UNIVERSITY OF SAN CARLOS

SCHOOL OF LAW AND GOVERNANCE

College of Law

RELEVANT LAWS AND

JURISPRUDENCE
(Transportation Laws)

Module 3

Obligations of the parties

1. Obligations of Common
Carrier Basic obligations
 Compania Maritima v. Insurance Co. of North America, 12 SCRA 213 (1964)
FACTS:
 October, 1952:  Macleod and Company of the Philippines (Macleod) contracted by telephone the services
of the Compañia Maritima (CM), a shipping corporation, for:
 shipment of 2,645 bales of hemp from the Macleod's Sasa private pier at Davao City to Manila 
 subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. 
 This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch
office in Sasa and handcarried to CM's branch office in Davao in compliance with which the CM sent to
Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on
October 29, 1952. 
 The 2 lighters were manned each by a patron and an assistant patron. 
 The patrons of both barges issued the corresponding carrier's receipts and that issued
by the patron of Barge No. 1025 reads in part:
 Received in behalf of S.S. Bowline Knot in good order and condition from
MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at
Manila onto S.S. Steel Navigator.
 FINAL DESTINATION: Boston.
 Early hours of October 30: LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp
loaded therein
 Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it
of its liability
 The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing,
reconditioning, and redrying. 
 total loss adds up to P60,421.02
 All abaca shipments of Macleod were insured with the Insurance Company of North America against all
losses and damages
 Macleod filed a claim for the loss it suffered with the insurance company and was paid P64,018.55
 subrogation agreement between Macleod and the insurance company wherein the Macleod
assigned its rights over the insured and damaged cargo
 October 28, 1953.: failing to recover from the carrier P60,421.02 (amount supported by receipts), the
insurance company instituted the present action 
 CA affirmed RTC: ordering CM to pay the insurance co.
ISSUE: W/N there was a contract of carriage bet. CM (carrier) and Macleod (shipper)

HELD: YES. Affirmed

 receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver,
and if actually no goods are received there can be no such contract
 The liability and responsibility of the carrier under a contract for the carriage of goods
commence on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and
delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to
deliver in that way
 Whenever the control and possession of goods passes to the carrier and nothing remains to be
done by the shipper, then it can be said with certainty that the relation of shipper and carrier
has been established
 As regards the form of the contract of carriage it can be said that provided that there is a meeting of the
minds and from such meeting arise rights and obligations, there should be no limitations as to form
 The bill of lading is not essential
 Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual
delivery and acceptance are sufficient to bind the carrier
 marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various
buoyancy compartments

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  Servando v. Phil. Steam Navigation Co., 117 SCRA 832 (1982)
FACTS:

 Clara Uy Bico (1,528 cavans of rice worth P40,907.50) and Amparo Servando (44 cartons of colored
paper toys and general merchandise worth P1,070.50) loaded on board Philippine Steam Navigation
Co.'s vessel, FS-176 for carriage from Manila to Pulupandan, Negros Occidental
 Bill of Lading: 
 Clause 14.  Carrier shall not be responsible for loss or damage to shipments billed
'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall
carrier be responsible for loss or damage caused by force majeure, dangers or
accidents of the sea or other waters; war; public enemies; . . . fire . ...
 Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were
discharged, complete and in good order, unto the warehouse of the Bureau of Customs
 2 pm: warehouse was razed by fire
 Before the fire, 907 cavans of rice were delivered by Uy Bico  
 Uy Bico and Servando filed a claim for the value but was rejected by Philippine Steam
 CFI: favored UY Bico and Sercando
 delivery of the shipment in question to the warehouse of the Bureau of Customs is not the
delivery contemplated by Article 1736
ISSUE: W/N Philippine Steam should not be liable because of the stipulation in the bill of lading exempting it
from fortuitous event

HELD: YES. set aside

 Agreement was in iteration of 

 Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be foreseen, or which, though foreseen,
were inevitable.
 'caso fortuito' presents the following essential characteristics: (1) the cause of the unforeseen and
unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be
independent of the human will; (2) it must be impossible to foresee the event which constitutes the 'caso
fortuito', or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to
render it impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be
free from any participation in the aggravation of the injury resulting to the creditor." In the case at bar,
the burning of the customs warehouse was an extraordinary event which happened independently of the
will of the appellant. The latter could not have foreseen the event.
 nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation

 Maerskline v. CA, 222 SCRA 108 (1993)

FACTS:
Parties
Carrier – Maersk Line
Consignee – Efren Castillo,  the proprietor of Ethegal Laboratories
Shipper – Eli Lilly. Inc.
Consignee imported from Eli Lilly. Inc. Puerto Rico 600,000 empty gelatin capsules for the manufacture of his
pharmaceutical products. The capsules were placed in six (6) drums of 100,000 capsules each valued at US $1,668.71.
The capsules were shipped on board MV Anders Maerskline for shipment to the Philippines via Oakland, California. For
unknown reasons, said cargo of capsules were misshipped and diverted to Richmond, Virginia, USA and then transported
back Oakland, Califorinia. It finally arrived after two months from the intended date of arrival. Consignee refused to
receive the goods due to its failure to arrive on time.

Consignee filed an action for rescission of contract with damages against the carrier and the shipper due to gross
negligence and undue delay in the delivery of the goods.

Carrier’s allegation: The shipment was transported in accordance with the provisions of the covering bill of lading and
that its liability under the law on transportation of good attaches only in case of loss, destruction or deterioration of the
goods as provided for in Article 1734 of Civil Code
Shipper’s allegation (Answer with compulsory and cross-claim): The delay in the arrival of the subject merchandise was
due solely to the gross negligence of petitioner Maersk Line. The complaint against Eli Lilly, Inc. was dismissed.
Trial court’s decision: Carrier liable.
CA’s decision: affirmed with modification the lower court’s decision.
ISSUE:
Whether or not the carrier is liable for the delay in the delivery of the shipment.
RULING:
Yes. While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are
not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at
a given date or time, delivery of shipment or cargo should at least be made within a reasonable time. A delay in delivery
of gelatin capsules for use in pharmaceutical products for a period of two months and sevens days is considered beyond
the realm of reasonableness. Moreover, failure of the carrier to explain cause of delay in the delivery of the shipment
makes it liable for breach of contract of carriage through gross negligence amounting to bad faith, entitling consignee’s
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recovery of moral damages. The unexplained misshipment of the goods by the common carrier constitutes gross
carelessness or negligence amounting to wanton misconduct which justifies an award of exemplary damages to the
aggrieved party. Moreover,  attorney’s fees are generally not recoverable, but in this case since carrier acted with gross
negligence amounting to bad faith consignee is entitled to reasonable attorney’s fees.

 Macam v. CA, 313 SCRA 77 (1999)

FACTS:
On 6 April 1989, petitioner Benito Macam shipped on board the vessel Nen Jiang, owned and operated by respondent
China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. boxes of watermelons and
mangoes which were covered by bill of ladings and exported through letters of credit issued by National Bank of
Pakistan, Hongkong (Pakistan Bank). The Bills of Lading contained the following pertinent provision: “One of the Bills of
Lading must be surrendered duly endorsed in exchange for the goods or delivery order.” The shipment was bound for
Hongkong with Pakistan Bank as consignee and Great Prospect Company of Kowloon, Hongkong (GPC) as notify party.
On 6 April 1989, copies of the bills of lading and commercial invoices were submitted to petitioner’s depository bank,
Consolidated Banking Corporation (Solidbank), which paid petitioner in advance the total value of the shipment.

Upon arrival in Hongkong and after receiving a telex instruction, the shipment was delivered by respondent Wallem
directly to GPC, not to Pakistan Bank, and without the required bill of lading having been surrendered. Subsequently,
GPC failed to pay Pakistan Bank such that the latter, still in possession of the original bills of lading, refused to pay
petitioner through Solidbank.

ISSUE:
Is Wallem liable for the goods it delivered to GPC without presentation of the bills of lading and bank guarantee?
RULING:
NO. Wallem is not liable for the following reasons:
1. It delivered the goods to the person who has the right to receive them. This is in accordance with Art. 1736 which
states that: The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the
provisions of article 1738. GPC, even though designated as the notify party in the bills of lading, was clearly named as
buyer/importer in the export invoices.
2. The petitioner sent instructions through telex to deliver various shipments to the respective consignees without need
of presenting the bill of lading and bank guarantee per the respective shipper’s request since “for prepaid shipt ofrt
charges already fully paid.” GPC is listed as one among the several consignees in the telex.

 Delsan Transport Lines, Inc. v. American Home Assurance Corp., G.R. No.
149019, August 15, 2006
FACTS:
Caltex Philippines entered into a one-year contract of affreightment with the petitioner, Delsan Transport Lines, Inc. to
transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Petitioner took
on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil
Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance
Corporation. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas
taking with it the entire cargo of fuel oil. Petitioner attributes the sinking of MT Maysun to fortuitous event or force
majeure.
The insurance company paid Caltex the insured value of the lost cargo and was subrogated of the rights of Caltex.
However, despite repeated demands, it failed to collect from petitioner carrier.

RTC’s decision: The vessel, MT Maysun, was seaworthy to undertake the voyage as determined by the Philippine Coast
Guard per Survey Certificate Report No. M5-016-MH upon inspection during its annual dry-docking and that the incident
was caused by unexpected inclement weather condition or force majeure, thus exempting the common carrier (herein
petitioner) from liability for the loss of its cargo.
CA’s decision: Reversed RTC’s decision. PAGASA weather report showed that the waves were not big. There was no
explanation as to what may have caused the sinking and found that the vessel was improperly manned. Hence, common
carrier is liable.
ISSUE:
Is petitioner exempt from liability due to fortuitous event?
RULING:
No. Petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its failure to
rebut the presumption of fault or negligence as common carrier occasioned by the unexplained sinking of its vessel, MT
Maysun, while in transit. From the testimonies of Jaime Jarabe and Francisco Berina, captain and chief mate,
respectively of the ill-fated vessel, it appears that a sudden and unexpected change of weather condition occurred in the
early morning of August 16, 1986; that at around 3:15 o’clock in the morning a squall (“unos”) carrying strong winds with
an approximate velocity of 30 knots per hour and big waves averaging eighteen (18) to twenty (20) feet high, repeatedly
buffeted MT Maysun causing it to tilt, take in water and eventually sink with its cargo. This tale of strong winds and big
waves by the said officers of the petitioner however, was effectively rebutted and belied by the weather report from the
Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), the independent government
agency charged with monitoring weather and sea conditions, showing that from 2:00 o’clock to 8:00 o’clock in the
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morning on August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while the height of the
waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject vessel sank.
Thus, petitioner’s vessel, MT Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no
squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.
NOTES:
 Seaworthiness relates to a vessel’s actual condition. Neither the granting of classification or the
issuance of certificates establishes seaworthiness. Authorities are clear that diligence in securing
certificates of seaworthiness does not satisfy the vessel owner’s obligation. Also securing the
approval of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage
does not establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no
obligation in relation to seaworthiness.
 The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice
and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice
and good conscience ought to pay. It is not dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues simply upon payment by the insurance
company of the insurance claim. Consequently, the payment made by the private respondent
(insurer) to Caltex (assured) operates as an equitable assignment to the former of all the remedies
which the latter may have against the petitioner.

 Westwind Shipping Corporation v. UCPB General Insurance Co., Inc., et al., G.R.
No. 200289, November 25, 2013
Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligence in vigilance over the goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.

FACTS

Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal containers/skids of tin-free steel for
delivery to the consignee, San Miguel Corporation The shipment was 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.

The shipment arrived in Manila and was discharged in the custody of the arrastre operator, Asian Terminals, Inc. During
the unloading operation six containers/skids sustained dents and punctures from the forklift used by the stevedores of
Ocean Terminal Services, Inc. in centering and shuttling the containers/skids. Orient Freight International, Inc., the
customs broker of SMC, withdrew from ATI the 197 containers/skids and delivered the same at SMC’s warehouse. It was
discovered upon discharge that additional nine containers/skids were also damaged due to the forklift operations; thus,
making the total number of 15 containers/skids in bad order.

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

ISSUE Whether Westwind and OFII are liable to exercise extraordinary diligence

RULING YES. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods transported by them. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to
the person who has a right to receive them.

In this case, since the discharging of the containers/skids, which were covered by only one bill of lading, had not yet
been completed at the time the damage occurred, there is no reason to imply that there was already delivery, actual or
constructive, of the cargoes to ATI.

The mere proof of delivery of goods in good order to the carrier, and their arrival in the place of destination in bad
order, make out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred,
the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some
other circumstances inconsistent with its liability.18

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

 Nedlloyd Lijnen B.V. Rotterdam v. Glow Laks Enterprises, Ltd., G.R. No.
156330, November 19, 2014
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.

In the present case, petitioners failed to prove that they did exercise the degree of diligence required by law over the
goods they transported. Indeed, aside from their persistent disavowal of liability by conveniently posing an excuse that
their extraordinary responsibility is terminated upon release of the goods to the Panamanian Ports Authority, petitioners
failed to adduce sufficient evidence they exercised extraordinary care to prevent unauthorized withdrawal of the
shipments.

FACTS
Petitioner Nedlloyd Lijnen B.V. Rotterdam (Nedlloyd) is a foreign corporation engaged in the business of carrying goods
by sea, whose vessels regularly call at the port of Manila. It is doing business in the Philippines thru its local ship agent,
co-petitioner East Asiatic Co., Ltd. (East Asiatic).

Respondent Glow Laks Enterprises,Ltd., is likewise a foreign corporation organized and existing under the laws of Hong
Kong. It is not licensed to do, and it is not doing business in, the Philippines.

Respondent loaded on board M/S Scandutch at the Port of Manila a total 343 cartoons of garments, complete and in
good order for pre-carriage to the Port of Hong Kong. The goods arrived in good condition in Hong Kong and were
transferred to M/S Amethyst for final carriage to Colon, Free Zone, Panama. Both vessels, M/S Scandutch and M/S
Amethyst, are owned by Nedlloyd represented in the Phlippines by its agent, East Asiatic. Upon arrival of the vessel at
the Port of Colon, petitioners purportedly notified the consignee of the arrival of the shipments, and its custody was
turned over tothe National Ports Authority in accordance with the laws, customs regulations and practice of trade in
Panama. By an unfortunate turn of events, however, unauthorized persons managed to forge the covering bills of lading
and on the basis of the falsified documents, the ports authority released the goods. Respondent filed a formal claim with
Nedlloyd for the recovery of the amount of US representing the invoice value of the shipment but to no avail,
subsequently, respondent initiated a civil case against Nedlloyd seeking for the recovery of the amount of the shipment.

Petitioners however disclaimed liability and asserted in their Answer that they were never remiss in their obligation as a
common carrier and the goods were discharged in good order and condition into the custody of the National Ports
Authority of Panama in accordance with the Panamanian law. They averred that they cannot be faulted for the release
of the goods to unauthorized persons, their extraordinary responsibility as a common carrier having ceased at the time
the possession of the goods were turned over to the possession of the port authorities.

The trial court ordered the dismissal of the complaint. On appeal, the Court of Appeals reversed the findings of the RTC
and held that under the New Civil Code, the discharge of the goods in to the custody of the ports authority therefore
does not relieve the common carrier from liability because the extraordinary responsibility of the common carriers lasts
until actual or constructive delivery of the cargoes to the consignee or to the person who has the right to receive them.
Absent any proof that the notify party or the consignee was informed of the arrival of the goods, the appellate court
held that the extraordinary responsibility of common carriers remains.

ISSUE Whether petitioners are liable for the misdelivery of goods under Philippine laws. (YES)

RULING
Under the New Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over goods, according to the circumstances of each case.
Common carriers are responsible for loss, destruction or deterioration of the goods unless the same is due to flood,
storm, earthquake or other natural disaster or calamity. Extraordinary diligence is that extreme care and caution which
persons of unusual prudence and circumspection use for securing or preserving their own property or rights. This
expecting standard imposed on common carriers in contract of carrier of goods is intended to tilt the scales in favor of
the shipper who is at the mercy of the common carrier once the goods have been lodged for the shipment. Hence, in
case of loss of goods in transit, the common carrier is presumed under the law to have been in fault or negligent.

Article 1736 and Article 1738 are the provisions in the New Civil Code which define the period when the common carrier
is required to exercise diligence lasts, viz:

Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goodsare unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or

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constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to
the provisions of article 1738.

Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods
are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of
the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. Explicit is the
rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the
time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stop page in transitu, and
terminates only after the lapseof a reasonable time for the acceptance, of the goods by the consignee or such other
person entitled to receive them.

It was further provided in the same statute that the carrier may be relieved from the responsibility for loss or damage to
the goods upon actual or constructive delivery of the same by the carrier to the consignee or to the person who has the
right to receive them. In sales, actual delivery has been defined as the ceding of the corporeal possession by the seller,
and the actual apprehension of the corporeal possession by the buyer or by some person authorized by him to receive
the goods as his representative for the purpose of custody or disposal. By the same token, there is actual delivery in
contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized
agent and a reasonable time is given him to remove the goods.

In this case, there is no dispute that the custody of the goods was never turned over to the consignee or his agents but
was lost into the hands of unauthorized persons who secured possession thereof on the strength of falsified documents.
The loss or the misdelivery of the goods in the instant case gave rise to the presumption that the common carrier is at
fault or negligent.

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

In the present case, petitioners failed to prove that they did exercise the degree of diligence required by law over the
goods they transported. Indeed, aside from their persistent disavowal of liability by conveniently posing an excuse that
their extraordinary responsibility is terminated upon release of the goods to the Panamanian Ports Authority, petitioners
failed to adduce sufficient evidence they exercised extraordinary care to prevent unauthorized withdrawal of the
shipments. Nothing in the New Civil Code, however, suggests, even remotely, that the common carriers’ responsibility
over the goods ceased upon delivery thereof to the custom authorities. To the mind of this Court, the contract of
carriage remains in full force and effect even after the delivery of the goods to the port authorities; the only delivery that
releases it from their obligation to observe extraordinary care is the delivery to the consignee or his agents. Even more
telling of petitioners’ continuing liability for the goods transported to the fact that the original bills of lading up to this
time, remains in the possession of the notify party or consignee.

It is evident from the review of the records and by the evidence adduced by the respondent that petitioners failed to
rebut the prima facie presumption of negligence. We find no compelling reason to depa1i from the ruling of the Court of
Appeals that under the contract of carriage, petitioners are liable for the value of the misdelivered goods.

2. Duty to Exercise Extraordinary

Diligence Rationale
 Kapalaran Bus Lines v. Coronado, et al., 176 SCRA 792 (reiterated in Cacho v.
Manahan, G.R. No. 203081, January 17, 2018)
Legal Issue:
Whether or not KAPALARAN BUS LINE (KBL) is liable for damages from the collision.

Facts of the Case:

The jeepney driven by Lope Grajera was then coming from Pila, Laguna and traversing the an old highway
towards Sta. Cruz collided with a KBL bus driven by its regular driver Virgilio Llamoso. As testified to by Atty. Conrado L.
Manicad who was driving a Mustang car coming from the direction of Sta. Cruz and proceeding towards the direction of
Manila, he stopped at the intersection to give way to the jeepney driven by Grajera. The sketch marked very clearly that
the jeepney had already traversed the intersection when it met the KBL bus head-on. It is also obvious that the point of
impact was on the right lane of the highway which is the lane properly belonging to the jeepney. Judging from the
testimony of Atty. Conrado L. Manicad and the sketch (Exhibit 'E'), the sequence of events shows that the first vehicle to
arrive at the intersection was the jeepney. Seeing that the road was clear, the jeepney which had stopped at the
intersection began to move forward, and for his part, Atty. Manicad stopped his car at the intersection to give way to the
jeepney. The KBL bus had no more room within which to stop without slamming into the rear of the vehicle behind the
car of Atty. Manicad. The KBL driver chose to gamble on proceeding on its way, unfortunately, the jeepney driven by
Grajera, which had the right-of-way, was about to cross the center of the highway and was directly on the path of the

6
KBL bus. The impact indicates that the KBL bus was travelling at a fast rate of speed because, after the collision, it did not
stop; it travelled for another 50 meters and stopped only when it hit an electric post.

Ruling of the Court:

YES. KBL is liable for the damages in the collision.

Reason behind the Ruling:

The patent and gross negligence on the part of the petitioner Kapalaran's driver raised the legal presumption
that Kapalaran as employer was guilty of negligence either in the selection or in the supervision of its bus driver, where
the employer is held liable for damages; it has of course a right of recourse against its own negligent employee. The
liability of the employer under Article 2180 of the Civil Code is direct and immediate; it is not conditioned upon prior
recourse against the negligent employee and a prior showing of the insolvency of such employee. So far as the record
shows, petitioner Kapalaran was unable to rebut the presumption of negligence on its own part. The award of moral
damages against petitioner Kapalaran is not only entirely in order; it is also quite modest consideirng Dionisio Shinyo's
death during the pendency of this petition, a death hastened by, if not directly due to, the grievous injuries sustained by
him in the violent collision.

How duty is complied

 Juntilla v. Fontanar, 136 SCRA 624
FACTS:
 Jeepney was driven by Berfol Camoro from Danao City to Cebu City.  It was Clemente Fontanar but was
actually owned by defendant Fernando Banzon.
 When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle.
Roberto Juntilla was sitting at the front seat was thrown out of the vehicle.
 Upon landing on the ground, he momentarily lost consciousness.  When he came to his senses,
he found that he had a lacerated wound on his right palm.  He also injured his left arm, right
thigh and on his back.
 Because of his shock and injuries, he went back to Danao City but on the way, he discovered that his
"Omega" wrist watch worth P 852.70 was lost.  Upon his arrival in Danao City, he immediately entered
the Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed
immediately to the place of the accident and look for the watch.
 Roberto Juntilla filed for breach of contract with damages 
 Respondents: beyond the control since tire that exploded was newly bought and was only
slightly used
 RTC: favored Roberto Juntilla 
 CA: Reversed since accident was due to fortuitous event
ISSUE: W/N there is a fortuitous event

HELD: NO. CA reversed, RTC reinstated.

 passenger jeepney was running at a very fast speed before the accident
 at a regular and safe speed will not jump into a ditch when its right rear tire blows up
 passenger jeepney was overloaded
 3 passengers in the front seat  
 14 passengers in the rear
 caso fortuito presents the following essential characteristics: 
 (1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the human will. 
 (2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen,
it must be impossible to avoid. 
 (3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner.

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  (4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting to
the creditor. 
 In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the
human will. The accident was caused either through the negligence of the driver or because of
mechanical defects in the tire. Common carriers should teach their drivers not to overload their vehicles,
not to exceed safe and legal speed limits, and to know the correct measures to take when a tire blows up
thus insuring the safety of passengers at all times
 the source of a common carrier's legal liability is the contract of carriage, and by entering into the said
contract, it binds itself to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of a very cautious person, with a due regard for all the circumstances. The
records show that this obligation was not met by the respondents
 respondents likewise argue that the petitioner cannot recover any amount for failure to prove such
damages during the trial
 findings of facts of the City Court of Cebu 

 Eastern Shipping Lines v. IAC, 150 SCRA 463

FACTS: En route from Kobe, Japan to Manila, M/S Asiatica, the vessel owned by petitioner carrier, Eastern Shipping Lines
caught fire and sank, resulting in the total loss of ship and cargo. The crew did not know what caused the fire. When they
noticed the smoke, there was already a big fire which might have started twenty-four (24) hours before they became
aware of it. The respective respondent Insurers paid the corresponding marine insurance values to the consignees
concerned and were thus subrogated unto the rights of the latter as the insured.
See details below:

G.R. No. L-69044

Insurer 1 – Development Insurance and Surety Corporation
Cargo and Consignee 1a – 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to
Philippine Blooming Mills Co., Inc.
Cargo and Consignee 1b – 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc.
G.R. No. 71478
Insurer 2 – Nisshin Fire & Marine Insurance Co
Cargo and Consignee 2 – 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles
Apparel Corporation
Insurer 3 – Dowa Fire & Marine Insurance Co., Ltd.
Cargo and Consignee 3 – Two cases of surveying instruments consigned to Aman Enterprises and General Merchandise.
ISSUES:
1. Which law is applicable, the Civil Code provisions on Common Carriers or the Carriage of Goods by Sea Act?
2. Who has the burden of proof to show negligence of the carrier? It is petitioner-carrier’s contention that in accordance
with COGSA, when loss of fire is established, burden of proof on negligence shifts to the shipper.
3. Will loss caused by fire exempt the carrier from liability?
4. What is the extent of carrier’s liability?

RULING:
1. The law of the country to which the goods are to be transported governs the liability of the common carrier in case of
their loss, destruction or deterioration. As the cargoes were transported from Japan to the Philippines, the liability of
petitioner-carrier is governed primarily by the Civil Code. However, in all matters not regulated by the Civil Code, the
rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. Thus, the
Carriage of Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code.
2. In accordance with the New Civil Code, the burden of proving that it has exercised the extraordinary diligence
required by law, after finding that transported good were lost caused by fire falls upon the carrier.

3. No. Fire may not be considered a natural disaster or calamity like those enumerated in Article 1734 as it arises almost
invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused
by lightning or by other natural disaster or calamity.

If fire were to be considered a “natural disaster” within the meaning of Article 1734 of the Civil Code, it is required under
Article 1739 that the “natural disater” must have been the proximate and only cause of the loss,  and that the carrier
has exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster.
4. Since there was actual fault on the part of the carrier, it is liable for the loss. Article 1749 allows the limitation of
liability. Although the Code expressly permits a stipulation limiting the liability of a carrier it does not of itself limit the
liability to a fixed amount per package. Thus, the COGSA which is suppletory to the provisions of the Civil Code,
supplements by establishing a statutory provision limiting the carrier’s liability in the absence of a declaration of a higher
value of goods, which should not exceed US$500 per package.
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NOTES:
Carriage Of Goods By Sea Act (COGSA)
APPLICATION

As a general rule, COGSA only applies to foreign trade. But it may also apply to domestic trade when there is a
paramount clause in the contract.

PARAMOUNT CLAUSE – It is a clause which attracts the application of another law to govern the rights and obligations of
the parties. Hence, the parties can stipulate that the COGSA will apply to the contract of carriage and not the Civil Code
or Code of Commerce.
HIERARCHY OF LAWS

A. If the COMMON carrier is coming to the Philippines:

1st: Civil Code

2nd: COGSA (in foreign trade)
3rd: Code of Commerce

B. If the PRIVATE carrier is coming to the Philippines:

1st: COGSA
2nd: Code of Commerce
3rd: Civil Code (excluding rules on common carriers)

C. If the private or common carrier is from the Philippines to a foreign country:

 Republic of the Philippines v. Lorenzo Shipping Corp., G.R. No.

153563, February 07, 2005
 Victory Liner v. Race, G.R. No. 164820, March 28, 2007
 Victory Liner, Inc. v. Race, G.R. No. 164820, December 8, 2008

To whom duty is owed

 PAL v. CA, 106 SCRA 391
 Cangco v. Manila Railroad Co., 38 Phil. 768
FACTS:

Jose Cangco was in the employment of Manila Railroad Company. He lived in the pueblo of San Mateo, in the province
of Rizal, which is located upon the line of the defendant railroad company; and in coming daily by train to the company’s
office in the city of Manila where he worked, he used a pass, supplied by the company, which entitled him to ride upon
the company’s trains free of charge.

During his ride in the train he arose from his seat and makes his way to the exit while the train is still on travel. When the
train has proceeded a little farther Jose Cangco step down into the cement platform but unfortunately step in to a sack
of watermelon, fell down and rolled under the platform and was drawn under the moving car which resulting to his arm
to be crashed and lacerated. He was rushed to the hospital and sued the company and the employee who put the sack
of watermelon in the platform.

The accident occurred between 7 and 8 o’ clock on the dark night. It is that time of the year that may we considered as
season to harvest watermelon explaining why there are sacks of watermelon in the platform. The plaintiff contends that
it is the negligence of the Manila Railroad Co. on why they let their employees put a hindrance in the platform that may
cause serious accident. The defendant answered that it is the lack of diligence on behalf of the plaintiff alone on why he
did not wait for the train to stop before alighting the train.

ISSUE:

Whether or not the company is liable or there is a contributory negligence on behalf of the plaintiff.

RULING:

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There is no contributory negligence on behalf of the plaintiff. The Supreme Court provides some test that may find the
contributory negligence of a person. Was there anything in the circumstances surrounding the plaintiff at the time he
alighted from the train which would have admonished a person of average prudence that to get off the train under the
conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to
desist was contributory negligence.

Alighting from a moving train while it is slowing down is a common practice and a lot of people are doing so every day
without suffering injury. Cangco has the vigor and agility of young manhood, and it was by no means so risky for him to
get off while the train was yet moving as the same act would have been in an aged or feeble person. He was also
ignorant of the fact that sacks of watermelons were there as there were no appropriate warnings and the place was
dimly lit.

Article 1173, first paragraph: The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of that persons, of the time and of the
place. When negligence shows bad faith, the provisions of Article 1171 and 2201, paragraph 2, shall apply.

In the case the proximate cause of the accident is the lack of diligence of the company to inform their employees to not
put any hindrance in the platform like sacks of watermelon. The contract of defendant to transport plaintiff carried with
it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains (civil code,
article 1258). That duty, being contractual, was direct and immediate, and its non-performance could not be excused by
proof that the fault was morally imputable to defendant’s servants. Therefore, the company is liable for damages against
Cangco.

Imbued with public interest

 Solidbank Corp. v. Sps. Tan, G.R. No. 167346, April 2, 2007
http://www.thezamboanguena.com/2018/01/solid-bank-corp-v-spouses-tan-g-r-no-167346-02-
apr-2007-520-scra-123/

In carriage by sea

Seaworthiness
Warranty
 Caltex Philippines v. Sulpicio Lines, 315 SCRA 709
FACTS:

 December 19, 1987 8 pm: motor tanker MT Vector owned and operated by Vector Shipping
Corporation carried 8,800 barrels of petroleum products of Caltex by virtue of a charter contract 
 December 20, 1987 6:30 am: MV Doña Paz passenger and cargo vessel owned and operated by Sulpicio
Lines, Inc. left the port of Tacloban headed for Manila with 1,493 passengers indicated in the Coast Guard
Clear
 December 20, 1987: MT Vector collided with MV Doña Paz in the open sea within the vicinity of Dumali
Point between Marinduque and Oriental Mindoro, killing almost all the passengers and crew members of
both ships except for 24 survivors 
 MV Doña Paz carried an estimated 4,000 passengers most were not in the passenger manifest
 board of marine inquiry in BMI Case No. 653-87 after investigation found that the MT Vector, its
registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation,
were at fault and responsible for its collision with MV Doña Paz
 February 13, 1989: Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother
respectively, filed a complaint for “Damages Arising from Breach of Contract of Carriage” against Sulpicio
Lines, Inc. for the death of Sebastian E. Cañezal (public school teacher 47 years old) and his 11-year old
daughter Corazon G. Cañezal
 Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano, Vector Shipping
Corporation and Caltex 
 Sulpicio alleged that Caltex chartered MT Vector with gross and evident bad faith
knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy
and a hazard to safe navigation
 RTC: dismissed the third party complaint and favored the Cañezal's against Sulpicio Lines
 CA: included Caltex as liable party
ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable for damages resulting from a collision between the
chartered vessel and a passenger ship

HELD: NO. Grants Petition. CA set aside.

 respective rights and duties of a shipper and the carrier depends not on whether the carrier is public or
private, but on whether the contract of carriage:
 bill of lading or equivalent shipping documents; or 
 charter party or similar contract on the other
 Caltex and Vector entered into a contract of affreightment, also known as a voyage
charter

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  charter party
 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
 Charter parties fall into three main categories:  
 (1) Demise or bareboat
 charterer mans the vessel with his own people and becomes, in effect, the owner for
the voyage or service stipulated, subject to liability for damages caused by negligence 
 common carrier becomes private
 contract of affreightment 
 one by which the owner of a ship or other vessel lets the whole or part of her to a
merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight
 may be either:
 (2)time charter - wherein the leased vessel is leased to the charterer for a
fixed period of time
 (3) voyage charter - wherein the ship is leased for a single voyage
 charter-party provides for the hire of the vessel only, either for a determinate period
of time or for a single or consecutive voyage, the ship owner to supply the ship’s
store, pay for the wages of the master of the crew, and defray the expenses for the
maintenance of the ship
 charterer is free from liability to third persons in respect of the ship
 does not convert the common carrier into a private carrier
 Carriage of Goods by Sea Act :

Sec. 3.  (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence
to -

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

xxx                               xxx                                    xxx

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship.  For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew.  The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code
 a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew,
the carrier being obliged by law to impliedly warrant its seaworthiness
 nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping
his cargoes
 Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years
before the tragic incident occurred in 1987.  Past services rendered showed no reason for Caltex to
observe a higher degree of diligence.
 Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was
convinced of its seaworthiness

Sufficient evidence
 Delsan Transport v. CA, G.R. No. 127897, Nov. 15, 2001
FACTS:

Caltex entered into a contract of affreightment with Delsan Transport Lines, Inc., for a period of one year whereby the
said common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts
of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel
oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private
respondent, American Home Assurance Corporation.

On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early
morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.

The Respondent (insurance) paid the Caltex the amount of P5,096,635.57 representing the amount of the value of the
lost cargo.

ISSUE:

1
1
1. Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo
amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner.

2. Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money
for lack of cause of action

RULING:

No, under the law, extra ordinary diligence is required by the common carrier in taking good care of the goods. The
common carrier is presumed negligent unless the contrary provides otherwise. The right of subrogation has its roots in
equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice and good conscience ought to pay. It is not dependent upon, nor does it grow
out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance
company of the insurance claim.

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

 National Steel Corp v. CA, 283 SCRA 45

FACTS:

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the
general public. Its services are available only to specific persons who enter into a special contract of charter party with
its owner. The ship is a private carrier, and it is in this capacity that its owner, Vlasons Shipping, Inc. (VSA), entered into a
contract of affreightment or contract of voyage charter hire with National Steel Corporation (NSC) on 17 July 1974,
whereby NSC hired VSI’s vessel, the MV ‘VLASONS I’ to make 1 voyage to load steel products at Iligan City and discharge
them at North Harbor, Manila

The shipment was placed in the 3 hatches of the ship which arrived with the cargo at Pier 12, North Harbor, Manila, on
12 August 1974. The following day, when the vessel’s 3 hatches containing the shipment were opened by NSC’s agents,
nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The cargo was discharged
and unloaded by stevedores hired by the Charterer.

On 6 September 1974 NSC filed with VSI its claim for damages suffered due to the downgrading of the damaged
tinplates in the amount of P941,145.18. Then on 3 October 1974, NSC formally demanded payment of said claim but VSI
refused and failed to pay.
On appeal, and on 12 August 1993, the Court of Appeals modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of litigation. NSC and
VSI filed separate motions for reconsideration. The CA denied both motions. NSC and VSI filed their respective petitions
for review before the Supreme Court.

ISSUE:

Whether or not VSI contracted with NSC as a common carrier or a private carrier.

RULING:

Article 1732 of the Civil Code defines a common carrier as “persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public.” It has been held that the true test of a common carrier is the carriage of passengers or goods,
provided it has space, for all who opt to avail themselves of its transportation service for a fee.

A carrier which does not qualify under the test of a common carrier is deemed a private carrier. “Generally, private
carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general
public. The most typical, although not the only form of private carriage, is the charter party, a maritime contract by
which the charterer, a party other than the shipowner, obtains the use and service of all or some part of a ship for a
period of time or a voyage or voyages.”Herein, VSI did not offer its services to the general public. It carried passengers or
goods only for those it chose under a “special contract of charter party.” The MV Vlasons I “was not a common but a
private carrier.” Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to
the cargo, are determined primarily by stipulations in their contract of private carriage or charter party.

In Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, the
Court ruled that “in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve

1
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the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public
cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy
embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law
in contracts involving common carriers.”

From the parties’ Contract of Voyage Charter Hire, dated 17 July 1974, VSI “shall not be responsible for losses except on
proven willful negligence of the officers of the vessel.” The NANYOZAI Charter Party, which was incorporated in the
parties’ contract of transportation further provided that the shipowner shall not be liable for loss of or damage to the
cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the
vessel seaworthy or to ensure that the same was “properly manned, equipped and supplied,” and to “make the holds
and all other parts of the vessel in which cargo was carried, fit and safe for its reception, carriage and preservation.” The
NANYOZAI Charter Party also provided that “owners shall not be responsible for split, chafing and/or any damage unless
caused by the negligence or default of the master or crew.”
Herein, NSC must prove that the damage to its shipment was caused by VSI’s willful negligence or failure to exercise due
diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the
burden of proof was placed on NSC by the parties’ agreement.
Article 361 of the Code of Commerce provides that “Merchandise shall be transported at the risk and venture of the
shipper, if the contrary has not been expressly stipulated. Therefore, the damage and impairment suffered by the goods
during the transportation, due to fortuitous event, force majeure, or the nature and inherent defect of the things, shall
be for the account and risk of the shipper. The burden of proof of these accidents is on the carrier.”

Article 362 of the Code of Commerce provides that “The carrier, however, shall be liable for damages arising from the
cause mentioned in the preceding article if proofs against him show that they occurred on account of his negligence or
his omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of
lading, making him to believe that the goods were of a class or quality different from what they really were.”

As the MV Vlasons I was a private carrier, the shipowner’s obligations are governed by the foregoing provisions of the
Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of negligence
on a common carrier.

The Supreme Court denied the consolidated petitions; and affirmed the questioned Decision of the Court of Appeals
with the modification that the demurrage awarded to VSI is deleted. No pronouncement as to costs.

 Loadstar Shipping v. CA, 315 SCRA 339

FACTS:

On November 19, 1984, loadstar received on board its M/V “Cherokee” bales of lawanit hardwood, tilewood and
Apitong Bolidenized for shipment, of which the goods were insured for the with the Manila Insurance Company against
various risks including “Total Loss by Total Loss of the Vessel”. The vessel sank off at Limasawa Island along with its
cargo. As a result of the total loss of its shipment, the consignee made a claim with loadstar which, however, ignored the
same. As the insurer, MIC paid to the insured in full settlement of its claim, and the latter executed a subrogation receipt
therefor. MIC thereafter filed a complaint against loadstar alleging that the sinking of the vessel was due to fault and
negligence of loadstar and its employees.

In its answer, Loadstar denied any liability for the loss of the shipper’s goods and claimed that the sinking of its vessel
was due to force majeure. The court a quo rendered judgment in favor of MIC, prompting loadstar to elevate the matter
to the Court of Appeals, which however, agreed with the trial court and affirmed its decision in toto. On appeal, loadstar
maintained that the vessel was a private carrier because it was not issued a Certificate of Public Convenience, it did not
have a regular trip or schedule nor a fixed route, and there was only “one shipper, one consignee for a special cargo”.

ISSUE:

Whether or not M/V Cherokee was a private carrier so as to exempt it from the provisions covering Common Carrier?

HELD:

Loadstar is a common carrier.

The Court held that LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic,
occasional, episodic or unscheduled. Further, the bare fact that the vessel was carrying a particular type of cargo for one
shipper, which appears to be purely co-incidental; it is no reason enough to convert the vessel from a common to a
private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers.

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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.

Proper Manning
 Coastwise Lighterage v. CA, 245 SCRA 796
FACTS:
The consignee entered into a contract of affreightment which is to transport molasses from the province of Negros to
Manila with the carrier using the latter’s barges. The barges were towed in tandem by the tugboat MT Marica, also
owned by the carrier. While approaching the pier of destination, one of the barges, “Coastwise 9” was struck and as a
result, the molasses at the cargo tanks were contaminated and rendered unfit for the use it was intended. The consignee
rejected the shipment of molasses as a total loss. The insurer paid the consignee the amount representing the value of
the damaged cargo of molasses.
Parties:
Consignee – Pag-asa Sales, Inc.
Carrier – Coastwise Lighterage Corporation (Coastwise)
Insurer of the cargo – Philippine General Insurance Company (PhilGen)
ISSUES:
1. WON Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment which it
entered into with the consignee, Pag-asa Sales, Inc. What is the extent of its liability over the lost, damaged and
deteriorated cargo?
2. WON the insurer was subrogated into the rights of the consignee against the carrier, upon payment by the insurer of
the value of the consignee’s goods lost while on board one of the carrier’s vessels.
RULING:
1. No. The contract of affreightment entered into between the consignee and the carrier did not convert the latter into a
private carrier, but remained a common carrier and was still liable as such. The consignee only leased three of
petitioner’s vessels, in order to carry cargo from one point to another, but the possession, command and navigation of
the vessels remained with petitioner carrier.
As a common carrier, the presumption of negligence attaches to it when the goods it transports are lost, destroyed or
deteriorated. This presumption may be overcame only by proof of the exercise of extraordinary diligence such as placing
a person with navigational skills. However, the carrier failed to overcome this presumption of negligence as the patron
did not possess the necessary license to navigate.
2. Petitioner carrier was liable for breach of the contract of carriage it entered into with the consignee. In accordance
with Art. 2207, payment by the insurer to the assured operated as an equitable assignment to the former of all remedies
which the latter may have against the third party whose negligence or wrongful act caused the loss. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer,
upon payment to the assured will be subrogated to the rights of the assured to recover from the wrongdoer to the
extent that the insurer has been obligated to pay.

 
NOTES:
The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of affreightment)  –
Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for the voyage
or service stipulated. The charterer mans the vessel with his own people and becomes the owner pro hac vice, subject to
liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and
exclusively relinquish possession, command and navigation thereof to the charterer, anything short of such a complete
transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all.
On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of its space to
haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and under such
contract the general owner retains the possession, command and navigation of the ship, the charterer or freighter
merely having use of the space in the vessel in return for his payment of the charter hire. . . . . . . . . An owner who
retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must answer
for any breach of duty as to the care, loading and unloading of the cargo. . . . – Puromines, Inc. vs. Court of Appeals,

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 Manila Steamship v. Abdulhaman, 100 Phil. 32
http://noobcasedigest.blogspot.com/2018/12/manila-steamship-vs-
abdulhanan-case.html

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Proper Loading
 Negros Navigation v. CA, 281 SCRA 534 (applying Mecenas v.
CA)
FACTS:

In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin
ticketsfor his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets were
for Voyage of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980.

The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro, with the
M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and
Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the sea
tragedy. The bodies of some of the victims were found and brought to shore, but the four members of private
respondents’ families were never found.

Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34, against the
Negros Navigation, the Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation
(PNOC/STC), seeking damages for the death of the four family members that were never found. Petitioner, however,
denied that the four relatives of private respondents actually boarded the vessel as shown by the fact that their bodies
were never recovered. Petitioner further averred that the Don Juan was seaworthy and manned by a full and competent
crew, and that the collision was entirely due to the fault of the crew of the M/T Tacloban City. The RTC ruled in favor of
the complainants and ordered petitioner to pay for the damages. The CA affirmed the said decision.

ISSUE:

Whether petitioner is liable for damages to the full extent

RULING:

Prior to this case, a previous case was brought for the death of other passengers. Said case is entitledMecenas v.
Intermediate Appellate Court .In that case it was found that although the proximate cause ofthe mishap was the
negligence of the crew of the M/TTacloban City, the crew of theDon Juanwas equallynegligent as it found that the
latter’s master, Capt. Rogelio Santisteban, was playing mahjong at the timeof collision, and the officer on watch, Senior
Third Mate Rogelio De Vera, admitted that he failed to call theattention of Santisteban to the imminent danger facing
them. This Court found that Capt. Santisteban andthe crew of the M/VDon Juan failed to take steps to preventthe
collision or at least delay the sinking of theship and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the shipcaptain and
other crew members while on board the ship and failing to keep the M/VDon Juanseaworthyso much so that the ship
sank within 10 to 15 minutes of its impact with the M/TTacloban City .

In addition, the Court found that the Don Juan was overloaded
On the Doctrine of stare decisis: Adherence to the Mecenas case is dictated by this Courts policy of maintaining stability
in jurisprudence in accordance with the legal maxim stare decisis et non quieta movere (Follow past precedents and do
not disturb what has been settled.) Where, as in this case, the same questions relating to the same event have been put
forward by parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare
decisis is a bar to any attempt to re litigate the same issue.

Proper Storage
 Phil. Home Assurance Corp. v. CA, 257 SCRA 468
In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises from some
act of man or by human means. It cannot be an act of God unless caused by lightning or a natural disaster or casualty not
attributable to human agency.

FACTS

Eastern Shipping Lines, Inc. (ESLI) loaded on board its SS Eastern Explorer in Kobe, Japan, shipments for carriage to
Manila and Cebu, consigned to William Lines, Inc., Orca's Company, Pan Oriental Match Company and Ding Velayo under
their respective Bills of Lading.

While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the
accommodation area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the
acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death
and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced
the master and the crew to abandon the ship.

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The cargoes which were saved were loaded to another vessel for delivery to their original ports of destination. ESLI
charged the consignees several amounts corresponding to additional freight and salvage charges. The charges were all
paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees.

PHAC, as subrogee of the consignees, thereafter filed a complaint against ESLI to recover the sum paid under protest on
the ground that the same were actually damages directly brought about by the fault, negligence, illegal act and/or
breach of contract of ESLI.

ISSUE

Whether or not the fire that gutted the ship is a natural disaster.

RULING

NO. In absolving respondent carrier of any liability, the Court of Appeals sustained the trial court's finding that the fire
that gutted the ship was a natural disaster or calamity. Petitioner takes exception to this conclusion and we agree.

In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises from some
act of man or by human means. It cannot be an act of God unless caused by lightning or a natural disaster or casualty not
attributable to human agency.

In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that by reason
thereof, the same exploded despite efforts to extinguish the fire. Neither is there any doubt that the acetylene cylinder,
obviously fully loaded, was stored in the accommodation area near the engine room and not in a storage area
considerably far, and in a safe distance, from the engine room. Moreover, there was no showing, and none was alleged
by the parties, that the fire was caused by a natural disaster or calamity not attributable to human agency. On the
contrary, there is strong evidence indicating that the acetylene cylinder caught fire because of the fault and negligence
of respondent ESLI, its captain and its crew.

Verily, there is no merit in the finding that the fire was not the fault or negligence of respondent but a natural disaster or
calamity. The records are simply wanting in this regard. Respondent Eastern Shipping Lines, Inc. is thus ordered to return
to petitioner Philippine Home Assurance Corporation the amount it paid under protest in behalf of the consignees
herein.

 Phil. American Gen. Insurance v. CA, 273 SCRA 260

Facts:
July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by Felman, 7,500 cases of 1-liter Coca-Cola soft
drink bottles to be transported to Zamboanga City to Cebu. The shipment was insured with Philamgen.

July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim with respondent Felman for recovery of
damages. Felman denied thus prompted cocacola to file an insurance claim with Philamgen. Philamgen later on claimed
its right of subrogation against Felman which disclaimed any liability for the loss.

Philamgen alleged that the sinking and loss were due to the vessel's unseaworthiness, that the vessel was improperly
manned and its officers were grossly negligent. Felman filed a motion to dismiss saying that there is no right of
subrogation in favor of Philamgen was transmitted by the shipper.

RTC dismissed the complaint of Philamgen. CA set aside the dismissal and remanded the case to the lower court for trial
on the merits. Felman filed a petition for certiorari but was denied.

RTC rendered judgment in favor of Felman. it ruled that the vessel was seaworthy when it left the port of Zamboanga as
evidenced by the certificate issued by the Phil. Coast Guard and the ship owner’s surveyor. Thus, the loss is due to a
fortuitous event, in which, no liability should attach unless there is stipulation or negligence.

On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo for being top-heavy and the cocacola
bottles were also improperly stored on deck. Nonetheless, the CA denied the claim of Philamgen, saying that Philamgen
was not properly subrogated to the rights and interests of the shipper plus the filing of notice of abandonment had
absolved the ship owner from liability under the limited liability rule.

Issues:

(a) Whether the vessel was seaworthy, (b) whether limited liability rule should apply and (c) whether Philamgen was
properly subrogated to the rights against Felman.

Ruling:
(a) The vessel was unseaworthy. The proximate cause thru the findings of the Elite Adjusters, Inc., is the vessel's being
top-heavy. Evidence shows that days after the sinking coca-cola bottles were found near the vicinity of the sinking which
would mean that the bottles were in fact stowed on deck which the vessel was not designed to carry substantial amount
of cargo on deck. The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height thus
making it unstable.

(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for the negligent acts of the captain in the care
of the goods. This liability however can be limited through abandonment of the vessel, its equipment and freightage.

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Nonetheless, there are exceptions wherein the ship agent could still be held answerable despite the abandonment, as
where the loss or injury was due to the fault of the ship owner and the captain. The international rule is that the right of
abandonment of vessels, as legal limitation of liability, does not apply to cases where the injury was occasioned by the
fault of the ship owner. Felman was negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to the assurer that the vessel is seaworthy and
such warranty is as much a term of the contract as if expressly written on the face of the policy. However, the implied
warranty of seaworthiness can be excluded by terms in writing in the policy of the clearest language. The marine policy
issued by Philamgen to cocacola has dispensed that the "seaworthiness of the vessel as between the assured and the
underwriters in hereby admitted."

The result of the admission of seaworthiness by Philamgen may mean two things: (1) the warranty of seaworthiness is
fulfilled and (2) the risk of unseaworthiness is assumed by the insurance company. This waiver clause would mean that
Philamgen has accepted the risk of unseaworthiness, therefore Philamgen is liable.

On the matter of subrogation, it is provided that;

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

Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent upon, nor does it grow out of any privity
of contract or upon payment by the insurance company of the insurance claim. It accrues simply upon payment by the
insurance company of the insurance claim.

Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring
an action as subrogee against FELMAN. Having failed to rebut the presumption of fault, the liability of FELMAN for the
loss of the 7,500 cases of 1-liter Coca-Cola soft drink bottles is inevitable.

WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE
AMERICAN GENERAL INSURANCE CO., INC.

 Belgian Overseas v. Phil. First Insurance, 383 SCRA 23

Facts:

-    CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold

Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation.

-    On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the

subject cargo. Four (4) coils were found to be in bad order.

-    Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel

Trading Corporation declared the same as total loss.

-    Philippine First Insurance paid the claim of Philippine Steel and was thus subrogated.

-    Philippine First then instituted a complaint for recovery of the amount paid to the consignee as insured.

-    Belgian claims that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect

of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or

omission of the shipper of the goods or their representatives. Belgian further argued that their liability, if there be any,

should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, Belgian

averred that, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to

said shipment.

-    The RTC dismissed the complaint.

-    The CA reversed and ruled that Belgian were liable for the loss or the damage of the goods shipped, because they had

failed to overcome the presumption of negligence imposed on common carriers. As to the extent of Belgian’s liability,

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the CA held that the package limitation under COGSA was not applicable, because the words "L/C No. 90/02447"

indicated that a higher valuation of the cargo had been declared by the shipper.

Issues:

-    Whether the notice of loss was timely filed. (Belgian claims that pursuant to Section 3, paragraph 6 of COGSA,

respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was

discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.)

Whether the package limitation of liability under COGSA is applicable. (Belgian contends that assuming that they are

liable their liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)of COGS

Held:

-    NO. Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their

destination constitutes a prima facie case of fault or negligence against the carrier.

-    In this case, Belgian failed to rebut the prima facie presumption of negligence. First, as stated in the Bill of Lading,

Belgian received the subject shipment in good order and condition in Germany. Second, prior to the unloading of the

cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the

metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally

Sheet issued by Jardine Davies Transport Services stated that the four coils were in bad order and condition. Normally, a

request for a bad order survey is made in case there is an apparent or a presumed loss or damage.Fourth, the Certificate
of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with

fresh water. Fifth, Belgian -- in a letteraddressed to the Philippine Steel --admitted that they were aware of the condition

of the four coils found in bad order and condition.

-    YES. First, the provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the

time of their receipt, has been the subject of a joint inspection or survey. Here, prior to unloading the cargo, an

Inspection Report as to the condition of the goods was prepared and signed by representatives of both parties. Second,

as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is

nonetheless filed within one year. This one-year prescriptive period also applies to the shipper, the consignee, the

insurer of the goods or any legal holder of the bill of lading.

-    A claim is not barred by prescription as long as the one-year period has not lapsed. In the present case, the cargo was

discharged on July 31, 1990, while the Complaint51 was filed by respondent on July 25, 1991, within the one-year

prescriptive period.

-    YES. In this case, there was no stipulation in the Bill of Lading limiting the carrier's liability. Neither did the shipper

declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No.

90/02447 cannot be the basis for Belgian’s liability.

-    First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for

the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. That

notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.

-    Second, a bill of lading is separate from the Other Letter of Credit arrangements. Thus, Belgian’s liability should be

computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.

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 

Competence of captain and crew

 Valenzuela Hardwood and Industrial Supply v. CA, G.R. No.
102316, June 30, 1997
FACTS:

Plaintiff shipped at Maconcon Port, Isabela 940 round logs on board M/V Seven Ambassador, a vessel owned by
defendant Seven Brothers Shipping Corporation. Plaintiff insured the logs against loss and/or damage with defendant
South Sea Surety and Insurance Co., Inc. for P2M and the latter issued its Marine Cargo Insurance Policy on said date. In
the meantime, the M/V Seven Ambassador sank resulting in the loss of the plaintiff’s insured logs.

Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy
but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers
Shipping Corporation for the value of the lost logs but the latter denied the claim.

Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance
Company (“South Sea”), but modified it by holding that Seven Brothers Shipping Corporation (“Seven Brothers”) was not
liable for the lost cargo.

ISSUE:

Whether defendants shipping corporation and the surety company are liable to the plaintiff for the latter’s lost logs.

HELD:

The charter party between the petitioner and private respondent stipulated that the “Owners shall not be responsible
for loss, split, short-landing, breakages and any kind of damages to the cargo” is VALID.

There is no dispute between the parties that the proximate cause of the sinking of M/V Seven Ambassadors resulting in
the loss of its cargo was the “snapping of the iron chains and the subsequent rolling of the logs to the portside due to
the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event.”
Likewise undisputed is the status of Private Respondent Seven Brothers as a private carrier when it contracted to
transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition.

Private respondent had acted as a private carrier in transporting petitioner’s lauan logs. Thus, Article 1745 and other
Civil Code provisions on common carriers which were cited by petitioner may not be applied unless expressly stipulated
by the parties in their charter party.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of
the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered into by
the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their
contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the
parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract
involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the
Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting
commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.

In carriage by land

Duty to Inspect
 Nocum v. Laguna Tayabas Bus Company, No. L-‐23733, Oct. 31, 1969
FACTS:

Nocum, plaintiff, was a passenger of the defendant’s Bus No. 120, then making a trip within the barrio of Dita,
Municipality of Bay, Laguna, who got injured as a consequence of the explosion of firecrackers, contained in a box,

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loaded in said bus and declared to its conductor as containing clothes and miscellaneous items by a co-passenger.
Plaintiff sued Laguna Tayabas for Breach of Contract of Carriage.

The Trial Court held Laguna Tayabas Bus Company liable since it did not observe the extraordinary or utmost diligence of
a very cautious person as required by the Civil Code. It further states that the defense of fortuitous event is unavailing.

The Trial Court’s decision is based on the witness, Severino Andaya, who states that a man with box went up the
baggage compartment of the bus and the box was place under the seat. They left Azcarraga at about 11:30 in the
morning and when the explosion occurred, the plaintiff was thrown out. There were 37 other passengers who got
injured.

The bus conductor said that such box belongs to a passenger whom he didn’t know and states that it contained
miscellaneous items and clothes. From its appearance there was no indication that the contents of the box were
explosives and firecrackers.

The dispatcher said that they were not authorized to open the baggage of passengers because the instruction from the
management is to call the police if there were packages containing articles which were against regulations.

ISSUE:

Whether or not Laguna Tayabas Bus Company is liable for breach of contract of carriage?

RULING:

Laguna Tayabas Bus Company is not liable for damages. In overland transportation, the common carrier is not bound nor
empowered to make an examination on the contents of packages or bags, particularly those hand carried by passengers.

No doubt, the views of the trial court do seem to be in line with the reasons that the Code Commission had for
incorporating the above-quoted provisions in its draft of the Civil Code. Indeed, in approving the said draft, Congress
must have concurred with the Commission that by requiring the highest degree of diligence from common carriers in the
safe transport of their passengers and by creating a presumption of negligence against them.

It is undisputed that before the box containing the firecrackers were allowed to be loaded in the bus by the conductor,
inquiry was made with the passenger carrying the same as to what was in it and according to the trial court “if proper
and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the
accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher
Cornista, employees should call the police if there were packages containing articles against company regulations.”

However, the Supreme Court considered the opinion that the law does not require as much. Article 1733 is not as
unbending as the trial court has held, for it reasonably qualifies the extraordinary diligence required of common carriers
for the safety of the passengers transported by them to be “according to all the circumstances of each case.” In fact,
Article 1755 repeats this same qualification: “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.”

Fairness demands that in measuring a common carrier’s duty towards its passengers, allowance must be given to the
reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is
to be presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers,
not to speak of his own. Not to be lightly considered must be the right to privacy to which each passenger is entitled. He
cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to
indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a
passenger’s baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in
danger of being transgressed.

Calling a policeman to his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger
to submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and
other miscellaneous, could not have justified invasion of a constitutionally protected domain.
What must be importantly considered here is not so much the infringement of the fundamental sacred rights of the
particular passenger herein involved, but the constant threat any contrary ruling would pose on the right of privacy of all
passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for mischief and
abuse.

Skill and Expertise of Driver; Condition of Vehicle; Proof of lack of prudence

 Baritua, et al. v. Nimfa Divina Mercader in her capacity and as guardian
of Darwin, Giovanni, Rodel and Dennis, all surnamed Mercader, et al.,
G.R. No. 136048, January 23, 2001
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Facts:
late Dominador Mercader is a [b]usinessman mainly engaged in the buy and sell of dry good, he boarded [petitioners']
bus at [petitioners'] Manila Station/terminal, bound for Brgy. Rawis, Laoang Northern Samar as a paying passenger.

 late Dominador Mercader was not able to reach his destination considering that on March 17, 1983 at Beily (Bugco)
Bridge, Barangay Roxas, Mondragon, Northern Samar, while he was on board [petitioners'] bus, said bus fell into the
river as a result of which the late Dominador Mercader died.

 The accident happened because [petitioners'] driver negligently and recklessly operated the bus at a fast speed in
wanton disregard of traffic rules and regulations and the prevailing conditions then existing that caused [the] bus to fall
into the river

 Complaint was filed against JB Lines, Inc. [Petitioner JB Lines, Inc.] and judgment is for [herein respondents] and
against [herein petitioners], ordering the latter to pay the former.

 the Court of Appeals affirmed the trial court's award of monetary damages in favor of respondents, except the
amount of Dominador Mercader's lost earnings, which it reduced to P798,000.

 It held that petitioners failed to rebut the presumption that in the event a passenger died or was injured, the carrier
had acted negligently. Petitioners, it added, presented no sufficient proof that they had exercised extraordinary
diligence. Hence, this Petition. Issue:

 whether the CA disregarded petitioners' procedural rights.

Held: no.  We sustain the ruling of the CA that petitioners failed to prove that they had observed extraordinary
diligence. First, petitioners did not present evidence on the skill or expertise of the driver of Bus No. 142 or the condition
of that vehicle at the time of the incident. Second, the bus was overloaded at the time. In fact, several individuals were
standing when the incident occurred.21 Third, the bus was overspeeding. Its conductor testified that it had overtaken
several buses before it reached the Bugko Bailey Bridge.22 Moreover, prior to crossing the bridge, it had accelerated and
maintained its speed towards the bridge.23  We therefore believe that there is no reason to overturn the assailed CA
Decision, which affirmed that of the RTC. It is a wellsettled rule that the trial court's factual findings, when affirmed by
the appellate court, are conclusive and binding, if they are not tainted with arbitrariness or oversight of some fact or
circumstance of significance and influence.24 As clearly discussed above, petitioners have not presented sufficient
ground to warrant a deviation from this rule.  Finally, we cannot fault the appellate court in its computation of the
damages and lost earnings, since it effectively computed only net earnings in accordance with existing jurisprudence. 
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED

 Sanico, et al. v. Colipano, G.R. No. 209969, Sept. 27, 2017

Proof of Extraordinary Diligence

 Mariano, Jr. v. Callejas, et al., G.R. No. 166640, July 31, 2009

In carriage by sea

Precautionary Measures; Knowledgeable of nature of cargo

 Tabacalera Insurance Co., et al. v. North Front Shipping Services, Inc., et
al., G.R. No. 119197, May 16, 1997

Knowing and following the required precaution

 Sulpicio Lines, Inc. v. First Lepanto-‐Taisho Insurance Corp., G.R. No.
140349, June 29, 2005

No proof of repairs
 Vector Shipping Corp., et al. v. Macasa, et al., G.R. No. 160219, July 21,
2008

Use of all reasonable means

 Aboitiz Shipping Corp. v. Insurance Co. of North America, G.R. No.
168402, August 6, 2008

Prompt notification
 Nedlloyd Lijnen B.V. Rotterdam, et al. v. Glow Laks Enterprises, Ltd., G.R.
No. 156330, November 19, 2014

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 In carriage by air

Inspection
 Saludo, et al. v. CA, et al., G.R. No. 95536, March 23, 1992

Reasonableness of weight standards

 Yrasuegui v. Philippine Airlines, Inc., G.R. No. 168081, Oct. 17, 2008

3. Baggages (checked-‐in and hand carried)

4. Obligations of Shipper and Passenger (Articles 1741, 1761 and 1762, NCC)
 Manay, Jr., et al. v. Cebu Air, Inc., G.R. No. 210621, April 4, 2016
The Air Passenger Bill of Rights[1] mandates that the airline must inform the passenger in writing of all the
conditions and restrictions in the contract of carriage. [2] Purchase of the contract of carriage binds the
passenger and imposes reciprocal obligations on both the airline and the passenger. The airline must exercise
extraordinary diligence in the fulfillment of the terms and conditions of the contract of carriage. The passenger,
however, has the correlative obligation to exercise ordinary diligence in the conduct of his or her affair

-o-

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