UNIVERSITY OF ASIA AND THE PACIFIC

School of Law and Governance

Institute of Law

TRANSPORTATION AND PUBLIC UTILITIES LAWS

CLASS DIGESTS
2ND SEMESTER, S.Y 2019-2020

SUBMITTED BY:

UA&P TRANSPORTATION LAW CLASS

3JD 2020

SUBMITTED TO:

ATTY. TIMOTEO B. AQUINO

03 February 2020
Baba, Karla Marie B. Topic: Nature of Common Carriers

1. First Philippine Industrial Corporation v. Court of Appeals

G.R. No. 125948 | December 29, 1998
J. Martinez

FACTS:
 First Philippine Industrial Corporation (FPIC) was granted a pipeline concession for petroleum
products. It applied for a mayor’s permit in Batangas City. The City Treasurer of Batangas City
assessed local taxes based on gross receipts against FPIC which the latter is required to pay
before the mayor’s permit could be issued.
 FPIC paid the taxes but protested that the company is engaged in the transportation business
and is thus exempt from local taxes based on gross receipts under Section 133 (j) of the Local
Government Code of 1991. The City Treasurer denied the protest. FPIC filed a tax refund
claim with the RTC.
 RTC denied the claim, stating that Section 133 (j) covers only common carriers and that FPIC
is not a common carrier, but a special carrier extending its services and facilities to a single
specific or “special customer” under a “special contract.”

ISSUE/S: Whether FPIC is a common carrier

RULING:
YES, IT IS A COMMON CARRIER.
Article 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.” This definition 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 the passengers or goods should be by motor vehicle.

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 person
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.

In this case, FPIC is engaged in the business of carrying goods (petroleum products) as a public
employment. It carries the goods through its pipes and the transportation is for hire. The fact that it has
a limited clientele does not exclude it from being a common carrier.

Therefore, FPIC is a common carrier.

1
Balboa, Nerissa Gloria J. Topic: Nature of Common Carriers

2. Sps Fabre & Porfirio Cabil v. CA, WWCF, Amyline Antonio, et. al.
G.R. No. 111127 | December 21, 1996
J. Mendoza

FACTS:
 Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus used primarily in
connection with a bus service for children in St. Scholastica’s College in Malate, Manila.
Porfirio Cabil was their driver.
 On Nov. 2, 1984, Word for the World Christian Fellowship (WWCF) arranged for the
transportation of 33 members of its Young Adults Ministry from Manila to La Union and back
for Php 3,000. The bus was supposed to leave at 5:00pm, but because some members were
late, it left at 8:00pm. The usual route to Caba, La Union was through Carmen, Pangasinan.
However, the bridge at Carmen was under repair, so Cabil was forced to take a detour through
Ba-ay in Lingayen, Pangasinan.
 At 11:30pm, Cabil came upon a sharp curve on the highway. The road was slippery because it
was raining, causing the bus, which was running at the speed of 50kph, to skid to the left road
shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence
of Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a
series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it
and smashed its front portion. Several passengers were injured.
 Cabil claimed he did not see the curve until it was too late, and that he could not have seen the
curve despite the care he took in driving the bus, because it was dark and there was no sign
on the road. He allegedly saw the curve when he was already within 15-30 meters of it, and
while he slowed down to 30kph, it was already too late.
 Amilyne Antonio, who was seriously injured, brought the case to the Makati RTC. As a result of
the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist
down. She was transferred from hospital to hospital in Ba-ay then in Manila, and ultimately
underwent an operation to correct the dislocation of her spine in Makati Medical Center.
 The RTC found no convincing evidence that the minibus was properly checked for travel to a
long distance trip and that the driver was properly screened and tested before being admitted
for employment, and deemed the petitioners negligent. The CA affirmed the decision with
respect to Amyline Antonio but dismissed it with respect to the other plaintiffs who failed to
prove their respective claims.

ISSUE/S: Whether petitioners were negligent and are therefore liable for the injuries suffered by the
respondents

RULING: Yes, petitioners were negligent as Cabil drove his bus negligently, while his employer, the
Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee.

This case involves a contract of carriage. 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.

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.

This 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. It also

2
Balboa, Nerissa Gloria J. Topic: Nature of Common Carriers
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.

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

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

This liability of the common carriers does not cease upon proof that they exercised all the diligence of
a good father of a family in the selection and supervision of their employees.

On the night in question, it was raining, and, as a consequence, the road was slippery, and it was
dark. However, Cabil drove his bus at 50kph and only slowed down when he noticed the curve some
15-30 meters ahead. Given the conditions of the road and considering that the trip was Cabil’s first
one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There was testimony
that the vehicles passing on that portion of the road should only be running 20kph, so at 50kph, Cabil
was running at a very high speed. Thus, Cabil was grossly negligent and should be held liable for the
injuries suffered by private respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his
employers, the Fabres, were themselves negligent in the selection and supervision of their employee.

3
Bataan, Xhavier Brett King D. Topic: Nature of Common Carriers

3. Pedro De Guzman vs. Court of Appeals & Ernesto Cendana

G.R. No. L–47822 | December 22, 1988
Feliciano, J.

FACTS:
 De Guzman is the merchant–shipper here; Cendana is the common carrier; and Manuel
Estrada is the driver employee of Cendana.
 In 1970, De Guzman contracted Cendana for the hauling of 750 cartons of Liberty milk from a
warehouse in Makati to Urdaneta. 150 cartons were loaded in one truck driven by Cendana
himself and the 600 cartons were loaded in the 2nd truck driven by Manuel. The 600 boxes
never reached De Guzman as it was allegedly hi–jacked in Tarlac by Armed men.
 The CFI ruled for the liability of Cendana in the amount of P22, 150 for the undelivered goods
reasoning he is a common carrier. However, the CA reversed said ruling stating Cendana is
not liable and not a common carrier reasoning that transporting goods is only a casual
occupation. Hence, this appeal before the High Court.

ISSUE/S:
1. Whether or not Cendana is a common carrier.
2. Whether or not Cendana is liable for the undelivered goods.

RULING:
1. Yes, Cendana is a common carrier. Article 1732 of the NCC states 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. The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local Idiom as "a sideline"). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. We think that Article
1733 deliberaom making such distinctions. Here, Cendana is properly characterized as a
common carrier even though he merely "back-hauled" goods for other merchants from Manila
to Pangasinan, although such back-hauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation was
not the carriage of goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below commercial freight rates
is not relevant here. Hence, Cendana is common carrier.

2. No, Cendana is not liable. 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.” 3of the 5 hold-uppers were armed with firearms.

4
Cadiz, Sophia Topic: Nature of Common Carriers

4. Sps. Perena v. Sps. Nicolas, National Railways, CA

G.R. No. 157917 | 29 August 2012
J. Bersamin

FACTS:
 The Pereñas were engaged in the business of transporting students from their respective
residences in Parañaque City to Don Bosco Makati. They employed Clemente Alfaro as driver.
The van sits 14 students, 2 at the front and 6 for each row at the back.
 On August 22, 1996, as on previous school days, the van picked Aaron Zarate up at 6AM and
he sat on the left side of the van near the rear door. They were running late due to heave
traffic, so the driver drove to an alternate route in Magallanes Interchage where there was a
railroad crossing.
 The railroad crossing in the area had no railroad warning signs or watchmen, in fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing motorists. At that
time the driver was to traverse the crossing, he was closely tailing a bus and his view of the
oncoming train was blocked because he overtook the another bus on its left side.
 The train blew its horn to warn of its approach. At 50 meters, the train operator applied ordinary
breaks. He applied emergency brakes only when collision was imminent. The train hit the rear
end of the van and the impact threw 9 out of 12 students out, including Aaron who landed in
the path of the train which dragged his body and severed his head.
 Sps. Zarate filed a complaint for damages against Sps. Perena for breach of contract of
carriage and PNR for quasi delict.
 RTC and CA found both Sps. Perena and PNR as jointly and severally liable for damages
 Sps. Perena argued that they exercised the diligence of a good father of the family in the
selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s
license and that he had not been involved in any vehicular accident prior to the fatal collision
with the train

ISSUE/S: Whether Sps. Perena and PNR as jointly and severally liable for damages

RULING: YES. Sps. Perena and PNR are jointly and severally liable.

A common carrier is required to observe extraordinary diligence 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.

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. It is required of ordinary diligence of a good father of the family.

In this case, Sps.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

5
Cadiz, Sophia Topic: Nature of Common Carriers
to the students of a particular school living within or near where they operated the service and
for a fee.

The Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the
accident because death had occurred to their passenger. They had the burden to prove they
exercised extra ordinary diligence.

The Pereñas were liable for the death of Aaron (breach of contract of carriage) 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. 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 most probably reduced his
ability to hear the warning horns of the oncoming train. Also, he sought to overtake a passenger bus
on the left side leading him to miscalculate his chances of beating the bus in their race, and of getting
clear of the train.

The RTC rightly found the PNR (quasi delict under Art. 2176 of Civil Code) also guilty of negligence
because the PNR did not ensure the safety of others through the placing of crossbars, signal lights,
warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from crossing
there.

Public use: “There must be, in general, a right which the law compels the owner to give to the general
public. It is not enough that the general prosperity of the public is promoted. Public use is not
synonymous with public interest. The true criterion by which to judge the character of the use is
whether the public may enjoy it by right or only by permission.”

Petition is denied

6
Chua, Raphael Ryan D. Topic: Nature of Common Carrier

5. Spouses Dante Cruz and Leonora Cruz v. Sun Holidays, Inc.

G.R. No. 186312 | June 29, 2019
J. Carpio Morales

FACTS:
 Spouses Cruz lodged a complaint against Sun Holidays for damages arising from the death of
their son, Ruelito Cruz, who with his wife died on board M/B Coco Beach III that capsized en
route to Batangas from Puerto Galera where they stayed at Coco Beach Island Resort owned
by Sun Holidays on September 11, 2000.
 Spouses Cruz alleged that Sun Holidays was guilty of negligence as a common carrier in in
allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by PAGASA
the morning of the incident.
 Sun Holidays denied being a common carrier, alleging that its boats are not available to the
general public as they only ferry Resort guests and crew members, that it exercised utmost
diligence in ensuring the safety of its passengers, and that there was no storm as the Coast
Guard cleared the voyage.
 The RTC dismissed the Complaint and the CA denied the appeal, finding that the proximate
cause of the incident was a squall, which is a fortuitous event.

ISSUES:
1. Whether Sun Holidays is a common carrier
2. Whether Sun Holidays is guilty of negligence
3. Whether the incident was caused by a fortuitous event

RULING:

1. Yes, Sun Holidays is a common carrier. Under 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. It 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;
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; or
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.

In this case, Sun Holidays is a common carrier as its ferry services are so intertwined with its
main business as to be properly considered ancillary thereto. The services are available to the
public due to the constant operation of its own Coco Beach boats and the tour packages which
include the ferry service available to anyone who pays for it. Thus, Sun Holidays is a common
carrier.

2. Yes, Sun Holidays was negligent. 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. PAGASA issued 24-hour public weather
forecasts and tropical cyclone warnings for shipping on September 10 and 11, 2000 advising of
tropical depressions in Northern Luzon which would also affect the province of Mindoro. A very
cautious person exercising the utmost diligence would thus not brave such stormy weather and
put other people’s lives at risk. The extraordinary diligence required of common carriers
7
Chua, Raphael Ryan D. Topic: Nature of Common Carrier
demands that they take care of the goods or lives entrusted to their hands as if they were their
own, which Sun Holidays failed to do. Thus, Sun Holidays was negligent.

3. No, the incident was not caused by a fortuitous event. The elements of a "fortuitous event" are:
(a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to
comply with their obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to render it impossible for the
debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free
from any participation in the aggravation of the resulting injury to the creditor.

To fully free a common carrier from any liability, the fortuitous event must have been
the proximate and only cause of the loss, and it should have exercised due diligence to prevent
or minimize the loss before, during and after the occurrence of the fortuitous event. However,
the occurrence of squalls was expected under the weather condition, and M/B Coco Beach III
suffered from engine trouble before it capsized and sank. Thus, the incident was foreseeable
and not completely free from human intervention, and therefore not a fortuitous event.

8
Esguerra, George Clarence T. Topic: Nature of Common Carriers

6. Westwind Shipping Corp. v. UCPB General Insurance Co.

G.R. No. 200289 | 25 November 2013
J. Peralta

FACTS:
 On 23 August 1993, Kinsho-Mataichi Corp. shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to San Miguel Corp. (SMC), the consignee. The
shipment was covered by a Bill of Lading, and was loaded and received clean on board M/V
Golden Harvest Voyage No. 66, a vessel owned by Westwind. SMC insured the cargoes
against all risks with UCPB for $184,798.98 (at the time equivalent to P6,209,245.28).
 The shipment arrived in Manila on 31 August 1993 and was discharged in the custody of the
arrastre operator, Asian Terminals, Inc. (ATI). During the unloading, 6 containers/skids worth
P117,093.12 sustained dents and punctures from the forklift used by the stevedores of Ocean
Terminal Services, Inc. (OTSI). As a consequence, the local ship agent, Baliwag Shipping
Agency, issued 2 Bad Order Cargo Receipt.
 On 7 September 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC,
withdrew from ATI the 197 containers, including the 6 damaged condition, and delivered the
same at SMC’s warehouse. It was discovered upon discharge that additional 9 containers
valued at P175,639.68 were also damaged due to the forklift operations (thus, a total of 15
containers).
 SMC filed a claim against UCPB, Westwind, ATI, and OFII to recover the amount
corresponding the 15 damaged containers. UCPB paid P292, 732.80. Thereafter, in the
exercise of its right of subrogation, UCPB instituted a complaint against Westwind, ATI, and
OFII.
 The RTC dismissed the complaint and counterclaims of the parties – that the right, if any,
against ATI already prescribed based on the stipulation in the 16 Cargo Gate Passes issued,
and that according to International Container Terminal Services v. Prudential, a claim for
reimbursement for damaged goods must be filed within 15 days from the date of consignee’s
knowledge. With respect to Westwind, under Sec. 3(6) of COGSA and E.E. Elser v. CA and
Belgian Overseas Chartering v. Phil. First Insurance Co., Westwind is not liable since the
discharging were done by ATI personnel using forklifts and there was no allegation that
Westwind participated in the stevedoring operations. Finally, OFII is likewise not liable – it
never undertook the operation of forklifts.
 The CA, however, reversed and set aside the trial court and ordered Westwind and OFII to pay
UCPB. Westwind is responsible for the 6 damaged containers at the time of its unloading. OFII
is liable for the additional 9 containers since OFII is a common carrier bound to observe
extraordinary diligence and is presumed to be at fault.
 Westwind and OFII filed the petitions with the SC.

ISSUE/S: Whether or not Westwind and OFII, as common carriers, are liable instead of ATI, the
arrastre operator.

RULING: Yes. Both petitions lack merit.

The case of Philippines First Insurance v. Wallem Phils. Shipping applies. 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, common carriers
are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility
lasts from the time the goods are unconditionally placed in the possession of, and received by the

9
Esguerra, George Clarence T. Topic: Nature of Common Carriers
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 other words, cargoes, while being
unloaded, generally remain under the custody of the carrier.

Here, since the discharging of the containers, 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 imply that there was
already delivery of the cargoes to ATI. OFII is likewise liable as a customs broker has been regarded
as a common carrier because transportation of goods is an integral part of its business. OFFI, for
undertaking the transport of cargoes from ATI to SMC’s warehouse, is thus considered a common
carrier.

Hence, Westwind and OFII are liable for the respective cargoes damaged (6-9 respectively), as
common carriers.

10
Jackson, Loida M. Topic: Nature of Common Carriers

7. Sanico v. Colipano
G.R. No. 209969 | September 27, 2017
J. Caguioa

FACTS:
 Colipano filed a complaint on January 7, 1997 for breach of contract of carriage and damages
against Sanico and Castro. She claimed that at 4pm of December 25, 1993, she and her
daughter were paying passengers in the jeepney operated by Sanico, which was driven by
Castro.
 Colipano claimed 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, the jeepney
slid backwards because it did not have the power to reach the top. Colipano 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. 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. The conductor then instructed everyone not to panic but
Colipano tried to disembark and her foot got caught in between the step board and the coconut
tree. 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 found that Sanico and Castro breached the contract of carriage between them and
Colipano but only awarded actual and compensatory damages in favor of Colipano. On appeal,
CA affirmed with modification the RTC Decision, by reducing the award for compensatory
damages for loss of income.

ISSUE: Whether or not Sanico and Castro breached the contract of carriage with Colipano.

RULING: Only Sanico breached the contract of carriage.

Only Sanico was the party to the contract of carriage with Colipano. 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.

The elements of a contract of carriage existed between Colipano and Sanico: (1) consent, as shown
when Castro, as employee of Sanico, accepted Colipano as a passenger when he allowed Colipano to
board the jeepney, and as to Colipano, when she boarded the jeepney; (2) cause or consideration,
when Colipano, for her part, paid her fare; and, (3) object, the transportation of Colipano from the
place of departure to the place of destination.

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. The Court finds that neither of these defenses obtain.
Thus, Sanico is liable for damages to Colipano because of the injury that Colipano suffered as a
passenger of Sanico's jeepney.

11
Laviña, Alyssa V. Topic: Nature of a Common Carrier

8. Oriental Assurance Corp. v. Ong

G.R. No. 189524, October 11, 2017
J. Leonen
Parties:
Asian Terminals – arrastre contractor
Manuel Ong – truck owner, consignee’s representative
JEA Steel Industries, Inc. (JEA Steel) – consignee
Oriental Assurance Corp – insurer of Jea Steel

FACTS:
 JEA Steel Industries, Inc. (JEA Steel) imported from South Korea 72 aluminum-zinc-alloy-
coated steel sheets in coils. These steel sheets were transported to Manila onboard the vessel
M/V Dooyang Glory as evidenced by Bill of Lading.
 Upon arrival of the vessel at the Manila South Harbor on June 10, 2002, 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 on June 14, 2002 and June 17, 2002.
 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 insurance claim for the value of the 11 damaged coils,
pursuant to Marine Insurance Policy No. OAC/M-12292.
 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. On May 19, 2003, Oriental
filed a Complaint before the Regional Trial Court of Manila for sum of money against
respondents Ong and Asian Terminals.
 Ong countered that the 11 coils were already damaged when they were loaded onboard his
trucks and transported to the consignee.
 Asian Terminals claimed that:
o it exercised due diligence in handling the cargo, that the cargo was released to the
consignee’s representative in the same condition as when received from the vessel,
and that the damages were sustained while in the custody of the vessel or the customs
broker.
o Asian Terminals further argued that Oriental’s claim was barred for the latter’s failure to
file a notice of claim within the 15-day period provided in the Gate Pass and in the
Contract for Cargo Handling Services (Management Contract) between the Philippine
Ports Authority and Asian Terminals. The Gate Pass was signed by the consignee’s
representative to acknowledge the delivery and receipt of the shipment.
o Asian Terminals added that its liability, if any, should not exceed P5,000.00, pursuant to
said Section 7.01.
1.
 RTC Manila rendered its Decision on August 9, 2006 dismissing the complaint. It found no
preponderance of evidence to establish that respondents were the ones responsible for the
damage to the 11 coils.
 The Court of Appeals dismissed Oriental’s appeal on the ground that its claim had already
prescribed. The Court of Appeals found that 11 of the coils were already damaged before they
were loaded in Ong’s trucks. Hence, the legal presumption of negligence applies against Asian
Terminals unless it is able to prove that it exercised extraordinary diligence in the handling of
the cargo. The Court of Appeals held that as an arrastre operator, Asian Terminals was bound
to observe the same degree of care required of common carriers.
12
Laviña, Alyssa V. Topic: Nature of a Common Carrier

 The Court of Appeals further ruled that while Asian Terminals failed to rebut the presumption of
negligence against it, it cannot be held liable to pay the value of the damaged coils because
Oriental’s claim was filed beyond the 15-day prescriptive period stated in the Gate Pass.
According to the Court of Appeals, it can resolve the issue of prescription despite not being
assigned as an error on appeal as it was already raised, although not tackled, in the lower
court.

ISSUE/S:
2. Whether or not the Court of Appeals gravely erred in ruling that Manuel Ong is not liable for the
damage of the cargo.?
3. Whether or not the claim against Asian Terminals, Inc. is barred by prescription?

RULING:
1. NO. Both the Court of Appeals and the Regional Trial Court found that the 11 coils were
already damaged before the coils were loaded on Ong’s truck. Hence, Ong could not be
responsible for the damaged shipment.

In this case, petitioner asserts that Ong should be held solidarily liable with Asian Terminals for
acting in bad faith when it did not apprise the consignee or Asian Terminals about the
damaged coils. This Court finds this contention untenable since, this issue was never raised by
petitioner in the lower courts. In fact, Ong and Asian Terminals “[were] sued in the alternative
because [petitioner was] uncertain against whom it [was] entitled for relief.” The rule is well-
settled that no question will be considered by the appellate court which has not been raised in
the lower court.

Furthermore, there was no proof of Ong’s bad faith. Mere allegation cannot take the place of
evidence. Besides, Ong’s assertion that the loading of the cargo on the trucks was undertaken
by Asian Terminals and the unloading of the same cargo was undertaken by the consignee at
its warehouse remains unrebutted. In fact, Asian Terminals caused the inspection of the
shipment before they were loaded on Ong’s trucks on June 17, 2002.

Moreover, at the consignee’s warehouse, the inspection was done in the presence of the
consignee’s authorized representative. Thus, Ong is not obliged to inform the consignee or
Asian Terminals about the damaged coils as they would have presumably known about them.

2. YES. 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 binding on an
insurer-subrogee even if the latter is not a party to it.
“ We have repeatedly held that, by availing himself of the services of the arrastre operator and
taking delivery therefrom in pursuance of a permit and a pass issued by the latter, which were
“subject to all the terms and conditions” of said management contract, including, inter alia, the
requirement thereof that “a claim is filed with the Company within 15 days from the date of
arrival of the goods,” the consignee — and, hence, the insurer, or plaintiff herein, as successor
to the rights of the consignee — became bound by the provisions of said 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.

Article 2207 of the Civil Code provides:

13
Laviña, Alyssa V. Topic: Nature of a Common Carrier
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.

14
Lopez, Michiko S. Topic: Nature of Common Carriers

9. Philam Insurance Company v. Heung-A Shipping and Wallem Philippines Shipping

G.R. No. 187701 | July 23, 2014
J. Reyes

FACTS:
 Novartis Consumer Health Philippines imported from Jinsuk Trading in South Korea 19 pallets
of 200 rolls of Ovaltine Power 18 Glaminated plastic packaging material. Jinsuk engaged
Protop Shipping Corporation to forward the goods to their consignee, Novartis. The bill of
lading was in the name of Sagawa Express Phils.
 Protop shipped the cargo through Dongnama Shipping, which loaded the cargo on M/V Heung-
A Bangkok owned and operated by Heung-A Shipping. Wallem is the ship-agent of Heung-A in
the Philippines.
 Novartis insured the Shipment with Philam under an All Risk Marine Open Insurance Policy
against all loss, damage, liability, or expense before, during transit and even after the
discharge of the shipment from the carrying vessel until its complete delivery to the
consignee’s premises.
 The vessel arrived at the port of Manila and the container was discharged to the possession of
Asian Terminals as the customs arrastre operator. The shipment was withdrawn from Asian
Terminals’ container yard by Stephanie Brokerage, Novartis’ appointed broker. The shipment
reached Novartis’ premises and was inspected.
 The container van was found locked with its load intact, but the boxes of the shipment were
found wet and damp, and parts of the container van were found to be damaged and rusty.
Since the damaged packaging materials might contaminate the product they were meant to
hold, Novartis’ Senior Lab Technician rejected the entire shipment. The adjusters of Manila
Adjusters and Surveyors had similar observations.
 Novartis sought indemnification from Protop, Sagawa, Asian Terminals and Stephanie. Philam
paid the insured value of P1.9M and Philam filed a complaint against the respondents.
 RTC ruled that the damage occurred on the vessel while in transit from Korea to the
Philippines, finding Heung-A as the common carrier liable. Wallem was held liable as Heung-
A’s ship agent in the Philippines, while Protop was held liable due to the bad condition of the
container van. Sagawa, Asian Terminals, Stephanie Brokerage were exoneraged from liability.
The CA agreed with the RTC.

ISSUE/S: Whether the shipment sustained damage while under the custody of Heung-A

RULING: Yes, the shipment sustained damage while under the custody of Heung-A.

The uncontested results of the inspection survey conducted by Manila Adjusters Surveyors Company
showed that sea water seeped into the panels/sidings and roofing of the container van. This was
confirmed by the examination conducted by Hernandez, the chemist of PRECISION, on samples from
the cartons, boxes, aluminum foil and laminated plastic packaging materials. Based on the laboratory
examination results, the contents of the van were drenched by sea water, an element which is highly
conspicuous in the high seas. It can thus be reasonably concluded that negligence occurred while the
container van was in transit, in HEUNG-A’s possession, control and custody as the carrier.

Although the container van had defects, they were not so severe as to accommodate heavy saturation
of sea water. The holes were tiny and the rusty portions did not cause gaps or tearing. Hence, the van
was still in a suitable condition to hold the goods and protect them from natural weather elements or
even the normal flutter of waves in the seas. The scale of the damage sustained by the cargo inside

15
Lopez, Michiko S. Topic: Nature of Common Carriers
the van could have been only caused by large volume of sea water since not a single package inside
was spared.

As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary diligence in
conveying the same and its slot charter agreement with DONGNAMA did not divest it of such
characterization nor relieve it of any accountability for the shipment.

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner
to another person for a specified time or use; a contract of affreightment by which the owner of a ship
or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight. A charter party has two
types.

First, it could be a contract of affreightment whereby the use of shipping space on vessels is leased in
part or as a whole, to carry goods for others. The charter-party provides for the hire of vessel only,
either for a determinate period of time (time charter) or for a single or consecutive voyage (voyage
charter). The shipowner supplies the ship’s stores, pay for the wages ofthe master and the crew, and
defray the expenses for the maintenance of the ship. The voyage remains under the responsibility of
the carrier and it is answerable for the loss of goods received for transportation. The charterer is free
from liability to third persons in respect of the ship.

Second, charter by demise or bareboat charter under which the whole vessel is let to the charterer
with a transfer to him of its entire command and possession and consequent control over its
navigation, including the master and the crew, who are his servants. The charterer mans the vessel
with his own people and becomes, in effect, the owner for the voyage or service stipulated and hence
liable for damages or loss sustained by the goods transported.

Clearly, despite its 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 the prima facie presumption of negligence 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.

Protop is also solidarily liable with Heung-A in view of the bill of lading issued to Novartis. A bill of
lading is a written acknowledgement of the receipt of goods and an agreement to transport and to
deliver them at a specified place to a person named or on his or her order. It operates both as a
receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver
the same as therein stipulated.

Protop breach its contract with Novartis when it failed to deliver the goods in the same quantity, quality
and description as stated in the Bill of Lading.

16
Magnaye, Isaiah Athriene Topic: Nature of Common Carriers

10. LTFRB v. Valenzuela

G.R. No. 159213
July 3, 2013

FACTS:
 On May 8, 2015 DOTC, set the standard classifications for public transport conveyances to be
used as basis for the issuance of a Certificate of Public Convenience for public utility vehicles.
The DOTC, through DO 2015-11, created two new classifications, namely, Transportation
Network Companies and Transportation Network Vehicle Service.
 Although DO 2015-11 made mention of TNVS, the term was not clearly defined until June 19,
2017, when the DOTr issued DO 201 7-11 which set the rules and procedures on the issuance
of franchises for public transport routes and services, including TNCs and TNVS. DO 2017-11
further provided that "motorcycles x x x are likewise not allowed as public transport
conveyance." Consequently, the LTFRB issued various memorandum circulars to govern the
issuance of the necessary CPC for a TNVS and the accreditation of a TNC.
 In its issuances, the LTFRB declared that a TNC is treated as a transport provider, whose
accountability commences from the acceptance by its TNVS while online. On the other hand,
the accountability of the TNVS, as a common carrier, attaches from the time the TNVS is
online and offers its services to the riding public.
 Meanwhile, on May 26, 2016, DBDOYC registered its business with the Securities and
Exchange Commission, and subsequently, in December 2016, 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. In this regard, DBDOYC accredited Angkas drivers and allowed
them to offer their transport services to the public despite the absence of CPCs.
 Cognizant of the foregoing, the LTFRB issued a press release on January 27, 2017 informing
the riding public that DBDOYC, which is considered as a TNC, cannot legally operate.
 Despite such warning, however, DBDOYC continued to operate and offer its services to the
riding public sans any effort to obtain a certificate ofTNC accreditation.
 In response, DBDOYC, on July 4, 2018, filed a Petition for Declaratory Relief with Application
for Temporary Restraining Order/Writ of Preliminary Injunction19 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; (b) Angkas and its drivers are not
engaged in the delivery of a public service.

ISSUE: Whether or not Transport Network Vehicles and Companies such as Angkas are common
carriers.

RULING: Yes, Transport Network Vehicles and Companies such as Angkas are common carriers.
Article 1732 of the Civil Code does not distinguish between a carrier who offers its services to the
general public and one who offers services or solicits business only from a narrow segment of the
general population. 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 geolocation technology." Accordingly, it appears that it is practically functioning as a
booking agent, or at the very least, acts as a thirdparty 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 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
17
Magnaye, Isaiah Athriene Topic: Nature of Common Carriers

regulations. With the safety of the public further in mind, and given that, at any rate, the above-said
administrative issuances are presumed to be valid until and unless they are set aside, the nullification
of the assailed injunctive writ on the ground of grave abuse of discretion is in order.

18
Manotok, Ma. Thelma Francesca T. Topic: Registered Owner Rule and Kabit System

11. Filcar Transport Services v. Espinas

G.R. No. 174156 | June 20, 2011
J. Brion

FACTS:
 At around 6:30 p.m., respondent Jose A. Espinas was driving his car along Leon Guinto Street
in Manila. Upon reaching the intersection of Leon Guinto and President Quirino Streets,
Espinas stopped his car.
 When the signal light turned green, he proceeded to cross the intersection. He was already in
the middle of the intersection when another car, traversing President Quirino Street and going
to Roxas Boulevard, suddenly hit and bumped his car.
 As a result of the impact, Espinas’ car turned clockwise. The other car escaped from the scene
of the incident, but Espinas was able to get its plate number.
 After verifying with the Land Transportation Office, Espinas learned that the owner of the other
car is Filcar Transport Services. Timoteo Floresca, the personal driver of Atty. Candido Flor,
Corporate Secretary of Filcar was driving the car when the accident occurred.
 Filcar denied any liability to Espinas and claimed that the incident was not due to its fault or
negligence since Floresca was not its employee but that of Atty. Flor.

ISSUE/S: Whether Filcar, as registered owner of the motor vehicle which figured in an accident, may
be held liable for the damages caused to Espinas?

RULING: Yes. Filcar is liable for damages caused to Espinas. The Land Transportation and Traffic
Code does not contain any provision on the liability of registered owners in case of motor vehicle
mishaps. Article 2176, in relation to Article 2180 of the Civil Code provides that the registered owner of
the motor vehicle is considered as the employer of the driver, and made primarily liable for the act
committed by the latter, in the case of motor vehicle mishaps. The motor vehicle registration law, to a
certain extent, modified Article 2180 of the Civil Code by making the defenses, that the employee acts
beyond the scope of his assigned task or that it exercised the due diligence of a good father of a
family to prevent damage, unavailable to the registered owner of the motor vehicle. The agreement
between Filcar and Atty. Flor to assign the motor vehicle to the latter does not bind Espinas who was
not a party to and has no knowledge of the agreement, and whose only recourse is to the motor
vehicle registration. Thus, for as long as Filcar is the registered owner of the car involved in the
vehicular accident, it could not escape primary liability for the damages caused.

19
Murao, Jose Pepito G. III Topic: Registered Owner Rule and Kabit System

12. Greenstar Express Inc. and Fruto Sayson Jr. v. Universal Robina Corp. and Nissin
Universal Robina Corp.
G.R. No. 205090 | October 17, 2016
J. Del Castillo

FACTS:
 On February 25, 2003 Greenstar Express’ bus driven by Fruto Sayson collided head-on with
respondent Universal Robina Corp. (URC)’s L-300 van driven by the deceased Operations
Manager Renante Bicomong while going on opposite directions along Maharlika Highway in
Laguna.
 Greenstar then filed a complaint for damages premised on the negligence of URC’s driver
supported by 5 witness accounts including driver Sayson who testified that he was driving at
around 60 kilometers per hour when the URC’s van swerved to his lane causing damage to the
front of his bus but the total wreckage of the van’s front portion.
 For its part, URC presented 2 employees and the widow Gloria who substantiated its claim that
Renante was driving URC’s van in his personal capacity during an official holiday. Widow
Gloria Bicomong even testified that Renante was driving to Candelaria to see their daughter
when the accident happened and that Bicomong used URC’s service van over the executive
vehicle issued to him.
 The RTC of San Pedro dismissed Greenstar’s complaint and absolved URC from any liability
on the basis of Art. 2184 and Art. 2180 of the Civil Code confining liability of employers for
accidents when they were inside the motor vehicle and could have prevented the same or
when employees were acting within the scope of their assigned tasks. In the instant case, the
accident occurred during a non-working holiday and Bicomong was on his way home to
Candelaria.
 The CA affirmed the RTC’s decision on the ground of jurisprudence absolving an employer
from liability when the employee uses a service vehicle registered in the employer’s name in
his personal capacity.

ISSUE/S: W/N the CA erred in declaring that URC was not liable for the accident allegedly caused by
its employee using a van registered under its name?

RULING: NO. Under the Registered Owner Rule pronounced as early as 1957, registration of a motor
vehicle is for the purpose of the easy identification of the owner in case of any damage or injury
caused by his vehicle. The Registered Owner Rule, however, merely posits a disputable presumption
against employers who may prove non-liability under Art. 2180 and Art. 2184 of the Civil Code. In the
instant case, URC overcame the presumption of negligence by proving that Bicomong was not in the
performance of his work, Bicomong was not assigned the L-300, and that although Bicomong had
used the van in the past, the same does not amount to an implied authorization. Meanwhile, Greenstar
driver Sayson could have prevented the accident as he saw the van speeding as far as 250 meters
away yet he did not slow down but instead maintained his speed. Petition DENIED. CA AFFIRMED in
toto.

20
Ong, Roberto Ruiz B. Topic: Perfection of Contract of Carriage

13. Light Rail Transit Authority & Rodolfo Roman v. Marjorie Navidad, Heirs of the Late Nicanor
Navidad & Prudent Security Agency
G.R. No. 145804 | February 6, 2003
Vitug,J. :

FACTS:
 On 14 October 1993, Nicanor Navidad who was drunk entered the Edsa LRT station. He
purchased a token and proceeded to the platform near the LRT tracks.
 He had an altercation with the Security Guard, Escalin. A fist fight ensued, there was no
evidence to show who started the fight or who threw the first punch. The fist fight led to Nicanor
falling down to the train tracks. A moving train passed with Roman as the operator passed by
ended up killing Nicanor.
 His widow and children filed a complaint for damages against the security guard, the train
operator, the LRTA and Prudent Security Agency. The RTC ruled in favor of the Widow and
Children ordering Prudent and security guard to pay for damages joint and severally.
 The CA reversed the ruling holding the LRTA and the conductor liable and exonerated Prudent
and the security guard. The CA stated that the petitioners failed to present expert evidence to
establish the fact that the application of emergency brakes could have stopped the train.

ISSUE/S: Whether the LRTA is liable for the death of Nicanor

RULING: Yes, The LRTA is liable for the death

Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence
as prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common 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."
"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or of strangers, if the common carrier’s employees
through the exercise of the diligence of a good father of a family could have prevented or stopped the
act or omission
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.

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
21
Ong, Roberto Ruiz B. Topic: Perfection of Contract of Carriage
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.

Here, by purchasing a token and by waiting in the platform where he was supposed to be makes
Nicanor a passenger by virtue of a perfected contract of carriage thus falls within the extraordinary
diligence required by the LRTA. The LRTA failed to prove that it had exercised the such diligence.

Hence, the LRTA is liable for the death of Nicanor.

22
Sabado, Marionnie C. Topic: Obligations of the Parties in a Contract of Carriage

14. Annie Tan v. Great Harvest Enterprises, Inc.

G.R. No. 220400 | March 20, 2019
J. Leonen

FACTS:
 Great Harvest hired Tan to transport 430 bags of soya beans worth Php 230,000.00 from Port
Area, Manila to Selecta Feeds in Quezon City.
 Her employee, 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.
 Tan reported her missing truck to the Western Police District Anti-Carnapping Unit and the
National Bureau of Investigation. The NBI informed Tan that her missing truck had been found
in Cavite. However, the truck had been cannibalized and had no cargo in it.
 Great Harvest sent Tan a letter demanding full payment for the missing bags of soya beans,
but she refused to pay for the missing shipment or settle the matter with Great Harvest. Thus,
Great Harvest filed a Complaint for sum of money against Tan.
 The RTC of Quezon City granted Great Harvest's Complaint for sum of money. It found that
Tan entered into a verbal contract of hauling with Great Harvest and held her responsible for
her driver's failure to deliver the soya beans to Great Harvest.
 The CA dismissed Tan’s appeal. It found that the parties' standard business practice when the
recipient would reject the cargo was to deliver it to Great Harvest's warehouse. Thus, contrary
to Tan's claim, there was no deviation from the original destination. The CA also held that the
cargo loss was due to Tan's failure to exercise the extraordinary level of diligence required of
her as a common carrier, as she did not provide security for the cargo or take out insurance on
it.
 Tan contends that she is not liable for the loss of the soya beans and points out that the
agreement with respondent Great Harvest was to deliver them to Selecta Feeds, an obligation
with which she complied. She claims that what happened after that was beyond her control.
When Selecta Feeds rejected the soya beans and respondent directed Cabugatan to deliver
the goods to its warehouse, respondent superseded her previous instruction to Cabugatan to
return the goods to Tacoma, the loading point. Hence, she was no longer required to exercise
the extraordinary diligence demanded of her as a common carrier.
 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/S: Whether petitioner Tan should be held liable for the value of the stolen soya beans

RULING: YES. 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.

Art. 1734 of the Civil Code provides that common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood,
storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war,
whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The
character of the goods or defects in the packing or in the containers; (5) Order or act of competent
public authority.

23
Sabado, Marionnie C. Topic: Obligations of the Parties in a Contract of Carriage
Here, petitioner is a common carrier obligated to exercise extraordinary diligence over the goods
entrusted to her. Her responsibility began from the time she received the soya beans from
respondent's broker and would only cease after she has delivered them to the consignee or any
person with the right to receive them. Nothing in the records shows that any of these exceptions
caused the loss of the soya beans. Petitioner failed to deliver the soya beans to respondent because
her driver absconded with them. She cannot shift the blame for the loss to respondent's supposed
diversion of the soya beans from the loading point to respondent's warehouse, as the evidence has
conclusively shown that she had agreed beforehand to deliver the cargo to respondent's warehouse if
the consignee refused to accept it.

Therefore, petitioner is liable.

24
Tirol, Courtney Allison P. Topic: Obligations of the Parties in a Contract of Carriage

15. Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp.

G.R. No. 193986 | January 15, 2014
J. Villarama, Jr.

FACTS:
 On August 29, 2003, Sumitomo Corporation shipped through MV Eastern Challenger V-9-S, a
vessel owned by petitioner Eastern Shipping Lines, Inc., 31 various steel sheets in coil from
Yokohama, Japan for delivery in favor of the consignee Calamba Steel Center, Inc. The cargo
had a declared value of US$125,417.26 and was insured against all risk by Sumitomo with
respondent Mitsui Sumitomo Insurance Co., Ltd.
 When the shipment arrived at the port of Manila, and upon unloading from the vessel, nine
coils were observed to be in bad condition. The cargo was then turned over to Asian
Terminals, Inc. (ATI) for stevedoring, storage and safekeeping pending Calamba Steel’s
withdrawal of the goods. When ATI delivered the cargo to Calamba Steel, the latter rejected
its damaged portion for being unfit for its intended purpose.
 Subsequently, a second and third shipment of 28 and 117 steel sheets in coil respectively were
made by Sumitomo through petitioner’s MV Eastern Challenger V-10-S for transport and
delivery again to Calamba Steel. The same were insured. However, upon arrival at the port of
Manila, 11 coils were found damaged for the second shipment and 6 coils were in bad
condition for the third. The possession of the said cargo was then transferred to ATI for
stevedoring, storage and safekeeping pending withdrawal thereof by Calamba Steel. When
ATI delivered the goods, Calamba Steel rejected the damaged portion thereof, the same being
unfit for its intended purpose.
 Calamba Steel filed an insurance claim with Mitsui through the latter’s settling agent,
respondent BPI/MS Insurance Corporation (BPI/MS), and the former was paid for the damage
suffered by all three shipments for the total amount of US$30,210.32. Correlatively, as insurer
and subrogee of Calamba Steel, Mitsui and BPI/MS filed a Complaint for Damages against
petitioner and ATI.
 The Regional Trial Court (RTC) ruled in favor of the plaintiff and against defendants Eastern
Shipping Lines, Inc. and Asian Terminals, Inc., jointly and severally, ordering the latter to pay
plaintiffs to pay actual damages, attorney's fees, and costs of suit.
 Aggrieved, petitioner and ATI appealed to the Court of Appeals (CA). On July 9, 2010, the CA
in its assailed Decision affirmed with modification the RTC’s findings and ruling, holding,
among others, that both petitioner and ATI were very negligent in the handling of the subject
cargoes. Pointing to the affidavit of Mario Manuel, Cargo Surveyor, the CA found that “during
the unloading operations, the steel coils were lifted from the vessel but were not carefully laid
on the ground. Some were even ‘dropped’ while still several inches from the ground while other
coils bumped or hit one another at the pier while being arranged by the stevedores and forklift
operators of ATI and [petitioner].”

ISSUE/S: Whether petitioner is solidarily liable with ATI on account of the damage incurred by the
goods.

RULING: Yes. Maritime law jurisprudence provides that cargoes while being unloaded generally
remain under the custody of the carrier. Moreover, the law 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 transported by them. Subject to certain exceptions enumerated under
Article 173431 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,
25
Tirol, Courtney Allison P. Topic: Obligations of the Parties in a Contract of Carriage
or to the person who has a right to receive 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.

In this case, 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. Hence, petitioner failed to discharge such burden and are thus solidarily
liable with ATI.

26
Valdez, Darwin Moreno Topic: Obligations of the Parties in Contract of Carriage

16. Westwind Shipping Corp v. UCPB General Insurance Co., Inc.

G.R. No. 200289 and 200314 | November 25, 2013
J. Peralta

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 (SMC). The shipment,
covered by a Bill of Lading, was loaded 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. (UCPB)
 The shipment arrived in Manila, Philippines and was discharged in the custody of the arrastre
operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc. During the unloading
operation, however, six containers/skids worth P117,093.12 sustained dents and punctures
from the forklift used by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering
and shuttling the containers/skids. Consequently, the local ship agent of the vessel, Baliwag
Shipping Agency, Inc., issued two Bad Order Cargo Receipt.
 Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew from ATI the 197
containers/skids, including the six in damaged condition, and delivered the same at SMC’s
warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was discovered upon
discharge that additional nine containers/skids valued at P175,639.68 were also damaged due
to the forklift operations; thus, making the total number of 15 containers/skids in bad order.
 Almost a year after, SMC filed a claim against UCPB, Westwind, ATI, and OFII to recover the
amount corresponding to the damaged 15 containers/skids. When UCPB paid the total sum of
P292,732.80, SMC signed the subrogation receipt. Thereafter, in the exercise of its right of
subrogation, UCPB instituted on August 30, 1994 a complaint for damages against Westwind,
ATI, and OFII.
 The RTC dismissed the case. It opined that Westwind and OFII are not liable, since the
discharging of the cargoes were done by ATI personnel using forklifts and that there was no
allegation that Westwind had a hand in the conduct of the stevedoring operations.
 CA reversed the RTC. Per the CA, Westwind is responsible for the six damaged
containers/skids at the time of its unloading. It concluded that the common carrier, not the
arrastre operator, is responsible during the unloading of the cargoes from the vessel and that it
is not relieved from liability and is still bound to exercise extraordinary diligence at the time in
order to see to it that the cargoes under its possession remain in good order and condition.
Same is concluded regarding OFII’s liability on the other 9 containers.
 Westwind argues that it no longer had actual or constructive custody of the containers/skids at
the time they were damaged by ATI’s forklift operator during the unloading operations. As for
OFII, it maintains that it is not a common carrier, but only a customs broker.

ISSUE/S: Whether or not Westwind and OFII are liable.

RULING: YES, Westwind and OFII are both liable as common carriers.

Section 3 (2) of the COGSA states that among the carriers’ responsibilities are to properly and
carefully load, care for and discharge the goods carried. The bill of lading covering the subject
shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases after its
discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for the
cargo from the time it is turned over to him until its delivery at the port of unloading.

27
Valdez, Darwin Moreno Topic: Obligations of the Parties in Contract of Carriage
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under
the custody of the carrier. The extraordinary responsibility of the common carrier lasts until the time
the goods are actually or constructively delivered by the carrier to the consignee or to the person who
has a right to receive them.

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.

In OFII’s case, a customs broker has been regarded as a common carrier because transportation of
goods is an integral part of its business. The contention of OFII 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.

28
Venus, Ma. Dominique M. Topic: Obligations of the parties in a contract of carriage

17. Central Shipping Company, Inc. v. Insurance Company of North America

G.R. No. 150751 | 20 September 2004
J. Panganiban

FACTS:
 On 25 July 1990, at Puerto Princesa Palawan, petitioner Central Shipping Company, Inc.
(Central Shipping) received on board its vessel, the M/V Central Bohol, 376 pieces of
Philippine Apitong Round Logs. Central Shipping undertook to transport the logs to Manila for
delivery to consignee Alaska Lumber Co., Inc. (Alaska Lumber).
 The cargo was insured for P3,000,000.00 against total loss under respondent Insurance
Company of North America’s (Insurance Company) Marine Cargo Policy No. MCPB-00170.
 While en route to Manila, the vessel listed about 10 degrees starboard side due to the shifting
of logs in the hold. When the listing increased to 15 degrees, the ship captain ordered his men
to abandon the vessel. Thereafter, the vessel completely sank and as a result, the cargo was
totally lost.
 The Insurance Company alleged that the total loss of the cargo was caused by the fault and
negligence of Central Shipping and its captain and as a direct consequence thereof, Alaska
Lumber suffered damage in the sum of P3,000,000.00
 Alaska Lumber then presented a claim for the the said value of the cargo to Central Shipping
but Central Shipping failed and refused to settle the claim. Hence, the Insurance Company,
being the insurer, paid the claim and sought to be subrogated to all the rights and actions of
Alaska Lumber as against Central Shipping.
 Central Shipping raised as its main defense that the proximate and only cause of the sinking of
the vessel and the loss of the cargo was a natural disaster, a tropical storm which neither
Central Shipping nor the captain of the vessel could have foreseen.
 The Regional Trial Court was unconvinced that the sinking of the vessel had been caused by
the weather or any other caso fortuito. It held that monsoons, which were common during the
months of July to December, could have been foreseen and provided for by an ocean-going
vessel. Hence, the RTC, in applying the rule of presumptive fault or negligence against the
carrier, held Central Shipping liable for the loss of the cargo.
 The Court of Appeals affirmed the decision of the RTC. The CA further held that the weather
disturbance was not the sole and proximate cause of the sinking of the vessel, which was also
due to the concurrent shifting of logs in the hold that could have resulted only from improper
stowage. Hence, the CA held Central Shipping responsible for the consequent loss of or
damage to the cargo because its own negligence had contributed thereto. Hence, this petition.

ISSUE/S:
1. Whether Central Shipping is liable for the loss of the cargo; and
2. Whether the Doctrine of Limited Liability is applicable.

RULING:
1. Yes, Central Shipping is liable for the loss of the cargo.

“From the nature of their business and for reasons of public policy, common carriers are bound
to observe extraordinary diligence over the goods they transport, according to all the
circumstances of each case. In the event of loss, destruction or deterioration of the insured
goods, common carriers are responsible; that is, unless they can prove that such loss,
destruction or deterioration was brought 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.”
Venus, Ma. Dominique M. Topic: Obligations of the parties in a contract of carriage
In this case, Central Shipping disclaims responsibility for the loss of the cargo by claiming the
occurrence of a “storm” under Article 1734(1). Central Shipping attributes the sinking of its
vessel solely to the weather condition. Here, the pieces of evidence with respect to the weather
conditions encountered by the vessel showed that there was a southwestern monsoon at that
time. However, such monsoons were normally expected on sea voyages and strong winds
during such monsoons were not unusual. Hence, the Court held that it would not be sufficient
to categorize weather condition at that time as a “storm” within the absolutory causes
enumerated in the law.

Even if the weather encountered by the ship is to be deemed a natural disaster under Article
1739 of the Civil Code, Central Shipping 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. Hence, if a common carrier fails to exercise due diligence -- or that
ordinary care that the circumstances of the particular case demand -- to prevent or minimize
the loss before, during and after the occurrence of the natural disaster, the carrier shall be
deemed to have been negligent.  The loss or injury is not, in a legal sense, due to a natural
disaster under Article 1734(1).

Therefore, Central Shipping is liable for the loss of the cargo.

2. No, the Doctrine of Limited Liability is not applicable.

The Doctrine of Limited Liability does not apply in situations in which the loss or the injury is
due to the concurrent negligence of the shipowner and the captain.

In this case, the sinking of the vessel had been caused by the fault or the negligence of the
ship captain and the crew as shown by the improper stowage of the logs. The Court held that
closer supervision on the part of the shipowners could have prevented the fatal miscalculation.
As such, the shipowner was equally negligent.

Therefore, the Doctrine of Limited Liability is not applicable.

Victa, Carlos Emmanuel A. Topic: Obligations of the Parties in a Contract of Carriage

18. Nocum v. Laguna Tayabas Bus Co.

G.R. No. L-23733 | Oct. 31, 1969
J. Barredo

FACTS:
 Petitioner Nocum was a passenger in a bus owned by Respondent Laguna Tayabas Co.then
making a trip within Laguna. Petitioner was injured as a consequence of the explosion of
firecrackers, contained in a box, loaded in the bus and declared to its conductor as containing
clothes and miscellaneous items by a co-passenger.
 Petitioner Nocum filed a complaint against Laguna Tayabas Co., Respondent for actual
damages. The Court of First Instance of Batangas ruled in favor of Petitioner holding that
respondent did not observe the extraordinary or utmost diligence of a very cautious person
required by the Civil Code provisions on Common Carriers. Hence, this appeal by respondent.

ISSUE/S: Whether Laguna Tayabas Co. is liable for injury resulting from the explosion of firecrackers
brought on board the bus by a co-passenger of petitioner.

RULING: No. The Lower Court erred in holding the respondent liable for injuries to petitioner.

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.

While it is true that the provisions of the Civil Code on Common carriers require the highest degree of
diligence from common carriers in the safe transport of their passengers and by creating a
presumption of negligence against them, the Court holds that the that the exacting criterion of said
Civil Code provisions has not been met in the circumstances of this case. In measuring a common
carrier's duty towards its passengers, allowance must be given to presume that a passenger will not
take with him anything dangerous to the lives and limbs of his co-passengers. Respondent in this
case, exercised the diligence expected of a common carrier with regards to the loaded package, to the
extent allowed it by law with respect to the passenger’s right to privacy. Respondent could not be
expected to inquire into the nature of the package which injured petitioner without the assistance of
competent authority in this case. Hence, respondent is absolved of liability

Appeal is granted. The decision of the Lower Court is reversed and the Case against the Respondent
Company is dismissed.
Baba, Karla Marie B. Topic: Obligations of the Parties in the Contract
of Carriage

19. La Mallorca v. Court of Appeals

No. L-20761 | July 27, 1966
J. Barredo

FACTS:
 A family of five rode a Pambuco bus owned and operated by La Mallorca. When they reached
Anao, Pampanga, the five disembarked.
 After leading the family to a shaded spot, Mariano Beltran, the father, went back to the bus to
get his bayong. He did not notice that one of his daughters, Raquel (4 ½ years old), followed
him.
 While Mariano was on the running board of the bus, waiting for the conductor to hand him his
bayong, the bus started moving forward to resume the trip. The motor was previously shut off
during the unloading. The conductor had not yet given the driver the customary signal to start
because he was trying to return Mariano’s bayong. Because of this, Mariano got off before
getting his bayong from the conductor.
 Raquel was found dead, her skull crushed. She was run over by the bus.
 The parents filed a complaint for damages. The trial court found La Mallorca liable for breach
of contract of carriage.
 On appeal, 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. The contract of
carriage had already terminated.
 The Court of Appeals agreed and found the defendant-appellant guilty of quasi-delict instead
for the negligence of its driver in accordance with Article 2180 of the Civil Code.

ISSUE/S:
1. Whether Raquel was still a passenger of the bus
2. If yes, whether the driver exercised the required extraordinary diligence

RULING:
1. YES. SHE WAS STILL A PASSENGER DURING THE INCIDENT.
The relation of carrier and passenger does not cease at 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.
In this the father returned to the bus to get his bayong which was not unloaded when they
alighted from the bus. Raquel followed the father.
Therefore, Raquel was still considered a passenger.

2. NO, HE DID NOT.

Article 1755 of the Civil Code requires the “utmost diligence” of a “very cautions person.”
In this case, however, although the father was still on the running board of the bus, the bus
started to run. The father even had to jump down from the moving vehicle. The child was run
over and was killed. The driver, although stopping the bus, did not put off the engine. He
started to run the bus even before the bus conductor gave him the signal to go. The conductor
was still trying to deliver the bayong.
There was a clear lack of extraordinary diligence.
Balboa, Nerissa Gloria J. Topic: Obligations of the parties in a contract of carriage

20. Aboitiz Shipping Corp. v. Court of Appeals

G.R. No. 84458 | November 16, 1989
J. Regalado

FACTS:
 Anacleto Viana boarded the vessel M/V Antonia, owned by defendant bound for Manila. Said
vessel arrived in Manila and the passengers therein disembarked through a gangplank
connecting 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.
 The crane owned by the third-party defendant and operated by its crane operator 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 was thereafter brought to the hospital where he later expired 3 days thereafter.
 Aboitiz denied responsibility contending that at the time of the accident, the vessel was
completely under the control of respondent Pioneer Stevedoring Corporation (Pioneer) as the
exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes from the
vessel of Aboitiz. Aboitiz then filed a third-party complaint against Pioneer. Pioneer raised the
defense, among others, that Aboitiz is being sued by the Vianas for breach of contract of
carriage to which Pioneer is not a party. It also argued that it was the contributory negligence
of Anacleto that was the proximate cause of his death.
 Aboitiz alleged that under the memorandum of agreement the liability of Pioneer as contractor
is automatic for any damages or losses whatsoever occasioned by and arising from the
operation of its arrastre and stevedoring service. Later, the trial court absolved Pioneer from
liability for failure of the Vianas and Aboitiz to preponderantly establish a case of negligence
against the crane operator. The CA upheld this ruling.

ISSUE/S:
1. Whether Aboitiz is liable for the death of Anacleto Viana
2. Whether Pioneer should be ordered to reimburse Aboitiz

RULING:
1. Yes, Aboitiz is liable for the death of Anacleto.

The rule is that the relation of carrier and passenger continues until the passenger has been
landed at the port of destination and has left the vessel owner's dock or premises. Once
created, the relationship will not ordinarily terminate until the passenger has, after reaching his
destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to
leave the carrier's premises. All persons who remain on the premises a reasonable time after
leaving the conveyance are to be deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare for his departure. The carrier-passenger
relationship is not terminated merely by the fact that the person transported has been carried
to his destination if, for example, such person remains in the carrier's premises to claim his
baggage. It is apparent from the foregoing that what prompted the Court to rule as it did in said
case is the fact of the passenger's reasonable presence within the carrier's premises. That
Balboa, Nerissa Gloria J. Topic: Obligations of the parties in a contract of carriage
reasonableness of time should be made to depend on the attending circumstances of the case,
such as the kind of common carrier, the nature of its business, the customs of the place, and
so forth, and therefore precludes a consideration of the time element per se without taking into
account such other factors. Here, an interval of one (1) hour had elapsed before the victim met
the accident. The primary factor to be considered is the existence of a reasonable cause as will
justify the presence of the victim on or near the petitioner's vessel. We believe there exists
such a justifiable cause.

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. 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. The victim here then was still a passenger at the time of the accident.
When the accident occurred, the victim was in the act of unloading his cargoes, which he had
every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to
bring its passengers safely to their destination but also to afford them a reasonable time to
claim their baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already
disembarked from the vessel. What is clear to us is that 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 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 vessel 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. No, Pioneer should not be ordered to reimburse Aboitiz.

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. More particularly, 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 cautions persons, with a due regard for all the circumstances. Thus, where a
passenger dies or is injured, the common carrier is presumed to have been at fault or to have
acted negligently. This gives rise to an action for breach of contract of carriage where all that is
required of plaintiff is to prove the existence of the contract of carriage and its non-performance
by the carrier, that is, the failure of the carrier to carry the passenger safety to his destination,
which, in the instant case, necessarily includes its failure to safeguard its passenger with
extraordinary diligence while such relation subsists. It is therefore incumbent upon the common
carrier to rebut the same. However, petitioner failed to do so.

There is no showing that petitioner was extraordinarily diligent in requiring or seeing to it that
said precautionary measures were strictly and actually enforced to serve 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.
Balboa, Nerissa Gloria J. Topic: Obligations of the parties in a contract of carriage
While the victim was admittedly contributorily negligent, still 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.

No excepting circumstance being present, we are likewise bound by respondent court's

declaration that there was no negligence on the part of Pioneer Stevedoring Corporation.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross
negligence of the victim, hence its present contention that the death of the passenger was due
to the negligence of the crane operator cannot be sustained both on grounds of estoppel and
for lack of evidence on its present theory. Even in its answer filed in the court below it readily
alleged that Pioneer had taken the necessary safeguards insofar as its unloading operations
were concerned, a fact which appears to have been accepted by the plaintiff therein by not
impleading Pioneer as a defendant. Parenthetically, Pioneer is not within the ambit of the rule
on extraordinary diligence required of, and the corresponding presumption of negligence
foisted on, common carriers like Aboitiz.
Bataan, Xhavier Brett King D. Topic: Obligation of Parties in Contract of Carriage

21. Spouses Perena vs. Spouses Zarate

G.R. No. 157917 | August 29, 2012
Bersamin, J.

FACTS:
 Perena is the common carrier here; Clemente Alfaro is the driver; and spouses Zarate are the
complainant–parents of the victim child Aaron Zarate who died in the accident. Zarate
contracted Perena to transport Aaron from Paranaque to Don Bosco–High School Makati in a
Kia Ceres Van (PYA 896) transporting 14 students at that time.
 When the van was about to traverse the rail road crossing operated by Johnny Alano travelling
northbound, the driver’s view was 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 killed Aaron throwing him
out of the van.
 Zarate sued Perena for breach of carriage contract and PNR for quasi–delict. RTC and CA
ruled for their solidary liability and award for damages for loss of earning capacity is
P2.1million. Hence, this petition.

ISSUE/S:
1. Whether or not Perena is a common carrier.
2. Whether or not the ruling that Perena and PNR as jointly and severally liable is proper.

RULING:
1. Yes, Perena is a common carrier. 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. The question must be determined by the character
of the business actually carried on by the carrier, not by any secret intention or mental
reservation it may entertain or assert when charged with the duties and obligations that the law
imposes. 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 for the safety
of the passengers transported by them, according to all the circumstances of each case”. Here,
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.

2. Yes, they are solidarily liable. The SC Reasoned that they nonetheless could be held jointly
and severally liable by virtue of their respective negligence combining to cause the death of
Aaron
Cadiz, Sophia Topic: Obligations of Parties in a Contract of
Carriage

22. Regional Container Lines of SG and EDSA Shipping v. Netherlands Insurance Inc.
G.R. No. 168151 | 4 September 2009
J. Brion

FACTS:
 On Oct. 20, a cargo containing 405 cartons of Epoxy Compound, consigned to Temic
Telefunken, was shipped from Singapore to Manila
 U-Freight SG contracted the services of Pacific Eagle Lines to transport the cargo. Pacific
Eagle packed and sealed the cargo in its refrigerated container with a required temperature of
0º Celsius to prevent it from perishing.
 Pacific Eagle loaded the container on board M/V Piya Bhum, a vessel owned by Regional
Container Lines (RCL) with which Pacific Eagle had a slot charter agreement. RCL’s agent in
the Philippines is EDSA Shipping.
 Temic insured the cargo with Netherlands Insurance (Insurer).
 On Oct. 25 in Manila port, 2 surveyors checked the cargo and found that from Oct. 18 to 25,
the temperature reading was at 0º Celsius. However, at midnight of Oct. 25, when the cargo
had already been unloaded from the ship, the temperature fluctuated to 33º Celsius due to the
burnt condenser fan motor of the container.
 On Nov. 9, Temic received the damaged cargo and filed a claim for cargo loss against the
Insurer. The latter paid the sum of P1Million.
 Seven months from delivery of the cargo, the Insurer filed a complaint for subrogation of
insurance settlement against RCL (owner of the vessel), EDSA Shipping, Pacific Eagle Liner,
and U-Freight SG.
 The Courts found EDSA Shipping and RCL liable as common carriers under the theory of
presumption of negligence.
 On appeal, the petitioners argue that the damage was caused due to the fluctuation of the
temperature in the “reefer van” which fluctuation occurred after the cargo had already been
discharged from the vessel and under the custody of the arrastre operator (ICTSI).

ISSUE/S: Whether EDSA Shipping and RCL are jointly liable

RULING: YES, EDSA and RCL are jointly liable.

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

Here, 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; RCL and EDSA Shipping failed to dispute this.
Cadiz, Sophia Topic: Obligations of Parties in a Contract of
Carriage
EDSA and RCL did not provide proof that they exercised extraordinary diligence in handling the cargo,
instead, they filed a demurrer to evidence.

Thus, petition is DENIED. The Petitioners failed to proof they exercised extraordinary diligence to
overcome the presumption of negligence.
Chua, Raphael Ryan D. Topic: Obligations of the Parties in the Contract of Carriage

23. Hermiano Mariano, Jr. v. Ildefonso C. Callejas and Edgar de Boja

G.R. No. 1666640 | July 31, 2009
C.J. Puno

FACTS:
 The Celyrosa Express bus driven by Edgar de Borja and carrying Dr. Frelinda Mariano collided
with an Isuzu truck along Aguinaldo Highway. Due to the impact, the bus fell on its right side on
the right shoulder of the highway and caused the death of Dr. Mariano and physical injuries to
four other passengers.
 Hermiano Mariano filed a complaint for breach of contract of carriage and damages against
Ildefonso Callejas, owner of Celyrosa Express, and De Borja, for their failure to transport Dr.
Mariano to her destination, claiming 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.
 Callejas filed a third party complaint against Liong Chio Chang, doing business as La Perla
Sugar Supply, owner of the trailer truck.
 The RTC found Callejas, de Borja, and Chang jointly and severally liable to pay damages, but
the CA reversed the RTC.

ISSUE/S: Whether Callejas and de Borja are liable for breach of contract and damages

RULING: No, the respondents are not liable.

A common carrier has the express obligation 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, and to observe extraordinary diligence in the discharge of its duty. However, 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 make the carrier an
insurer of the absolute safety of its passengers.

In this case, the evidence shows that the death of Dr. Mariano was due to the reckless negligence of
the driver of the Isuzu truck which lost its brakes and bumped the Celyrosa Express bus. Before the
collision, the passenger bus was cruising on its rightful lane along the Aguinaldo Highway when the
trailer truck coming from the opposite direction, on full speed, suddenly swerved and encroached on
its lane, and bumped the passenger bus on its left middle portion. De Borja had every right to expect
that the trailer truck coming from the opposite direction would stay on its proper lane. He was not
expected to know that the trailer truck had lost its brakes. The swerving of the trailer truck was abrupt
and it was running on a fast speed as it was found 500 meters away from the point of collision.
Moreover, any doubt as to the culpability of the driver of the trailer truck ought to vanish when he
pleaded guilty to the charge of reckless imprudence resulting to multiple slight physical injuries and
damage to property in a criminal case involving the same incident. Therefore, Callejas and de Borja
are not liable.
Esguerra, George Clarence T. Topic: Obligations of Parties in Contract of Carriage

24. Heirs of Jose Marcial K. Ochoa v. G & S Transport Corp.

G.R. No. 170071 | 9 March 2011
J. Del Castillo

FACTS:
 Sometime in the evening of 10 March 1995, Jose Marcial boarded and rode a taxicab, a
passenger vehicle owned by Avis Coupon Taxi (Avis) and driven by its employee Bibiano
Padilla. The Avis taxicab is owned and operated by G & S Transport Corp. (G&S), a common
carrier. The taxicab was cruising along EDSA at high speed. It overtook another cab driven by
Pablo Clave and tried to pass another vehicle, a 10-wheeler cargo truck. Because of the
narrow space between the left side railing of the fly-over and the 10-wheeler truck, Avis cab
was unable to pass and because of its speed, Padilla was unable to control it. 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. The forceful drop broke
and split the vehicle into two parts. Both driver and Jose Marcial were injured and rushed to the
hospital. At the East Avenue Medical Center, Jose Marcial died.
 The heirs of Jose Marical demanded from G&S indemnity for Jose’s death. And as G&S failed
to heed the same, they filed a Complaint for Damages.
 The RTC rendered a decision finding the mishap to be caused by Padilla’s negligence, and
that G&S’s evidence that it exercised diligence in the selection and supervision of its
employees is insufficient.
 On appeal, G&S averred that: (1) before they employed Padilla, he was a truck driver for 11
years; (2) Padilla has been an employee of G&S from 1986 to 1996 and during such, there
was no recorded incident of his being a negligent driver; (3) despite his qualifications, G&S
required Padilla to submit an NBI clearance, driver’s license and police clearance; (4) Padilla’s
being a good driver-employee was manifest in his years of service with G&S; and that (5)
Padilla attended a seminar at the Pope Pius Center sometime in December 1999 as part of the
NAIA Taxi Operation Program. G&S also argued that the proximate cause of the death is a
fortuitous event.
 The CA ruled in favor of the heirs. According to the CA, since Padilla was negligent, there can
be no fortuitous event, and that G&S’s evidence was insufficient to support its claim that it
exercised due diligence in the selection and supervision of its employees. The CA likewise
reduced the amount awarded in favor of the heirs.
 Hence, both parties filed their respective Petitions for Review on Certiorari before the SC.

ISSUE/S: Whether or not G&S is not liable because of a fortuitous event, or because of its alleged
exercise of diligence in the selection and supervision of its employees.

RULING: No. G&S’s petition is DENIED.

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.

Here, it is clear from the records that there existed a contract of carriage between G&S, as owner and
operator of Avis taxicab, and Jose Marcial, as the passenger of said vehicle. Both the trial court and
CA found that the accident which led to Jose Marcial’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 Jose Marcial for
breach of contract of carriage.
Jackson, Loida M. Topic: Obligations of the Parties

25. Asian Terminals, Inc. v. Simon Enterprises, Inc.

G.R. No. 177116 | February 27, 2013
J. Villarama Jr.

FACTS:
 Contiquincybunge Export Company loaded 6,843.700 metric tons of U.S. Soybean Meal in
Bulk on board the vessel MN "Sea Dream" at the Port of Darrow, Louisiana, U.S.A., for
delivery to the Port of Manila to respondent 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
received the shipment but claimed having received only 6,825.144 metric tons of U.S. Soybean
Meal, or short by 18.556 metric tons, which is estimated to be worth US$7,100.16 or
₱186,743.20.
 Contiquincybunge Export Company made another shipment to respondent and allegedly
loaded on board the vessel M/V "Tern" at the Port of Darrow, Louisiana, U.S.A. 3,300.000
metric tons of U.S. Soybean Meal in Bulk for delivery to respondent at the Port of Manila. The
subject shipment was discharged to the receiving barges of petitioner ATI and received by
respondent which, however, 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.
Thus, respondent filed 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.
The RTC held that petitioner ATI and its co-defendants solidarily liable.CA affirmed RTC’s
Decision.

ISSUE: Whether or not ATI is solidarily liable with its codefendants for the shortage incurred in the
shipment of the goods to respondent.

RULING: No. ATI is not solidarily liable with its codefendants for the shortage incurred in the shipment
of the goods to respondent.

Under 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:
xxx
(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;
xxx
First, 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 at
Darrow, Louisiana, U.S.A. Furthermore, as the bill of lading indicated that the contract of carriage was
under a "said to weigh" clause, the shipper is solely responsible for the loading while the carrier is
oblivious of the contents of the shipment. Hence, the weight of the shipment as indicated in the bill of
lading is not conclusive as to the actual weight of the goods.

Second, 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%. 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.
Jackson, Loida M. Topic: Obligations of the Parties

Third, no negligence on the part of ATI was proven. A reading of the Survey Report of Del Pan
Surveyors would not show any untoward incident or negligence on the part of petitioner ATI during the
discharging operations. It was also showed that the methods used in determining whether there was a
shortage are not accurate. These discrepancies only lend credence to petitioner ATI's assertion that
the weighing methods respondent used as bases are unreliable and should not be completely relied
upon.
Laviña, Alyssa V. Topic: Perfection of Contract of Carriage
26. Loadstar Shipping Company v. Malayan Insurance Company, Inc.,
G.R. No. 185565, April 26, 2017 

FACTS:
 Copper concentrates were delivered by the petitioners Loadstar Int’l Shipping Company to the
consignee PASAR although part thereof was contaminated with seawater.
 PASAR did not simply reject the contaminated goods (on the basis that these were no longer
fit for the intended purpose).
 PASAR claim the value thereof from Malayan Insurance Company and leave things at that.
 Malayan opted to cash in the situation by selling the contaminated copper concentrates to the
very same consignee PASAR who already rejected the goods as total loss.
 Now, Malayan sought to recover the total value of the wet copper concentrates from Loadstar
Shipping.
 Malayan argues that since the petitioners and PASAR agreed in their Contract of Affreightment
that copper concentrates are easily contaminated with seawater, the contaminated parts
should be considered as totally damaged; and that when the petitioners failed to provide a
seaworthy ship under 25 years of age as agreed upon, they should be held liable for damages.
 Malayan contends that in Delsan, 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/S: Whether Loadstar is liable to pay for damages due to unseaworthiness of the ship?

RULING: YES. the petitioners failed to provide a seaworthy ship under 25 years of age as agreed
upon, they should be held liable for damages.

The Court notes that the 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 wattage of the cargo.

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.”
In this case, when the copper concentrates delivered were contaminated with seawater, the petitioners
have failed to exercise extraordinary diligence in the carriage thereof.

In view of the foregoing, the Court deems it proper to award nominal damages to Malayan. This is in
recognition of the breach of contract committed by the petitioners. “So long as there is a violation of
the right of the plaintiff — whether based on law, contract or other sources of obligations — an award
of nominal damages is proper.” Articles 2221 and 2222 of the Civil Code provide:
3.
4. Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him.

Article 2222. 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. 
Lopez, Michiko S. Topic: Obligations of the Parties in the Contract of Carriage
27. Air France v. Charles Zani
G.R. No. 199767 | March 13, 2019
Resolution

FACTS:
 Petitioner and respondent executed a credit agreement allowing respondent to purchase airline
tickets on credit and at a fixed price from petitioner.
 Respondent purchased several airline tickets from petitioner under this agreement. Despite the
payment terms, however, respondent had an outstanding balance of P1,738,180, prompting
petitioner to send a demand letter to respondent. Petitioner, through its counsel, wrote
respondent informing him that he will be refused carriage on any of petitioner's network or
flights until respondent settles his outstanding balance.
 Due to respondent's failure to pay, petitioner filed in the RTC a collection case against
respondent.
 The RTC ruled in favor of petitioner, which the CA affirmed in its Decision. The SC affirmed the
RTC and the CA through a Minute Resolution.
 Meanwhile, respondent purchased and booked flights through ANSCOR Travel Corporation, a
travel agency. Respondent's trip was from July 12-24, 2000; covered different destinations;
and involved several airlines, including petitioner. The travel agency issued confirmed
Conjunction Tickets which included petitioner Air France.
 The first three legs of the conjunction flight proceeded as scheduled. For his July 18, 2000
flight from Mahe Island to Paris, respondent decided to rebook his confirmed flight to an earlier
date. He communicated with petitioner's Paris office and got confirmation via telephone for a
July 16, 2000 flight, two days earlier than originally scheduled. Per instructions from petitioner,
respondent proceeded to the former's office in Mahe Island on the morning of July 15, 2000,
and personally received another confirmation for which a confirmation sticker was placed on
his ticket.
 However, petitioner's manager in Mahe informed respondent via telephone call that he will not
be allowed embarkation on the confirmed flight the following day. On July 16, 2000,
respondent was refused boarding.
 Aggrieved, respondent filed a complaint for damages against petitioner and claims that
petitioner's refusal was a breach of the contract of carriage which caused him actual and moral
damages.
 Petitioner argued that at the time of the incident, respondent was indebted to it in the
aggregate amount of P1,738,180, which is a clear violation of their credit arrangement. Thus,
when petitioner refused carriage to respondent, it was merely enforcing its rights under Article
VII(1)(g) of the General Conditions of Carriage, Passenger, and Baggage.
 RTC ruled in respondent's favor. It held that petitioner and respondent had a perfected contract
when the former confirmed the latter's tickets twice, and that petitioner's refusal to let
respondent board was a breach of their contract, notwithstanding respondent's pending
obligation to it. CA affirmed the RTC’s decision.

ISSUE/S: Whether petitioner was correct in refusing carriage to respondent

RULING: No, petitioner was not correct in refusing carriage to respondent

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. Thus, an
airline's issuance of confirmed tickets is a guarantee to the passenger that the airline would honor the
tickets, assure him of a space in the flight, and transport him for that segment of his trip corresponding
to the confirmed ticket.
Lopez, Michiko S. Topic: Obligations of the Parties in the Contract of Carriage
Meanwhile, breach of contract is defined as the failure, without legal reason, to comply with the terms
of a contract, or the failure, without legal excuse, to perform any promise which forms the whole or
part of the contract.

A contract of carriage existed between petitioner and respondent. Respondent carried confirmed
tickets covering several flights with petitioner: 1) Mahe Island to Paris (scheduled on July 18, 2000 and
rebooked to July 16, 2000); 2) Paris to Nice (scheduled on July 19, 2000); and 3) Nice to Paris
(scheduled on July 23, 2000). Further to their contract, respondent had the right to expect that he
would fly from Mahe Island to Paris on July 16, 2000. Since petitioner refused to transport him,
petitioner evidently breached their contract of carriage and respondent had every right to sue
petitioner for this breach.

Petitioner argues that respondent's previous unpaid purchases violated the General Conditions of
Carriage, Passenger, and Baggage to which his ticket for the July 16, 2000 flight is subjected, and
consequently justified petitioner's exercise of its right to refuse carriage.

The Court agreed with petitioner that the General Conditions of Carriage, Passenger, and Baggage,
as well as the IATA conditions of carriage, are part of the contract of carriage between petitioner and
respondent as they set forth the terms and conditions of the contract between petitioner and its
passengers, including respondent. Thus, when respondent purchased his tickets, he was
instantaneously bound by the terms and conditions of the contract of carriage which include
petitioner's right to refuse to carry respondent when the applicable fare or charge has not been paid or
a credit arrangement between petitioner and respondent has not been complied with. It is unclear,
however, whether this condition applies to previous ticket purchases respondent made or is limited to
the July 16, 2000 flight.

Petitioner can only refuse carriage due to non-payment of the fare or credit arrangement when what
remains unpaid, or the credit arrangement which remains unsettled, is the fare for that particular ticket
or flight, in this case, the July 16, 2000 flight from Mahe Island to Paris. In this case, respondent's
unpaid obligation to petitioner did not include the payment for the July 16, 2000 flight. It refers to
previous purchases respondent made pursuant to his credit arrangement with petitioner.
Magnaye, Isaiah Athriene Topic: Obligations of the Parties
in Contract of Carriage
28. Spouses Jesus Fernando and Elizabeth Fernando v. Northwest Airlines, Inc.
G.R. No. 212038 and G.R. No. 212043,
February 8, 2017

FACTS:
 Jesus Fernando 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 Linda Puntawongdaycha, a Northwest personnel but the latter merely
glanced at his ticket without checking its status with the computer and peremptorily said that
the ticket has been used and could not be considered as valid. He gave Linda the number of
his Elite Platinum World Perks Card for the latter to access the ticket control record with the
airline's computer for her to see that the ticket is still valid. But Linda refused to check the
validity of the ticket in the computer. As a result, the Immigration Officer brought Jesus
Fernando to the interrogation room of the INS where he was interrogated for more than two (2)
hours.
 When he was finally cleared by the Immigration Officer, he was granted only a twelve (12)-day
stay in the United States (US), instead of the usual six (6) months. 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.
 When Jesus Fernando and his family 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.
 In the presence of the other passengers, Linda Tang rudely pulled them out of the queue.
Elizabeth Fernando explained to Linda Tang that the matter could be sorted out by simply
verifying their electronic tickets in her computer and all she had to do was click and punch in
their Elite Platinum World Perks Card number. But Linda Tang arrogantly told them that if they
wanted to board the plane, they should produce their credit cards and pay for their new tickets,
otherwise Northwest would order their luggage off-loaded from the plane.
 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.

ISSUE/S: 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.

RULING: Yes, there was breach of contract of carriage and whether it was done in a wanton,
malevolent or reckless manner amounting to bad faith. 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 rude or
discourteous conduct on the part of employees towards a passenger gives the latter an action for
damages against the carrier. 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 utmost diligence of a very cautious person expected of it."
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
Magnaye, Isaiah Athriene Topic: Obligations of the Parties
in Contract of Carriage
provide the proper and adequate assistance to them. Further, the actuations of Northwest personnel in
both subject incidents are constitutive of bad faith. In ignoring Jesus Fernando's pleas to check the
validity of the tickets in the computer, the Northwest personnel exhibited an indifferent attitude without
due regard for the inconvenience and anxiety Jesus Fernando might have experienced. As to the
second incident, there was likewise fraud or bad faith on the part of Northwest when it did not allow
the Fernandos to board their flight for Manila on scheduled date, in spite of confirmed tickets in the
presence of the other passengers, Northwest personnel Linda Tang pulled the Fernandos out of the
queue and asked for paper tickets (coupon type). Even the matter could be sorted out by simply
verifying their electronic tickets in her computer and all she had to do was click and punch in their Elite
Platinum World Perks Card number, Tang refused to do so; she, instead, told them to pay for new
tickets so they could board the plane.
Manotok, Ma. Thelma Francesca T. Topic: Obligation of Parties in Contract of
Carriage
29. Cacho vs. Manahan
G.R. No. 203081 | January 17, 2018
J. Martires

FACTS:
 At around 5:00 A.M., Linda 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.

ISSUE/S: Whether Manahan and Dagupan Bus were negligent in meeting their responsibilities?

RULING:
1. Yes, Manahan was negligent. In Picart v. Smith, conduct is said to be negligent when a
prudent man in the position of the tortfeasor would have foreseen that an effect harmful to
another was sufficiently probable to warrant his foregoing conduct or guarding against its
consequences. Here, Manahan was clearly negligent when he was relatively driving fast on a
narrow highway and approaching a similarly narrow bridge. A bus is a significantly large
vehicle which would be difficult to maneuver and stop if it were travelling at a high speed. In
addition, the time of the accident was on or about sunrise when visibility on the road was
compromised. Manahan should have been more prudent and careful in his driving the bus
especially considering that Dagupan Bus is a common carrier.

2. Yes, Dagupan Bus was negligent. Article 2180, in relation to Article 2176, of the Civil Code
provides that the employer of a negligent employee is liable for the damages caused by the
latter. When an injury is caused by the negligence of an employee there instantly arises a
presumption of the law that there was negligence on the part of the employer either in the
selection of his employee or in the supervision over him after such selection. Dagupan Bus had
allowed Manahan to drive one of its buses after seven (7)-day apprenticeship 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.

Thus, Manahan and Dagupan Bus are negligent in meeting their responsibilities. The heirs of
Cacho are awarded damages.
Murao, Jose Pepito G. III Topic: Obligation of Parties in Contract of
Carriage

30. Unitrans International Forwarder Inc. v. Insurance Company of North America, Unknown
Charterer of M/S Doris Wullf, and TMS Ship Agencies
G.R. No. 203865 | March 13, 2019
J. Caguioa

FACTS:
 On April 22, 2002, shipper Dominant Musical Instrument from Melbourne solicited the shipment
services of South East Asia Container Line (SEACOL) for the transport of musical instruments
to San Miguel Foundation of Performing Arts. As consignee, San Miguel insured the shipment
against all risk with respondent Insurance Company of North America.
 Upon its arrival in Manila on May of 2002, two cartons of musical instruments was received by
Unitrans in bad condition with 2 specific instruments no longer in usable condition. With San
Miguel claim against SEACOL and the unknown charterer of M/S Doris Wullf left unheeded,
respondent Insurance Company of North America (ICNA) paid 22.65K to San Miguel.
 In turn, ICNA filed a complaint for collection of $22.65K against SEACOL and its local agent
Unitrans and the unknown charterer of M/S Doris Wullf and its local agent TMS Ship Agencies.
 In its Answer, Unitrans denied being SEACOL’s local agent and claimed that it was only
engaged by BTI Logistics to serve as a delivery or receiving agent of the shipment and
engaged by San Miguel as customs broker and deliverer of the shipment. Meanwhile, the
Unknown Charterer and TMS claimed that they were not parties to the Bill of Lading with
SEACOL and that the shipment was discharged from its vessel in the same condition it was
loaded.
 The RTC of Makati held Unitrans liable to ICNA for $22.65K based on the statement of
Unitrans’ witness that it was a common carrier and on the ground of Art. 1742 of the Civil Code
obligating common carriers to exercise due diligence and to lessen the loss caused by the
charterer. The CA affirmed the RTC’s decision on the ground that Unitrans failed to show that
SEACOL as an indispensable party. Hence, this petition for Review on Certiorari.

ISSUE/S: W/N the CA erred in holding petitioner Unitrans liable?

RULING: NO. Under Art. 1735 of the Civil Code, common carriers are presumed to have acted
negligently, unless they prove extraordinary diligence. In the instant case, Unitrans general manager
himself admitted that it acted as freight forwarder and accredited non-vessel common carrier in the
subject transaction. With the burden of proof to show extraordinary diligence, Unitrans merely
questioned why other parties supposedly involved were not found liable but in turn absolved TMS from
liability when its general manager declared that TMS never handled the cargo. Petition DENIED
Ong, Roberto Ruiz B. Topic: Defenses

31. Sealoader Shipping Corporation V. Grand Cement Manufacturing Corporation, Joyce

Launch & Tug Co., Inc., Romulo Diantan & Johnny Ponce
G.R. No. 167363 | December 15, 2010
J. Leonardo-De Castro

FACTS:
 Sealoader is a corporation engaged in the business of shipping
 Grand Cement is a cement manufacturing and sale company
 Sealoader had a time charter party agreement with Joyce Launch who owned and operated a
motor tugboat, M/T Viper
 The tugboat was charted for 15 days
 Cement and Sealoader entered into a contract to transport
 On March 1994, the barge of Sealoader arrived at the wharf of Cement but the employees
were unable to lad the cement due a pending different barge being loaded
 The barge of Sealoader stayed in the wharf for the time being
 On April 1994, typhoon Bisig with recoded winds over 120 kmph struck
 Sealoader did not inform the loader because the loader did was not equipped with a radio
which was mandatory before the storm hit the wharf completely disregarding the storm.
 The barge of sealoader was still in docked in the wharf.
 The Captain was not present at the time
 The tugboat tried to tow the loader out of the wharf but the towing line connecting the vessels
snapped
 The connecting line snapped because the mooring lines were not cast off by the loader
 The loader rammed the wharf causing damage
 According to the Sworn Statement of Acosta a crew member of the loader, which was taken
barely three months after the typhoon, he was already informed of the approaching typhoon. 
 Grand Cement filed a complaint for damages against Sealoader
 The RTC ruled in favor of Grand Cement due to negligence as seen by disregarding the storm
and the lack of the mandatory radio requirement.
 The CA affirmed the ruling but held Grand Cement liable due to contributory negligence
because it was still loading to a different vessel causing the loader to docked in the wharf
during the storm.
 The Sealoader claims the doctrine of last clear chance is applicable
 Grand cement claims that it should not be held liable for contributory negligence
 Two separate cases were made by both parties as to their liablities.

ISSUE/S:
1. Whether Sealoader was negligent
2. Whether the doctrine of last clear chance applies

RULING:
1. Yes, Sealoader was negligent
The case of Layugan v. Intermediate Appellate Court provides that:
negligence as "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do, or as Judge Cooley defines it,
‘(T)he failure to observe for the protection of the interests of another person, that degree of
care, precaution, and vigilance which the circumstances justly demand, whereby such other
person suffers injury.’"

Here, there was negligence on the part of Sealoader not Grand Cement by virtue of a lack of
Ong, Roberto Ruiz B. Topic: Defenses
radio or navigational communication facilities on the loader and the manifest laxity of the crew
on keeping an eye on the weather conditions. it was found out mores so that Acosta merely
relied on the assuraces of other vessels as to the weather conditons.

Grand Cement was not guilty of negligent acts, which contributed to the damage that was
incurred on its wharf. Sealoader had the responsibility to inform itself of the prevailing weather
conditions in the areas where its vessel was set to sail. Sealoader cannot merely rely on other
vessels for weather updates and warnings on approaching storms, as what apparently
happened in this case. Common sense and reason dictates this. To do so would be to gamble
with the safety of its own vessel, putting the lives of its crew under the mercy of the sea, as
well as running the risk of causing damage to the property of third parties for which it would
necessarily be liable

Hence, Sealoader was negligent

2. No , the doctrine of last clear chance does not apply .

Philippine National Railways v. Brunt provides that:

The doctrine of last clear chance states that where both parties are negligent but the negligent
act of one is appreciably later than that of the other, or where it is impossible to determine
whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid
the loss but failed to do so, is chargeable with the loss. Stated differently, the antecedent
negligence of plaintiff does not preclude him from recovering damages caused by the
supervening negligence of defendant, who had the last fair chance to prevent the impending
harm by the exercise of due diligence

Here, it was only Sealoader who was negligent not Grand Cement.

Hence, the doctrine of last clear chance is not applicable.

Sabado, Marionnie C. Topic: Defenses

32. Keihin-Everett Forwarding Co., Inc. v. Tokio Marine Malayan Insurance Co., Inc.
G.R. No. 212107 | January 28, 2019
J. Reyes, Jr.

FACTS:
 Honda Trading ordered 80 bundles of Aluminum Alloy Ingots to PT Molten. PT Molten loaded
the goods in two container vans which were 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), Honda Trading also engaged the services of petitioner Keihin-Everett to clear and
withdraw the cargo from the pier and to transport and deliver the same to its warehouse in
Laguna.
 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 offloaded from the ocean liner and temporarily stored
at the CY Area of the Manila International Port pending release by the Customs Authority. The
shipment was then 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 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, the contents
thereof were no longer retrieved.
 As a consequence, Honda Trading suffered losses in the total amount of Php 2,121,917.04,
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, respondent Tokio Marine filed a
complaint for damages against petitioner Keihin-Everett. Respondent Tokio Marine maintained
that it had been subrogated to all the rights and causes of action pertaining to Honda Trading.
 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. It
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 Php 500,000.00 fixed in its
Accreditation Agreement with petitioner Keihin-Everett.
 The RTC rendered a Decision finding petitioner Keihin-Everett and respondent Sunfreight
Forwarders jointly and severally liable to pay respondent Tokio Marine's claim. It found the
driver of Sunfreight Forwarders as the cause of the evil caused.
 The CA modified the ruling of the RTC insofar as the solidary liability of Keihin-Everett and
Sunfreight Forwarders is concerned 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/S: Whether petitioner Keihin-Everett liable to respondent Tokio Marine

RULING: YES. Keihin-Everett, as a common carrier, is mandated to observe, under Art. 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 Art. 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
Sabado, Marionnie C. Topic: Defenses
right to receive them. 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 carry 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.

Therefore, petitioner is liable.

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. Under Art. 1735 of the Civil
Code, the presumption of fault on the part of Sunfreight Forwarders (as common carrier) 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. Sunfreight Forwarders also has the
option to absorb the loss or to proceed after its missing driver, the suspect in the hijacking incident.
Tirol, Courtney Allison P. Topic: Concurrence of Causes of Action

33. People v. Edgar Go

G.R. No. 210816 | December 10, 2018
J. Reyes, J., Jr.

FACTS:
 On June 20, 2008, M/V Princess of the 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. At 11:00 a.m., PAGASA issued Severe Weather Bulletin (SWB) No. 7, raising Storm
Warning Signal (SWS) No. 1 over Cebu, among other places.
 SLI Manila Port Captain Benjamin Eugenio met with Captain Florencio Marimon, Master of the
vessel, at SLI's Engineering Office for a predeparture conference to discuss SWB No. 7.
Captain Eugenio and Captain Marimon decided to await the next PAGASA typhoon forecast,
which was expected at around 5:00 p.m., considering that based on SWB No.7, Stars' regular
route would not be affected by Typhoon Frank. PAGASA then issued SWB No. 8, which
indicated that Typhoon Frank had intensified and was forecasted to move west northwest and
cross Samar within the day and Camarines Sur in the afternoon of the following day.
 Prior to Stars' departure, Philippine Coast Guard (PCG) Boarding Officer PO1 Felix Sardan
boarded the vessel to inspect its documents and conduct verification, specifically the
correctness of the entries in the Master's Oath of Safe Departure, and the soundness and
sufficiency of the cargo hold, the life saving devices, and all the navigational lights. Captain
Marimon showed 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. PO1 Sardan immediately relayed the alternate route via text message to PCG Station
Commander Erwin Balagtas who approved the alternate plan with the order that should SWS
No. 3 affect the alternate route, the vessel should either take shelter or return to the port of
Manila for the safety of the passengers and the crew. SLI received SWB No. 8 a few minutes
prior to 8:00 p.m.
 After obtaining a clearance from the PCG, Stars departed for its regular Friday voyage to Cebu
under Voyage No. 392 along its regular route. On board the vessel were 709 passengers, 29
contractors and 111 crew members or a total of 849 persons. When Stars was in the vicinity of
Cape Santiago, within its regular route, Manila radio operator Edgar Gorillo received
PAGASA's SWB No. 9 which forecasted that Typhoon Frank was moving northwest away from
the vessel's route. Gorillo relayed SWB No.9 to Stars' radio operator Santiago Doroy. From
that time until 1:00 a.m. of June 21, 2008, Gorillo kept close contact with Stars and SLI's ship
officers were confident that the vessel was in the safe zone in view of SWB No. 9.
 On June 21, 2008, Gorillo and Captain Eugenio received SWB No. 10 indicating that for the
past six hours, Typhoon Frank had been moving westward away from its original northwest
movement. At 5:30 a.m., respondent arrived at SLI's Manila Office and checked on the radio
room. Gorillo informed respondent that Captain Marimon assessed the sea condition as
"slight." At 6:20 a.m., Doroy relayed to Gorilla that the vessel was still navigating its regular
route at 1.3 miles off Sibuyan Point of Romblon and approaching Apunan Point and that the
sea was rough but manageable.
 Captain Marimon sent SLI Manila a telegram stating that he was steering Stars away from its
regular course, moving towards the south of Tablas to take shelter and evade the center of
Typhoon Frank. At 8:30 a.m., the vessel was within the vicinity of Aklan Point where it was
caught in the center of Typhoon Frank. Communications with the vessel were then cut off.
After a few hours, Captain Marimon informed Captain Ponteres that the vessel had listed and
he could no longer steer it and would instead adapt to the wind to keep the vessel stable and
upright. Captain Ponteres communicated with Captain Marimon thrice, the last of which was
Captain Marimon's declaration that he had given the order to abandon ship via the vessel's
public announcement system. Continuously pounded by heavy waves and buffeted by strong
winds, Stars eventually capsized and sank in the Sibuyan Sea,
Tirol, Courtney Allison P. Topic: Concurrence of Causes of Action

 Respondent called the PCG to dispatch a rescue team and ordered that SLI's cargo vessel
Surcon 12 and its M/V Princess of Caribbean sail to the area to undertake rescue operations.
Due to inclement weather, immediate rescue efforts had to be deferred and it was only at noon
time that rescue arrived at the site. Of the 849 persons on board, only 32 survived, 227 died
and 592 were reported missing.[11]
 In an Investigation Report, the Board of Marine Inquiry (BMI) stated that the proximate cause
of [the] capsizing of [the] MV Princess of the Stars was the failure of SLI management to
effectively implement its Safety Quality Management Manual issued on 07 May 2002 in
compliance with IMO's-ISM Code for the Safe Operation of Ships and Pollution Prevention
including the requirements of Quality/Safety System. It was indicative of a system failure in
which the company was responsible.
 The DOJ Panel found probable cause to indict Captain Marimon and respondent for reckless
imprudence resulting in multiple homicide, physical injuries, and damage to property. An
Information for reckless imprudence was filed with the Regional Trial Court (RTC) of Manila.
Department of Transportation and Communications Secretary Leandro Mendoza issued a
Resolution exculpating SLI from any negligence and holding Captain Marimon solely
responsible for the sinking of Stars.
 The Court of Appeals ruled that respondent's act of allowing the officers of the vessel to decide
whether to set sail or not did not make him criminally liable as such decision was within the
authority of the captain of the vessel, in coordination with the PCG, in view of the weather
bulletin. The appellate court also found erroneous the finding of the DOJ Panel that respondent
was criminally liable for not instructing the vessel to seek shelter or drop anchor in the face of
the storm because there was not a shred of evidence from which such power to decide matters
pertaining to the vessel's navigation could be inferred.

ISSUE/S: Whether the criminal action may proceed independently from the civil action.

RULING: Yes.

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 [A]rticle 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
Tirol, Courtney Allison P. Topic: Concurrence of Causes of Action
not by those of the Civil Code. Thus, 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. The separate 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, yhe
shipowner's liability based on the contract of carriage is separate and distinct from the criminal liability
of those who may be found negligent.
Valdez, Darwin Moreno Topic: Concurrence of Causes of Action

34. Orient Freight International, Inc. v. Keihin-Everett Forwarding Company

G.R. No. 191937 | August 09, 2017
J. Leonen

FACTS:
 Under a Trucking Service Agreement, Keihin-Everett would provide services for Matsushita
Communication Industrial Corporation of the Philippines's trucking requirements. These
services were subcontracted by Keihin-Everett to Orient Freight, through their own Trucking
Service Agreement.
 When the Trucking Service Agreement between Keihin-Everett and Matsushita expired,
Keihin-Everett executed an In-House Brokerage Service Agreement for Matsushita's PEZA
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, Salud Rizada, about a column in the tabloid
newspaper Tempo. This news narrated the interception by Caloocan City police of a stolen
truck filled with shipment of video monitors and CCTV systems owned by Matsushita.
 When contacted by Keihin-Everett about this news, Orient Freight stated that the tabloid report
had blown the incident out of proportion. They claimed that the incident simply involved the
breakdown and towing of the truck, which was driven by Ricky Cudas, with truck helper,
Rubelito Aquino. The truck was promptly released and did not miss the closing time of the
vessel intended for the shipment.
 However, when the shipment arrived in Yokohama, 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. It found out that, 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. Later, Orient confirmed this.
 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."
 Keihin-Everett demanded P2,500,000.00 from Orient 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.
 When Orient Freight refused to pay, Keihin-Everett filed a complaint for damages. The RTC
found that Orient Freight’s negligence caused the cancellation of Keihin-Everett’s contract with
Matsushita.
 The CA affirmed the RTC’s decision. It found Orient-Freight negligent under Art. 2176 of NCC.

ISSUE/S:
1. Whether or not, considering the existing contracts in this case, Article 2176 of the Civil Code can
be applied
2. Whether Orient Freight, Inc. was negligent for failing to disclose the facts surrounding the hijacking
incident which led to the termination of the Trucking Service Agreement between Keihin-Everett
and Matsushita

RULING:
1. NO, Art. 2176 should not be applied. BUT, there are instances when Art. 2176 may apply even
when there is a pre-existing contractual relation. Whether negligence occurs as an incident in
the course of the performance of a contractual undertaking or is itself the source of an extra-
Valdez, Darwin Moreno Topic: Concurrence of Causes of Action
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.

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. The act that breaks the contract may also be a tort. 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.

Both the RTC and CA 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 respondent contacted
petitioner regarding the news report and asked it to investigate the incident, petitioner's
obligation was created. Thereafter, petitioner was alleged to have performed its obligation
negligently, causing damage to 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. Consequently, Articles 1170, 1172,
and 1173 of the Civil Code on negligence in the performance of an obligation should apply.

2. YES, Orient-Freight was negligent. Negligence here has been defined as "the failure to
observe that degree of care, precaution and vigilance that the circumstances just demand,
whereby that other person suffers injury." In this case, petitioner's conduct showed its negligent
handling of the investigation and its failure to timely disclose the facts of the incident to
respondent and Matsushita.
Venus, Ma. Dominique M. Topic: Damages

35. Spouses Dionisio Estrada and Jovita R. Estrada vs. Philippine Rabbit Bus Lines
G.R. No. 203902 | 19 July 2017
J. Del Castillo

FACTS:
 On 9 April 2002, along a national highway in Pangasinan, a collision occurred between a
passenger bus driven by respondent Eduardo Saylan (Saylan) and owned by respondent
Philippine Rabbit Bus Lines, Inc. (Philippine Rabbit) and an Isuzu truck driven by Willy Urez
and registered in the name of Rogelio Cuyton, Jr.
 At the time of the incident, the bus was going towards the north direction, while the Isuzu truck
was traveling towards the south direction. The collision happened at the left lane or the lane
properly belonging to the Isuzu truck. The right front portion of the Isuzu truck appeared to
have collided with the right side portion of the body of the bus.
 Before the collision, the bus was following closely a jeepney. When the jeepney stopped, the
bus suddenly swerved to the left lane, encroaching upon the rightful lane of the Isuzu truck
which resulted in the collision of the two vehicles.
 Petitioner Dionisio Estrada (Dionisio) was among the passengers of the bus. As a
consequence of the accident, Dionisio’s right arm was injured and had to be amputated.
Dionisio incurred expenses for the treatment of his injury. Hence, a Complaint for Damages
against Philippine Rabbit and Saylan was filed with the Regional Trial Court.
 Dionisio argued that that pursuant to the contract of carriage between him and Philippine
Rabbit, Philippine Rabbit and Saylan were duty-bound to carry him safely as far as human care
and foresight can provide, with utmost diligence of a very cautious person, and with due regard
for all the circumstances prevailing. However, through the fault and negligence of Philippine
Rabbit's driver, Saylan, and without human care foresight, and due regard for all
circumstances, they failed to transport him safely by reason of the collision which resulted in
the amputation of Dionisio's right arm. And since demands for Philippine Rabbit to pay him
damages for the injury he sustained remained unheeded, Dionisio filed the complaint
 Philippine Rabbit, in its Answer, averred that it carried Dionisio safely. While it did not contest
that its bus figured in an accident, Philippine Rabbit nevertheless argued that the cause was an
extraordinary circumstance independent of its driver's action or a fortuitous event. Hence, it
claimed to be exempt from any liability arising therefrom. Philippine Rabbit further contended
that it was the Isuzu truck coming from the opposite direction which had the last clear chance
to avoid the mishap. The proximate cause of the accident, therefore, was the wrongful and
negligent manner in which the Isuzu truck was operated by its driver. In view of this, Philippine
Rabbit believed that Dionisio has no cause of action against it.
 The RTC held that the award for P500,000 as moral damages, P57,766.25 as actual damages,
and P25,000.00 attorney’s fees was proper. Philippine Rabbit filed a motion for reconsideration
but was denied.
 The CA modified the RTC decision in that it declared Philippine Rabbit solely and exclusively
liable to Dionisio for actual damages and deleted the award for moral damages and attorney’s
fees.
 Philippine Rabbit filed a Motion for Reconsideration but the same was denied. Hence, this
petition for Certiorari.

ISSUE/S:
Whether Spouses Estrada are entitled to moral and actual damages.

RULING: No, Spouses Estrada are not entitled to moral and actual damages but are entitled to
temperate damages.
Venus, Ma. Dominique M. Topic: Damages
Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the proximate result of the
defendant's wrongful act or omission.

The following requisites for the award of moral damages are: (1) there must be an injury clearly
sustained by the claimant, whether physical, mental or psychological; (2) there must be a culpable act
or omission factually established; (3) the wrongful act or omission of the defendant is the proximate
cause of the injury sustained by the claimant; and (4) the award for damages is predicated on any of
the cases stated in Article 2219 of the Civil Code.

Breach of contract is not provided for in Article 2219 hence moral damages, as a general rule, are not
recoverable in actions for damages predicated on breach of contract. As an exception, moral damages
are recoverable in an action for breach of contract: (1) in cases in which the mishap results in the
death of a passenger; and (2) in cases in which the carrier is guilty of fraud or bad faith, as provided in
Article 2220.

In this case, there is no showing here that Philippine Rabbit induced Dionisio to enter into a contract of
carriage with the former through insidious machination. Neither is there any indication or even an
allegation of deceit or concealment or omission of material facts by reason of which Dionisio boarded
the bus owned by Philippine Rabbit. Likewise, it was not shown that Philippine Rabbit's breach of its
known duty to transport Dionisio was attended by some motive, interest, or ill will. Hence, no fraud or
bad faith can be attributed to Philippine Rabbit. Therefore, the Court held that moral damages are not
recoverable in this case.

Further, actual damages for loss/impairment of earning capacity are also not recoverable.

Art. 2205. provides that damages may be recovered for loss or impairment of earning capacity in
cases of temporary or permanent personal injury. It is, however, settled that "damages for loss [or
impairment] of earning capacity is in the nature of actual damages. To be recoverable, they must be
duly proved with a reasonable degree of certainty. Thus, as a rule, documentary evidence should be
presented to substantiate the claim for damages for loss of earning capacity.

By way of exception, damages for loss or impairment of earning capacity may be awarded despite the
absence of documentary evidence when “(1) the deceased [or the injured] was self-employed and
earning less than the minimum wage under current labor laws, in which case, judicial notice may be
taken of the fact that in the deceased's line of work no documentary evidence is available; or (2) the
deceased was employed as a daily worker earning less than the minimum wage under current labor
laws.”

In this case, the Court awarded temperate damages in lieu of actual damages for loss of earning
capacity where earning capacity is plainly established but no evidence was presented to support the
allegation of the injured party's actual income.
Victa, Carlos Emmanuel A. Topic: Damages

36. Darines v. Quinones & Quitan

G.R. No. 206468 | August 2, 2017
J. Del Castillo

FACTS:
 Petitioners Judith and Joyce Darines (Mother and Daughter respectively) were paying
passengers of Amianan Bus Line travelling to Baguio City from Pangasinan, where the pair
boarded.
 While travelling along Kennon Road, the bus crashed into a parked truck. As a result, both
vehicles were damaged; two passengers of the bus died; and the other passengers, including
petitioners, were injured.
 Petitioners argue that respondents Quinones and Quitan breached their contract of carriage as
they failed to bring them safely to their destination. They also contended that Quitan's negligent
driving caused the collision. They prayed for actual, moral, exemplary and temperate
damages, and costs of suit.
 Respondents deny that they were driving in a reckless manner. In a decision, the RTC of
Baguio City held respondents liable to pay moral and exemplary damages.
 Actual damages in the form of medical and hospitalization expenses were already paid for
hence the RTC ruled that the only remaining matters for resolution were: whether respondents
were liable to pay petitioners actual damages representing the expenses incurred during a
ritual, Judith's alleged lost income, and moral and exemplary damages.
 On appeal to the CA, the RTC was reversed. The CA held that respondents did not dispute
that they were liable for breach of contract of carriage; in fact, they paid for the medical and
hospital expenses of petitioners. The CA deleted the award of moral damages because
petitioners failed to prove that respondents acted fraudulently or in bad faith, as shown by the
fact that respondents paid petitioners' medical and hospitalization expenses.

ISSUE/S: Whether respondents are liable for moral and exemplary damages, arising from their breach
of Contract of Carriage.

RULING: No. Moral and Exemplary damages are not in order as the circumstances of this case
provide.

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages.1âwphi1 Article 2206 shall also apply to the death of a
passenger caused by the breach of contract by a common carrier. (Emphasis supplied)
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least
three thousand pesos, even though there may have been mitigating circumstances. In addition:
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased.
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad faith.

The case at bar is one for breach of contract of carriage. Pursuant to Article 1764, in relation to Article
2206(3), and Article 2220 of the Civil Code, in an action for breach of contract of carriage, moral
damages may be awarded only in case (1) an accident results in the death of a passenger; or (2) the
carrier is guilty of fraud or bad faith. Petitioner’s claim is anchored on the imputation of the negligence
of respondents, but did not discuss or impute fraud or bad faith, or such gross negligence which would
amount to bad faith, against respondents. There being no proof that respondents acted in fraud or in
Victa, Carlos Emmanuel A. Topic: Damages

bad faith in performing their duties arising from their contract of carriage, they are then not liable for
moral or exemplary damages.

Respondents are not liable to petitioners for Moral and Exemplary damages as there is no evidence of
Bad Faith in their negligence as Common Carriers. CA Decision affirmed.
Baba, Karla Marie B. Topic: Damages

37. Sulpicio Lines, Inc. v. Karaan, et. al.

G.R. No. 208590 | October 3, 2018
J. Tijam

FACTS:
 Respondents were passengers of M/V Princess of the Orient owned by Sulpicio Lines (now
Philippine Span Asia Carrier Corporation. They were passengers when it sank on September
18, 1998 near Fortune Island.
 During investigation, it was found that several "erroneous maneuvers" were executed by the
captain. After the vessel passed Limbones Point and as it moved toward Fortune Island, the
captain already noticed the tilting of the vessel by three degrees to the. The ship was being
battered on the starboard side by big waves (seven to eight meters high) and strong
southwesterly winds (25 knots). Maintaining high speed would have shifted the solid and liquid
cargo of the ship to port thus worsening the tilt of the large vessel. The captain, however,
maintained speed and ordered the slowing down of the vessel too late.
 Additionally, the crew members they did not make any stability calculations for the vessel's
cargo stowage plan. The radio officer also failed to send an SOS using the internationally
accepted communication network but instead only used the Single Side Band to inform the
company about the emergency.
 Respondents offered their testimony to prove the damages suffered.
 The RTC granted the passengers’ claim for damages (actual, moral, exemplary and nominal
damages)
 The CA modified the damages. It increased the moral damages, granted temperate damages
instead of actual damages, and deleted the nominal damages.

ISSUE/S:
1. Whether granting temperate damages in lieu of actual damages was proper
2. Whether granting exemplary damages was proper

RULING:
1. YES, IT WAS PROPER
The law sanctions the award of temperate damages in case of insufficiency of evidence of
actual loss suffered. Article 2224 of the Civil Code states:
a. Article 2224. Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the case, be
provided with certainty.

Respondents suffered loss in the sinking of the ship. However, they did not present
independent proof as to the actual numerical value of the loss. Therefore, the award of
temperate damages was valid.

2. YES, IT WAS PROPER.

In contracts and quasi-contracts, the Court has the discretion to award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner (Civil
Code, Article 2232). Exemplary damages cannot be recovered as a matter of right, and it is left
to the court to decide whether or not to award them (Article 2233).
Baba, Karla Marie B. Topic: Damages
Petitioner was extremely remiss before and during the time of the vessel's sinking. The captain
failed to properly maneuver the ship. The crew did not prepare the proper calculations and
reports for cargo storage. The radio officer failed to send the SOS in the proper medium

Thus, the exemplary damages are warranted.

Bataan, Xhavier Brett King D. Topic: Bill of Lading

39. Ace Navigation Co. Inc., v. FGU Insurance Corp & Pioneer Insurance & Surety Corp
G.R. No. 171591 | June 25, 2012
Perlas–Bernabe, J.

FACTS:
 The shipper is Cardia; the shipper’s agent is Ace Navigation; the consignee is Heindrich; and
the carrier is Pakarti. 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.
 Cardia contracted Pakarti to transport 165,000 bags of Grey Portland Cement from China to
Manila. The subject shipment were insured with FGU and Pioneer against all risk under Marine
Open Policy. It was REGENCY that directly dealt with consignee HEINDRICH, and
accordingly, issued Clean Bill of Lading. AceNav found that 43,000 bags of cement were in
bad order or condition.
 Co–insurers paid the Heindrich for said damages and consequently subrogated all rights and
causes of action. AceNav claimed that it cannot be held liable as it was not a privy to the bill of
lading. It also denied being a local ship agent of vessel or Regency. AceNav said that it was
only an agent of Cardia. Hence, this petition.

ISSUE/S:
1. Whether or not AceNav is liable for the destroyed goods in the shipment.
2. Whether AceNav is a ship agent or just a mere agent of Cardia.

RULING:
1. No, AceNav is not liable. 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.

2. AceNav is a mere agent of Cardia. Art 586 of the Commerce Code provides that “By ship
agent is understood the person entrusted with the provisioning of a vessel, or who represents
her in the port in which she may be found.” Further, Article 1897 of the NCC provides that an
agent is not personally liable to the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such party sufficient notice of his
powers. Here, 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.
Cadiz, Sophia Topic: Bill of Lading

40. Asian Terminals, Inc. v. Simon Enterprises, Inc.

G.R. No. 177166 | 27 February 2013
J. Villarama

FACTS:
 Contiquincybunge (not a typo lol) Export made 2 shipments of Soybean Meal (6,825 and 3,300
metric tons, respectively) from the US to Manila with Simon Enterprises as Consignee. The
Carrier issued its clean Berth Term Grain Bill of Lading.
 The shipment was discharged to the receiving barges of Asian Terminals (ATI), an arrastre
operator. Upon receipt, the Consignee reported on having received only 3,100 MT instead of
manifested 3,300 (2nd shipment).
 The Consignee filed an action for damages against the owner of the vessels (Carrier), local
agent Inter-Asia Marin, and ATI.
 RTC held ATI and its co-defendants solidarily liable for damages.
 On appeal, CA held that the owner of the vessel and Inter-Asia Marine failed to establish they
exercised extraordinary diligence and that ATI, as arrastre operator, should be held jointly and
severally liable considering that ATI’s stevedores were under the direct supervision of the
owner of the vessel
 On petition, ATI argues that stipulations in the bill of lading that the cargo was carried on a
“shipper’s weight, quantity and quality unknown” is not contrary to public policy. Thus, ATI
cannot be bound by the quantity or weight of the cargo stated in the bill of lading

ISSUE/S: Whether ATI, the arrastre operator, is liable for the damages

RULING: NO. ATI is not liable for the damage because the weighing methods relied upon by the
Consignee are unreliable bases.

The Consignee failed to prove that the shipment suffered shortage because it was not able to
establish that the shipment was weighed at the port of origin and that the actual weight was 3,300
metric tons.

The Berth Term Grain Bill of Lading states that the subject shipment was carried with the qualification
"Shipper’s weight, quantity and quality unknown" (a “said to weigh clause”), meaning that it was
transported with the carrier having been oblivious of the weight, quantity, and quality of the cargo.

Jurisprudence states that: if the bill of lading indicates that the contract of carriage is under a “said to
weigh” clause, the shipper is solely responsible for the loading while the carrier is oblivious of the
contents of the shipment. The arrastre operator was, like any ordinary depositary, duty-bound to take
good care of the goods received from the vessel and to turn the same over to the party entitled to their
possession, subject to such qualifications as may have validly been imposed in the contract between
the parties. The arrastre operator was not required to verify the contents of the container received
and to compare them with those declared by the shipper because, as earlier stated, the cargo was at
the shipper’s load and count. Because of the “said to weigh” clause, the weight of the cargo could not
be gauged from the bill of lading.

Hence, the weight of the shipment as indicated in the bill of lading is not conclusive. The Court also
considered the testimony of the Consignee’s Claims Manager when he explained why the cargo
description indicated 3,000MT instead of 3,300 MT, that “the supplier has the option to ship the cargo
plus or minus 10% of the quantity”. His answers shows uncertainty of the actual weight of shipment,
Cadiz, Sophia Topic: Bill of Lading
and that assuming that the Consignee received only 3,100 MT, that volume is a valid shipment
because it was within the 10% allowable shortage.

Moreover, the SC agreed with ATI upon its claim that the shortage could have been caused by the
inherent moist nature of the soybeans “to settle or consolidate” (to shrink) over time. It could have lost
weight during the 36-day voyage due to temperature change (as it was wintertime when it left the USA
and the climate was warmer when it reached Manila).

Petition for certiorari is granted. The complaint against Asian Terminals is dismissed.
Chua, Raphael Ryan D. Topic: Notice of Claim and Prescription

41. Tsuneishi Heavy Industries (Cebu) Inc. v. MIS Maritime Corporation

G.R. No. 193572 | April 4, 2018
J. Jardaleza

FACTS:
 MIS Maritime Corp. contracted Tsuneishi to dry dock and repair its vessel M/T MIS-1.
Tsuneishi rendered the required services, but a month later, while the vessel was still dry
docked, Tsuneishi conducted an engine test on M/T MIS-1 and discovered that the vessel had
a burnt crank journal and hairline cracks on the crankpin due to defective lubrication or
deterioration. Tsuneishi insisted the damage was not its fault, but as an act of good will,
Tsuneishi paid for the vessel's new engine crankshaft, crankpin, and main bearings.
 Tsuneishi billed MIS $318,571.50 for the repair and dry docking services, but MIS refused to
pay, and demanded $471,462.60 from Tsuneishi as payment for lost income, resulting in
Tsuneishi’s remaining liability of $152,891.10. Tsuneishi rejected MIS’ demands, while MIS
refused to pay the amount of the contract despite repeated demands.
 Tsuneishi filed a complaint against MIS with the RTC, which issued a writ of preliminary
attachment, but the CA found that the RTC acted with grave abuse of discretion in issuing the
writ of preliminary attachment.
 Tsuneishi filed a petition for review on certiorari, arguing that while Section 21 of the Ship
Mortgage Decree grants it a maritime lien, the law itself does not provide for the procedure for
its enforcement, and that that the procedure for its enforcement is Rule 57 of the Rules of
Court on the issuance of the writ of preliminary attachment. Tsuneishi also claims that it
successfully complied with the requirements for the issuance of a writ of preliminary injunction.

ISSUE/S:
1. 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
2. Whether Tsuneishi complied with the requirements for the issuance of a writ of preliminary
attachment.

RULING:
1. No. 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.

a. 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. Therefore, a maritime lien under Section 21 of the Ship Mortgage
Decree is not to be enforced through a writ of preliminary attachment under Rule 57 of
the Rules of Court.

2. No. The Bitera Affidavit does not state that MIS has no other sufficient security for the claim
sought to be enforced, which is a requirement under Section 3, Rule 57 of the Rules of Court.
MIS also did not act with fraud in refusing to pay the obligation, as the affidavit fails to to allege
Chua, Raphael Ryan D. Topic: Notice of Claim and Prescription
the existence of fraud with sufficient specificity. MIS' position was clear: Tsuneishi caused the
damage in the vessel's engine which delayed its trip and should thus be liable for its losses.
Thus, Tsuneishi failed to comply with the requirements for the issuance of a writ of preliminary
attachment.
Esguerra, George Clarence T. Topic: Notice of Claim and Prescription

42. Philam Insurance Co. v. Heung A Shipping Corp.

G.R. No. 187701 | 23 July 2014
J. Reyes

FACTS:
 On 19 December 2000, Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported
from Jinsuk Trading Co. (JINSUK), 19 pallets of 200 rolls of Ovaltine Power 18 Glaminated
plastic packaging material. To ship the goods, JINSUK engaged the services of Protop
Shipping Corp. (PROTOP), a freight forwarded likewise based in South Korea, to forward the
goods to their consignee, NOVARTIS.
 PROTOP shipped the cargo through Dongnama Shipping (DONGNAMA) which in turn loaded
the same on M/V Heung-A Bangkok V-019 owned and operated by Heung-A Shipping
(HEUNG-A), a Korean corporation, pursuant to a slot charter agreement whereby a space in
the latter’s vessel was reserved for the exclusive use of the former. Wallem Philippine Shipping
(WALLEM) is the ship agent of HEUNG-A in the Philippines. NOVARTIS insured the shipment
with Philam Insurance (PHILAM) under an All Risk Marine Open Insurance Policy against all
loss, damage, liability, or expense before, during transit and even after the discharge of the
shipment from the carrying vessel until its complete delivery. The vessel arrived at the port of
Manila and the shipment was discharged into the possession, custody and care of Asian
Terminals, Inc. (ATI).
 The shipment was thereafter withdrawn by NOVARTIS’ appointed broker, Stephanie Customs
Brokerage (STEPHANIE) from ATI’s container yard. The shipment reached NOVARTIS’
premises. Upon initial inspection, the container van was found locked with its load intact. After
opening the same, it was discovered that the boxes of the shipment were wet and damp, parts
of the container van were damaged and rusty, and there were also water droplets on the walls
and the floor was wet. NOVARTIS’ Lab Technician rejected the entire shipment. The duly
certified adjusters of the Manila Adjusters and Surveyors Co. yielded similar results.
 NOVARTIS demanded indemnification for the lost/damaged shipment from PROTOP,
SAGAWA, ATI and STEPHANIE but was denied. Insurance claims were thus filed with
PHILAM. Claiming that it was subrogated to all the rights and claims of NOVARTIS, PHILAM
filed a complaint for damages against PROTOP, HEUNG-A, SAGAWA, ATI and STEPHANIE.
Later on, WALLEM was also impleaded.
 The RTC held PROTOP, HEUNG-A and WALLEM solidarily liable. According to the lower
court, HEUNG-A failed to present evidence showing that it exercised the diligence required as
common carrier. WALLEM was held liable as HEUNG-A’s ship agent in the Philippines while
PROTOP was adjudged liable because the damage sustained by the shipment was due to the
bad condition of the container van.
 The CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM are liable for the
damaged shipment. The CA rejected WALLEM and HEUNG-A’s argument that NOVARTIS
failed to comply with Art. 366 of the Code of Commerce requiring that a claim must be made
against the carrier within 24hours from receipt of the merchandise because such provision
applies only to inter-island shipments within the Philippines.
 PHILAM, WALLEM and HEUNG-A filed a petition for review before the SC.

ISSUE/S: Whether or not NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or
WALLEM.

RULING: Yes. HEUNG-A and WALLEM’s petitions are denied.

The prescriptive period for filing an action for lost/damaged goods governed by contracts of carriage
by sea to and from Philippine ports in foreign trade is governed by Sec. 6(3) of the COGSA: “Unless
Esguerra, George Clarence T. Topic: Notice of Claim and Prescription
notice of loss or damage and the general nature of such loss or damage be given in writing to the
carrier or his agent at the port of discharge before or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be
prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the
loss or damage is not apparent, the notice must be given within 3 days of the delivery.”

Here, the consignee, NOVARTIS, received the subject shipment on 5 January 2001. PHILAM, as the
subrogee of NOVARTIS, filed a claim against PROTOP on 4 June 2001, against WALLEM on 12
October 2001 and against HEUNG-A on 11 December 2001, or all within the 1-year prescriptive
period. Verily then, despite NOVARTIS’ failure to comply with the 3-day notice requirement, its
subrogee PHILAM is not barred from seeking reimbursement from PROTOP, HEUNG-A and
WALLEM because the demands for payment were timely filed.

Hence, PROTOP, WALLEM and HEUNG-A are solidarily liable to PHILAM.

Jackson, Loida M. Topic: Notice of Claim and Prescription

43. UCPB General Insurance Co., Inc. v. Aboitiz Shipping Corp. Eagle Express Lines, Damco
Intermodal Services, Inc., And Pimentel Customs Brokerage Co.
G.R. No. 168433 | February 10, 2009
J. Tinga

FACTS:
 3 units of waste water treatment plant with accessories were purchased by San Miguel
Corporation from Super Max Engineering Enterprises, Co., Ltd. of Taipei, Taiwan. The goods
came from Charleston, U.S.A. and arrived at the port of Manila on board MV "SCANDUTCH
STAR". The same were then transported to Cebu on board MV "ABOITIZ SUPERCON II".
After its arrival at the port of Cebu and clearance from the Bureau of Customs, the goods were
delivered to and received by SMC at its plant site on August 2, 1991. It was then discovered
that one electrical motor of DBS Drive Unit Model DE-30-7 was damaged.
 UCPB paid SMC the amount of ₱1,703,381.40 representing the value of the damaged unit.
Consequently, on July 21, 1992, UCPB filed a Complaint as subrogee of SMC against aboitiz
(ship owner). It also impleaded East Asiatic Co. Ltd. (freight forwarder) for being the "general
agent" of DAMCO.
 DAMCO was declared in default. EAST sought dismissal of the complaint against it on the
ground of prescription. The lower court held DAMCO Intermodal Systems, Inc., Eagle Express
Lines, Inc. and defendant Aboitiz Shipping solidarily liable to UCPB.
 The CA, reversed the decision of the trial court and ruled that UCPB’s right of action against
respondents did not accrue because UCPB failed to file a formal notice of claim within 24
hours from (SMC’s) receipt of the damaged merchandise as required under Art. 366 of the
Code of Commerce. According to the CA, the filing of a claim within the time limitation in Art.
366 is a condition precedent to the accrual of a right of action against the carrier for the
damages caused to the merchandise.

ISSUE/S: Whether or not a claim should have been made by SMC, or UCPB as SMC’s subrogee,
within the 24-hour period prescribed by Art. 366 of the Code of Commerce.

RULING: Yes, 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.

Art. 366 of the Code of Commerce states:

Art. 366. 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.
The fundamental reason or purpose of the requirement to give notice of loss or damage to the goods
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. This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is still fresh and easily investigated so as to safeguard itself
from false and fraudulent claims.

In this case, the shipment in this case was received by SMC on August 2, 1991. However, as found by
the Court of Appeals, the claims were dated October 30, 1991, more than three (3) months from
receipt of the shipment and, at that, even after the extent of the loss had already been determined by
SMC’s surveyor. The claim was, therefore, clearly filed beyond the 24-hour time frame prescribed by
Art. 366 of the Code of Commerce.
Lopez, Michiko S. Topic: Notice of Claim and Prescription

44. Benjamin Cua v. Wallem Philippine Shipping, Inc.,

G.R. No. 171337, July 11,2012

FACTS:
 On November 12, 1990, Cua filed a civil action for damages against Wallem and Advance
Shipping before the RTC of Manila.5 Cua sought 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.
o Cua claimed that the loss was due to the respondents’ failure to observe extraordinary
diligence in carrying the cargo. Advance Shipping (a foreign corporation) was the owner
and manager of M/V Argo Trader that carried the cargo, while Wallem was its local
agent.
 Advance Shipping filed a motion to dismiss the complaint, assailing the RTC’s jurisdiction over
Cua’s claim; it argued that Cua’s claim should have first been brought to arbitration.
 Cua opposed Advance Shipping’s argument; he contended that he, as a consignee, was not
bound by the Charter Party Agreement, which was a contract between the ship owner
(Advance Shipping) and the charterers.
 RTC ruled that Cua was not bound by the arbitration clause in the Charter Party Agreement.
 In the meantime, Wallem filed its own motion to dismiss raising the sole ground of prescription.
o 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, Wallem
argued that Cua’s action has been barred.
 RTC resolved that “the Court need not act on the Motion to Dismiss filed by the defendant
Wallem Philippines Shipping, Inc.[,]”and required the defendants therein to file their Answer.
 After trial on the merits, the RTC issued its decision on December 28, 1995, ordering the
respondents jointly and severally liable to pay as damages to Cua.
 The respondents filed an appeal with the CA, insisting that Cua’s claim is arbitrable and has
been barred by prescription and/or laches.
 The CA ruled that there was no basis for the RTC to conclude that the prescriptive period was
extended by the parties’ agreement. Hence, it set aside the RTC decision and dismissed Cua’s
complaint.
 Cua filed a motion for reconsideration of the CA decision, which was denied by the CA in a
resolution dated January 31, 2006. Cua thus filed the present petition to assail the CA rulings.

ISSUE/S: Whether Cua’s claim for payment of damages against the respondents has prescribed?

RULING: No. Cua timely filed his claim before the trial court.

Prescription may be considered by the courts motu proprio if the facts supporting the ground are
apparent from the pleadings or the evidence on record. What is decisive is whether the pleadings and
the evidence support a finding that Cua’s claim has prescribed, and it is on this point that we disagree
with the CA’s findings. We find that the CA failed to appreciate the admissions made by the
respondents in their pleadings that negate a finding of prescription of Cua’s claim.

It is true that the Carriage of Goods by Sea Act (COGSA) is the applicable law for all contracts for
carriage of goods by sea to and from Philippine ports in foreign trade it is thus the law that the Court
shall consider in the present case since the cargo was transported from Brazil to the Philippines.
Under Section 3(6) of the COGSA, the carrier is discharged from liability for loss or damage to the
Lopez, Michiko S. Topic: Notice of Claim and Prescription

cargo “unless the suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered.” Jurisprudence, however, recognized the validity of an agreement
between the carrier and the shipper/consignee extending the one-year period to file a claim.

However in this case, the vessel MV Argo Trader arrived in Manila on July 8, 1989; Cua’s complaint
for damages was filed before the RTC of Manila on November 12, 1990. Although the complaint
was clearly filed beyond the one-year period, Cua additionally alleged in his complaint (under
paragraph 11) that “[t]he defendants x x x agreed to extend the time for filing of the action up
to November 12, 1990.”

The allegation of an agreement extending the period to file an action in Cua’s complaint is a material
averment that, under Section 11, Rule 8 of the Rules of Court, must be specifically denied by the
respondents; otherwise, the allegation is deemed admitted. A specific denial is made by specifying
each material allegation of fact, the truth of which the defendant does not admit and, whenever
practicable, setting forth the substance of the matters upon which he relies to support his denial. The
purpose of requiring the defendant to make a specific denial is to make him disclose the matters
alleged in the complaint which he succinctly intends to disprove at the trial, together with the matter
which he relied upon to support the denial.
A review of the pleadings submitted by the respondents discloses that they failed to
specifically deny Cua’s allegation of an agreement extending the period to file an action to
November 12, 1990. Wallem’s motion to dismiss simply referred to the fact that Cua’s complaint was
filed more than one year from the arrival of the vessel, but it did not contain a denial of the extension.

Thus, Cua timely filed a claim for the damage to and shortage of the cargo.
Lopez, Michiko S. Topic: Notice of Claim and Prescription

45. Insurance Company of North America v. Asian Terminals Inc.

G.R. No. 180784 | February 15, 2012
J. Peralta

FACTS:
 Macro-Lito Corporation, through M/V “DIMI P” vessel, shipped 185 packages of electrolytic tin
free steel, complete and in good condition.
 The goods are covered by a bill of lading, had a declared value of $169,850.35 and was
insured with petitioner Insuracne Company of North America against all risk.
 The carrying vessel arrived at the port of Manila on November 19, 2002, and when the
shipment was discharged therefrom, it was noted that seven of the packages were damaged
and in bad condition.
 The shipment was then turned over to the custody of respondent Asian Terminals. Inc for
storage and safekeeping pending its withdrawal by the consignee. Prior to the withdrawal of
the shipment, a joint inspection of the said cargo was conducted. The examination report
showed that an additional five packages were found to be damaged and in bad order. The
consignee, San Miguel Corporation, filed separate claims against both the Petitioner and the
Respondent for the damage caused to the packages.
 Petitioner then paid San Miguel Corporation the amount based on a report of its independent
adjuster. Petitioner then formally demanded reparation against the Respondent for the amount
it paid San Miguel Corporation.
 For the failure of the Respondent to satisfy the demand of the Petitioner, the Petitioner filed for
an action for damages with the RTC, which found that the shipment suffered additional
damage under the custody of the Respondent prior to the turn-over of the said shipment to San
Miguel.
 As to the extent of liability, Respondent invoked the Contract for Cargo Handling Services
executed between the Philippine Ports Authority and the Respondent. Under the contract, the
Respondent’s liability for damage to cargoes in its custody is limited to PhP 5,000 for each
package, unless the value of the cargo shipment is otherwise specified or manifested in writing
together with the declared Bill of Lading. The trial Court found that the shipper and consignee
with the said requirements.
 However, the RTC dismissed the complaint on the ground that the Petitioner’s claim was
barred by the statute of limitations. It held that the Carriage of Goods by Sea Act (COGSA),
embodied in Commonwealth Act No. 65 is applicable. The trial court held that under the said
law, 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, in respect of loss or damage thereto.
Petitioner submits that the trial court’s dismissal of the complaint on the ground of prescription
under the COGSA is erroneous. It contends that the one-year limitation period for bringing a
suit in court under the COGSA is not applicable to this case. 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.

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

RULING: No, the one-year prescriptive period for filing a suit under the COGSA does not apply to this
action for damages against respondent arrastre operator

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.
Lopez, Michiko S. Topic: Notice of Claim and Prescription

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 Section 7.01 of the Contract for Cargo Handling Services executed between the Philippine Ports
Authority and Marina Ports Services, Inc. (now 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.

Hence, the verification and ascertainment of liability by respondent ATI had been accomplished within
thirty (30) days from the date of delivery of the package to the consignee and within fifteen (15) days
from the date of issuance by the Contractor (respondent ATI) of the examination report on the request
for bad order survey. Although the formal claim was filed beyond the 15-day period from the issuance
of the examination report on the request for bad order survey, the purpose of the time limitations for
the filing of claims had already been fully satisfied by the request of the consignees broker for a bad
order survey and by the examination report of the arrastre operator on the result thereof, as the
arrastre operator had become aware of and had verified the facts giving rise to its liability. The arrastre
operator suffered no prejudice by the lack of strict compliance with the 15-day limitation to file the
formal complaint.

However, petitioner filed for the five packages that were damaged while in the custody of the
respondent was not forthright in its claim, as it knew that the damages it sought, based on the report of
its adjuster covered nine packages. Based on the report, only four of the nine packages were
damaged in the custody of the Respondent. Petitioner can be granted only the amount of damages
that is due to it.
Magnaye, Isaiah Athriene Topic: Notice of Claim and Prescription

46. Vector Shipping Corporation and Francisco Soriano v. American Home Assurance
Company and Sulpicio Lines, Inc
G.R. No. 159213 | July 3, 2013
J. Bersamin

FACTS:
 Vector was the operator of the motor tanker M/T Vector, while Soriano was the registered
owner of the M/T Vector. Respondent is a domestic insurance corporation.
 On September 30, 1987, 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 Marine Open Policy No. 34- 5093-6.
 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 near Dumali Point
in Tablas Strait, located between the Provinces of Marinduque and Oriental Mindoro. 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 of P7,455,421.08 it paid to Caltex. Respondent appealed to the
CA, which promulgated its assailed decision on July 22, 2003 reversing the RTC. explaining
that the resolution of the case is primarily anchored on the determination of what kind of
relationship existed between Caltex and M/V Doña Paz and between Caltex and M/T Vector
for purposes of applying the laws on prescription. 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.

ISSUE/S: Whether or not this action of respondent was already barred by prescription.

RULING: No, the action of respondent was not yet barred by prescription. Article 1144 of the Civil
Code, which states: “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; (3) Upon a
judgment.” The present action was not upon a written contract, but upon an obligation created by law.
Hence, it came under Article 1144 (2). 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, to wit: “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.”
Manotok, Ma. Thelma Francesca T. Topic: Notice of Claim and Prescription

47. Asian Terminals, Inc. v. Philam Insurance Co., Inc.

G.R. No. 181163, G.R. No. 181262, G.R. No. 181319 | July 24, 2013
J. Reyes

FACTS:
 Nichimen Corporation shipped to Universal Motors Corporation (Universal Motors) 219
packages containing 120 units of brand new Nissan Pickup Truck Double Cab 4x2 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 ₱29,400,000, was insured
with Philam against all risks under Marine Policy.
 The carrying vessel arrived at the port of Manila, and when the shipment was unloaded by the
staff of ATI, it was found that two packages were dented and broken. Thereafter, the cargoes
were stored for temporary safekeeping inside CFS Warehouse in Pier No. 5.
 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.

ISSUE/S:
1. Whether Philam’s right of action has prescribed?
2. Whether ATI and Westwind are liable for the damage suffered by the subject cargo?

RULING:

1. No. Philam’s right of action has not prescribed. Carriage of Goods by Sea Act (COGSA)
provides that notice of loss or damage and the general nature of loss or damage is given in
writing to the carrier or his agent at the port of discharge before or at the time of the removal of
the goods into the custody of the person entitled to delivery under the contract of carriage.
Under the same law, the failure to comply with notice requirement shall not affect or prejudice
the right of the shipper to bring suit within one year after delivery of the goods. Petitioner
Philam, as subrogee of Universal Motors, filed the Complaint for damages on January 18,
1996, just eight months after all the packages were delivered to its possession on May 17,
1995. Evidently, petitioner Philam’s action against petitioners Westwind and ATI was
seasonably filed. 

2. Yes. Both petitioners Westwind and ATI are jointly and severally liable for the damage to the
cargo.

In Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., 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. While the staff of ATI undertook the physical unloading of the cargoes from the
carrying vessel, Westwind’s duty officer exercised full supervision and control over the entire
process.

In Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., 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. The facts of these cases show
Manotok, Ma. Thelma Francesca T. Topic: Notice of Claim and Prescription

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 packages.

The liability of petitioners ATI and Westwind should be confined to the value of the one piece
Frame Axle Sub without Lower.
Murao, Jose Pepito G. III Topic: Notice of Claim and Prescription

48. Pioneer Insurance and Surety Corp. v. APL Co. Pte. Ltd
G.R. No. 226345 | August 2, 2017
J. Mendoza

FACTS:
 In 2012, Chillies Export House Limited shipped 250 bags of chili peppers worth $12.27K from
India to BSFIL Technologies in Manila via respondent APL Co. BSFIL Technologies, as
consignee, insured the chili peppers with petitioner Pioneer Insurance. In February 6, 2012,
BSFIL Technologies withdrew the bags and discovered that 76 were wet and infested with
molds. Thus, BSFIL declared the shipment unfit for human consumption and made a formal
claim against APL and Pioneer Insurance. Pioneer hired an insurance adjuster, which declared
that the shipment was wet because of the van APL provided. In turn, Pioneer insurance paid
the claim amounting to 95.5K. With Pioneer subrogated to the rights of BSFIL and APL
refusing to pay, Pioneer filed a complaint for sum of money on February 1, 2013.
 The MTC of Makati ordered petitioner Pioneer to pay APL 195.5K with interest and 10K
attorney’s fees on the ground of the presumption of failure to exercise extraordinary diligence
expected of common carriers. The RTC of Makati affirmed in toto the MTC decision and added
that under the Carriage of Goods by Sea Act (COGSA), lack of written notice shall not
prejudice the right of the shipper to bring a suit within 1 year after delivery, with the shorter
prescriptive period to file a suit in the Bill of Lading inapplicable for being contrary to law.
 The CA reversed the RTC decision by declaring that Pioneer’s action was barred by
prescription. Under Clause 8 of the Bill of Lading, APL limited its liability to actions filed within 9
months of delivery of goods. The CA declared that a shorter prescriptive period set out in the
Bill of Lading may be upheld provided that it is reasonable and sufficient time for filing of an
action. Hence, this Petition for Review on Certiorari.

ISSUE/S: W/N the CA erred in declaring that Pioneer’s action as BSFIL’s subrogee has prescribed in
accordance with the shorter prescriptive period in the Bill of Lading?

RULING: YES. Art. 1370 of the Civil Code mandates the plain meaning rule vis-à-vis interpretation of
stipulations in a contract. In the instant case, although the Bill of Lading limited APL’s liability to suits
filed within 9 months from delivery, the Bill also qualified such by stating that in the event that such
period is contrary to any law, the period prescribed by law shall apply. Thus, with the 1-year
prescriptive period compulsorily applicable, it must trump the stipulation by parties to a contract.
Petition GRANTED.
Ong, Roberto Ruiz B. Topic: Aviation Laws and the Warsaw Convention

49. Edna Diago Lhuillier v. British Airways,

G.R. No. 171092 | March 15, 2010
J, Del Castillo

FACTS:
 Edna Lhuillier took the 548 flight from London to Rome
 on the plane, she requested from the flight attendant, Halliday to assist her in placing the hand
carry to the luggage bin
 Halliday refused and stated that “ If I were to help all 300 passengers in this flight, I would have
a broken back!”
 When the plane was about to land, another flight attendant , Kerrigan singled her out to among
the business class section and lectured her on plane safety
 Allegedly, she was made to appear ignorant, uneducated and stupid
 She tried to defend herself by stating that she knew the regulations by being a frequent
traveler.
 Kerrigan went up to her face and menacingly told her that “ We don’t like your attitude”
 Upon landing she tried to demand for an apology from the ground manager but declined to do
so stating that the flight stewards were only doing their job.
 The petitioner filed for damages in our jurisdiction against British Airways
 The respondent by way of special appearance filed a motion to dismiss on the grounds of lack
of jurisdiction pursuant to the Warsaw convention which the Philippines is a signatory.
 The RTC granted the motion to dismiss
 The Petitioner filed a petition for review directly to the SC

ISSUE/S: Whether the Philippines has Jurisdiction over the case.

RULING: No, the Philippines has no jurisdiction over the case

Article 28(1)of the Warsaw Convention of 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.

Our Courts have to apply the principles of international law, and are bound by treaty stipulations
entered into by the Philippines which form part of the law of the land. One of this is the Warsaw
Convention. Being a signatory thereto, the Philippines adheres to its stipulations and is bound by its
provisions including the place where actions involving damages to plaintiff is to be instituted, as
provided for under Article 28(1) thereof.

Here, being a signatory of the Warsaw convention, the action must be brought to either England or
Italy of which would have jurisdiction over the case not the Philippines.

Hence, the Philippines has no jurisdiction over the case

Sabado, Marionnie C. Topic: Aviation Laws and Warsaw Convention

50. Northwest Airlines, Inc. v. Sps. Edward J. Heshan and Nelia L. Heshan, and Dara Ganessa
L. Heshan, represented by her parents, Edward and Nelia Heshan
G.R. No. 179117 | February 3, 2010
J. Carpio Morales

FACTS
● Edward purchased 3 roundtrip tickets from Northwest Airlines, Inc. (petitioner) for him, his wife
Nelia and daughter Dara for their trip from Manila to St. Louis, Missouri, USA and back.
● On the way back to the Philippines, the Heshans proceeded to the airport to take the
connecting flight from St. Louis to Memphis on their way to Los Angeles. At the airport, the
Heshans first checked-in their luggage at the airport’s "curbside check-in" near the entrance.
Since they arrived 3 hours early for their 6:05 p.m. flight, the Heshans spent the time at a
nearby coffee shop. At 5:15 p.m. when the check-in counter opened, Edward took to the line
where he was second in the queue. When his turn came and presented the tickets to
petitioner’s customer service agent Carns to get the boarding passes, he was asked to step
aside and wait to be called again.
● After all the other departing passengers were given their boarding passes, the Heshans were
told to board the plane without any boarding pass given to them and to just occupy open seats
therein. Inside the plane, the Heshans noticed that only one vacant passenger seat was
available, which was offered to Dara, while Edward and Nelia were directed to occupy two
"folding seats" located at the rear portion of the plane. To respondents, the two folding seats
were crew seats intended for the stewardesses.
● The Heshans complained to the cabin crew about the matter but were told that if they did not
like to occupy the seats, they were free to disembark from the plane. And disembark they did,
complaining thereafter to Carns about their situation. Petitioner’s plane then departed for
Memphis without respondents onboard.
● The Heshans were later endorsed to and carried by Trans World Airways to Los Angeles.
Respondents arrived in Los Angeles at 10:30 p.m. of the same day but had to wait for 3 hours
at the airport to retrieve their luggage from petitioner’s previous flight. Respondents stayed for
five days more in the U.S. before going back home to Manila.
● Respondents sent a letter to petitioner to demand indemnification for the breach of contract of
carriage. Via letter, petitioner replied that respondents were prohibited to board the flight for
"verbally abus[ing] [the] flight crew."
● Respondents filed a complaint with RTC Quezon City for breach of contract with damages. The
Court rendered judgment in favor of respondents. [T]hat the [respondents] held confirmed
reservations for the St Louis-Memphis leg of their return trip to the Philippines is not disputed.
As such, they were entitled as of right under their contract to be accommodated in the flight,
regardless of whether they had selected their seats in advance or not. They had arrived at the
airport early to make sure of their seating together, and, in fact, Edward was second in the
queue for boarding passes. Yet, Edward was unceremoniously sidelined and curtly told to wait
without any explanations why. His concerned seeking for explanations was repeatedly
rebuffed by the airline employees. When, at last, they were told to board the aircraft although
they had not yet been issued boarding passes, which they thought to be highly unusual, they
soon discovered, to their dismay, that the plane was fully booked, with only one seat left for the
3 of them. Edward and Nelia rejected the offer [to take] the crew seats. [Respondents] were
thus forced to disembark.
● The CA affirmed the decision of the RTC.

ISSUE/S: Whether petitioner violated the contract of carriage

Sabado, Marionnie C. Topic: Aviation Laws and Warsaw Convention
RULING: YES.

An examination of the evidence presented by petitioner shows that it consisted only of depositions of
its witnesses. It had in its possession and disposition pertinent documents such as the flight manifest
and the plane’s actual seating capacity and layout which could have clearly refuted respondents’
claims that there were not enough passenger seats available for them. It inexplicably failed to offer
even a single piece of documentary evidence. The Court thus believes that if at least the cited
documentary evidence had been produced, it would have been adverse to petitioner’s case.

Petitioner also failed to satisfactorily explain why it did not issue boarding passes to respondents who
were confirmed passengers, even after they had checked-in their luggage three hours earlier. That
respondents did not reserve seats prior to checking-in did not excuse the non-issuance of boarding
passes.

Petitioner’s assertion that respondents disembarked from the plane when their request to be seated
together was ignored does not impress. The observation of the appellate court, viz: x x x x [T]he fact
that the Appellees still boarded the plane 10 minutes prior to the departure time, despite knowing that
they would be seated apart, is a clear manifestation of the Appellees’ willingness to abandon their
request and just board the plane in order to catch their flight. But as it turns out, there were not enough
seats for the three of them as aptly found by the Court a quo, to which We subscribed [sic]. x x x x,
merits the Court’s concurrence.

Nonetheless, the petition is in part meritorious. There is a need to substantially reduce the moral
damages awarded by the appellate court. While courts are given discretion to determine the amount of
damages to be awarded, it is limited by the principle that the amount awarded should not be palpably
and scandalously excessive. Moral damages are neither intended to impose a penalty to the
wrongdoer, nor to enrich the claimant. Taking into consideration the facts and circumstances attendant
to the case, an award to respondents of Php 500,000, instead of Php 2,000,000, as moral damages is
to the Court reasonable.
Tirol, Courtney Allison P. Topic: Aviation Laws and Warsaw Convention

51. Cathay Pacific Airways v. Reyes

G.R. No. 185891 | June 26, 2013
J. Perez

FACTS:
 Wilfredo Reyes made a travel reservation with Sampaguita Travel for his family’s trip to
Adelaide, Australia. Upon confirmation of their flight schedule, Wilfredo paid for the airfare and
was issued 4 Cathay Pacific roundtrip airplane tickets for Manila-Hong Kong-Adelaide-Hong
Kong-Manila. Wilfredo, together with his wife Juanita Reyes, son Michael Roy Reyes, and
mother-in-law Sixta Lapuz flew to Adelaide, Australia without a hitch.
 One week before they were scheduled to fly back home, Wilfredo re-confirmed his family’s
return flight with the Cathay Pacific office in Adelaide. They were advised that the reservation
was “still okay as scheduled”. On the day of their scheduled departure from Adelaide, Wilfredo
and his family arrived at the airport on time. However, when the airport check-in opened,
Wilfredo was informed by a staff from Cathay Pacific that Wilfredo’s family 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. 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. He
was informed by Sampaguita Travel that it was actually Cathay Pacific which cancelled their
bookings. Respondents as passengers sent a letter to Cathay Pacific advising the latter of the
incident and demanding payment of damages.
 After a series of exchanges and with no resolution in sight, respondents filed a Complaint for
damages against Cathay Pacific and Sampaguita Travel for actual, moral, and exemplary
damages.
 Cathay Pacific asserted that in the case of Wilfredo, 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 and had it cancelled the following day, while the ticket numbers of Juanita and Michael
do not exist.
 On the other hand, Sampaguita Travel denied Cathay Pacific’s claim that it was the cause of
the cancellation of the bookings. Sampaguita Travel maintained that it made the necessary
reservation with Cathay Pacific for respondents’ trip to Adelaide. Sampaguita Travel asserted
that 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 Regional Trial Court (RTC) ruled in favor of Cathay Pacific and Sampaguita Travel. The
RTC found 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. On appeal, the
Court of Appeals ordered Cathay Pacific to pay P25,000.00 each to respondents as nominal
damages.

ISSUE/S: Whether the respondents are entitled to nominal damages.

RULING: Yes.
Tirol, Courtney Allison P. Topic: Aviation Laws and Warsaw Convention
The determination of whether or not the award of damages is correct depends on the nature of the
respondents’ contractual relations with Cathay Pacific and Sampaguita Travel.

Respondents’ cause of action against Cathay Pacific stemmed from a breach of contract of carriage.
Jurisprudence provides that 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 consideration.

In this case, respondents entered into a contract of carriage with Cathay Pacific. As far as
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. 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.
Thus, Cathay Pacific opened itself to claims for compensatory, actual, moral and exemplary damages,
attorney’s fees and costs of suit.

In contrast, 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.

In this case, 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.

For one to be entitled to actual damages, it is necessary to prove the actual amount of loss with a
reasonable degree of certainty, premised upon competent proof and the best evidence obtainable by
the injured party. In this case, it was proven by Cathay Pacific that first, it extended all possible
accommodations to respondents. They were promptly informed of the problem in their bookings while
they were still at the Adelaide airport. Despite the non-confirmation of their bookings, respondents
were still allowed to board the Adelaide to Hong Kong flight. Cathay Pacific was not motivated by
malice or bad faith in not allowing respondents to board on their return flight to Manila.

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.

However, considering that the three respondents were denied boarding their return flight from Hong
Kong to Manila and that they had to wait in the airport overnight for their return flight, they are deemed
to have technically suffered injury. Hence, the respondents are entitled to nominal damages due to 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.

Cathay Pacific and Sampaguita Travel arc jointly and solidarily liable for nominal damages awarded to
respondents Wilfredo, Juanita and Michael Roy.
Valdez, Darwin Moreno Topic: Aviation Laws and Warsaw Convention

52. Spouses Fernando v. Northwest Airlines

G.R. No. 212038 | February 08, 2017
J. Peralta

FACTS:
 Jesus and Elizabeth S. Fernando 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.
The following events transpired according to the spouses:
o The arrival at Los Angeles Airport on December 20, 2001: When Jesus Fernando
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. He alleged that he was humiliated by Linda Puntawongdaycha and
brought into the interrogation room for 2 hours. He was later allowed to depart, but was
only granted a 12-day stay in the US, instead of the usual 6 months.
o The departure from the Los Angeles Airport on January 29, 2002 : 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. They failed to present the same since, according to them,
Northwest issued electronic tickets which they showed to the supervisor. In the
presence of the other passengers, Linda Tang rudely pulled them out of the queue.
They were assisted by Northwest personnel Jeanne Meyer who retrieved their control
number from her computer and was able to ascertain that the Fernandos' electronic
tickets were valid and they were confirmed passengers for Narita and Manila on that
day. Jeanne 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.
 Thus, they instituted a complaint for damages against Northwest before the RTC. The RTC
ordered Northwest to pay damages to the spouses. The CA in affirming the RTC decision,
ruled that Northwest breached the contract of carriage.

ISSUE/S: Whether or not there was breach of contract of carriage

RULING: YES, there was a breach of contract of carriage.

They voluntarily and 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. 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.

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,
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.

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 utmost diligence of a very cautious person expected of it. 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
Valdez, Darwin Moreno Topic: Aviation Laws and Warsaw Convention
could have been avoided. Northwest was remiss in its duty to provide the proper and adequate
assistance to them.

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.

A contract of carriage, in this case, air transport, is primarily intended to serve the traveling public and
thus, imbued with public interest. The law governing common carriers consequently imposes an
exacting standard of conduct. A contract to transport passengers is quite different in kind and degree
from any other contractual relation because of the relation which an air-carrier sustains with the public.
Its business is mainly with the travelling public. It invites people to avail of the comforts and
advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public
duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for
damages.
Venus, Ma. Dominique M. Topic: Maritime Law

53. Philam Insurance Company, Inc. v. Heung-A Shipping Corporation

G.R. No. 187701 | 23 July 2014
J. Reyes

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 G laminated plastic
packaging material.
 In order to ship the goods to the Philippines, JINSUK engaged the services of freight forwarder
Protop Shipping Corporation (PROTOP). PROTOP shipped the cargo through Dongnama
Shipping Co. Ltd. (DONGNAMA) which in turn loaded the cargo on M/V Heung-A Bangkok V-
019 owned and operated by respondent Heung-A Shipping Corporation, (HEUNG-A), pursuant
to a ‘slot charter agreement’ whereby a space in HEUNG-A’s vessel was reserved for the
exclusive use of DONGNAMA.
 NOVARTIS insured the cargo with petitioner Philam Insurance Company, Inc. (PHILAM)
against all loss, damage, liability, or expense before, during transit and even after the
discharge of the shipment from the carrying vessel until its complete delivery to the
consignee’s premises.
 When the cargo reached the premises of NOVARTIS, it was inspected by the company’s
Senior Laboratory Technician. Upon initial inspection, it was discovered that the boxes of the
shipment were wet and damp. The entire shipment was rejected since the damaged packaging
materials might contaminate the product they were meant to hold. Samples from the wet
packing materials were then submitted to a chemist who reported that the cause of the wetting
was salt water.
 NOVARTIS then demanded indemnification for the lost/damaged shipment from PROTOP,
Sagawa Express Phils., Inc. (SAGAWA), the designated entity in the Philippines which will
obtain the delivery contract; Asian Terminals, Inc. (ATI), the customs arrastre operator; and
Stephanie Customs Brokerage (STEPHANIE), NOVARTIS’s appointed broker. However, the
demand was denied.
 Insurance claims were then filed with PHILAM which paid NOVARTIS value of the shipment in
the amount of P1,904,613.20. Claiming that after such payment, it was subrogated to all the
rights and claims of NOVARTIS against the parties liable for the lost/damaged shipment,
PHILAM filed a complaint for damages against PROTOP, et. al.
 HEUNG-A denied liability and held that it is not the carrier insofar as NOVARTIS is concerned.
According to HEUNG-A, the carrier was either PROTOP which was a freight forwarder
considered as a non-vessel operating common carrier or DONGNAMA which provided the
container van to PROTOP. HEUNG-A asserted that its only obligation was to provide
DONGNAMA a space on board M/V Heung-A Bangkok V-019.
 The RTC held HEUNG-A as the common carrier. The RTC held HEUNG-A liable to pay
PHILAM. The CA affirmed the RTC. The CA held: 1) that The fact that HEUNG-A was not a
party to the bill of lading did not negate the existence of a contract of carriage since a bill of
lading is not indispensable for the creation of a contract of carriage; and 2) that the proximate
cause of the damage was the failure of HEUNG-A to inspect and examine the actual condition
of the sea van before loading it on the vessel. Hence, this petition.

ISSUE/S: Whether HEUNG-A is the common carrier that should be liable to the damage sustained by
the package while on transit.

RULING: Yes, HEUNG-A is the common carrier that should be liable to the damage sustained by the
package while on transit since HEUNG-A’s slot charter arrangement with DONGNAMA is a charter
party arrangement.
Venus, Ma. Dominique M. Topic: Maritime Law
A charter party is a contract whereby an entire ship or some principal part thereof, is let by the owner
to another person for a specified time or use. It has two types. First, it could be a contract of
affreightment whereby the use of shipping space on vessels were leased in part or as a whole, to
carry goods for others. The charter-party provides for the hire of vessel only, either for a definite period
of time (time charter) of for a single or consecutive voyage (voyage charter). The shipowner supplies
the ship’s stores, pay for the wages of the master and the crew, and defray the expenses for the
maintenance of the ship. The voyage remains under the responsibility of the carrier and it is
answerable for the loss of goods received for transportation. The charterer is free from liability to third
persons in respect to the ship. Second, charter by demise or bareboat charter under which the whole
vessel is let to the charterer with a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and the crew, who are his servants. The
charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or
service stipulated and hence liable for damages or loss sustained by the goods transported.

In this case, the ‘slot charter arrangement’ between HEUNG-A and DONGNAMA, where the latter is
reserved a space in the vessel is a contract of affreightment. The arrangement did not divest HEUNG-
A its character as the common carrier nor relieve it of any accountability for the shipment.

 As a common carrier, it is presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed, unless they prove that they exercise extraordinary
diligence in transporting the same. Here, HEUNG-A failed to rebut this prima facie presumption.
Therefore, HEUNG-A is liable to the damage sustained by the package while on transit.
Victa, Carlos Emmanuel A. Topic: Maritime Law

54. De La Torre v. Hon. Court of Appeals, Concepcion, Larrazabal, Phil. Trigon Shipyard Corp,
and Roland De La Torre
G.R. No.160088 | July 13, 2011
J. Mendoza

FACTS:
 This is a case involving the chartering and sub chartering of the vessel LCT-Josephine, owned
by co-respondent Concepcion in this case. The first charter agreement was entered into with
co-respondent Roland De La Torre. A second charter agreement was entered into by
Concepcion regarding the same vessel this time with co-respondent Phil. Trigon Shipyard Corp
(PTSC) represented by Petitioner Roland. PTSC would sub charter the same vessel to Trigon
Shipping Lines (TSL), a single proprietorship owned by petitioner Agustin De La Torre. TSL in
turn, further sub chartered the LCT Josephine to one Larrazabal, also a co-respondent in this
case. On November 23, 1984, the LCT-Josephine with its cargo of sand and gravel arrived at
Leyte. With the vessel’s ramp already lowered, the unloading of the vessel’s cargo began with
the use of Larrazabal’s payloader. While the payloader was on the deck of the LCT-Josephine
scooping a load of the cargo, the vessel’s ramp started to move downward. The vessel tilted
and sea water rushed in. Due to this, LCT-Josephine sank. Concepcion filed a complaint for
"Sum of Money and Damages" against PTSC, Roland before the RTC. PTSC and Roland filed
their answer together with a third-party complaint against Petitioner. Petitioner, in turn, filed his
answer plus a fourth-party complaint against Larrazabal. The latter filed his answer and
counterclaim but was subsequently declared in default by the RTC. The RTC ruled the
following:
o The defendants, PTSC, and the third-party defendant, Agustin de la Torre, shall pay the
plaintiff, jointly and severally, the sum of EIGHT HUNDRED FORTY-ONE THOUSAND
THREE HUNDRED EIGHTY SIX PESOS AND EIGHTY SIX CENTAVOS as the value
of the LCT JOSEPHINE with interest.
o The defendants, PTSC, shall pay to the plaintiff the sum of NINETY THOUSAND
PESOS (₱ 90,000.00) as unpaid rentals for the period from May 1, 1984, to November,
1984, and the sum of ONE HUNDRED SEVENTY THOUSAND PESOS (₱ 170,000.00)
as lost rentals from December, 1984, to April 30, 1986, with interest on both amounts.
o The defendants’ counterclaim for the unpaid balance of plaintiff’s obligation for the dry-
docking and repair of the vessel LCT JOSEPHINE in the amount of TWENTY-FOUR
THOUSAND THREE HUNDRED FOUR PESOS AND THIRTY-FIVE CENTAVOS (₱
24,304.35), being valid, shall be deducted from the unpaid rentals, with interest on the
said unpaid balance at the rate of 6% per annum from the date of the filing of the
counter-claim on March 31, 1986;
o The counter-claim of the defendants in all other respects, for lack of merit, is hereby
DISMISSED;
o The fourth party claim against Larrazabal is without basis and therefore, dismissed.
 On appeal to the CA by the defendants, the decision of the RTC was affirmed in toto.

ISSUE/S:
1. Whether the Limited Liability rule applies to petitioner De La Torre.
2. Whether petitioner Agustin De La Torre is solidarily liable with PTSC and Roland De La Torre for
the loss of the LCT Josephine.

RULING:
1. No. The Limited Liability Rule does not apply to De La Torre as he is not an owner or co-owner
of the LCT Josephine.
Victa, Carlos Emmanuel A. Topic: Maritime Law

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.

Petitioner argues that that the Limited Liability Rule under the Code of Commerce should be
applied to them. The said rule has been explained to be that of the 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 extinguishment. 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 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. The Law is 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. Only the shipowner, Concepcion, may avail of this defense as
intended by the language of the Law. Petitioner Agustin in this case, may not invoke the limited
liability rule as a defence.

Petitioner does not have the benefit of Limited Liability as he is not the owner of the vessel,
who has obligations to third parties.

2. Yes. Agustin is Solidarily Liable with PTSC and Roland De La Torre for the loss of the vessel.

Article 1651. Without prejudice to his obligation toward the sublessor, the sublessee is bound
to the lessor for all acts which refer to the use and preservation of the thing leased in the
manner stipulated between the lessor and the lessee. (1551)

Although he was never privy to the contract between PTSC and Concepcion, he remained
bound to preserve the chartered vessel for the latter. Despite his non-inclusion in the complaint
of Concepcion, it was deemed amended so as to include him because, despite or in the
absence of that formality of amending the complaint to include him, he still had his day in court
as he was in fact impleaded as a third-party defendant by Roland – the same person who
represented him in the Contract of Agreement with Larrazabal. Since the purpose of formally
impleading a party is to assure him a day in court, once due process of law has in fact been
accorded a litigant, whatever the imperfection in form, the real litigant may be held liable as a
party.

Agustin De La Torre is jointly and severally liable for the loss of the vessel with the defendants
in this case.
Baba, Karla Marie B. Topic: Maritime Law

55. Ace Navigation Co., Inc. v. FGU Insurance Corporation, et. al.
G.R. No. 171591 | June 25, 2012
J. Perlas-Bernabe

FACTS:
 Cardia Limited shipped on board the vessel M/V Pakarti Tiga from the Shanghai Port 165,200
bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to
Heindrich Trading Corp. The shipment was insured with respondents, FGU Insurance Corp.
and Pioneer Insurance and Surety Corp., against all risks under a marine open policy.
 The vessel is owned by P.T. Pakarti Tata and chartered to Shinwa Kaiun Kaisha Ltd.
 Shinwa entered into a charter party contract with Sky International, Inc., an agent of Kee Yeh
Maritime Co., which further chartered it to Regency Express Lines S.A.
 Regency directly dealt with consignee Heindrich, and accordingly, issued a clean bill of lading.
 Upon inspection by Heindrich and petitioner Ace Navigation Co., Inc. (Ace Nav), agent of
Cardia, 43,905 bags were found in bad order. Heindrich thereafter claimed the insurance from
respondents. The insurance companies were subrogated the rights of Heindrich, and thus filed
complaints.
 Ace Nav countered that it was not a party to the bill of lading.

ISSUE/S:
1. Whether Ace Nav is a party to the contract of carriage
2. Whether Ace Nav is a ship agent and not a mere agent.

RULING:
1. YES, IT IS.
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. Because of their relationships with Pakarta, Shinwa,
Kee Yeh and its agent Sky likewise became parties to the bill of lading. Ace Nav, as agent of
CARDIA, also became a party to the said contract of carriage.

Thus, Ace Navigation was also a party to the contract of carriage.

2. NO, IT IS NOT.
Article 586 of the Code of Commerce provides:
ART. 586. 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.

By ship agent is understood the person entrusted with the provisioning of a vessel, or who
represents her in the port in which she may be found.
Baba, Karla Marie B. Topic: Maritime Law

In this case, however, Ace Nav’s obligation was limited to informing Heindrich of the arrival of
the vessel. Ace Nav did not have a hand in the provisioning of the vessel. I did not represent
the carrier, its charterers, or the vessel at any time during the unloading of the goods.

Therefore, Ace Nav is not a ship agent and cannot be held liable for the acts done in the
vessel.
Balboa, Nerissa Gloria J. Topic: Public Utilities Law

56. LTFRB v. G.V. Florida Transport Inc.

G.R. No. 213088 | June 28, 2017
J. Peralta

FACTS:
 At around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at Sitio
Paggang, Barangay Talubin, Bontoc, Mountain Province involving a public utility bus coming
from Sampaloc, Manila, bound for Poblacion Bontoc. Fifteen passengers died while 32 were
injured.
 The DOTC-CAR report showed that the license plate of the bus actually belongs to a different
bus owned by and registered under a certain Norberto Cue and that the bus involved in the
accident is not duly authorized to operate as a public transportation.
 Thus, on the same day of the accident, herein petitioner, pursuant to its regulatory powers,
immediately issued an Order preventively suspending, for a period not exceeding thirty (30)
days, the operations often (10) buses of Cue, as well as respondent's entire fleet of buses.
 Thereafter, in its Incident Report dated February 12, 2014, the DOTC-CAR stated, among
others: that the License Plate Number attached to the ill-fated bus belongs to a different unit
owned by Cue; that, per registration records, the subject bus was registered as "private"; and
that the registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while the previous owner is
herein respondent bus company.
 Subsequently, Dagupan Bus filed its Answer claiming that: it is not the owner of the bus which
was involved in the accident; the owner is G.V. Florida; Dagupan Bus entered into a
Memorandum of Agreement with G.V. Florida, which, among others, facilitated the exchange
of its CPC covering the Cagayan route for the CPC of Florida covering the Bataan route; and
the subsequent registration of the subject bus in the name of Dagupan Bus is a mere
preparatory act on the part of G.V. Florida to substitute the old authorized units of Dagupan
Bus plying the Cagayan route which are being operated under the abovementioned CPC which
has been exchanged with G.V. Florida.
 Cue contended that the CPC and all unauthorized units had been sold to Florida. GV Florida
then alleged that it, indeed, bought Cue's CPC and the ten public utility buses operating under
the said CPC, including the one which bears License Plate No. TXT-872; since Cue's buses
were already old and dilapidated, and not wanting to stop its operations to the detriment of the
riding public, it replaced these buses with new units using the License Plates attached to the
old buses, pending approval by petitioner of the sale and transfer of Cue's CPC in its favor.
 The LTFRB suspended the operation of respondent’s buses and for 6 months and cancelled its
CPCs. The CA then reversed the suspension. respondent, in its Comment to the present
Petition, contends that the suspension of its 28 CPCs is tantamount to an outright confiscation
of private property without due process of law; and that petitioner cannot simply ignore
respondent's property rights on the pretext of promoting public safety. Respondent insists that
the penalty imposed by petitioner is not commensurate to the infraction it had committed.

ISSUE/S: Whether petitioner is justified in suspending respondent’s CPCs for a period of 6 months

RULING: Yes, the LTFRB is justified in suspending respondent’s CPC.

Section 5(b) of E.O. 202 states:

Sec. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. The
Board shall have the following powers and functions:

xxxx
Balboa, Nerissa Gloria J. Topic: Public Utilities Law

b. 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;
xxxx

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.

Respondent, nonetheless, insists that it is unreasonable for petitioner to suspend the operation of 186
buses covered by its 28 CPCs, considering that only one bus unit, covered by a single CPC, was
involved in the subject accident.

The Court is not persuaded. It bears to note that the suspension of respondent's 28 CPCs is not only
because of the findings of petitioner that the ill-fated bus was not roadworthy. Rather, and more
importantly, the suspension of the 28 CPCs was also brought about by respondent's wanton disregard
and obstinate defiance of the regulations issued by petitioner, which is tantamount to a willful and
contumacious 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.

The Court agrees with petitioner that its 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. In this regard, the Court gives due deference to petitioner's
exercise of its sound administrative discretion in applying its special knowledge, experience and
expertise to resolve respondent's case.

Neither is the Court convinced by respondent's contention that the authority given to petitioner, under
the abovequoted Section 16(n) of the Public Service Act does not mean that petitioner is given the
power to suspend the entire operations of a transport company. Respondent must be reminded that,
as quoted above, the law clearly states that petitioner has the power "[t]o suspend or revoke any
certificate issued under the provisions of [the Public Service 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 this Act x x x" This Court has held that when the context so indicates,
the word "any" may be construed to mean, and indeed it has been frequently used in its enlarged and
plural sense, as meaning "all," "all or every," "each," "each one of all," "every" without limitation;
indefinite number or quantity, an indeterminate unit or number of units out of many or all, one or more
as the case may be, several, some.
Bataan, Xhavier Brett King D. Topic: Public Utilities Law

57. Tawang Multi Purpose Cooperative (TMPC) vs. La Trinidad Water District (LTWD)
G.R. No. 166471 | March 22, 2011
Carpio, J.

FACTS:
 TMPC is a cooperative, registered with the Cooperative Development Authority, and organized
to provide domestic water services in Barangay Tawang, La Trinidad, Benguet. LTWD is a
local water utility created under PD 198, as amended. It is authorized to supply water for
domestic, industrial and commercial purposes within the municipality of La Trinidad, Benguet.
 In October 2000, TMPC filed with Nat’l Water Resources Board (NWBC) an application for
certificate of public convenience (CPC) to operate and maintain a waterworks system in
Barangay Tawang. LTWD opposed TMPC’s application. LTWD claimed that, under Section 47
of PD No. 198, as amended, its franchise is exclusive. Section 47 states that: 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.
 NWBC ruled 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. The RTC reversed the ruling of NWRB ratiocinating that the
Constitution does not necessarily prohibit a franchise that is exclusive on its face, meaning,
that the grantee shall be allowed to exercise this present right or privilege to the exclusion of all
others. Nonetheless, the grantee cannot set up its exclusive franchise against the ultimate
authority of the State. Hence, TMPC came to the solace of the SC asking to reverse the
decision of RTC arguing that RTC erred in holding that Section 47 of PD No. 198, as amended,
is valid.

ISSUE/S:
1. Whether TMPC should be granted the franchise.
2. Whether Sec. 47 of PD 198 is constitutional.

RULING:
1. Yes, TMPC should be granted the franchise. Sec. 11 of Article XII of the Constitution provides
that no franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines, at least sixty per centum of whose capital is
owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in
character or for a longer period than fifty years. The Constitution is quite emphatic that the
operation of a public utility shall not be exclusive (Republic vs. Express Telecommunication).
Neither Congress nor the NTC can grant an exclusive ‘franchise, certificate, or any other form
of authorization’ to operate a public utility (PTC vs. NTC). Exclusivity of any public franchise
has not been favored by this Court such that in most, if not all, grants by the government to
private corporations, the interpretation of rights, privileges or franchises is taken against the
grantee (NPC vs. CA). Lastly, The Constitution mandates that a franchise cannot be exclusive
in nature (Radio Communication of the PH vs. NTC).

2. No, Sec. 47 of PD 198 is void. Under the doctrine of constitutional supremacy, if a law or
contract violates any norm of the constitution that law or contract whether promulgated by the
legislative or by the executive branch or entered into by private persons for private purposes is
null and void and without any force and effect.
Cadiz, Sophia Topic: Public Utilities Law

58. ABS-CBN Broadcasting Corp. v. Phil. Multimedia System, etc.

G.R. No. 175769-70 | 19 January 2009
J. Ynares-Santiago

FACTS:
 Respondents Philippine Multi-Media System, Inc. (PMSI), operator of Dream Broadcsating
System, delivers a digital direct-to-home (DTH) television satellite to its subscribers all over the
Philippines. [Basically it is a signal provider which has cable and satellite services]. It was
granted a legislative franchise under RA 8630 and was given a Provisional Authority by the
National Telecommunications Commission (NTC) to install, operate and maintain a nationwide
DTH satellite service. 
 Pursuant to Memorandum Circular 4-08-88 wherein all cable television system operators,
operating within the Grade “A” and “B” contours are mandated to carry out the television
signals of the authorized television broadcast stations, PMSI offered “Premium Channels” like
AXN, Jack TV [which are paid by the subscribers before the channels are transmitted] and
“Free TV” such as ABS-CBN Channels 2 and 23, GMA Channel 7, RPN Channel 9, etc.
 Petitioner ABS-CBN is television and radio broadcasting network which broadcasts live TV
programs through wireless and satellite means. It owns regional TV stations which pattern their
programming with the demands of the respective regions, thus, those programs shown in
Manila are not necessarily shown in the provinces.
 ABSCBN demanded PMSI to cease and desist from “rebroadcasting” Channels 2 and 23.
Specifically, it argued that the transmission of Channels 2 & 23 to the provinces where these
two are not usually shown altered ABSCBN’s programming for said provinces.
 PMSI contended that the “rebroadcasting” was in accordance with the authority granted by
NTC and it is simply operating under the “MUST-CARRY RULE” outlined in the NTC MC 4-08-
88
 Negotiations were ensued between the parties in an effort to reach a settlement; however, the
same was terminated by ABS-CBN allegedly due to PMSI’s inability to ensure the prevention
of illegal “retransmission” and further “rebroadcast” of its signals, as well as the adverse effect
of the rebroadcasts on the business operations of its regional television stations.
 ABS-CBN filed with the Intellectual Property Rights Office (IPO) a complaint for “Violation of
Laws Involving Property Rights, with TRO” alleging that PMSI’s unauthorized rebroadcasting of
Channels 2 and 23 infringed on its broadcasting rights and copyright.
 The Bureau of Legal Affairs (BLA) of IPO granted the TRO. Pursuant to the TRO, PMSI
suspended the retransmission of Channels 2 and 23 and likewise filed a petition for certiorari
with the CA. On appeal, IPO Director ruled in favor of PMSI.
 Meanwhile, ABSCBN filed a petition for review with TRO before the CA. CA issued a TRO.
 On appeal, CA granted the petition of PMSI and sustained the findings of IPO Director. ABS-
CBN filed its appeal however it was dismissed by the CA. Hence, this petition.
 ABSCBN’s petition:
o It claims that PMSI’s carriage of its signals is for a commercial purpose.
o It assails that the MC No. 4-08-88 excludes DTH services from its coverage.
o It argues that PMSI’s carriage of channels 2 and 23 resulted in competition between its
Manila and regional stations.
ISSUE/S:
1. Whether PMSI violated laws on property rights
2. Whether the MUST CARRY RULE in MC 04-08-88 is a valid exercise of police power by the State

RULING:
Cadiz, Sophia Topic: Public Utilities Law
1. NO. PMSI did not violate laws on property rights because it is not engaged in
rebroadcasting Channels 2 and 23. It only retransmits ABSBCN’s signals which falls under
the limitations on copyright by virtue of MC 04-08-88.
Sec. 202.7 of the IP defines broadcasting as: “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.”

The Rome Convention defines rebroadcasting as: “the simultaneous broadcasting by one
broadcasting organization of the broadcast of another broadcasting organization.”

In this case, 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. PMSI merely retransmits the same in
accordance with MC 04-08-88. With regard to its premium channels, PMSI buys the
channels from content providers and transmits on an as-is basis to its viewers. Clearly,
PMSI doesn’t function as a broadcast organization; thus, it cannot be said it is engaged in
rebroadcasting.

The retransmission of ABS-CBN’s signals by PMSI – which functions essentially as a cable

television – does not constitute rebroadcasting in violation of the former’s intellectual
property rights under the IP Code.

2. YES. The MUST CARRY RULE falls under the limitations on copyright, and is a valid
exercise of police power.

IP Code, Sec. 184. Limitations on Copyright —184.1 (h): The use made of a work by or
under the direction or control of the Government, by the National Library or by educational,
scientific or professional institutions where such use is in the public interest and is
compatible with fair use.

EO No. 546 (g) states that National Telecommunications Commission shall: “Promulgate
such rules and regulations, as public safety and interest may require, to encourage a larger
and more effective use of communications, radio and television broadcasting facilities, and
to maintain effective competition among private entities in these activities whenever the
Commission finds it reasonably feasible.”

In this case, the carriage of ABS-CBN’s signals by virtue of the must-carry rule in MC 04-
08-88 is under the direction and control of the government though the NTC which is vested
with exclusive jurisdiction to supervise, regulate and control telecommunications and
broadcast services/facilities in the Philippines. The imposition of the must-carry rule is
within the NTC’s power to promulgate rules and regulations, as public safety and interest
may require, to encourage a larger and more effective use of communications, radio and
television broadcasting facilities, and to maintain effective competition among private
entities in these activities whenever the Commission finds it reasonably feasible.

As correctly observed by the Director-General of the IPO: Accordingly, the “Must-Carry

Rule” under NTC Circular No. 4-08- 88 falls under the foregoing category of limitations on
copyright. This Office agrees with the Appellant [herein respondent PMSI] that the “Must-
Carry Rule” is in consonance with the principles and objectives underlying Executive Order
Cadiz, Sophia Topic: Public Utilities Law
No. 436, to wit: The Filipino people must be given wider access to more sources of news,
information, education, sports event and entertainment programs other than those provided
for by mass media and afforded television programs to attain a well-informed, well-versed
and culturally refined citizenry and enhance their socioeconomic growth: WHEREAS, cable
television (CATV) systems could support or supplement the services provided by television
broadcast facilities, local and overseas, as the national information highway to the
countryside.

PMSI was likewise granted a legislative franchise under Republic Act No. 8630, Section 4
of which similarly states that it “shall provide adequate public service time to enable the
government, through the said broadcasting stations, to reach the population on important
public issues; provide at all times sound and balanced programming; promote public
participation such as in community programming; assist in the functions of public
information and education x x x.” Section 5, paragraph 2 of the same law provides that “the
radio spectrum is a finite resource that is a part of the national patrimony and the use
thereof is a privilege conferred upon the grantee by the State and may be withdrawn
anytime, after due process.”

The Court held that a franchise is a mere privilege which may be reasonably burdened with
some form of public service. Thus: All broadcasting, whether by radio or by television
stations, is licensed by the government. Airwave frequencies have to be allocated as there
are more individuals who want to broadcast than there are frequencies to assign. A
franchise is thus a privilege subject, among other things, to amendment by Congress in
accordance with the constitutional provision that “any such franchise or right granted . . .
shall be subject to amendment, alteration or repeal by the Congress when the common
good so requires.”

Finally, the “Must-Carry Rule” favors both broadcasting organizations and the public. It
prevents cable television companies from excluding broadcasting organization especially in
those places not reached by signal. Also, the rule prevents cable television companies from
depriving viewers in far-flung areas the enjoyment of programs available to city viewers. In
fact, this Office finds the rule more burdensome on the part of the cable television
companies. The latter carries the television signals and shoulders the costs without any
recourse of charging. On the other hand, the signals that are carried by cable television
companies are dispersed and scattered by the television stations and anybody with a
television set is free to pick them up.

The essence of intellectual property is that its protection is merely a means towards the
end of making society benefit from the creation of its men and women of talent and genius.
It also explains why the author or the creator enjoys no more rights than are consistent with
public welfare.
Chua, Raphael Ryan D. Topic: Public Utilities Law

59. Surigao del Norte Electric Cooperative, Inc.

(SURNECO) v. Energy Regulatory Commission
G.R. No. 183626 | October 4, 2010
J. Nachura

FACTS:
 SURNECO filed a petition before the 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.
 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.
 Meanwhile, the passage of RA No. 9136 led to the creation of the Energy Regulatory
Commission (ERC), replacing and succeeding the ERB.
 ERC clarified ERB’s earlier policy regarding the PPA formula to be used by the electric
cooperatives, and ERC continued its review, verification, and confirmation of the electric
cooperatives’ implementation of the PPA formula based on the available data and information
submitted by the latter.
 ERC issued an Order mandating that the discounts earned by SURNECO from its power
supplier should be deducted from the computation of the power cost.
 SURNECO filed a motion for reconsideration, which was denied by the ERC. The CA denied a
subsequent petition for review and motion for reconsideration.

ISSUE/S:
Whether the CA and ERC erred 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 NPC; and
3. ordering it to refund alleged over-recoveries arrived at by the ERC without giving SURNECO
the opportunity to be heard

RULING:

(1) No. SURNECO cannot insist on using the multiplier scheme after the imposition of the system
loss caps under Section 10 of R.A. No. 7832. 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. Under NEA Memorandum No. 1-A, the use of the multiplier scheme allows
the recovery of system losses even beyond the caps mandated in R.A. No. 7832. However,
this is incompatible with the system loss caps established in R.A. No. 7832. As between NEA
Memorandum No. 1-A, a mere administrative issuance, and R.A. No. 7832, a legislative
enactment, the latter must prevail. Thus, SURNECO can no longer use the multiplier scheme
to compute its system’s loss.

(2) No. 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. 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
Chua, Raphael Ryan D. Topic: Public Utilities Law
ERC simply performed its mandate to protect the public interest imbued in those rates.
Therefore, ERC did not err in ordering SURNECO to deduct from the power cost or refund to
its consumers the discounts extended to it by NPC.

(3) No. 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.

The PPA confirmation necessitated a review of the electric cooperatives’ monthly documentary
submissions to substantiate their PPA charges. The cooperatives were duly informed of the
need for other required supporting documents and were allowed to submit them accordingly. In
fact, hearings were conducted. Moreover, the ERC conducted exit conferences with the
electric cooperatives’ representatives, SURNECO included, to discuss preliminary figures and
to double-check these figures for inaccuracies, if there were any. In addition, after the issuance
of the ERC Orders, the electric cooperatives were allowed to file their respective motions for
reconsideration. Therefore, SURNECO was not denied due process.
Chua, Raphael Ryan D. Topic: Public Utilities Law

60. Initiatives For Dialouge and Empowerment Through Alternative Legal Services, Inc.
(IDEALS) v. Power Sector Assets and Liabilities Management Corp.
G.R. No. 192088 | 9 October 2012
J. Villarama, Jr.

FACTS:

Sometime in August 2015, the Power Sector Assets and Liabilities Management Corp.
(PSALM) commenced the privatization of the 246MW AHEPP. AHEPP’s main units built in 1967 and
1968, and 5 auxiliary units, form part of the Angat Complex which includes the Angat Dam, Angat
Reservoir and the outlying watershed area. A portion of AHEPP – 10MW Auxiliary Unit and the 18MW
Auxiliary Unit – is owned by respondent Metropolitan Waterworks and Sewage System (MWSS).
Because of the Angat Dam and AHEPP’s multi-functional design, the operation of the Angat Complex
involves various government agencies.

PSALM’s Board of Directors approved the Bidding Procedures for the privatization of the
AHEPP. Subject of the bid was the HEPP consisting of 4 main units and 3 auxiliary units with an
aggregate installed capacity of 218MW. The auxiliary units owned by MWSS were excluded from the
bid.

PSALM’s Board approved and confirmed the issuance of a Notice of Award to the highest
bidder, K-Water.

The present petition with prayer for a TRO and/or WPI was filed by IDEALS, FDC, AKBAYAN
and Alliance of Progressive Labor.

One of petitioners’ contention is that PSALM violated the constitutional provisions on the
appropriation and utilization of water as a natural resource, as implemented by the Water Code
limiting water rights to Filipino citizens and corporations (60% Filipino-owned), when PSALM awarded
the bid to K-Water, a foreign corporation.

ISSUE/S:

Whether or not the award of the bid to K-Water, a foreign corporation, violates the constitutional
proscription in Art. XII, Sec. 2 of the Constitution.

RULING:

No.

Foreign ownership of a hydropower facility is not prohibited under existing laws. The
construction, rehabilitation and development of hydropower plants are among those infrastructure
Chua, Raphael Ryan D. Topic: Public Utilities Law
projects which even wholly-owned foreign corporations are allowed to undertake under the Amended
Build-Operate-Transfer Law (RA 7718).

With respect to foreign investors, the nationality issue had been framed in terms of the
character or nature of the power generation process itself, i.e., whether the activity amounts to
utilization of natural resources within the meaning of Art. XII, Sec. 2 of the Constitution. If so, then
foreign companies cannot engage in hydropower generation business; but if not, then government
may legally allow even foreign-owned companies to operate hydropower facilities.

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
(Opinion 173, 1984). – Once water is removed from its natural source, they cease to be part of the
natural resources of the country and are the subject of ordinary commerce and may be acquired by
foreigners.

Appropriation of water, as used in the Water Code refers to the “acquisition of rights over the
use of waters or the taking or diverting of waters from a natural source in the manner and for any
purpose allowed by law.” On the other hand, water right is defined in the Water Code as the privilege
granted by the government to appropriate and use water.

Under the Water Code concept of appropriation, a foreign company may not be said to be
“appropriating” our natural resources if it utilizes the waters collected in the dam and converts the
same into electricity through artificial devices. Since the NPC remains in control of the operation of the
dam by virtue of water rights granted to it, there is no legal impediment to foreign-owned companies
undertaking the generation of electric power using waters already appropriated by NPC, the holder of
water permit.

While the sale of AHEPP to a foreign corporation pursuant to the privatization mandated by the
EPIRA did not violate Art. XII, Sec. 2, K-Water contravenes certain constitutional provision and the
Water Code.
 Agreement to transfer the Water Permit to K-Water; use of K-Water of the water covered by
the permit; and allowance of K-Water to appropriate and use the water sourced from Angat
reservoir – not valid.
 Lessees or transferees of water rights must comply with the citizenship requirement imposed
by the Water Code and its IRR.
 Water Code explicitly provides that Filipino citizens and juridical persons who may apply for
water permits should be “duly qualified by law to exploit and develop water resources.”

Since only the hydroelectric power plants and appurtenances are being sold, the privatization
scheme should enable the buyer (K-Water) to have beneficial use of the waters diverted or collected
in the Angat Dam for its hydropower generation activities, and at the same time ensure that the NPC
retains full supervision and control over the extraction and diversion of waters from the Angat River.

Sec. 6, Rule 23 of the IRR of EPIRA, insofar as it ordered NPC’s water rights in multi-purpose
hydropower facilities to be included in the sale, is declared as merely directory and not an absolute
condition in the privatization scheme. NPC shall continue to be the holder of the water permit even as
the operational control and day-to-day management of the AHEPP is turned over the K-Water.

Hence, the Court partly granted the petitions.