wet because of the
water which seeped inside the container van APL provided. Pioneer Insurance paid BSFIL
P195,505.65 after evaluating the claim.

Having been subrogated to all the rights and cause of action of BSFIL, Pioneer Insurance
sought payment from APL, but the latter refused. This prompted Pioneer Insurance to file a
complaint for sum of money against APL.

Pioneer Insurance insists the action, which was filed on February 1, 2013, was within the one
year prescriptive period under the COGSA after BSFIL received the goods on February 6,
2012. It argues that the nine-month period provided under the Bill of Lading was inapplicable
because the Bill of Lading itself states that in the event that such time period is found to be
contrary to any law compulsorily applicable, then the period prescribed by such law shall then
apply. Pioneer Insurance is of the view that the stipulation in the Bill of Lading is subordinate
to the COGSA. It asserts that while parties are free to stipulate the terms and conditions of
their contract, the same should not be contrary to law, morals, good customs, public order, or
public policy.

APL countered that Pioneer Insurance erred in claiming that the nine-month period under the
Bill of Lading applies only in the absence of an applicable law. It stressed that the nine-month
period under the Bill of Lading applies, unless there is a law to the contrary. APL explained
that "absence" differs from "contrary." It, thus, argued that the nine-month period was
applicable because it is not contrary to any applicable law.

In its Reply, Pioneer Insurance averred that the nine-month period shall be applied only if

113
there is no law to the contrary. It noted that the COGSA was clearly contrary to the provisions
of the Bill of Lading because it provides for a different prescriptive period. For said reason,
Pioneer Insurance believed that the prescriptive period under the COGSA should be
controlling.

ISSUE:
Whether or not the one year prescriptive period under the COGSA should be controlling.

HELD:
YES. One year prescriptive period under COGSA should be controlling.

It is well-entrenched in jurisprudence that in case of loss or damage of cargoes, the one-year

prescriptive period under the COGSA applies. It is at this juncture where the parties are at
odds, with Pioneer Insurance claiming that the one-year prescriptive period under the COGSA
governs; whereas APL insists that the nine-month prescriptive period under the Bill of Lading
applies.

In the present case it involves lost or damaged cargo. After a closer persual of the Bill of
Lading, the Court finds that its provisions are clear and unequivocal leaving no room for
interpretation.
In the Bill of Lading, it was categorically stated that the carrier shall in any event be
discharged from all liability whatsoever in respect of the goods, unless suit is brought in the
proper forum within nine (9) months after delivery of the goods or the date when they should
have been delivered. The same, however, is qualified in that when the said nine-month period
is contrary to any law compulsory applicable, the period prescribed by the said law shall
apply.

A reading of the Bill of Lading between the parties reveals that the nine-month prescriptive
period is not applicable in all actions or claims. As an exception, the nine-month period is
inapplicable when there is a different period provided by a law for a particular claim or action.
Hence, it is readily apparent that the exception under the Bill of Lading became operative
because there was a compulsory law applicable which provides for a different prescriptive
period.

Strictly applying the terms of the Bill of Lading, the one-year prescriptive period under the
COGSA should govern because the present case involves loss of goods or cargo. In finding
so, the Court does not construe the Bill of Lading any further but merely applies its terms
according to its plain and literal meaning.

Thus, one year prescriptive period under COGSA should be controlling.

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TRANSPORTATION LAW

Edna Lhuillier v. British Airways GR No. 171092

By: Oliva, Pauline Antonette G. Date: March 15, 2010
Ponente: Del Castillo, J.

DOCTRINE:
The Warsaw Convention is a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this country. Under Article 28(1) of
the Warsaw Convention, the plaintiff may bring the action for damages before – 1. the court
where the carrier is domiciled; 2. the court where the carrier has its principal place of
business; 3. the court where the carrier has an establishment by which the contract has been
made; or 4. the court of the place of destination.

Allegations of tortious conduct committed against an airline passenger during the course of
the international carriage do not bring the case outside the ambit of the Warsaw Convention.

FACTS:
On February 28, 2005, petitioner took respondent’s flight from London, United Kingdom to
Rome, Italy. Once on board, she allegedly requested one of the flight attendants to assist her
in placing her hand-carried luggage in the overhead bin. However, the flight attendant
allegedly refused to help and assist her, and even sarcastically remarked that "If I were to
help all 300 passengers in this flight, I would have a broken back!"

Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight
attendant singled her out from among all the passengers in the business class section to
lecture on plane safety and after which, she was told, "We don’t like your attitude." Upon
arrival in Rome, petitioner complained to respondent’s ground manager and demanded an
apology. However, the latter declared that the flight stewards were "only doing their job."

Petitioner thus filed a complaint for damages against respondent before the RTC of Makati
City. Respondent, by special appearance sought for the dismissal of the complaint, citing lack
of jurisdiction over the case and over its person. It maintained that only the courts of London
or Rome have jurisdiction over the complaint, pursuant to the Warsaw Convention, Article
28(1) of which provides: An action for damages must be brought at the option of the plaintiff,
either before the court of domicile of the carrier or his principal place of business, or where he
has a place of business through which the contract has been made, or before the court of the
place of destination.

The RTC granted the Motion to Dismiss, finding that the Warsaw Convention applies in this
case, since the Philippines is a signatory thereto.

ISSUE:
Whether or not Philippine Courts have jurisdiction over a tortious conduct committed against a
Filipino citizen and resident by airline personnel of a foreign carrier travelling beyond the
territorial limit of any foreign country, and thus is outside the ambit of the Warsaw Convention

HELD:
No. The Warsaw Convention has the force and effect of law in this country.

115
The Warsaw Convention applies because the air travel, where the alleged tortious conduct
occurred, was between the United Kingdom and Italy, which are both signatories to the
Warsaw Convention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to all international carriage of persons, luggage or goods
performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed
by an air transport undertaking.

2. For the purposes of this Convention the expression "international carriage" means any
carriage 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 carriage or a transhipment, 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. A carriage without such an agreed stopping place between
territories subject to the sovereignty, suzerainty, mandate or authority of the same High
Contracting Party is not deemed to be international for the purposes of this Convention.

Thus, when the place of departure and the place of destination in a contract of carriage are
situated within the territories of two High Contracting Parties, said carriage is deemed an
"international carriage". The High Contracting Parties referred to herein were the signatories
to the Warsaw Convention and those which subsequently adhered to it.

In the case at bench, petitioner’s place of departure was London, United Kingdom while her
place of destination was Rome, Italy. Both the United Kingdom and Italy signed and ratified
the Warsaw Convention. As such, the transport of the petitioner is deemed to be an
"international carriage" within the contemplation of the Warsaw Convention.

Since the Warsaw Convention applies in the instant case, then the jurisdiction over the
subject matter of the action is governed by the provisions of the Warsaw Convention.

Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages
before –
1. the court where the carrier is domiciled;
2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the contract has been made; or
4. the court of the place of destination.

In this case, it is not disputed that respondent is a British corporation domiciled in London,
United Kingdom with London as its principal place of business. Hence, under the first and
second jurisdictional rules, the petitioner may bring her case before the courts of London in
the United Kingdom. In the passenger ticket and baggage check presented by both the
petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently,
under the third jurisdictional rule, the petitioner has the option to bring her case before the
courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of
destination is Rome, Italy, which is properly designated given the routing presented in the said
passenger ticket and baggage check. Accordingly, petitioner may bring her action before the
courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have
jurisdiction over the case filed by the petitioner.

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Tortious conduct as ground for the petitioner’s complaint is within the purview of the Warsaw
Convention.

Relevant to this particular issue is the case of Carey v. United Airlines, where the passenger
filed an action against the airline arising from an incident involving the former and the airline’s
flight attendant during an international flight resulting to a heated exchange which included
insults and profanity. The United States Court of Appeals (9th Circuit) held that the
"passenger's action against the airline carrier arising from alleged confrontational incident
between passenger and flight attendant on international flight was governed exclusively by
the Warsaw Convention, even though the incident allegedly involved intentional misconduct
by the flight attendant."

In Bloom v. Alaska Airlines, the passenger brought nine causes of action against the airline in
the state court, arising from a confrontation with the flight attendant during an international
flight to Mexico. The United States Court of Appeals (9th Circuit) held that the "Warsaw
Convention governs actions arising from international air travel and provides the exclusive
remedy for conduct which falls within its provisions." It further held that the said Convention
"created no exception for an injury suffered as a result of intentional conduct" which in that
case involved a claim for intentional infliction of emotional distress.

It is thus settled that allegations of tortious conduct committed against an airline passenger
during the course of the international carriage do not bring the case outside the ambit of the
Warsaw Convention.

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TRANSPORTATION LAW

Northwest Airlines, Inc. vs. Spouses GR No. 179117

Heshan Date: February 3, 2010
By: Pimentel, Abbeylyn Erica T. Ponente: Carpio-Morales, J.

DOCTRINE: When an airline issues a ticket to a passenger, confirmed for a particular flight on
a certain date, a contract of carriage arises. The passenger then has every right to expect that
he be transported on that flight and on that date. If he does not, then the carrier opens itself to
a suit for a breach of contract of carriage.

FACTS: Respondents have confirmed tickets for their Missouri to Manila flight, with a series
of connecting flights, issued by petitioner. For the Memphis to Los Angeles leg of,
respondents checked-in their baggage three (3) hours before the flight and was second in line
to claim boarding passes. Respondents were not immediately issued boarding passes by
petitioner’s agents without any explanation and proceeded with issuing boarding passes to
passengers next in line. Respondent returned to the check-in counter ten minutes before the
flight but was informed that no boarding passes are needed and that they may occupy the
remaining available seats. However, there were no more sufficient available seats.
Respondents were then offered the cabin crew seat. Respondents turned upset by the way
they were treated by petitioner’s agents and eventually disembarked from the plane. They
instead took another flight from a different airline.

Respondent thus filed a complaint for damages for breach of contract of carriage with the
RTC against petitioner. The RTC ruled in respondent’s favor and was affirmed by the CA. On
its petition for certiorari to the SC, petitioner argues that it did not commit any breach of
contract of carriage since respondents were eventually transported from Memphis to Los
Angeles, albeit via another airline, and that respondents made no claim of having sustained
injury during the carriage.

ISSUE: Did petitioner commit breach of contract of carriage?

HELD: Yes. Petitioner committed breach of contract of carriage.

In Singapore Airlines vs. Fernandez (GR No. 142305, December 10, 2003), the court ruled
that when an airline issues a ticket to a passenger, confirmed for a particular flight on a certain
date, a contract of carriage arises. The passenger then has every right to expect that he be
transported on that flight and on that date. If he does not, then the carrier opens itself to a suit
for a breach of contract of carriage.

In this case, respondents have confirmed tickets for the Memphis to Los Angeles leg issued
by petitioner. However, petitioner failed to transport respondents on flight as confirmed in the
ticket. This failure to transport is a clear act of breach.

Therefore, petitioner committed breach of contract of carriage when it failed to transport

respondents on the flight confirmed in the ticket.

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Cathay Pacific Airways v. Juanita Reyes, GR No. 185891,

Wilfredo Reyes, Michael Roy Reyes, Sixta Date: June 26, 2013
Lapuz, and Sampaguita Travel Ponente: Perez, J.
By: Roces, Suzanne

DOCTRINE:
An airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every right to expect that he would fly on
that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage.

FACTS:
This is petition for review of the decision of the Court of Appeals ordering petitioner Cathay
Pacific (Cathay) to pay respondents Juanita Reyes (Juanita), Wilfredo Reyes (Wilfredo), and
Michael Reyes (Michael) P25,000.00 each to respondents as nominal damages for the
cancellation of their flights from Adelaide, Austrailia to Manila.

Respondents Wilfredo, Juanita, and Michael, together with Sixta Lapuz (Sixta), Wilfredo’s
mother-in-law, were holders of Cathay Pacific round-trip airplane tickets for Manila-
HongKong-Adelaide,Australia-HongKong-Manila, and Wilfredo made the booking through
Sampaguita Travel. One week before they were scheduled to fly back home, Wilfredo
reconfirmed his family’s return flight with the Cathay Pacific office in Adelaide. They were
advised that the reservation was "still okay as scheduled." However, on the day their
scheduled departure from Adelaide. Wilfredo was informed by a staff from Cathay Pacific that
the Reyeses did not have confirmed reservations, and only Sixta’s flight booking was
confirmed. Nevertheless, they were allowed to board the flight to HongKong due to adamant
pleas from Wilfredo. When they arrived in HongKong, they were again informed of the same
problem. Unfortunately this time, the Reyeses were not allowed to board because the flight to
Manila was fully booked. Only Sixta was allowed to proceed to Manila from HongKong. On
the following day, the Reyeses were finally allowed to board the next flight bound for Manila.
Upon arriving in the Philippines, Wilfredo went to Sampaguita Travel to report the incident,
and was informed by Sampaguita Travel that it was actually Cathay Pacific which cancelled
their bookings. The respondents then, through counsel, sent a letter to Cathay Pacific
advising the latter of the incident and demanding payment of damages. As their pleas were
unheeded, respondents, invoking breach of contract of carriage, filed a Complaint for
damages against Cathay Pacific and Sampaguita Travel.

In its Answer, Cathay Pacific alleged that based on its computerized booking system, several
and confusing bookings were purportedly made under the names of respondents through two
(2) travel agencies, namely: Sampaguita Travel and Rajah Travel Corporation. Cathay Pacific
asserted that in the case of Wilfredo with PNR No. J76TH, no valid ticket number was inputted
within a prescribed period which means that no ticket was sold. Thus, Cathay Pacific had the
right to cancel the booking. Cathay Pacific found that Sampaguita Travel initially inputted a
ticket number for PNR No. J76TH and had it cancelled the following day, while the PNR Nos.
HDWC3 and HTFMG of Juanita and Michael do not exist.
On the other hand, Sampaguita Travel, in its Answer, denied Cathay Pacific’s claim.
Sampaguita Travel explained that the Reyeses had two (2) PNRs each because confirmation
from Cathay Pacific was made one flight segment at a time. Sampaguita Travel asserted that

119
it only issued the tickets after Cathay Pacific confirmed the bookings. Furthermore,
Sampaguita Travel exonerated itself from liability for damages because respondents were
claiming for damages arising from a breach of contract of carriage.

The RTC ruled in favor of Sampaguita and Cathay. It held that respondents were in
possession of valid tickets but did not have confirmed reservations for their return trip to
Manila. Additionally, the trial court observed that the several PNRs opened by Sampaguita
Travel created confusion in the bookings. The trial court however did not find any basis to
establish liability on the part of either Cathay Pacific or Sampaguita Travel considering that
the cancellation was not without any justified reason. Finally, the trial court denied the claims
for damages for being unsubstantiated. Upon appeal, the CA ordered Cathay Pacific to pay
P25,000.00 each to respondents as nominal damages.

ISSUE:
1. Was Cathay Pacific’s cancellation of the respondents’ flight a breach of the contract of
carriage?
2. Is Sampaguita Travel also liable for damages incurred by the respondent Reyeses?
3. Is the award of nominal damages in this case correct?

HELD:
1. Yes, Cathay Pacific breached its contract of carriage with respondents when it
disallowed them to board the plane in Hong Kong going to Manila on the date reflected on
their tickets.
Respondents’ cause of action against Cathay Pacific stemmed from a breach of contract of
carriage. A contract of carriage is defined as 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. Under Article 1732 of the Civil Code, this "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" is called a
common carrier.

Respondents entered into a contract of carriage with Cathay Pacific. As far as the
respondents are concerned, they were holding valid and confirmed airplane tickets. The ticket
in itself is a valid written contract of carriage whereby for a consideration, Cathay Pacific
undertook to carry respondents in its airplane for a round-trip flight from Manila to Adelaide,
Australia and then back to Manila. In fact, Wilfredo called the Cathay Pacific office in Adelaide
one week before his return flight to re-confirm his booking. He was even assured by a staff of
Cathay Pacific that he does not need to re- confirm his booking.

In its defense, Cathay Pacific posits that Wilfredo’s booking was cancelled because a ticket
number was not inputted by Sampaguita Travel, while bookings of Juanita and Michael were
not honored for being fictitious. Cathay Pacific clearly blames Sampaguita Travel for not
finalizing the bookings for the respondents’ return flights. Respondents are not privy to
whatever misunderstanding and confusion that may have transpired in their bookings. On its
face, the airplane ticket is a valid written contract of carriage. This Court has held that when
an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every right to expect that he would fly on
that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage.

120
Therefore, Cathay Pacific’s cancellation of the respondents’ flight is a breach of the contract of
carriage.

2. Yes. Sampaguita Travel is also liable for damages incurred by the respondent Reyeses.

The contractual relation between Sampaguita Travel and respondents is a contract for
services. The object of the contract is arranging and facilitating the latter’s booking and
ticketing. It was even Sampaguita Travel which issued the tickets.
Since the contract between the parties is an ordinary one for services, the standard of care
required of respondent is that of a good father of a family under Article 1173 of the Civil Code.
This connotes reasonable care consistent with that which an ordinarily prudent person would
have observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily prudent person
would have used in the same situation? If not, then he is guilty of negligence.

There was indeed failure on the part of Sampaguita Travel to exercise due diligence in
performing its obligations under the contract of services. It was established by Cathay Pacific,
through the generation of the PNRs, that Sampaguita Travel failed to input the correct ticket
number for Wilfredo’s ticket. Cathay Pacific even asserted that Sampaguita Travel made two
fictitious bookings for Juanita and Michael. The negligence of Sampaguita Travel renders it
also liable for damages.

Therefore, Sampaguita Travel is also liable for damages incurred by the respondent Reyeses

3. Yes. The award of nominal damages in this case correct.

The Supreme Court sustained the award of nominal damages in the amount of P25,000.00 to
only three of the four respondents who were aggrieved by the last-minute cancellation of their
flights. Nominal damages are recoverable where a legal right is technically violated and must
be vindicated against an invasion that has produced no actual present loss of any kind or
where there has been a breach of contract and no substantial injury or actual damages
whatsoever have been or can be shown. Under Article 2221 of the Civil Code, nominal
damages may be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the
plaintiff for any loss suffered. Considering that the three respondents were denied boarding
their return flight from HongKong to Manila and that they had to wait in the airport overnight
for their return flight, they are deemed to have technically suffered injury. Nonetheless, they
failed to present proof of actual damages. Consequently, they should be compensated in the
form of nominal damages.

The amount to be awarded as nominal damages shall be equal or at least commensurate to

the injury sustained by respondents considering the concept and purpose of such damages.
The amount of nominal damages to be awarded may also depend on certain special reasons
extant in the case. The amount of such damages is addressed to the sound discretion of the
court and taking into account the relevant circumstances, such as the failure of some
respondents to board the flight on schedule and the slight breach in the legal obligations of
the airline company to comply with the terms of the contract, i.e., the airplane ticket and of the
travel agency to make the correct bookings. The Supreme Court finds the award of
P25,000.00 to the Reyeses correct and proper.

121
Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the
bookings which led to the erroneous cancellation of respondents’ bookings. Their negligence
is the proximate cause of the technical injury sustained by respondents. Therefore, they have
become joint tortfeasors, whose responsibility for quasi-delict, under Article 2194 or the Civil
Code, is solidary. Based on the foregoing, Cathay Pacific and Sampaguita Travel are jointly
and solidarily liable for nominal damages awarded to respondents Wilfredo, Juanita and
Michael Roy.

The Supreme Court also ruled that Cathay Pacific and Sampaguita Travel are not liable for
actual damages, because respondents failed to show proof of actual damages. Neither are
they liable for moral damages for it is proven in this case that they did not act in bad faith. The
Supreme Court agreed with the CA that "what may be attributed to x x x Cathay Pacific is
negligence concerning the lapses in their process of confirming passenger bookings and
reservations, done through travel agencies. But this negligence is not so gross so as to
amount to bad faith." Cathay Pacific was not motivated by malice or bad faith in not allowing
respondents to board on their return flight to Manila. It is evident and was in fact proven by
Cathay Pacific that its refusal to honor the return flight bookings of respondents was due to
the cancellation of one booking and the two other bookings were not reflected on its
computerized booking system. Likewise, Sampaguita Travel cannot be held liable for moral
damages. True, Sampaguita Travel was negligent in the conduct of its booking and ticketing
which resulted in the cancellation of flights. But its actions were not proven to have been
tainted with malice or bad faith. Under these circumstances, respondents are not entitled to
moral and exemplary damages. With respect to attorney’s fees, the Supreme Court also
upheld the appellate court’s finding on lack of factual and legal justification to award attorney’s
fees.

Therefore, the award of nominal damages in this case is correct, and Cathay Pacific and
Sampaguita Travel are jointly and solidarily liable for nominal damages awarded to
respondents Wilfredo, Juanita and Michael Roy.

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Sps. Fernando vs. Northwest Airlines, GR No. 212038

Inc. Date: February 8, 2017
By: Jermile Ed L. Salor Ponente: Peralta, J.

DOCTRINE:
In an action based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or negligent. All that he has to prove is the
existence of the contract and the fact of its non-performance by the carrier.

FACTS:
Spouses Jesus and Elizabeth Fernando, owners of JB Music and JB Sports, are frequent
flyers of Northwest Airlines, Inc. and are holders of its elite cards. Petitioners initiated the filing
of the instant case which arose from this incident:

Jesus arrived at the LAX via Northwest Airlines to join his family for Christmas, however, upon
arrival at the airport, he found that his documents reflect his return ticket as August 2001. So
he approached Northwest Personnel named Linda. The latter merely glanced at his ticket
without checking its status and peremptorily said that the ticket has been used and invalid. He
then averred that such ticket was unused because of some ticket restrictions. Hence, ticket
remains unused. He was then brought to the Immigration’s interrogation room and was asked
humiliating questions for two hours. After that, he was granted only a 12-day stay in the US,
instead of the usual 6 months.

ISSUE:
Whether or not there was a breach of contract of carriage.

HELD:
Yes. Undoubtedly, a contract of carriage existed between Northwest and the Fernandos. They
freely gave their consent to an agreement whose object was the transportation of the
Fernandos from LA to Manila, and whose cause or consideration was the fare paid by the
Fernandos to Northwest. In Alitalia Airways v. CA, the Supreme Court held that when an
Airline issues a ticket to a passenger confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger then has every right to expect that he would fly on
that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage.

When Northwest confirmed the reservations of Fernandos, it bound itself to transport the
Fernandos on their flight on 29 January 2002. In an action based on a breach of contract of
carriage, the aggrieved party does not have to prove that the common carrier was at fault or
negligent. All that he has to prove is the existence of the contract and the fact of its non-
performance by the carrier. As the aggrieved party, the Fernandos only had to prove the
existence of the contract and the fact of its non-performance by Northwest, as carrier, in order
to be awarded compensatory and actual damages.

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Phil-Nippon Kyoei Corp., v. Gudelosao GR No. 181375

By: Gomez, Donna Kris Date: July 13, 2016
Ponente: Jardeleza, J.

DOCTRINE:
When the vessel is totally lost, in which case abandonment is not required because there is
no vessel to abandon, the liability of the shipowner or agent for damages is extinguished.
Nonetheless, the limited liability rule is not absolute and is without exceptions. It does not
apply in cases: (1) where the injury or death to a passenger is due either to the fault of the
shipowner, or to the concurring negligence of the shipowner and the captain; (2) where the
vessel is insured; and (3) in workmen's compensation claims.

FACTS:
Philippine Nipon, a domestic shipping corporation, purchased a "Ro-Ro" passenger/cargo
vessel "MV Mahlia" in Japan. For the vessel's one month conduction voyage from Japan to
the Philippines, petitioner, as local principal, and Top Ever Marine Management Maritime Co.,
Ltd., as foreign principal, respondents as crew members. They were hired through the local
manning agency of TMCL. Petitioner secured a Marine Insurance Policy from SSSICI over the
vessel for P10,800,000.00 against loss, damage, and third party liability or expense, arising
from the occurrence of the perils of the sea for the voyage of the vessel from Onomichi, Japan
to Batangas, Philippines. This included Personal Accident Policies for the eight crew members
for P3,240,000.00 each in case of accidental death or injury.

The vessel sank due to extreme bad weather condition while still within Japanese waters with
only one survivor. The heirs and beneficiaries of the 2 crew members filed separate
complaints for death benefits and other damages against petitioner, TEMMPC, Capt. Orbeta,
TMCL, and SSSICI, with the NLRC.

Labor Arbiter rendered a Decision finding solidary liability among petitioner, TEMMPC, TMCL
and Capt. Orbeta. It also found SSSICI liable to the respondents for the proceeds of the
Personal Accident Policies and attorney's fees. SSSICI was also ordered to pay the heirs of
the deceased crew members and that petitioner should be absolved from any liability upon
the payment of SSSICI.

On appeal, the NLRC modified the Decision, it held that SSSICI should pay Complainants in
addition to their awarded claims, additional death benefits of US$7,000 each to the minor
children of Complainant. It absolved petitioner, TEMMPC and TMCL and Capt. Orbeta from
any liability based on the limited liability rule.

Ruling on the Petition for Certiorari filed before the CA, it reversed the decision of the NLRC
and reinstated the LA’s decision.

ISSUE:
Whether or not the doctrine of real and hypothecary nature of maritime law applies in favor of
petitioner

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HELD:
No. The doctrine of limited liability is not applicable to claims under POEA-SEC.
In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under
Book III of the Code of Commerce, viz.: 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 equipment and the
freightage he may have earned during the voyage.

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 Art. 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. 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. Article 837 applies the limited liability rule in cases of
collision.

Meanwhile, Articles 587 and 590 embody the universal principle of limited liability in all cases
wherein the shipowner or agent may be properly held liable for the negligent or illicit acts of
the captain. These articles precisely intend to limit the liability of the shipowner or agent to the
value of the vessel, its appurtenances and freightage earned in the voyage, provided that the
owner or agent abandons the vessel. When the vessel is totally lost, in which case
abandonment is not required because there is no vessel to abandon, the liability of the
shipowner or agent for damages is extinguished. Nonetheless, the limited liability rule is not
absolute and is without exceptions. It does not apply in cases: (1) where the injury or death to
a passenger is due either to the fault of the shipowner, or to the concurring negligence of the
shipowner and the captain; (2) where the vessel is insured; and (3) in workmen's
compensation claims. The provisions of the Code of Commerce invoked by appellant 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 employees. It is not the liability for
the damage or loss of the cargo or injury to, or death of, a passenger by or through the
misconduct of the captain or master of the ship; nor the liability for the loss of the ship as a
result of collision; nor the responsibility for wages of the crew, but a liability created by a
statute to compensate employees 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 employees in the event of death caused by their
employment. Such compensation has nothing to do with the provisions of the Code of
Commerce regarding maritime commerce. It is an item in the cost of production which must
be included in the budget of any well-managed industry. The claim for death benefits under
the POEA-SEC is the same species as the workmen's compensation claims under the Labor
Code — both of which belong to a different realm from that of Maritime Law. Therefore, the
limited liability rule does not apply to petitioner's liability under the POEA-SEC.

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TRANSPORTATION LAW

Dela Torre VS CA GR No. 160088

By: Samaniego, Emil L. Date: July 13, 2011
Ponente: J. Mendoza

DOCTRINE:
The Limited Liability Rule is intended to protect the interest of the shipowner, thus, it cannot
be applied against him.

FACTS:
Respondent Crisostomo G. Concepcion owned LCT-Josephine, a vessel registered with the
Philippine Coast Guard. Concepcion entered into a “Preliminary Agreement” with Roland de la
Torre for the dry-docking and repairs of the said vessel as well as for its charter afterwards.
While the payloader was on the deck of the LCT-Josephine scooping a load of the SAND
AND GRAVEL, the vessel’s ramp started to move downward, the vessel tilted and sea water
rushed in. Shortly thereafter, LCT-Josephine sank. Concepcion demanded that PTSC/ Roland
refloat LCT-Josephine. The latter assured Concepcion that negotiations were underway.
Unfortunately, this did not materialize. Thus, the RTC declared that the “efficient cause of the
sinking of the LCT-JOSEPHINE was the improper lowering or positioning of the ramp,” which
was well within the charge or responsibility of the captain and crew of the vessel. The
petitioners argued that since there is total loss of vessel due to its sinking, the Limited Liability
Rule under the Code of Commerce should be applied to them.

ISSUE:
Whether or not the Limited Liability Rule shall be applied to petitioners?

HELD:
No. With respect to petitioners’ position that the Limited Liability Rule under the Code of
Commerce should be applied to them, the argument is misplaced. The said rule has been
explained to be that of the real and hypothecary doctrine in maritime law where the shipowner
or ship agent’s liability is held as merely co-extensive with his interest in the vessel such that a
total loss thereof results in its extinction. In this jurisdiction, this rule is provided in three
articles of the Code of Commerce. These are:

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons
which may arise from the conduct of the captain in the care of the goods which he loaded on
the vessel; but he may exempt himself therefrom by abandoning the vessel with all her
equipment and the freight it may have earned during the voyage.
---
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in
the common fund for the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of
the part of the vessel belonging to him.
---
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall
be understood as limited to the value of the vessel with all its appurtenances and freightage
served during the voyage.
Article 837 specifically applies to cases involving collision which is a necessary consequence
of the right to abandon the vessel given to the shipowner or ship agent under the first

126
provision – Article 587. Similarly, Article 590 is a reiteration of Article 587, only this time the
situation is that the vessel is co-owned by several persons. Obviously, the forerunner of the
Limited Liability Rule under the Code of Commerce is Article 587. Now, the latter is quite clear
on which indemnities may be confined or restricted to the value of the vessel pursuant to the
said Rule, and these are the – "indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on the vessel." Thus, what is
contemplated is the liability to third persons who may have dealt with the shipowner, the agent
or even the charterer in case of demise or bareboat charter.

The only person who could avail of this is the shipowner, Concepcion. He is the very person
whom the Limited Liability Rule has been conceived to protect. The petitioners cannot invoke
this as a defense. Thus, it would be absurd to apply the Limited Liability Rule against him
who, in the first place, should be the one benefitting from the said rule.

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TRANSPORTATION LAW

LTFRB v. G. V. Florida Transport, Inc. GR No.213088

By: Señoran, Artlyn Gem G. Date: June 28, 2017
Ponente: Peralta, J.

DOCTRINE:
The LTFRB’s power to suspend the CPCs issued to public utility vehicles depends on its
assessment of the gravity of the violation, the potential and actual harm to the public, and the
policy impact of its own actions. The Court gives due deference to the LTFRB’s exercise of its
sound administrative discretion in applying its special knowledge, experience and expertise to
resolve respondent's case.

FACTS:
A vehicular accident occurred at Bontoc, Mountain Province involving a public utility bus
coming from Sampaloc, Manila, bound for Poblacion Bontoc and bearing a "G.V. Florida"
body mark with License Plate No. TXT-872. The mishap claimed the lives of 15 passengers
and injured 32 others. An initial investigation report, which came from the DOTC of the
Cordillera Administrative Region, showed that based on the records of the LTO and petitioner
LTFRB, License Plate No. TXT-872 actually belongs to a different bus owned by and
registered under the name of a certain Norberto Cue, Sr. under Certificate of Public
Convenience Case No. 2007-0407; and that the bus involved in the accident is not duly
authorized to operate as a public transportation.

Thereafter, in its Incident Report, the DOTC-CAR stated, among others: that the License Plate
Number attached to the bus was indeed TXT-872, which belongs to a different unit owned by
Cue; that, per registration records, the subject bus was registered as "private" on April 4, 2013
with issued License Plate No. UDO 762; and that the registered owner is Dagupan Bus Co.,
Inc., while the previous owner is respondent G. V. Florida, Inc. The LTFRB then rendered its
Decision canceling Cue's CPC No. 2007-0407 and suspending the operation of respondent's
186 buses under 28 of its CPCs for a period of six months.

ISSUE:
Whether or not suspension is within the powers of the LTFRB and was it reasonably
imposed?

HELD:
Yes, suspension is within the powers of the LTFRB and was reasonably imposed.

Section 16(n) of Commonwealth Act. No. 146, or the Public Service Act, provides that the
Public Service Commission (which was replaced by the LTFRB, among others) shall have the
power to suspend or revoke any certificate issued under the provisions of this Act whenever
the holder thereof has violated or willfully and contumaciously refused to comply with any
order rule or regulation of the Commission or any provision of the Act. Also, Section 5(b) of
E.O. 202 states that the LTFRB shall have the power to issue, amend, revise, suspend or
cancel Certificates of Public Convenience or permits authorizing the operation of public land
transportation services provided by motorized vehicles, and to prescribe the appropriate terms
and conditions therefor.

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In the present case, respondent is guilty of several violations of the law, to wit: lack of
petitioner's approval of the sale and transfer of the CPC which respondent bought from Cue;
operating the ill-fated bus under its name when the same is registered under the name of
Dagupan Bus Co., Inc.; attaching a vehicle license plate to the ill-fated bus when such plate
belongs to a different bus owned by Cue; and operating the subject bus under the authority of
a different CPC. What makes matters worse is that respondent knowingly and blatantly
committed these violations. The suspension of the 28 CPCs was brought about by
respondent's wanton disregard and defiance of the regulations issued by petitioner,
tantamount to a willful refusal to comply with the requirements of law or of the orders, rules or
regulations issued by petitioner and which is punishable, under the law, by suspension or
revocation of any of its CPCs.

Therefore, suspension is within the powers of the LTFRB, as expressly provided by law, and it
was reasonably imposed.

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TRANSPORTATION LAW

Tawang Multi-Purpose Cooperative vs. La GR No. 166471

Trinidad Water District Date: March 22, 2011
By: Tamaray, Paulinet Angela S. Ponente: Carpio, J.

DOCTRINE:
The President, Congress and the Court cannot directly create franchises that are exclusive in
character. What the President, Congress and the Court cannot legally do directly they cannot
do indirectly.

FACTS:
Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the Cooperative
Development Authority, and organized to provide domestic water services in Barangay
Tawang, La Trinidad, Benguet. La Trinidad Water District (LTWD) is a local water utility
created under Presidential Decree (PD) No. 198, as amended. It is authorized to supply water
for domestic, industrial and commercial purposes within the municipality of La Trinidad,
Benguet. TMPC filed with the National Water Resources Board (NWRB) an application for a
certificate of public convenience (CPC) to operate and maintain a waterworks system in
Barangay Tawang. LTWD opposed TMPC’s application. LTWD claimed that, under PD No.
198 as amended, its franchise is exclusive, citing Sec. 47: “Exclusive Franchise. No franchise
shall be granted to any other person or agency for domestic, industrial or commercial water
service within the district or any portion thereof unless and except to the extent that the board
of directors of said district consents thereto by resolution duly adopted, such resolution,
however, shall be subject to review by the Administration.”

In its Resolution, the NWRB approved TMPC’s application for a CPC. It held that LTWD’s
franchise cannot be exclusive since exclusive franchises are unconstitutional and found that
TMPC is legally and financially qualified to operate and maintain a waterworks system. LTWD
filed a motion for reconsideration. In its Resolution, the NWRB denied the motion. LTWD
appealed to the RTC. The RTC set aside the NWRB’s Resolution and cancelled TMPC’s
CPC. TMPC filed a motion for reconsideration. In its Order, the RTC denied the motion.
Hence, the petition.

ISSUE:
Whether or not the RTC erred in holding that the disputed provision in PD No. 198, as
amended, is valid

HELD:
The RTC erred in its decision. The 1935, 1973 and 1987 Constitutions are clear in stating that
franchises for the operation of a public utility cannot be exclusive in character. The 1935,
1973 and 1987 Constitutions expressly and clearly state that, "nor shall such franchise x x x
be exclusive in character." There is no exception. When the law is clear, there is nothing for
the courts to do but to apply it. The President, Congress and the Court cannot directly create
franchises that are exclusive in character. What the President, Congress and the Court cannot
legally do directly they cannot do indirectly. Thus, the President, Congress and the Court
cannot create indirectly franchises that are exclusive in character by allowing the Board of
Directors (BOD) of a water district and the Local Water Utilities Administration (LWUA) to
create franchises that are exclusive in character.In PD No. 198, as amended, former
President Ferdinand E. Marcos created indirectly franchises that are exclusive in character by

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allowing the BOD of LTWD and the LWUA to directly create franchises that are exclusive in
character.

In case of conflict between the Constitution and a statute, the former always prevails because
the Constitution is the basic law to which all other laws must conform to. The duty of the Court
is to uphold the Constitution and to declare void all laws that do not conform to it. Section 47
of PD 198 is UNCONSTITUTIONAL.

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TRANSPORTATION LAW

ABS-CBN Broadcasting Corp. v. Philippine GR No. 175769-70

Multi-Media System, Inc. Date: January 19, 2009
By: Torres, Ronald Derick M. Ponente: Ynares-Santiago, J.

DOCTRINE:
Broadcasting means ”the transmission by wireless means for the public reception of sounds
or of images or of representations thereof; such transmission by satellite is also ‘broadcasting’
where the means for decrypting are provided to the public by the broadcasting organization or
with its consent.”

FACTS:
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws of the
Republic of the Philippines to engage in television and radio broadcasting. It broadcasts its
programs by wireless means and by satellite. On the other hand, respondent Philippine Multi-
Media System, Inc. (PMSI) is the operator of Dream Broadcasting System and delivers digital
direct-to-home (DTH) television via satellite to its subscribers all over the Philippines.

PMSI was granted a legislative franchise under RA 8630 and was given provisional authority
by the National Telecommunications Commission (NTC) to install, operate and maintain
nationwide DTH satellite service. PMSI offered as part of its program line-up Channels 2 and
23.

On April 25, 2001, ABS-CBN demanded PMSI to cease and desist from rebroadcasting
Channels 2 and 23. PMSI replied that its rebroadcasting was in accordance with the authority
given by the NTC and its obligation under Memorandum Circular No 4-08-88. Thereafter,
negotiations between petitioner and respondent ensued but the same fell through. This
prompted ABS-CBN to file a complaint for “Violation of Laws Involving Property Rights, with
Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction” with the Intellectual Property Office (IPO) against respondent.

The Bureau of Legal Affairs (BFA) of the IPO rendered a decision in favor of ABS-CBN. PMSI
appealed with the Office of the Director-General of the IPO which overturned the decision of
the BLA. On appeal by ABS-CBN, the CA sustained the findings of the Director-General.
Petitioner’s motion for reconsideration was denied, hence this petition.

ISSUE:
Whether PMSI is engaged in broadcasting/rebroadcasting?

HELD:
No, respondent PMSI is not engaged in broadcasting/rebroadcasting.

The Director-General of the IPO correctly found that PMSI is not engaged in rebroadcasting
and thus cannot be considered to have infringed ABS-CBN’s broadcasting rights and
copyright, thus:

That the Appellant’s [herein respondent PMSI] subscribers are able to view Appellee’s

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 [herein petitioner ABS-CBN] programs (Channels 2 and 23) at the same time that the
latter is broadcasting the same is undisputed. The question however is, would the
Appellant in doing so be considered engaged in broadcasting. Section 202.7 of the IP
Code states that broadcasting means the transmission by wireless means for the
public reception of sounds or of images or of representations thereof; such
transmission by satellite is also ‘broadcasting’ where the means for decrypting are
provided to the public by the broadcasting organization or with its consent.

Section 202.7 of the IP Code, thus, provides two instances wherein there is
broadcasting, to wit:

1. The transmission by wireless means for the public reception of sounds or of

images or of representations thereof; and

2. The transmission by satellite for the public reception of sounds or of images

or of representations thereof where the means for decrypting are provided to
the public by the broadcasting organization or with its consent.

It is under the second category that Appellant’s DTH satellite television service must
be examined since it is satellite-based. The elements of such category are as follows:

1. There is transmission of sounds or images or of representations thereof;

2. The transmission is through satellite;

3. The transmission is for public reception; and

4. The means for decrypting are provided to the public by the broadcasting
organization or with its consent.

It is only the presence of all the above elements can a determination that the DTH is
broadcasting and consequently, rebroadcasting Appellee’s signals in violation of
Sections 211 and 177 of the IP Code, may be arrived at.

Accordingly, this Office is of the view that the transmission contemplated under
Section 202.7 of the IP Code presupposes that the origin of the signals is the
broadcaster. Hence, a program that is broadcasted is attributed to the broadcaster. In
the same manner, the rebroadcasted program is attributed to the rebroadcaster.

In the case at hand, Appellant is not the origin nor does it claim to be the origin of the
programs broadcasted by the Appellee. Appellant did not make and transmit on its
own but merely carried the existing signals of the Appellee. When Appellant’s
subscribers view Appellee’s programs in Channels 2 and 23, they know that the origin
thereof was the Appellee.

Under the Rome Convention, rebroadcasting is “the simultaneous broadcasting by one

broadcasting organization of the broadcast of another broadcasting organization.” The
Working Paper prepared by the Secretariat of the Standing Committee on Copyright and
Related Rights defines broadcasting organizations as “entities that take the financial and
editorial responsibility for the selection and arrangement of, and investment in, the transmitted

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content.” Evidently, PMSI would not qualify as a broadcasting organization because it does
not have the aforementioned responsibilities imposed upon broadcasting organizations, such
as ABS-CBN.

ABS-CBN creates and transmits its own signals; PMSI merely carries such signals which the
viewers receive in its unaltered form. PMSI does not produce, select, or determine the
programs to be shown in Channels 2 and 23. Likewise, it does not pass itself off as the origin
or author of such programs. Insofar as Channels 2 and 23 are concerned, PMSI merely
retransmits the same in accordance with Memorandum Circular 04-08-88. With regard to its
premium channels, it buys the channels from content providers and transmits on an as-is
basis to its viewers. Clearly, PMSI does not perform the functions of a broadcasting
organization; thus, it cannot be said that it is engaged in rebroadcasting Channels 2 and 23.

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TRANSPORTATION LAW

SURIGAO DEL NORTE ELECTRIC GR No. 183626

COOPERATIVE VS. ERC Date: October 4,2010
By: TURRECHA, ZENNIA S. Ponente: Nachura, J.

DOCTRINE:
The regulation of rates to be charged by public utilities is founded upon the police powers of
the State and statutes prescribing rules for the control and regulation of public utilities are a
valid exercise thereof. When private property is used for a public purpose and is affected with
public interest, it ceases to be juris privati only and becomes subject to regulation.

FACTS:
On February 8, 1996, the Association of Mindanao Rural Electric Cooperatives, as
representative of SURNECO and of the other 33 rural electric cooperatives in Mindanao, filed
a petition before the then Energy Regulatory Board (ERB) for the approval of the formula for
automatic cost adjustment and adoption of the National Power Corporation (NPC)
restructured rate adjustment to comply with Republic Act (R.A.) No. 7832.

In an Order dated February 19, 1997, the ERB granted SURNECO and other rural electric
cooperatives provisional authority to use and implement the Purchased Power Adjustment
(PPA) formula pursuant to the mandatory provisions of R.A. No. 7832 and its IRR, with a
directive to submit relevant and pertinent documents for the Board’s review, verification, and
confirmation.

After a careful evaluation of the records, the Commission noted that the PPA formula which
was approved by the ERB was silent on whether the calculation of the cost of electricity
purchased and generated in the formula should be "gross" or "net" of the discounts.
Let it be noted that the power cost is said to be at "gross" if the discounts are not passed-on to
the end-users whereas it is said to be at "net" if the said discounts are passed-on to the end-
users.

To attain uniformity in the implementation of the PPA formula, the Commission has resolved
that:
1. In the confirmation of past PPAs, the power cost shall still be based on "gross," and
2. In the confirmation of future PPAs, the power cost shall be based on "net."
The electric cooperatives filed their respective motions for clarification and/or reconsideration.
Hence, the ERC issued an Order dated January 14, 2005, stating that the PPA was a cost-
recovery mechanism, not a revenue-generating scheme, so that the distribution utilities or the
electric cooperatives must recover from their customers only the actual cost of purchased
power. The ERC thus adopted a new PPA policy, to wit—
A. The computation and confirmation of the PPA prior to the Commission’s Order dated June
17, 2003 shall be based on the approved PPA Formula;
B. The computation and confirmation of the PPA after the Commission’s Order dated June 17,
2003 shall be based on the power cost "net" of discount; and
C. If the approved PPA Formula is silent on the terms of discount, the computation and
confirmation of the PPA shall be based on the power cost at "gross," subject to the
submission of proofs that said discounts are being extended to the end-users.
Thereafter, the ERC continued its review, verification, and confirmation of the electric

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cooperatives’ implementation of the PPA formula based on the available data and information
submitted by the latter.

On March 19, 2007, the ERC issued its assailed Order, mandating that the discounts earned
by SURNECO from its power supplier should be deducted from the computation of the power
cost, disposing in this wise ¾.
Accordingly, SURNECO is directed to:
a) Reflect the PPA refund/collection as a separate item in the bill using the phrase "Previous
Years’ Adjustment on Power Cost";
b) Submit, within ten (10) days from its initial implementation of the refund/collection, a sworn
statement indicating its compliance with the aforecited directive; and
c) Accomplish and submit a report in accordance with the attached prescribed format, on or
before the 30th day of January of the succeeding year and every year thereafter until the
amount shall have been fully refunded/collected.

SURNECO filed a petition for review with the SC ascribing error to the CA and the ERC in:
(1) disallowing its use of the multiplier scheme to compute its system’s loss; (2) ordering it to
deduct from the power cost or refund to its consumers the discounts extended to it by its
power supplier, NPC; and (3) ordering it to refund alleged over-recoveries arrived at by the
ERC without giving SURNECO the opportunity to be heard.

ISSUE:
1. Whether or not SURNECO should be allowed to use the multiplier scheme to compute its
system’s loss.
2. Whether or not SURNECO should deduct from the power cost or refund to its consumers
the discounts extended to it by its power supplier, NPC
3. Whether or not it should refund over-recoveries arrived at by the ERC without giving
SURNECO the opportunity to be heard.

HELD:

1. No. SURNECO posits that, per NEA Memorandum No. 1-A, the NEA had authorized it to
adopt a multiplier scheme as the method to recover system loss. It claims that this cannot be
abrogated, revoked, or superseded by any order, resolution, or issuance by the ERC
prescribing a certain formula to implement the caps of recoverable rate of system loss under
R.A. No. 7832 without violating the non-impairment clause of the Constitution. SURNECO
cannot insist on using the multiplier scheme even after the imposition of the system loss caps
under Section 10 of R.A. No. 7832. The law took effect on January 17, 1995. Perusing
Section 10, and also Section 11, providing for the application of the caps as of the date of the
effectivity of R.A. No. 7832, readily shows that the imposition of the caps was self-executory
and did not require the issuance of any enabling set of rules or any action by the then ERB,
now ERC. Thus, the caps should have been applied as of January 17, 1995 when R.A. No.
7832 took effect. As between NEA Memorandum No. 1-A, a mere administrative issuance,
and R.A. No. 7832, a legislative enactment, the latter must prevail.

2. Yes. The ERC was merely implementing the system loss caps in R.A. No. 7832 when it
reviewed and confirmed SURNECO’S PPA charges, and ordered the refund of the amount
collected in excess of the allowable system loss caps through its continued use of the
multiplier scheme. The Commission issued an Order adopting a new PPA policy as follows:

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(a) the computation and confirmation of the PPA prior to the Commission’s Order dated June
17, 2003 shall be based on the approved PPA Formula; (b) the computation and confirmation
of the PPA after the Commission’s Order dated June 17, 2003 shall be based on the power
cost "net" of discount; and (c) if the approved PPA Formula is silent in terms of discount, the
computation and confirmation of the PPA shall be based on the power cost at "gross" reduced
by the amount of discounts extended to customers, subject to the submission of proofs that
said discounts are indeed being extended to customers. This was further clarified in order to
ensure that only the actual costs of purchased power are recovered by the DUs.

3. Yes. In directing SURNECO to refund its over-recoveries based on PPA policies, which
only ensured that the PPA mechanism remains a purely cost-recovery mechanism and not a
revenue-generating scheme for the electric cooperatives, the ERC merely exercised its
authority to regulate and approve the rates imposed by the electric cooperatives on their
consumers. The ERC simply performed its mandate to protect the public interest imbued in
those rates. SURNECO was also not denied due process. Administrative due process simply
requires an opportunity to explain one’s side or to seek reconsideration of the action or ruling
complained of. It means being given the opportunity to be heard before judgment, and for this
purpose, a formal trial-type hearing is not even essential. It is enough that the parties are
given a fair and reasonable chance to demonstrate their respective positions and to present
evidence in support thereof.

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TRANSPORTATION LAW

Initiatives For Dialouge and Empowerment GR No. 192088

Through Alternative Legal Services, Inc. Date: October 9, 2012
(IDEALS, Inc.) v. Power Sector Assets and Ponente: Villarama Jr., J.
Liabilities Management Corp. (PSALM)
By: Villanueva, Christine Joy D.

DOCTRINE:
Power generation shall not be considered a public utility operation, and hence no franchise is
necessary. Foreign ownership of a hydropower facility is not prohibited under existing laws.
While the Water Code imposes a nationality requirement for the grant of water permits, the
same refers to the privilege "to appropriate and use water." This should be interpreted to
mean the extraction of water from its natural source. Once removed therefrom, they cease to
be a part of the natural resources of the country and are the subject of ordinary commerce
and may be acquired by foreigners.

FACTS:
Respondent Power Sector Assets and Liabilities Management Corporation (PSALM) is a
government-owned and controlled corporation created by virtue of Republic Act No. 9136,
otherwise known as the "Electric Power Industry Reform Act of 2001" (EPIRA). As mandated
by EPIRA, PSALM commenced the privatization of Angat Hydro-Electric Power Plant
(AHEPP) through public bidding which was awarded to Korea Water Resources Corporation
(K-Water.), a foreign corporation.

Petitioners filed a petition for certiorari and prohibition seeking to permanently enjoin the sale
of AHEPP to K-Water. One of the grounds cited by petitioners is that the bidding participation
was indiscriminately restricted to the private sectors in violation of the EPIRA and
constitutional provisions on the appropriation and utilization of water as a natural resource, as
implemented by the Water Code of the Philippines limiting water rights to Filipino citizens and
corporations which are at least 60% Filipino-owned.

PSALM contends that the DOJ holds that the utilization of water by a hydroelectric power
plant does not constitute appropriation of water from its natural source considering that the
source of water (dam) that enters the intake gate of the power plant is an artificial structure.

ISSUE:
Is the sale of AHEPP to K-Water, a foreign corporation, in violation of Sec. 2, Art. XII of the
1987 Constitution?

HELD:
No. The Court held that under the EPIRA, the generation of electric power, a business
affected with public interest, was opened to private sector and any new generation company
is required to secure a certificate of compliance from the Energy Regulatory Commission
(ERC), as well as health, safety and environmental clearances from the concerned
government agencies. Power generation shall not be considered a public utility operation, and
hence no franchise is necessary.

Foreign ownership of a hydropower facility is not prohibited under existing laws. The

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construction, rehabilitation and development of hydropower plants are among those
infrastructure projects which even wholly owned foreign corporations are allowed to undertake
under the Amended Build-Operate-Transfer (Amended BOT) Law (R.A. No. 7718).

The DOJ has consistently regarded hydropower generation by foreign entities as not
constitutionally proscribed based on the definition of water appropriation under the Water
Code. While the Water Code imposes a nationality requirement for the grant of water permits,
the same refers to the privilege "to appropriate and use water." This should be interpreted to
mean the extraction of water from its natural source. Once removed therefrom, they cease to
be a part of the natural resources of the country and are the subject of ordinary commerce
and may be acquired by foreigners.

Therefore the sale of AHEPP to a foreign corporation pursuant to the privatization mandated
by the EPIRA did not violate Sec. 2, Art. XII of the 1987 Constitution which limits the
exploration, development and utilization of natural resources under the full supervision and
control of the State or the State's undertaking the same through joint venture, co-production or
production sharing agreements with Filipino corporations 60% of the capital of which is owned
by Filipino citizens.

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