[transpo] uranza notes

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A Transportation Law Reviewer:

Based on the Outline of Professor

Josephine Uranza

A Transportation Law Reviewer: Based on the Outline of Professor Josephine Uranza

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I. Introduction

A. The contract of transportation A contract of transportation is one whereby a certain person or association of persons obligate themselves to transport persons, things, news from one place to another for a fixed price. It is the removal of goods or persons from one place to another SOURCES: Civil Code (primary)

Code of Commerce (supplementary)

COGSA (supplementary) International Conventions (supplementary) 1. Coverage

a. Transportation of persons b. Transportation of things

2. Means of Transportation

a. By land – Domestic carriage only b. By sea – Domestic and international carriage c. By air – Domestic and international carriage

3. Types of Transportation

a. Domestic carriage b. International carriage

B. Use of transport 1. Basic commercial concepts in the use of transport services

Transport service is a support mechanism for the major industrial and commercial activities.

2. Parties to the contract of transportation a. Passenger - one who gives rise to the contract of

transportation by agreeing to present his own person or those of other or others in the case of transportation of passengers

b. Shipper - one who gives rise to the contract of transportation by agreeing to deliver the things or news to be transported,

c. Carrier - one who binds himself to transport persons, things, or news as the case may be; one employed in or engaged in the business of carrying goods for other for hire

d. Receiver or consignee - the party to whom the carrier is to deliver the things being transported;

one to whom the carrier may lawfully make delivery in accordance with its contract of carriage (but the shipper and the consignee may be one person)

II. Public Law Aspect of Transportation – State Regulation A. Public utility concept of transportation 1. Constitutional basis for regulating public utilities

1987 CONSTI Art. XII, Section 11. No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least 60% of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer period than fifty years. Neither shall any franchise or right be granted except under the condition that it shall be subject to amendment, alteration or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

The prohibition apply to the operation of a public utility, but does it apply to “ownership”?

Ma’am: Logically, YES. But the SC has not yet decided on this issue.

The last sentence of the present provision is not in the past Constitution.

Luzon Stevedoring Corp vs. Anti-Dummy Board

(1972) FACTS: Luzon Stevedoring Corporation filed a complaint for declaratory relief alleging that it has nine (9) non-American aliens under its employ since long before the decision, which ruled that aliens other than Americans may not be employed in whatever capacity in any retail business in the Philippine because of Section 1 of Republic Act No. 1180 otherwise known as the Retail Trade Law, in


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conjunction with Section 2-A of Commonwealth Act No. 108, as amended by Republic Act No. 134 HELD: YES. Generally, under the Corporation Law, aliens may be employed in domestic corporations and alien stockholders therein can vote to elect alien directors, for the simple reason that the Corporation Law does not prohibit the same. But the Corporation Law with respect to the operation of public utilities — which under the Constitution can be operated only by Filipino citizens or corporations or associations at least 60 per centum of the capital stock of which is owned by Filipino citizens or corporations or associations wholly owned by Filipino citizens (Section 8 of Article XIV of the Constitution) — must be subject to and conditioned by the Anti-Dummy Law which was enacted subsequent to the Corporation Law Aside from employing dummies, the stockholders who own 40% of the capital stock of a public utility, may effectively control its operation by employing aliens to implement their plan to subvert our territorial integrity and our economic stability. Shipping lines, whether for passengers alone, for cargo only, or for both passengers and cargo, are the vital arteries of commerce, perhaps more vital to our security and independence than the nationalization of the retail trade. Alien control of inter-island navigation means economic control and political domination of our country by alien hands. It should be stressed that the interest of Filipino stockholders may be nullified by the employment of hostile aliens who actually man and operate the ships.

a. Historical antecedents of the constitutional provision

1935 CONSTI, Art. XIV, Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or other entities organized under the laws of the Philippines sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it

shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires.

1973 CONSTI, Art. XIV, Section 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines at least sixty per centum of the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period then fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in the capital thereof.

2. Definition of public utilities

Luzon Brokerage vs. PSC (1932)

FACTS: The PSC required Luzon Brokerage to file an application for the issuance of a certificate of public convenience and necessity for its operation of a TH truck service.

Luzon Brokerage files a petition for prohibition against the PSC, alleging that it is not a public service or a public utility within the meaning of the Public Service Law, because as a customs broker it only conducts business of receiving, storing, forwarding and delivering cargoes of all kinds by operating a fleet of trucks designed and utilized exclusively for the carriage of goods or cargo of its particular customers, which from time to time are landed and received from vessels and delivered to the consignees or owners thereof, or are forwarded and delivered to such vessels for shipment. Therefore, may not be obliged to obtain a certificate of public convenience.

HELD: Luzon Brokerage is not a public utility. The mere omission from section 13 of the phrase "for public use" in


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the definition of a public service does not seem to us to warrant the inference that the Legislature meant to extend the jurisdiction of the Public Service Commission to private enterprises not devoted to public use. The idea of public use is implicit in the term "public service". A public service is a service for public use. It is of special significance that notwithstanding the changes in the wording of the definition of the term "public service" introduced by Act No. 3316, there were no alterations whatever made in the basic provisions of sections 14, 15, 16, 17, 18, 19, 20, 21 and 22 of Act No. 3108. The fact that these basic provisions were drafted with relation to common carriers and that no amendment of them was made to adapt them to private carriers like the petitioner clearly indicates that the Legislature, in the verbal amendments made by Act No. 3316 in section 13, did not contemplate the radical change which would discard the element of public use as an essential feature of every public service. NOTE: Having a Certificate of Public Convenience and Necessity does not necessarily mean that one is a common carrier.

North Negros Sugar Co. vs. Hidalgo

(1936) FACTS: North Negros is the owner of a site in which its sugar central, with its factory building and residence for its employees and laborers is located, known as the "mill site." Across its properties the it constructed a road connecting the "mill site" with the provincial highway. Through this road North Negros allowed and still allows vehicles to pass upon payment of a toll charge of P0.15 for each truck or automobile. Pedestrians are allowed free passage through it.

Like other people in and about the place, Hidalgo used to pass through the said road of the plaintiff, because it was his only means of access to the Hacienda "Sañgay" where he runs his billiard hall and tuba saloon. North Negros, sometime later, filed a complaint praying, that an injunction be issued, restraining the defendant from entering or passing through the properties of the plaintiff, especially through the "mill site" of plaintiff's sugar central. Hidalgo contends that the road is already one of public use.

HELD: Having been devoted by the plaintiff to the use of the public in general, upon paying the passage fees required in the case of motor vehicles, the road in question is charged with a public interest. While so devoted, the plaintiff may not establish discriminatory exceptions against any private person.

Whether or not a given business, industry, or service is a public utility does not depend upon legislative definition, but upon the nature of the business or service rendered, and an attempt to declare a company or enterprise to be a public utility.

Duty to Serve Without Discrimination. — A public utility is obligated by the nature of its business to furnish its service or commodity to the general public. Accordingly, a utility must act toward all members of the public impartially, and treat all alike. The circumstance that the North Negros is not the holder of a franchise or certificate of public convenience, or that it is a company devoted principally to the manufacturer of sugar and not to the business of public service or that the state has not as yet assumed control or jurisdiction over the operation of the road in question by the North Negros, does not preclude the idea that the said road is a public utility.

3. Definition of public services The Public Service Act (CA No. 146 as amended) provides that the term public service "includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever may be its classification, freight or carrier service or any class, express service, steamboat, or steamship line, pontines, ferries, and water craft, engaged in the transportation of passengers and freight or both, shipyard, marine repairshop, [warehouse], wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power, petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other similar public services..." [Sec. 13(b)]


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NOTE: Congress can change the definition of public service and the activities that are included in such definition.

Luzon Stevedoring Co vs. PSC (1953)

FACTS: The PSC charged Luzon Stevedoring et al. of engaging in the transportation of cargo in the Philippines for hire or compensation w/o authority or approval of the Commission.

Luzon Stevedoring et al. argued that it does not hold itself out as serving or willing to serve the public therefore, it cannot be considered of public service. They further argue that what they have w/ their clients are private lease contracts, therefore, not w/in the jurisdiction of the PSC. HELD: It is not necessary, under the definition of “public service” in the Act, that one holds himself out as serving or willing to serve the public to be considered a public service. The Public Service Commission has interpreted the law in accordance with legislative intent. Commonwealth Act No. 146 declares in unequivocal language that an enterprise of any of the kinds therein enumerated is a public service if conducted for hire or compensation even if the operator deals only with a portion of the public or limited clientele. The transportation service which was the subject of complaint was not casual or incidental. It had been carried on regularly for years at almost uniform rates of charges. Although the number of the petitioners' customers was limited, the value of goods transported was not inconsiderable. In at least one respect, the business complained of was a matter of public concern. The Public Service Law was enacted not only to protect the public against unreasonable charges and poor, inefficient service, but also to prevent ruinous competition. That, we venture to say, is the main purpose in bringing under the jurisdiction of the Public Service Commission motor vehicles, other means of transportation, ice plants, etc., which cater to a limited portion of the public under private agreements.

B. Grant of franchises Where do you get the franchise? From quasi-judicial

agencies delegated by Congress. BUT, there are still some public utilities that is required to get franchise directly from Congress (example: radio stations)

1. Legislative franchises

1987 CONSTI Art. XII, Section 11. No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least 60% of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer period than fifty years. Neither shall any franchise or right be granted except under the condition that it shall be subject to amendment, alteration or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

PANTRANCO vs. PSC (1940)

FACTS: PANTRANCO has been, for 20 yrs, in the business of transporting passengers by means of motor vehicles, commonly known as TPUs, in accordance with its CPC. It filed an application for the use of 10 additional trucks. The Commission granted the application, subject to 2 conditions:

1. The CPCs will be valid for 25 yrs after the promulgation of the Commission’s decision;

2. The Commonwealth of the Phils or any of its instrumentalities can acquire the service upon payment of the cost, minus reasonable depreciation.


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Pantranco questions the decision of the Commission as to the conditions, as well as the validity of the law upon which it is based, i.e., CA 454, which amends CA 146 (Public Service Act). HELD: PANTRANCO does not have the right to hold the CPCs in perpetuity. The Constitution of the Philippines provides, in section 8 of Article XIII, that "no franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires." The business of a common carrier holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation. When private property is affected with a public interest it ceased to be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to control. Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over public utilities may be exercised through boards of commissioners. This right of the state to regulate public utilities is founded upon the police power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as of the utilities themselves. Such statutes are, therefore, not unconstitutional, either as impairing the obligation of contracts, taking property without due process, or denying the equal protection of the laws, especially inasmuch as the question whether or not private property shall be devoted to a public use and the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public service he cannot complain that it becomes subject to the regulatory powers of the state.

This is the more so in the light of authorities which hold that a certificate of public convenience constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege.

Radio Communications of the Phils vs. NTC (1987)

FACTS: RCPI has been operating a RCPI system since 1957 under its legislative franchise granted by Republic Act No. 2036. RCPI established a radio telegraph service in Sorsogon, Sorsogon, San Jose, Mindoro followed by another in Catarman, Samar. Sometime later, Kayumanggi Radio Network was authorized by the NTC to operate RCPI systems in Catarman, Samar and in San Jose, Mindoro. Kayumanggi Radio Network filed a complaint with the NTC alleging that the RCPI was operating in Catarman, Samar and in San Jose, Mindoro without a certificate of public convenience and necessity. RCPI, on the other hand, counter-alleged that its telephone services in the places subject of the complaint are covered by the legislative franchise recognized by both the public respondent and its predecessor, the Public Service Commission. HELD: RCPI, a grantee of a legislative franchise to operate a radio company, is still required to secure a certificate of public convenience and necessity before it can validly operate its radio stations including radio telephone services. RCPI’s claim that its franchise cannot be affected by Executive Order No. 546 on the ground that it has long been in operation since 1957 cannot be sustained. A franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power through its administrative agencies. The position of the Radio Communications that by the mere grant of its franchise under RA No. 2036 it can operate a radio communications system anywhere within the Philippines is erroneous. The approval of the then Secretary of Public Works and Communications was a precondition before the Radio Communications could put up radio stations in areas where it desires to operate. The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications before the RCPI installed the questioned radio telephone services. Under the circumstances of this case, the mere fact that the Radio Communications possesses a franchise to put up and operate a radio communications system in certain


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areas is not an insuperable obstacle to the public respondent's issuing the proper certificate to an applicant desiring to extend the same services to those areas. The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted except that it must be subject to amendment, alteration, or even repeal by the legislature when the common good so requires 2. Franchises granted through delegated authority, powers and functions of regulatory agencies

a. Land transport

Admin Code of 1987, Title XV, Chapter 5, Sec. 15. Land Transportation Franchising and Regulatory Board. - The quasi-judicial powers and functions with respect to land transportation shall be exercised through the Land Transportation and Regulatory Board, hereinafter referred to as the "Board".

Admin Code of 1987, Title XV, Chapter 5, Sec. 19. Powers and functions of the Board. The Board shall: 1. prescribe and regulate routes xxx; 2. issue, amend, revise, suspend, or cancel CPCs or permits, xxx; 3. determine, prescribe, approve and periodically review and adjust reasonable fares xxx; 4. issue injunctions xxx; 5. punish for contempt of the Board xxx; 6. issue subpoena and subpoena duces tecum and to summon witnesses xxx; 7. conduct investigations and hearings of complaints for violation of the public service laws on land transportation xxx; 8. review motu proprio the decisions, actions of the Regional Franchising and Regulatory Offices xxx; 9. promulgate rules and regulations governing proceedings before the Board and the Regional Franchising and Regulatory Office xxx; 10. fix, impose and collect, and periodically review and adjust reasonable fees, and other related charges for services rendered; 11. formulate, promulgate, administer, implement and enforce rules and regulations on land transportation xxx; 12. coordinate and cooperate with other govt. agencies and entities concerned with any aspect involving public land transportation services xxx;

13. perform such other functions and duties as may be provided by law, or as may be necessary, or proper or incidental to the purposes and objectives of the Dept.

b. Air transport

RA 776 (Civil Aeronautics Act of the Phils) Section 11. Nature, terms and conditions. — A Certificate of Public Convenience and Necessity is a permit issued by the Board authorizing a person to engage in commerce and/or transportation, foreign and/or domestic. Any permit may be altered, amended, modified, suspended, cancelled or revoked by the Board in whole or in part, upon complaint or petition or upon the Board's initiative as hereinafter provided, whenever the Board finds such action to be in the public interest. There shall be attached to the exercise of the privileges granted by the permit, or amendment thereto, such reasonable terms, conditions or limitations as, in the judgment of the Board, the public interest may require. No permit shall confer any proprietary, property, or exclusive right in the use of any space, civil way, landing area or government-navigation facility. The permit shall, among others, specify the terminal and intermediate points, if any, between which the carrier is authorized to operate; the service to be rendered; the time of arrival and departure at each point, and the frequency of flights: Provided, That no change in routes, rates, schedules, or frequency nor supplemental or additional flights to those covered by an Commerce Permit or franchise shall be effected without prior approval of the Civil Aeronautics Board. Insofar as the operation is to take place without the Philippines, the permit shall designate the terminal and intermediate points only insofar as the Board shall deem practicable, and otherwise shall designate only the general route or routes to be followed. No carrier shall abandon any route, or part thereof for which a permit has been issued, unless upon findings by the Civil Aeronautics Board that such an abandonment is uneconomical and is in the public interest.

c. Sea transport


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EO 125, Sec. 14 as amended by EO 125-A, Sec. 3 The Maritime Industry Authority is hereby retained and shall have the ff. functions: a. develop and formulate plans, policies, projects xxx geared toward the promotion and devt. of the maritime industry, the growth and effective regulation of shipping enterprises, and for the national security objectives of the country; b. establish, prescribe and regulate routes, zones and/or areas of operation of particular operators of public water services; c. issue CPCs for the operation of domestic and overseas water carriers; d. register vessels as well as issue certificates, licenses or document necessary or incident thereto; e. undertake the safety regulatory functions pertaining to vessel construction and operation including the determination or manning levels and issuance of certificates of competency to seamen; f. enforce laws, prescribe and enforce rules and regulations, including penalties for violations thereof, governing water transportation and the Phil. merchant marine xxx; g. undertake the issuance of licenses to qualified seamen and harbor, bay and river pilots; h. determine, fix, prescribe charges/rates pertinent to the operation of public water transport utilities xxx; i. accredit marine surveyors and maritime enterprises engaged in shipbuilding, ship repair xxx; j. issue and register the continuous discharge book of Filipino seamen; k. establish and prescribe rules and regulations, standards and procedures for the efficient and effective discharge of the above functions; l. perform such other functions as may now or hereafter be provided by law.

PD No. 474 (Charter of the Maritime Industry Authority) Section 12. Specific Powers and Functions of the Administrator. — In addition to his general powers and functions, the Administrator shall; a. Issue Certificate of Philippine Registry for all vessels being used in Philippine waters, including fishing vessels covered by Presidential Decree No. 43 except transient civilian vessels of foreign registry, vessels owned and/or

operated by the Armed Forces of the Philippines or by foreign governments for military purposes, and bancas, sailboats and other watercraft which are not motorized, of less than three gross tons; b. Provide a system of assisting various officers, professionals, technicians, skilled workers and seamen to be gainfully employed in shipping enterprises, priority being given to domestic needs; c. In collaboration and coordination with the Department of Labor, to look into, and promote improvements in the working conditions and terms of employment of the officers and crew of vessels of Philippine registry, and of such officers and crew members who are Philippine citizens and employed by foreign flag vessels, as well as of personnel of other shipping enterprises, and to assist in the settlement of disputes between the shipowners and ship operators and such officers and crew members and between the owner or manager of other shipping enterprises and their personnel; d. To require any public water transport utility or Philippine flag vessels to provide shipping services to any coastal areas in the country where such services are necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires; e. Investigate by itself or with the assistance of other appropriate government agencies or officials, or experts from the private sector, any matter within its jurisdiction, except marine casualties or accidents which shall be undertaken by the Philippine Coast Guard; f. Impose, fix, collect and receive in accordance with the schedules approved by the Board, from any shipping enterprise or other persons concerned, such fees and other charges for the payment of its services; g. Inspect, at least annually, the facilities of port and cargo operators and recommend measures for adherence to prescribed standards of safety, quality and operations; h. Approve the sale, lease or transfer of management of vessels owned by Philippine Nationals to foreign owned or controlled enterprises;


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i. Prescribe and enforce rules and regulations for the prevention of marine pollution in bays, harbors and other navigable waters of the Philippines, in coordination with the government authorities concerned; j. Establish and maintain, in coordination with the appropriate government offices and agencies, a system of regularly and promptly producing, collating, analyzing and disseminating traffic flows, port operations, marine insurance services and other information on maritime matters; k. Recommend such measures as may be necessary for the regulation of the importation into and exportation from the Philippines of vessels, their equipment and spare parts; l. Implement the rules and regulations issued by the Board of Transportation; m. Compile and codify all maritime laws, orders, rules and regulations, decisions in leasing cases of courts and the Authority's procedures and other requirements relative to shipping and other shipping enterprises, make them available to the public, and, whenever practicable to publish such materials; n. Delegate his powers in writing to either of the Deputy Administrators or any other ranking officials of the Authority; Provided, That he informs the Board of such delegation promptly; and o. Perform such other duties as the Board may assign, and such acts as may be necessary and proper to implement this Decree.

RA 9295 (Domestic Shipping Development Act of 2004) ,Sec. 10. Jurisdiction; Power; and Duties of MARINA. - The MARINA shall have the power and authority to: (1) Register vessels; (2) Issue certificates of public convenience or any extensions or amendments thereto, authorizing the operation of all kinds. Classes and types of vessels in domestic shipping: Provided, That no such certificate shall be valid for a period of more than twenty-five (25) years;

(3) Modify, suspend or revoke at any time upon notice and hearing, any certificate, license or accreditation it may have issued to any domestic ship operator; (4) Establish and prescribe routes, zones or areas of operations of domestic ship operators; (5) Require any domestic ship operator to provide shipping services to any coastal area, island or region in the country where such services are necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires; (6) Set safety standards for vessels in accordance with applicable conventions and regulations; (7) Require all domestic ship operators to comply with operational and safety standards for vessels set by applicable conventions and regulations, maintain its vessels in safe and serviceable conditions, meet the standards of safety of life at sea and safe manning requirements, and furnish safe, adequate, efficient, reliable and proper service at all times; (8) Inspect all vessels to ensure and enforce compliance with safety standards and other regulations; (9) Ensure that all domestic ship operators shall have the financial capacity to provide and sustain safe, reliable, efficient and economic passenger or cargo service, or both; (10) Determine the impact which any new service shall have to the locality it will serve; (11) Adopt and enforce such rules and regulations which will ensure compliance by every domestic ship operator with required safety standards and other rules and regulations on vessel safety; (12) Adopt such rules and regulations which ensure the reasonable stability of passengers and freight rates and, if necessary, to intervene in order to protect public interest; (13) Hear and adjudicate any complaint made in writing involving any violation of this law or the rules and regulations of the Authority;


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(14) Impose such fines and penalties on, including the revocations of licenses of any domestic ship operator who shall fail to maintain its vessels in safe and serviceable condition, or who shall violate or fail to comply with safety regulations; (15) Investigate any complaint made in writing against any domestic ship operator, or any shipper, or any group of shippers regarding any matter involving violations of the provisions of this Act; (16) Upon notice and hearing, impose such fines, suspend or revoke certificates of public convenience or other license issued, or otherwise penalize any ship operator, shipper or group of shippers found violating the provisions of this Act; and (17) Issue such rules and regulations necessary to implement the provisions of this Act: Provided, That such rules and regulations cannot change or in any way amend or be contrary to the intent and purposes of this Act.

C. Regulation of public services

CA 146 (Public Service Act), Section13. (a) The Commission shall have jurisdiction, supervision, and control over all public services and their franchises, equipment, and other properties, and in the exercise of its authority, it shall have the necessary powers and the aid of the public force: Provided, That public services owned or operated by government entities or government-owned or controlled corporations shall be regulated by the Commission in the same way as privately-owned public services, but certificates of public convenience or certificates of public convenience and necessity shall not be required of such entities or corporations: And provided, further, That it shall have no authority to require steamboats, motor ships and steamship lines, whether privately-owned, or owned or operated by any Government controlled corporation or instrumentality to obtain certificate of public convenience or to prescribe their definite routes or lines of service.

1. The Certificate of Public Convenience Nature of CPC

It constitutes neither a franchise nor a contract, confers no property rights and is a mere license or privilege, and such privilege is forfeited when the grantee fails to comply with his commitments behind which lies the paramount interest of the public, for public necessity cannot be made to wait, nor sacrificed for private convenience. However, certificates represent property rights to the extent that if the rights, which any public utility is exercising pursuant to lawful orders of the PSC has been invaded by another public utility, in appropriate cases, actions may be maintained by the complainant public utility. Owners of public utilities have the right to maintain appropriate actions against other public utilities not authorized to operate in competition with the complainant. Certificates are considered as property as used in Civil Procedure as they have material value and are material assets. They are subject to attachment and seizure by legal process, and may be acquired by purchase. When CPC is not required The CPC is not required when the public service is owned and operated by government entities. 2. Regulation of ownership

CA 146 (Public Service Act), Section 16. Proceedings of the Commission, upon notice and hearing. The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary. (a) To issue certificates ... authorizing the operation of public services within the Philippines, whenever the Commission finds that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. Provided, that certificates will be granted only to citizens of the Philippines... or to corps., co-partnerships, associations or joint stock companies constituted and organized under the laws of the Philippines; Provided, that 60% of the stock or paid-up capital ... must belong entirely to citizens of the Philippines or of the US;


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Provided, further, that no such certificate shall be issued for a period of more than 50 years.

Luzon Stevedoring Corp vs. Anti-Dummy Board

(supra) HELD: The Corporation Law with respect to the operation of public utilities — which under the Constitution can be operated only by Filipino citizens or corporations or associations at least 60 per centum of the capital stock of which is owned by Filipino citizens or corporations or associations wholly owned by Filipino citizens (Section 8 of Article XIV of the Constitution) — must be subject to and conditioned by the Anti-Dummy Law which was enacted subsequent to the Corporation Law, otherwise known as Act No. 1459 which took effect April 1, 1906. Consequently, the alien stockholders who own 40% of the capital stock of a public utility corporation or association cannot elect an alien director, much less demand the employment of aliens in the management, operation, administration or control of the corporation or business whether as officer, employee, or laborer, with or without compensation. If the Corporation Law can be invoked to justify the employment of non-American aliens in public utilities, then the Anti-Dummy Law, as amended, would be a useless attempt to penalize violations of the nationalization laws and the constitutional provision reserving the operation of public utilities to Filipino citizens or Filipino-dominated corporations or associations would be nullified as a consequence.

RA 9295 (Domestic Shipping Development Act of 2004) Sec. 3. Definition of Terms. - As used in and for purposes of this Act, the following terms, whether in singular or plural are hereby defined as follows: (a) "Domestic shipping" shall mean the transport of passenger or cargo, or both, by ships duly registered and licensed under Philippine law to engage in trade and commerce between Philippine ports and within Philippine territorial or internal waters, for hire or compensation, with general or limited clientele, whether permanent occasional or incidental, with or without fixed routes, and done for contractual or commercial purposes;

(b) "Domestic trade" shall mean the sale, barter or exchange of goods, materials or products within the Philippines; (c) "Domestic Ship Operator" or "Domestic Ship Owner" may be used interchangeably and shall mean a citizen of the Philippines, or a commercial partnership wholly owned by Filipinos, or a corporation at least sixty percent (60%) of the capital of which is owned by Filipinos, which is duly authorized by the Maritime Industry Authority (MARINA) to engage in the business of domestic shipping;

xxx Sec. 5. Authority to Operate. - No franchise, certificate or any other form authorization for the carriage of cargo or passenger, or both in the domestic trade, shall be granted except of domestic ship owners or operators. Sec. 6. Foreign Vessels Engaged in Trade and Commerce in the Philippines Territorial Waters. - No foreign vessel shall be allowed to transport passengers or cargo between ports or place within the Philippine territorial waters, except upon the grant Special Permit by the MARINA when no domestic vessels is available or suitable to provide the needed shipping service and public interest warrants the same.

RA 776 (Civil Aeronautics Act of the Phils), Section 12. Citizenship requirement. — Except as otherwise provided in the Constitution and existing treaty or treaties, a permit authorizing a person to engage in domestic commerce and/or transportation shall be issued only to citizens of the Philippines.

3. Regulation of rates

CA 146 (Public Service Act), Section 16. Proceedings of the Commission, upon notice and hearing. — The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary:

xxx (c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation, mileage, kilometrage, and other special


12

rates which shall be imposed observed and followed thereafter by any public service: Provided, That the Commission may, in its discretion, approve rates proposed by public services provisionally and without necessity of any hearing; but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice to the concerns operating in the territory affected: Provided, further, That in case the public service equipment of an operator is used principally or secondarily for the promotion of a private business, the net profits of said private business shall be considered in relation with the public service of such operator for the purpose of fixing the rates.

Requirements:

The operator must file an application He will be given provisional approval

The application will be published to give notice

Thirty days after such publication there will be a hearing (ISSUE: WON the rate will apply permanently)

a. Approval of rates charged

KMU Labor Center vs. Garcia (1994)

FACTS: DOTC issued Memorandum Circular No. 90-395 to the LTFRB, allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB official rate for a period of one (1) year. PBOAP, availing itself of the deregulation policy of the DOTC without first having filed a petition for the purpose and without the benefit of a public hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to be made effective on March 16, 1994. KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares. HELD: The authority given by the DOTC and the LTFRB to the provincial bus operators to set a fare range over and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. What has been delegated cannot be delegated. The policy of allowing the provincial bus operators to change and increase their fares at will, would result not only to a chaotic situation but to an anarchic state of affairs. This would leave the riding public at the mercy of

transport operators who may increase fares every hour, every day, every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so. Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government function that requires dexterity of judgment and sound discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility and the public. Several factors, in fact, have to be taken into consideration before a balance could be achieved. A rate should not be confiscatory as would place an operator in a situation where he will continue to operate at a loss. Hence, the rate should enable public utilities to generate revenues sufficient to cover operational costs and provide reasonable return on the investments. On the other hand, a rate which is too high becomes discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable and fair and must be affordable to the end user who will utilize the services.

b. Return on Rate Base

Republic vs. Medina

(1971) FACTS: MERALCO filed an application with the Public Service Commission seeking approval of revised rate schedules, with increased charges, claiming that the floating exchange rate and economic conditions resulting therefrom increased its operating and maintenance expenses by more than 40%. Republic and other oppositors filed an opposition on the following grounds, among others: that the floating rate of exchange notwithstanding, the applicant's sound financial condition is still capable of maintaining efficient service and meeting due payments on its obligations, with a reasonable rate of return on its investment; that the applicant's cash reserves accumulated and realized from its huge net annual profits over the past years is capable of sustaining itself without resorting to borrowings, despite the alleged increase in operating expenses; that the proper basis of rate fixing is the fair value of its property useful and being used in the service of the public, without regard to encumbrance or indebtedness; that the increase in rate sought is excessive and unreasonable and will bring about greater hardship to the people, as well as directly cause increase in the cost of production which will have to be unduly borne by the consuming public.


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HELD: In authorizing an increase of rates, the PSC proceeded on the basis that the MERALCO as public utility should receive a reasonable return on its investment, equivalent to 12% on the rate base, the present market or replacement value of the properties devoted to the service less depreciation, plus operating capital equivalent to 2 months operating income. In so doing, the Public Service Commission only followed the constant doctrine of the case heretofore adjudicated by this Court: That for purposes of rate base determination, the controlling standard in determining the value of the property which should be included in its rate base is the present or market value. In following the doctrine of the SC, the PSC can hardly be accused of abuse of discretion. In the previous decision of the SC, objections raised against the 12% rate of return, identical to those interposed in the present case, were examined and overruled. Computation: Step 1: Property in Service (P913,447,085) + 2 months Working Capital (P26,365,148) = Rate Base (P939, 812, 233) Step 2: Operating Income (P107,325,875) divided by Rate Base (P939,812,233) = Rate of Return (11.4%) Conclusion: Because the rate of return is below 12% an increase is allowable. URANZA NOTES: Assets (only devoted to public service) are valued and appraised every 2 years. This is used to get the present value, or in the computation above, the Property in Service. The Working Capital is always valued at 2 months. The Computation is as follows: Rate of Return = [Valuation of present property + Working Capital] / Revenue If rate of return greater than 12%, the public service utility must lower the rate and reimburse its clients If rate of return lower than 12%, the public service utility may increase the rates

c. Rule with respect to water transport

RA 9295 (Domestic Shipping Development Act)

Sec. 8. Deregulation of the Domestic Shipping Industry. - In order to encourage investments in the domestic shipping industry by existing domestic ship operators and attract new investment from new operators and investors, domestic ship operators are hereby authorized to establish their own domestic shipping rates: Provided, That effective competition is fostered and public interest is served.

The MARINA shall monitor all shipping operations and exercise regulatory intervention where it is established after due process that public interest needs to be protected and safeguarded.

Sec. 11. Rates. - Every domestic ship operator shall have the right to fix its own passenger or cargo rates, or both.

c.f. KMU Labor Center v. Garcia – In water transportation, the general public does not notice changes in shipping rates, that’s why they don’t complain.

d. Rule with respect to air transport RA 776 (CAB Charter) Section 10. Powers and duties of the Board. —

xxx

(C) The Board shall have the following specific powers and duties:

xxx

(2) To fix and determine reasonable individual, joint or special rates, charges or fares which an air carrier may demand, collect or receive for any service in connection with commerce. The Board may adopt any original, amended, or new individual, joint or special rates, charges or fares proposed by an air carrier if the proposed individual, joint, or special rates, charges or fares are not unduly preferential or unduly discriminatory or unreasonable. The burden of proof to show that the proposed individual, joint or special rates, charges or fares are just are reasonable shall be upon the carrier proposing the same.

In fixing rates, charges, or fares under the provisions of this Act, the Board shall take into consideration, among other factors:


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(a) The effect of such rates upon the movement of traffic;

(b) The need in the public interest of adequate and efficient transportation of persons and property by carriers at the lowest cost consistent with the furnishing of such service;

(c) Such standards respecting the character and quality of service to be rendered by air carriers as may be prescribed by or pursuant to law;

(d) The inherent advantages or transportation by aircraft; and

(e) The need of each air carrier for revenue sufficient to enable such air carrier, under honest, economical, and efficient management, to provide adequate and efficient air carrier service.

Right to set rates by legislative franchise grantees subject to the rules of the CAB

Executive Order No. 219 (Establishing The Domestic And International Civil Aviation Liberalization Policy) Sec. 2.2 Tariffs and Fares. To the extent allowed by law, passage freight and other charges shall be liberalized. However, passage rates shall likewise be deregulated for routes/links operated by more than one (1) common carrier. For routes serviced by a single operator, passage rates shall continue to be regulated. However, all freight rates, charges and passage rates shall be monitored by the CAB.

HOWEVER: Grantees still need CAB approval

of rates and routes.

NOTE: Shipping industry complains of the air industry’s privileges!

PD 1590 (PAL Charter) Sec. 3 The grantee shall fix just and reasonable rates for the transportation of passengers, mail, and freight, subject to the regulations and approval of the Civil Aeronautics Board or such other regulatory agency as the Government may designate for this purpose. Any order of the Civil Aeronautics Board made under this Section shall be subject to review by the courts.

RA 7151 (Cebu Pacific Charter) Sec. 4. Rates for Services. — The grantee shall fix just and reasonable rates for the

transportation of passengers, mail, goods and freight, subject to the regulations and approval of the Civil Aeronautics Board and other proper regulatory agencies of the Government.

RA 8339 (Air Philippines Charter) Sec. 4. Rates for Services. — The grantee shall fix just and reasonable rates for the transportation of passengers, mail, goods and freight, subject to the regulations and approval of the Civil Aeronautics Board and other proper regulatory agencies of the government.

4. Regulation of authorized routes

CA 146, as amended, Sec 13 (b) The term public service includes every person that now or hereafter may operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever may be its classification,

xxx

For land transportation

Admin Code of 1987, Title XV, Chapter 5, Sec. 19. Powers and functions of the Board. - The Board (LTFRB) shall: (1) Prescribe and regulate routes, economically viable capacities, and zones or areas of operation of public land transportation services provided by motorized vehicles in accordance with the public land transportation development plans and programs approved by the Department of Transportation and Communications;

xxx

(11) Formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public utilities, standards of measurements or design, and rules and regulations requiring operators of any public land transportation service to equip, install and provide in their utilities and in their stations such devices, equipment, facilities and operating procedures and techniques as may promote safety, protection, comfort and convenience to persons and property in their charges


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as well as the safety of persons and property within their areas of operation;

For sea transportation

EO 125, Sec. 14 as amended by EO 125-A, Sec. 3 The Maritime Industry Authority is hereby retained and shall have the ff. functions:

xxx b. establish, prescribe and regulate routes, zones and/or areas of operation of particular operators of public water services;

RA 9295 (Domestic Shipping Development Act) Sec. 10. Jurisdiction; Power; and Duties of MARINA. - The MARINA shall have the power and authority to:

xxx

(4) Establish and prescribe routes, zones or areas of operations of domestic ship operators; (5) Require any domestic ship operator to provide shipping services to any coastal area, island or region in the country where such services are necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires;

For air transportation

RA 776 (Civil Aeronautics Act of the Phils) Section 11. Nature, terms and conditions. — A Certificate of Public Convenience and Necessity is a permit issued by the Board authorizing a person to engage in commerce and/or transportation, foreign and/or domestic.

xxx The permit shall, among others, specify the terminal and intermediate points, if any, between which the carrier is authorized to operate; the service to be rendered; the time of arrival and departure at each point, and the frequency of flights: Provided, That no change in routes, rates, schedules, or frequency nor supplemental or additional flights to those covered by an Commerce Permit or franchise shall be effected without prior approval of the Civil Aeronautics Board. Insofar as the

operation is to take place without the Philippines, the permit shall designate the terminal and intermediate points only insofar as the Board shall deem practicable, and otherwise shall designate only the general route or routes to be followed. No carrier shall abandon any route, or part thereof for which a permit has been issued, unless upon findings by the Civil Aeronautics Board that such an abandonment is uneconomical and is in the public interest.

a. General power of regulation

Laguna Tayabas Bus Company vs. Regodon

(1956) FACTS: Regodon applied for the operation of a TPU service for the transportation of passengers and freight on the line Atimonan-Lucena in the Province of Quezon, with the use of one (1) auto-truck.

The Laguna Tayabas Bus Company opposed this application alleging that there is no need for the proposed service as it is presently operating on the said line, and that the service it is rendering is sufficient to meet the needs of the travelling public. HELD: Giving the applicant the benefit of doubt and assuming that during the rush hours on the line in question, the volume of traffic justifies additional service, the SC approved the Commission's decision granting Regodon's application for additional service, but with the modification that the Commission adjust his time schedule so as to cover as nearly as possible only the rush hours between 6:00 and 8:00 a.m. and 5:00 and 6:00 p.m., of course, with one single unit. The reason for this modification is that any invasion of the lean hours in transportation by allowing additional service thereto would only result in unfair and cut-throat competition, with all the attendant evils and disadvantages, such as, financial loss to all operators, changing without authority time schedules so as to get more passengers, or racing of buses on the highway in order to pick up passengers.

b. Presumption of adequacy of service; protection of investments rule; protection of prior operator Prior operator rule


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To carry out the purpose and intent for which the PSC was created the law contemplates that the first licensee will be protected in his investment and will not be subjected to a ruinous competition. It is not therefore the policy of the law for the PSC to issue a CPC to a second operator to cover the same field and in competition with a first operator who is rendering sufficient, adequate and satisfactory service, and who in all things and respects is complying with the rules and regulations of the PSC. Accordingly, a CPC or CPCN ought not to be granted where there is no complaint as to existing rates and the co. in the field is rendering adequate services.

- regular operators are preferred over irregular operators

- prior operator is given opportunity to improve service

- prior operator given opportunity to extend lines

- RATIO: To prevent ruinous and wasteful competition in order that the interests of the public would be conserved and preserved; so long as the operator complied with the terms and conditions of the license and the reasonable demands of the public, it is the duty of the PSC to protect rather than to destroy its investment

Batangas Transportation Co. vs. Orlanes (1921)

FACTS: Orlanes seeks to have a certificate of public convenience to operate a line of auto trucks with fixed times of departure between Taal and Bantilan, in the municipality of Bolbok, Batangas, with the right to receive passengers and freight from intermediate points. At the time of his application, Orlanes was what is known as an irregular operator between Bantilan and Taal, and that the Batangas Transportation Company was what is known as a regular operator between Batangas and Rosario.

Orlanes now seeks to have his irregular operation changed into a regular one, the granting of which would make him a regular operator between those points and bring him in direct conflict and competition over the same points with the Batangas Transportation Company

under its prior license, and in legal effect that was the order which the Commission made, of which the Batangas Transportation Company now complains.

HELD: A certificate of public convenience may not be issued to a second operator to operate a public utility in a field where, and in competition with, a first operator who is already operating a sufficient, adequate and satisfactory service. To give an irregular operator, who was the last in the field, a preferential right over a regular operator, who was the first in the field, is NOT a rule of law.

So long as the first licensee keeps and performs the terms and conditions of its license and complies with the reasonable rules and regulations of the Commission and meets the reasonable demands of the public, it should have more or less of a vested and preferential right over a person who seeks to acquire another and a later license over the same route. Otherwise, the first licensee would not have any protection on his investment, and would be subject to ruinous competition and thus defeat the very purpose and intent for which the Public Service Commission was created.

c. Changes in the rules on presumption of

adequacy of service and protection of investments of prior operators

EO 185 - OPENING THE DOMESTIC WATER TRANSPORT INDUSTRY TO NEW OPERATORS AND INVESTORS 1. The entry of new operators into the domestic water transport industry shall be liberalized to enhance the level of competition and bring about reasonable rates and improved quality of services. 1.1. Opening-up of all Routes Public interest and public convenience call for the levelling of the playing field for all existing and new operators in the domestic water transport industry. Competition, provided it is not ruinous, should be the norm to open-up the industry to new investments and to stimulate further economic activity. 1.1.1. All routes/links shall have a minimum of two (2) operators. Routes/links presently serviced by only one (1)


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operator, or monopolized or cartelized as determined by MARINA, shall be open for entry to additional operators. 1.1.2. All routes/links which have been serviced by any operator for an aggregate period of at least five (5) years shall be open for entry to additional operators without limit. 1.2. Encouraging Entry Into Developmental Routes The entry of operators in developmental routes as determined by MARINA shall be encouraged. An operator who pioneers in the provision of a certain technological level/type of shipping service in a developmental route shall be authorized to charge market-accepted freight and passage rates differing from the authorized fork-tariff, if availed of; Provided, that the operator shall apply with MARINA for the adjustment in or adoption of such rates, the approval of which shall be accordingly granted; and Provided, further, that after five (5) years of such operation, the continued authorization of such rates, or adjustments thereof, shall be dependent on an evaluation undertaken by MARINA. 1.3. Deregulating Entry of Newly-Acquired Vessels Into Routes Already Served By Franchised Operators 1.3.1. An existing or new operator who acquires a vessel through importation, bareboat charter with option to purchase, lease-purchase, or local construction, shall be granted a Certificate of Public Convenience (CPC)/ Provisional Authority (PA) and allowed to operate such vessel in any route, even if already being served by existing franchised operators for less than five (5) years, including developmental routes; Provided, that the prescribed application for CPC has been filed, and the basic requisites prior to issuance thereof have been complied with; Provided, further, that upon filing of the application for CPC, the presumption of public need shall be accorded in favor of the applicant, especially but not necessarily when any of the following conditions shall be shown to obtain: 1.3.1.1. The proposed operation shall introduce innovative, technologically-advanced, or pioneering shipping services in the route applied for, such as, but not limited to, the deployment of fast ferries, cruise vessels, container vessels and RoRo vessels, or the employment of

modern and efficient on-board cargo handling equipment as an integral part of the vessel’s operation; 1.3.1.2. The proposed operation shall introduce improvements in the quality of service being provided in the applied route/link; 1.3.1.3. The vessel proposed to be deployed shall serve as an improvement over the existing vessels operating therein, either in terms of the vessel’s age, size, capacity, hull material and other vessel technical features; 1.3.1.4. The proposed operation shall foster cost-effective/competitive shipping service in the route proposed to be served; 1.3.1.5. The proposed operation shall service priority tourist links as identified by the Department of Tourism in its Tourism Master Plan; 1.3.1.6. The route/link applied for warrants additional operators/services, as determined by MARINA or by pertinent local government units, resulting in public invitations for additional services therein. This condition covers cases where there is a duly verified and legitimate public clamor for additional shipping services and it has been determined that existing authorized operators in the route/link have not been sensitive to an increase in demand by offering to increase capacity only after another operator has offered to provide additional services therein; and 1.3.1.7. Where existing authorized operators have abandoned their operations in a given route.

xxx

- The same deregulation scheme is adopted in air transportation (E.O. 202) 4. Regulation of equipment used; Imposition of reasonable standards.

CA 146, Section 16. Proceedings of the Commission, upon notice and hearing. — The Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the


18

limitations and exceptions mentioned and saving provisions to the contrary:

xxx

(d) To fix just and reasonable standards, classifications, regulations, practices, measurement, or service to be furnished, imposed, observed, and followed thereafter by any public service.

Corpus vs. PSC (1947)

FACTS: PSC granted Corpus a CPC to operate an auto-truck service for passengers and freight on several lines in Manila, providing that the certificate shall be valid only "until December 31, 1947." Disagreeing with this limitation, Corpus seeks its modification. HELD: Undoubtedly, the certificate granted is provisional in character. Being so, it is only logical that it be granted for a short period. Considering the age of the cars, the time limit granted by the commission cannot be unreasonable. The cars have been in use years before the war. Their long years of service and the fact that during the Japanese occupation there were no adequate means for proper repairs are reasons enough to believe that the cars cannot be of useful service for more than one year, taking into consideration the heavy pounding they will receive in the continuous daily public service in rough roads. Experience will show that such cars cannot be in continuous operation for many days without costly repairs which are hard to face. The commission acted wisely in reserving to itself the right to modify the conditions of the certificate granted. It is expected that the commission will exercise such keen and proper supervision as to immediately stop the operation of the service as soon as the vehicles used in same would endanger public safety. This should be one of the main concerns in this case. Transportation must be easy, cheap and above all safe. If vehicles are not in efficient condition and in proper shape as to afford safe transportation their use should immediately be stopped.


Admin Code of 1987, Title XV, Chapter 5, Sec. 19. Powers and functions of the Board. - The Board (LTFRB) shall:

xxx

(2) Issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land transportation services provided by motorized vehicles, and prescribe the appropriate terms and conditions therefor;

REMEMBER: The franchise is given to the operator’s company; the CPC is given for one particular vehicle.


RA 9295 (Domestic Shipping Development Act) Sec. 9. Safety Standards. - All vessels operate by domestic ship operators shall at all times be in seaworthy condition properly equipped with adequate life-saving, communication, safety and other equipment operated and maintained in accordance with the standards set by MARINA, and manned by duly licensed and competent vessel crew. The MARINA shall have the power to inspect vessels and all equipment on board to ensure compliance with safety standards


RA 776 (CAB Charter), Section11. Nature, terms and conditions. — A Certificate of Public Convenience and Necessity is a permit issued by the Board authorizing a person to engage in air commerce and/or air transportation, foreign and/or domestic.

xxx

There shall be attached to the exercise of the privileges granted by the permit, or amendment thereto, such reasonable terms, conditions or limitations as, in the judgment of the Board, the public interest may require.

xxx

5. Regulation of period within which a franchise may be enjoyed


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xxx (2) Issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land transportation services provided by motorized vehicles, and prescribe the appropriate terms and conditions therefor;


RA 9295 (Domestic Shipping Development Act) Sec. 10. Jurisdiction; Power; and Duties of MARINA. The MARINA shall have the power and authority to:

xxx (2) Issue certificates of public convenience or any extensions or amendments thereto, authorizing the operation of all kinds. Classes and types of vessels in domestic shipping: Provided, that no such certificate shall be valid for a period of more than twenty-five (25) years;

NOTE: The twenty-five year limit in this section is well within the 50-year maximum provided by the CONSTI.


RA 776 (CAB Charter), Section 11. Nature, terms and conditions. — A Certificate of Public Convenience and Necessity is a permit issued by the Board authorizing a person to engage in air commerce and/or air transportation, foreign and/or domestic.

Any permit may be altered, amended, modified, suspended, cancelled or revoked by the Board in whole or in part, upon complaint or petition or upon the Board's initiative as hereinafter provided, whenever the Board finds such action to be in the public interest.

xxx

6. Government’s right of requisition

RA 7471 (Overseas Shipping Development Act), Sec. 9. Requisition of Vessels. — The President of the Philippines may, in times of war and other national emergency, requisition absolutely or temporarily, for any naval or military purpose, any and all vessels of the Philippine registry. The Government shall pay the owner or operator of the vessel, based on normal conditions at the time of requisition: (a) The fair market value, if the vessel is taken absolutely, or (b) The fair charter value, if the vessel is taken temporarily. In case of disagreement, such fair value shall be determined by an arbitration committee composed of: (a) One (1) member to be appointed by the MARINA; (b) One (1) member to be appointed by the owner or operator of the vessel; and chan robles virtual law library (c) One (1) member to be appointed by the two (2) members so appointed. The decision of the arbitration committee shall be final and binding on both parties.

RA 9295 (Domestic Shipping Development Act) Sec. 24. Temporary Take-Over of Operations. In times of national emergency, when the public interest so requires, the State may during emergencies and under reasonable terms prescribed by it, temporary take over or direct the operations or any vessel engaged in domestic trade and commerce, or prescribe its rates or routes of operation. Immediately upon the cessation of the emergency, the State shall immediately reinstate to the domestic ship operation of its vessel under the same terms and conditions prior to the occurrence of the emergency.

Legislative franchise of airline grantees

PD 1590 (PAL Charter) Sec. 7. In case of war, insurrection, domestic trouble, public calamity, or national emergency, the Philippine Government upon order of the President shall have the right to take over and operate the equipment of the grantee, paying just compensation for such use or damages.


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RA 7151 (Cebu Pacific Charter) Sec. 8. Right of Government. — In case of war, insurrection, domestic trouble, public calamity or national emergency, the Philippine Government, upon the order of the President, shall have the right to take over and operate the equipment of the grantee paying for its use or damages.

RA 8339 (Air Philippines Charter) Sec. 10. Right of Government. — A special right is hereby reserved to the President of the Philippines, in times of war, rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order, to temporarily take over and operate the facilities or equipment of the grantee, to temporarily suspend the operation of any facility or equipment in the interest of public safety, security and public welfare, or to authorize the temporary use and operation thereof by any agency of the government, upon due compensation to the grantee, for the use of said facilities or equipment during the period when they shall be so operated.

7. Revocation of license

Vda de Cruz vs. Marcelo (1962)

FACTS: PSC granted Pedro Cruz a CPC to install, maintain and operate a 15-ton ice plant. Sometime later, an inspection was made by the engineer of the PSC on the site of the Ice Plant and it was found that the site where the ice plant was formerly installed was being used as a pig pen and that there was no more ice plant machinery and equipment at the place. Marcelo et al. filed a petition asking for the cancellation of the CPC of the deceased Pedro Cruz on the ground of abandonment. PSC cancelled and revoked Pedro Cruz’s CPC. Four applications (including Cruz) were filed before the Public Service Commission by different applicants, all of whom were authorized ice plant operators of Manila and suburbs, praying for authority to install, maintain an ice plant in the area. PSC, finding all the applicants to be equally financially capable of putting up the 15 ton ice plant but considering not advisable nor practical to split the 15 tons among the applicants, decided to grant the, certificate on the basis of priority of the date of filing of

the applications and granted it to Marcelo who was the first of the applicants. HELD: An operator whose CPC was cancelled and revoked because of his abandonment of the operation of the public service right formerly granted to him, cannot avail himself of the preferential rights of an old operator in the subsequent grant or re-issuance of the same particular line of public service (ice-plant). In the instant case, the petitioner has not only failed to improve nor complete the service, but has abandoned it. It is very clear that the herein petitioner, while acting as the administratrix of the late Pedro B. Cruz, and the latter while still living, had abandoned the operation of their 15-ton ice plant in such a manner that the ice plant was converted into a pig pen. Such abandonment is sufficient cause for the cancellation of a certificate of public convenience, for public necessity cannot be made to wait nor sacrifice for private convenience. Furthermore, abandonment is a violation of the law, as public service may not be abandoned to the prejudice of the interest of the public.

CA 146, Section 21. Every public service violating or failing to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission shall be subject to a fine of not exceeding two hundred pesos per day for every day during which such default or violation continues; and the Commission is hereby authorized and empowered to impose such fine, after due notice and hearing. The fines so imposed shall be paid to the Government of the Philippines through the Commission, and failure to pay the fine in any case within the same specified in the order or decision of the Commission shall be deemed good and sufficient reason for the suspension of the certificate of said public service until payment shall be made. Payment may also be enforced by appropriate action brought in a court of competent jurisdiction. The remedy provided in this section shall not be a bar to, or affect any other remedy provided in this Act but shall be cumulative and additional to such remedy or remedies.



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xxx (2) Issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land transportation services provided by motorized vehicles, and prescribe the appropriate terms and conditions therefor;


RA 9295 (Domestic Shipping Development Act) Sec. 10. Jurisdiction; Power; and Duties of MARINA. The MARINA shall have the power and authority to:

xxx (3) Modify, suspend or revoke at any time upon notice and hearing, any certificate, license or accreditation it may have issued to any domestic ship operator;


RA 776 (CAB Charter), Sec. 22. Modification, suspension or revocation. The Board, upon petition or complaint or upon its own initiative, may, by order entered after notice and opportunity for hearing, alter, amend, modify or suspend any permit, in whole or in part, if public convenience and necessity so require, or may revoke any permit in whole or in part, for intentional failure to comply with any provision of this Act or any order, rule or regulation issued thereunder, or any term condition or limitation of such permit: Provided, That the Board, for good cause, may by order without notice and hearings suspend, for a period not to exceed thirty days, any permit or the exercise or any privilege or authority issued or granted under this Act whenever such step shall, in the judgment of the Board, be necessary to avoid serious or irreparable damage or inconvenience to the public. Any interested person may file with the Board a protest or memorandum in support of or opposition to the alteration, amendment, modification, suspension, or revocation of any permit.

NOTE: Only Congress can revoke the legislative franchise it granted to the airline company.

7. Protection of operators from foreign competition

Luzon Stevedoring Corp vs. Anti-Dummy Board (supra)

HELD: Shipping lines, whether for passengers alone, for cargo only, or for both passengers and cargo, are the vital arteries of commerce, perhaps more vital to our security and independence than the nationalization of the retail trade. Alien control of inter-island navigation mean economic control and political domination of our country by alien hands. It should be stressed that the interest of Filipino stockholders may be nullified by the employment of hostile aliens who actually man and operate the ships. In times of peace, such vessels may be utilized for smuggling not only of prohibited or dutiable goods but also on hostile human cargo as well as for gun-running. In times of war, the peril to the State is greater because the officer and employees manning the ships or directing their open rations may be enemy aliens. And even if they are nationals of a neutral country, they may operate the ship in violation of the laws of war to embarrass our government and alienate the sympathy or support of other nations and thus weaken our position vis-a-vis the enemy. Principle of Cabotage Cabotage is the transport of goods or passengers between two points in the same country. Originally starting with shipping, cabotage now also covers aviation, railways and road transport. Cabotage is "trade or navigation in coastal waters, or, the exclusive right of a country to operate the air traffic within its territory." Cabotage is commonly used as part of the term "cabotage rights," the right of a company from one country to trade in another country. In aviation terms, it is the right to operate within the domestic borders of another country. Most countries do not permit cabotage by foreign companies, although this is changing within Europe for member states of the European Union. Politically, cabotage regulations restricting trade to domestic carriers are a form of protectionism. Justifications for cabotage regulations include national security and the need to regulate public safety. (from Wikipedia)

Protection to Domestic Carriers What is allowed:


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o Tokyo Manila (no loading/unloading) Davao

o If there is cargo taken in Manila then considered Domestic.

Issue of smuggling is what is being prevented by the principle of cabotage.

Tariff and Customs Code Sec. 902. Vessels Eligible for Coastwise Trade. The right to engage in the Philippine coastwise trade is limited to vessels carrying a certificate of Philippine registry. Sec. 905. Transportation of Passengers and Articles Between Philippine Ports. Passengers shall not be received at one Philippine port for any other such port by a vessel not licensed for the coastwise trade, except upon special permission previously granted by the Collector; and subject to the same qualification, articles embarked at a domestic port shall not be transported to any other port in the Philippines, either directly or by way of a foreign port, or for any part of the voyage, in any other vessel than one licensed for the coastwise trade. Sec. 1001 Ports Open to Vessels Engaged in Foreign Trade; Duty of Vessel to Make Entry. Vessels engaged in the foreign trade shall touch at ports of entry only, except as otherwise specially allowed; and every such vessel arriving within a customs collection district of the Philippines from a foreign port shall make entry at the port of entry for such district and shall be subject to the authority of the Collector of the port while within his jurisdiction. The master of any war vessel employed by any foreign government shall not be required to report and enter on arrival in the Philippines, unless engaged in the transportation of articles in the way of trade. Sec. 1009. Clearance of Foreign Vessels To and From Coastwise Ports. Passengers or articles arriving from abroad upon a foreign vessel may be carried by the same vessel through any port of entry to the port of destination in the Philippines; and passengers departing from the Philippines or articles intended for export may be carried in a foreign vessel through a Philippine port.

Upon such reasonable condition as he may impose, the Commissioner may clear foreign vessels for any port and authorize the conveyance therein of either articles or passengers brought from abroad upon such vessels; and he may likewise, upon such conditions as he may impose, allow a foreign vessel to take cargo and passengers at any port and convey the same upon such vessel to a foreign port.

RA 9295 (Domestic Shipping Development Act), Sec. 6. Foreign Vessels Engaged in Trade and Commerce in the Philippines Territorial Waters. No foreign vessel shall be allowed to transport passengers or cargo between ports or place within the Philippine territorial waters, except upon the grant Special Permit by the MARINA when no domestic vessels is available or suitable to provide the needed shipping service and public interest warrants the same.

D. The Department of Transportation and Communication 1. The regulatory agencies

a. Land Transportation, Franchising and Regulatory Board (LTFRB) The LTFRB is responsible for promulgating, administering, enforcing, and monitoring compliance of policies, laws, and regulations of land transportation services as a public utility.

b. Land Transportation Office (LTO) The LTO is responsible for optimizing the land transportation service and facilities and to effectively implement the various transportation laws, rules and regulations. (More on the registration of vehicles)

c. Civil Aeronautics Board (CAB) The CAB is mandated by RA 776 as amended by PD 1462, to regulate, promote and develop the economic aspect of air transportation in the Philippines and ensure that existing CAB policies are adapted to the present and future air commerce of the Philippines. It has supervision and jurisdiction and control over air carrier, general sales agents cargo sales agent, and airfreight forwarders, as well their property,


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property rights, equipment, facilities and franchise.

d. Civil Aviation Authority of the Philippines (CAAP) RA 9497 abolished the ATO and replaced it with the CAAP. It is responsible for implementing policies on civil aviation to assure safe, economic and efficient air travel. The agency also investigates aviation accidents.

e. Maritime Industry Authority (MARINA) MARINA has jurisdiction over the development, promotion and regulation of all enterprises engaged in the business of designing, constructing, manufacturing, acquiring, operating, supplying, repairing, and/or maintaining vessels, or component parts thereof, of managing and/or operating shipping lines, shipyards, drydocks, marine railways, marine repair ships, shipping and freight forwarding agencies and similar enterprises.

f. Philippine Coast Guard The PCG is the agency primarily responsible for the promotion of safety of life and property at sea and the protection of the marine environment as mandated by RA 5173, PD 600, PD 601, PD 602, PD 979, as amended.

g. Philippine Ports Authority The PPA is responsible for financing, management and operations of public ports throughout the Philippines.

h. National Telecommunications Commission (NTC) The NTC is vested with jurisdiction in the supervision and control over all telecommunications and broadcast services / facilities in the Philippines.

E. Quasi-judicial functions of regulatory agencies (I did not include the provisions of CA 146, since the PSC is now abolished and its quasi-judicial functions were absorbed by its successors)

1. LTFRB

Admin Code of 1987, Title XV, Chapter 5 Sec. 19. Powers and functions of the Board. - The Board (LTFRB) shall: (1) Prescribe and regulate routes, economically viable capacities, and zones or areas of operation of public land transportation services provided by motorized vehicles in accordance with the public land transportation development plans and programs approved by the Department of Transportation and Communications; (2) Issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land transportation services provided by motorized vehicles, and prescribe the appropriate terms and conditions therefor; (3) Determine, prescribe, approve and periodically review and adjust reasonable fares, rates and other related charges, relative to the operation of public land transportation services provided by motorized vehicles; (4) Issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction and in which cases the pertinent provisions of the Rules of Court shall apply; (5) Punish for contempt of the Board, both direct and indirect, in accordance with the pertinent provisions of, and the penalties prescribed by, the Rules of Court; (6) Issue subpoena and subpoena duces tecum and to summon witnesses to appear in any proceedings of the Board, to administer oaths and affirmations, and, in appropriate cases, to order the search and seizure of all vehicles and documents, upon probable cause and as may be necessary for the proper disposition of the cases before it; (7) Conduct investigations and hearings of complaints for violation of the public service laws on land transportation and of the Board's rules and regulations, orders, decisions or rulings and to impose fines or penalties for such violations;


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(8) Review motu propio the decisions/actions of the Regional Franchising and Regulatory Offices; (9) Promulgate rules and regulations governing proceedings before the Board and the Regional Franchising and Regulatory Office. However, except with respect to paragraphs 4, 5, 6, and 7 hereof, the rules of procedure and evidence prevailing in the courts of law should not be controlling but rather the spirit and intention of said rules. The Board and the Regional Franchising and Regulatory Offices shall use every and all reasonable means to ascertain facts in each case speedily and objectively and without regard to technicalities of law and procedures, all in the interest of due process; (10) Fix, impose and collect, and periodically review and adjust, reasonable fees and other related charges for services rendered; (11) Formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public utilities, standards of measurements or design, and rules and regulations requiring operators of any public land transportation service to equip, install and provide in their utilities and in their stations such devices, equipment, facilities and operating procedures and techniques as may promote safety, protection, comfort and convenience to persons and property in their charges as well as the safety of persons and property within their areas of operation; (12) Coordinate and cooperate with other government agencies and entities concerned with any aspect involving public land transportation services with the end in view of effecting continuing improvement of such services; and (13) Perform such other functions and duties as may be provided by law, or as may be necessary, or proper or incidental to the purposes and objectives of the Department; Sec. 20. Decisions of the Board; Appeals therefrom or Review Thereof . - The Board, in the exercise of its powers and functions, shall sit and render its decision en banc. Every such decision, order, or resolution of the Board must bear the concurrence and signature of at least two (2) members thereof.

The decision, order or resolution of the Board shall be appealable to the Secretary within thirty (30) days from receipt of the decision. However, the Secretary may motu propio review and decision or action of the Board before the same becomes final.

2. MARINA

PD 474 (MARINA Charter), Sec. 12. Specific Powers and Functions of the Administrator. In addition to his general powers and functions, the Administrator shall: (a.) Issue Certificate of Philippine Registry for all vessels being used in Philippine waters, including fishing vessels covered by Presidential Decree No. 43 except transient civilian vessels of foreign registry, vessels owned and/or operated by the Armed Forces of the Philippines or by foreign governments for military purposes, and bancas, sailboats and other watercraft which are not motorized, of less than three gross tons; (b.) Provide a system of assisting various officers, professionals, technicians, skilled workers and seamen to be gainfully employed in shipping enterprises, priority being given to domestic needs; (c.) In collaboration and coordination with the Department of Labor, to look into, and promote improvements in the working conditions and terms of employment of the officers and crew of vessels of Philippine registry, and of such officers and crew members who are Philippine citizens and employed by foreign flag vessels, as well as of personnel of other shipping enterprises, and to assist in the settlement of disputes between the shipowners and ship operators and such officers and crew members and between the owner or manager of other shipping enterprises and their personnel; (d.) To require any public water transport utility or Philippine flag vessels to provide shipping services to any coastal areas in the country where such services are necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires;


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(e.) Investigate by itself or with the assistance of other appropriate government agencies or officials, or experts from the private sector, any matter within its jurisdiction, except marine casualties or accidents which shall be undertaken by the Philippine Coast Guard; (f.) Impose, fix, collect and receive in accordance with the schedules approved by the Board, from any shipping enterprise or other persons concerned, such fees and other charges for the payment of its services; (g.) Inspect, at least annually, the facilities of port and cargo operators and recommend measures for adherence to prescribed standards of safety, quality and operations; (h.) Approve the sale, lease or transfer of management of vessels owned by Philippine Nationals to foreign owned or controlled enterprises; (i.) Prescribe and enforce rules and regulations for the prevention of marine pollution in bays, harbors and other navigable waters of the Philippines, in coordination with the government authorities concerned; (j.) Establish and maintain, in coordination with the appropriate government offices and agencies, a system of regularly and promptly producing, collating, analyzing and disseminating traffic flows, port operations, marine insurance services and other information on maritime matters; (k.) Recommend such measures as may be necessary for the regulation of the importation into and exportation from the Philippines of vessels, their equipment and spare parts; (l.) Implement the rules and regulations issued by the Board of Transportation; (m.) Compile and codify all maritime laws, orders, rules and regulations, decisions in leasing cases of courts and the Authority's procedures and other requirements relative to shipping and other shipping enterprises, make them available to the public, and, whenever practicable to publish such materials; (n.) Delegate his powers in writing to either of the Deputy Administrators or any other ranking officials of the Authority; Provided, That he informs the Board of such delegation promptly; and

(o.) Perform such other duties as the Board may assign, and such acts as may be necessary and proper to implement this Decree.

EO 125-A, Sec. 12. Maritime Industry Authority. The Maritime Industry Authority is hereby retained and shall have the following functions: (a) Develop and formulate plans, policies, programs, projects, standards, specifications and guidelines geared toward the promotion and development of the maritime industry, the growth and effective regulation of shipping enterprises, and for the national security objectives of the country; (b) Establish, prescribe and regulate routes, zones and/or areas of operation of particular operators of public water services; (c) Issue Certificates of Public Convenience for the operation of domestic and overseas water carriers; (d) Register vessels as well as issue certificates, licenses or documents necessary or incident thereto; (e) Undertake the safety regulatory functions pertaining to vessel construction and operation including the determination of manning levels and issuance of certificates of competency to seamen; (f) Enforce laws, prescribe and enforce rules and regulations, including penalties for violations thereof, governing water transportation and the Philippine merchant marine, and deputize the Philippine Coast Guard and other law enforcement agencies to effectively discharge these functions; (g) Undertake the issuance of licenses to qualified seamen and harbor, bay and river pilots; (h) Determine, fix and/or prescribe charges and/or rates pertinent to the operation of public water transport utilities, facilities and services except in cases where charges or rates are established by international bodies or associations of which the Philippines is a participating member or by bodies or associations recognized by the Philippine Government as the proper arbiter of such charges or rates;


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(i) Accredit marine surveyors and maritime enterprises engaged in shipbuilding, shiprepair, shipbreaking, domestic and overseas shipping ship management and agency; (j) Issue and register the continuous discharge book of Filipino seamen; (k) Establish and prescribe rules and regulations, standards and procedures for the efficient and effective discharge of the above functions; (l) Perform such other functions as may now or hereafter be provided by law."

RA 9295 (Domestic Shipping Development Act), Sec. 10. Jurisdiction; Power; and Duties of MARINA. - The MARINA shall have the power and authority to: (1) Register vessels; (2) Issue certificates of public convenience or any extensions or amendments thereto, authorizing the operation of all kinds. Classes and types of vessels in domestic shipping: Provided, That no such certificate shall be valid for a period of more than twenty-five (25) years; (3) Modify, suspend or revoke at any time upon notice and hearing, any certificate, license or accreditation it may have issued to any domestic ship operator; (4) Establish and prescribe routes, zones or areas of operations of domestic ship operators; (5) Require any domestic ship operator to provide shipping services to any coastal area, island or region in the country where such services are necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires; (6) Set safety standards for vessels in accordance with applicable conventions and regulations; (7) Require all domestic ship operators to comply with operational and safety standards for vessels set by applicable conventions and regulations, maintain its vessels in safe and serviceable conditions, meet the standards of safety of life at sea and safe manning

requirements, and furnish safe, adequate, efficient, reliable and proper service at all times; (8) Inspect all vessels to ensure and enforce compliance with safety standards and other regulations; (9) Ensure that all domestic ship operators shall have the financial capacity to provide and sustain safe, reliable, efficient and economic passenger or cargo service, or both; (10) Determine the impact which any new service shall have to the locality it will serve; (11) Adopt and enforce such rules and regulations which will ensure compliance by every domestic ship operator with required safety standards and other rules and regulations on vessel safety; (12) Adopt such rules and regulations which ensure the reasonable stability of passengers and freight rates and, if necessary, to intervene in order to protect public interest; (13) Hear and adjudicate any complaint made in writing involving any violation of this law or the rules and regulations of the Authority; (14) Impose such fines and penalties on, including the revocations of licenses of any domestic ship operator who shall fail to maintain its vessels in safe and serviceable condition, or who shall violate or fail to comply with safety regulations; (15) Investigate any complaint made in writing against any domestic ship operator, or any shipper, or any group of shippers regarding any matter involving violations of the provisions of this Act; (16) Upon notice and hearing, impose such fines, suspend or revoke certificates of public convenience or other license issued, or otherwise penalize any ship operator, shipper or group of shippers found violating the provisions of this Act; and (17) Issue such rules and regulations necessary to implement the provisions of this Act: Provided, That such rules and regulations cannot change or in any way amend or be contrary to the intent and purposes of this Act.


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3. CAB

RA 776 (CAB Charter) Sec. 10. Powers and duties of the Board. (a) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have the general supervision and regulation of, the jurisdiction and control over, air carriers, general sales agents, cargo sales agents, and airfreight forwarders as well as their property, property rights, equipment, facilities, and franchise, in so far as may be necessary for the purpose of carrying out the provisions of this Act. (b) The Board may perform such acts, conduct such investigations, issue and amend such orders, and make and amend such general and special rules, regulations, and procedures as it shall deem necessary to carry out the provisions of this Act. (c) The Board shall have the following specific powers and duties: (1) In accordance with the provisions of Chapter 4 of this Act, to issue, deny, amend, revise, alter, modify, cancel, suspend, or revoke, in whole or in part, upon petition or complaint, or upon its own initiative, any temporary operating permit or Certificate of Public Convenience and Necessity; Provided, however, That in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines. (2) To fix and determine reasonable individual, joint or special rates, charges or fares, which an air carrier may demand, collect or receive for any service in connection with air commerce. The Board may adopt any original, amended, or new individual, joint or special rates, charges or fares proposed by an air carrier if the proposed individual, joint, or special rates, charges for fares are not unduly preferential or unduly discriminatory or unreasonable. The burden of proof to show that the proposed individual, joint or special rates, charges or fares are just and reasonable shall be upon the air carrier proposing the same. In fixing rates, charges, fares under the provisions of this Act, the Board shall take into consideration, among other factors:

(a) The effect of such rates upon the movement of traffic; (b) The need in the public interest of adequate and efficient transportation of persons and property by air carriers at the lowest cost consistent with the furnishing of such service. (c) Such standards respecting the character and quality of service to be rendered by air carriers as may be prescribed by or pursuant to law; (d) The inherent advantages of transportation by aircraft; and (e) The need of each air carrier for revenues sufficient to enable such air carrier, under honest, economical, and efficient management, to provide adequate and efficient air carrier service. (3) To authorize any type of charters whether domestic or international and special air services or flight under such terms and conditions as in its judgment public interest requires. Notwithstanding the existence of bilateral air agreement, the CAB is authorized to grant any foreign airline increase in frequencies and/or capacities on international routes when in its judgment the national interest requires it, provided that the utilization of the increase frequencies and capacities is not more than thirty days. All grants of frequencies and/or capacities shall be subject to the approval of the President. (4) To approve or disapprove increase and/or decrease of capital, lease, purchase, sales of aircraft of air carrier engaged in air commerce; consolidation, merger, purchase, lease and acquisition and control of operating contracts between domestic foreign air carriers, or between domestic air carriers or any person engaged in any phase of aeronautics. (5) To inquire into the management of the business of any air carrier and, to the extent reasonably necessary for such inquiry, to obtain from such carrier, and from any person controlling, or controlled by, or under common control with, such air carrier, full and complete reports and other informations. Such reports shall be under oath whenever the Board so requires. (6) To require annual, monthly, periodical, and special reports from any air carrier, to prescribe the manner and form in which such reports shall be made, and to require from any air carrier specific answers to all questions upon which the Board may deem information to be necessary. Such reports shall be under oath whenever the Board so requires. The Board may also require any air carrier to file with it any contract, agreement, understanding or


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arrangement, or a true copy thereof, between such air carrier and any other carrier or person, in relation to any traffic affected by the provisions of this Act. (7) To prescribe the forms of any and all accounts, records, and memoranda of the movement of traffic, as well as of the receipts and expenditures of money, and the length of times such accounts, records and memoranda shall be preserved: Provided, that any air carrier may keep additional accounts, records, or memoranda if they do not impair the integrity of the accounts, records, or memoranda prescribed or approved by the Board and do not constitute an undue financial burden on such air carrier. (8) To require each officer and director of any air carrier to transmit a report describing the shares of stock with any persons engaged in any phase or other interest held by such air carrier of aeronautics, and the holding of the stock in and control of, other persons engaged in any phase of aeronautics. (d) The Board may investigate, upon complaint or upon its own initiative whether any individual or air carrier, domestic or foreign, is violating any provision of this Act, or the rules and regulations issued thereunder, and shall take such action consistent with the provisions of this Act, as may be necessary to prevent further violation of such provision, or rules and regulations so issued. (e) The Board may issue subpoena or subpoena duces tecum require the attendance and testimony of witness in any matter or inquiry pending before the Board or its duly authorized representatives, and require the production of books, papers, tariffs, contracts, agreements and all other documents submitted for purposes of this section to be under oath and verified by the person in custody thereof as to the truth and correctness of data appearing in such books, papers, tariffs, contracts, agreements and all other documents. (f) The Board may review, revise, reverse, modify or affirm on appeal any administrative decision or order of the Administrator on matter pertaining to: (1) Grounding of airmen and aircraft or (2) Revocation of any certificate or the denial by the Administrator of issuance of any certificate; or

(3) Imposition of civil penalty of fine in connection with the violation of any provision of this Act or rules and regulations issued thereunder. (g) The Board shall have the power, either on its own initiative or upon review on appeal from an order or decision of the Administrator, to determine whether to impose, remit, mitigate, increase, or compromise, such fines and civil penalties as the case may be. (h) (1) The Civil Aeronautics Board shall be advised of, and shall consult with the Department of Foreign Affairs concerning the negotiation of any air agreement with foreign governments for the promotion, establishment, or development of foreign air transportation.(2) In exercising and performing its powers and duties under the provisions of this Act, the Civil Aeronautics Board shall take into consideration the obligation assumed by the Republic of the Philippines in any treaty, convention or agreement with foreign countries on matters affecting civil aviation. Sec. 13. Conduct of Proceedings. The Board shall conduct its proceedings in such manner as will be conducive to the proper dispatch of business and to the ends of justice. All hearings and investigations before the Civil Aeronautics Board shall be governed by the rules of procedure adopted by the Board and in the conduct thereof the Board shall not be bound by the technical rules of evidence. Sec. 14. Delegation of authority to conduct hearings. Delegation of authority to conduct hearings. The Board may designate in writing any of its members or any of its officer to conduct hearings and investigations on any matter pending before the Board and for that purpose the person so designated shall have authority to administer oaths, issue subpoena and subpoena duces tecum, require the attendance and testimony of witnesses, examine witnesses, make ocular inspection of or enter into any airline establishment, building, place or premise in the performance of its official business.

III. Private Law Aspect of Transportation – Contractual Relations of the Parties to the Contract of Transportation A. Applicable law


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1. Philippine law will apply in the following cases:

a. Purely domestic carriage b. When the contract stipulates that Philippine law

applies c. When the contract is silent as to what law will

apply but the goods are bound for the Philippines

Law of the country of destination Accessibility of evidence of damage

2. Applicable Philippine law:

a. Civil Code b. Code of Commerce c. Carriage of Goods by Sea Act

B. Philippine Law – Code of Commerce (1888) 1. Carriage of passengers by water

a. Rights of the carrier i. Demand payment of passage

Code of Commerce, Art. 694. Should the passenger not arrive on board at the time fixed, or should he leave the vessel without permission from the captain, when the latter is ready to leave the port, the captain may continue the voyage and demand the full passage price.

ii. Grant passage only to the specified

person

Code of Commerce, Art. 695. The right to passage, if issued to a specified person, may not be transferred without the consent of the captain or of the consignee.

b. Rights of the passenger

i. Demand a refund of passage for suspension or interruption of voyage

Code of Commerce Art. 697. If before beginning the voyage it should be suspended through the sole fault of the captain or ship agent, the passengers shall be entitled to have their passage refunded and to recover for losses and

damages; but if the suspension was due to an accidental cause, or to force majeure, or to any other cause beyond the control of the captain or ship agent, the passengers shall only be entitled to the return of the passage money. Art. 698. In case a voyage already begun should be interrupted, the passengers shall be obliged to pay only the fare in proportion to the distance covered, and without right to recover for losses and damages if the interruption is due to a fortuitous event or to force majeure, but with a right to indemnify if the interruption should have been caused by the captain exclusively. If the interruption should be by reason of the disability of the vessel, and should the passenger agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the delay shall be for his own account. In case of delay in the departure of the vessel, the passengers have a right to remain on board and to be furnished food for the account of the vessel, unless the delay is due to an accidental cause or to force majeure. If the delay should exceed ten days, the passengers requesting the same shall be entitled to the return of the fare; and if it is due exclusively to the captain or ship agent they may furthermore demand indemnity for losses and damages.

xxx

NOTE: In the Philippines, there is no law which requires shipowners to publish a schedule of the arrivals and departures of their vessels in the different ports of call, and which hold them liable in damages to passengers for any deviation from said schedule

Trans-Asia Shipping Lines vs. CA (1996)

FACTS: Arroyo boarded a vessel owned by Trans-Asia Shipping. The vessel was supposed to take Arroyo from Cebu City to Cagayan de Oro. Sometime during the trip, the vessel stopped due to engine failure. When the engine was repaired, Arroyo, among other passengers, demanded that Tans-Asia return them to Cebu. After Arroyo disembarked in Cebu, the vessel continued its voyage to Cagayan De Oro. The next day, Arroyo boarded another vessel. Arroyo then filed an action for damages


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arising from bad faith, breach of contract, and tort against Trans-Asia. HELD: The delay in this case refers to the interruption or suspension of the performance of the obligation; whereas in Article 1169 of the Civil Code, delay refers to suspension of the commencement of the contract. In this case, there was interruption of the voyage which has already started. Therefore, the applicable law is Article 698 of the Code of Commerce. Article 698 provides for an obligation of the passenger to pay the price of the fare in proportion to the distance covered. There would be no right to recover from losses or damage if the delay is due to a fortuitous event. The passenger is to be indemnified if the delay is caused by the Captain exclusively. If the passenger agreed to wait for the repairs, he or she should account for his or her living expenses but not for an increased price of the fare.

Since the cause of the delay was the failure of Trans-Asia to observe extraordinary diligence, Art.698 is applied by the Court in relation to Articles 2199, 2200, 2201, 2208, and 21 of the Civil Code. This means that the petitioner Trans-Asia is liable for the loss of income incurred by Arroyo due to the delay. However, Arroyo was not able to prove that he did not receive his salary for the day he was stranded. Hence, the award for actual and compensatory damages is denied.

c. Obligations of the carrier i. Transport passengers to their ports of

destination

Code of Commerce Art. 698. (last paragraph)

xxx A vessel exclusively destined to the transportation of passengers must take them directly to the port or ports of destination, no matter what the number of passengers may be, making all the stops indicated in its itinerary. Art. 701. The convenience or the interest of the passengers shall not obligate nor empower the captain

to stand in-shore or enter places which may take the vessel out of her course, nor to remain in the ports he must or is under the necessity of touching for a period longer than that required by the needs of navigation.

ii. Provide subsistence during the voyage

Code of Commerce, Art. 702. In the absence of an agreement to the contrary, the subsistence of the passengers during the voyage shall be deemed included in the price of the passage; but should it be for their account, the captain shall be under the obligation, in case of necessity, to supply the food necessary for their sustenance at a reasonable price.

d. Obligations of the passenger

i. Observe measures to maintain order and discipline on board

Code of Commerce, Art. 700. In all that pertains to the preservation of order and discipline on board the vessel, the passengers shall be subject to the orders of the captain, without any distinction whatsoever.

2. Contract for the carriage of goods

a. Carriage on bill of lading terms o Also known as: Carrying on Liner Terms o Usually for Retail Trade

i. Negotiable BL

In this scenario, the Buyer, after getting the Negotiable BL, may then “negotiate” it to another.

o Elements of Negotiable BL

Receipt of Goods

Contract of Sale

Letter of Credit

Bank 1 Bank 1

Buyer Seller

Bill of Lading


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Evidence of Contract of Carriage

Transferability

ii. Non-negotiable BL – a.k.a. Waybill Only domestic trade uses the waybill.

b. Carriage on charter party terms

o Usually for Wholesale Trade - get whole ship or goods carried in bulk

o 2 Types: i. Voyage – origin

1) Single one voyage

2) Consecutive commitment of tons

for a period specified fixed destination, fixed

period pay freight

In Voyage, separate charge for period in port. (Lay days)

o Lay Days Days allowed to charter parties for loading and unloading the cargo. Usually free. (Limited period only)

o Demurrage Liability of shipper if Lay Days exceeded

o Despatch Rebate given to shipper for not using all Lay Days

ii. Time 1) Strict

Ex. 2 weeks (no cargo, no volume)

2) Trip Governed by Daily Rate

Ex. 12 months pay per day Paying no matter how used. Only important thing is that rent is paid.

3) Bareboat No Crew Time Daily Rate

3. Carriage on bill of lading terms

a. Definition of a bill of lading

BILL OF LADING – written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person named or his order.

NOTE: It is not indispensable to the creation of a contract of carriage. The contract itself arises from the moment goods are delivered by shipper to carrier and the carrier agrees to carry them. FUNCTIONS:

i. Receipt of the goods ii. Evidence of the agreement to transport

and deliver the goods iii. Document of title (in case of negotiable

bills of lading) - A document of title is any document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, goods represented by such document.

b. Contents of a bill of lading

Code of Commerce Art. 350. The shipper as well as the carrier of merchandise and goods may mutually demand of each other the issuance of a bill of lading in which there shall be stated: 1. The name, surname, and domicile of the shipper. 2. The name, surname, and domicile of the carrier. 3. The name, surname, and domicile of the person to whom or to whose order the goods are addressed, or whether they are to be delivered to the bearer of the said bill. 4. A description of the goods, stating their generic char-acter, their weight, and the external marks or signs of the packages containing the same. 5. The cost of the transportation. 6. The date of which the shipment is made. 7. The place of the delivery to the carrier. 8. The place and time at which the delivery is to be made to the consignee.


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9. The damages to be paid by the carrier in case of delay, if any agreement is made on this point. Art. 352. The bills of lading or tickets in cases of trans-portation of passengers may be diverse, one for persons and another for baggage; but all of them shall bear the name of the carrier, the date of shipment, the point of departure and arrival, the cost, and with regard to the baggage, the number and weight of the packages, with such other statements which may be necessary for their easy identification.

Many of the items required in a bill of lading may be

omitted with much advantage to commerce, which aims to have the greatest number of transactions in the last possible time especially in cases where there are tariffs or regulations issued by the carrier company. In this case, the circumstances relative to price, term and conditions of carriage may be omitted and simple reference be made to the tariff and regulations under which the transportation is to be made. (Art. 351)

The form of the bill of lading is not material: if it contains an acknowledgment by the carrier of the receipt of goods for transportation, it is in legal effect, a bill of lading

A ticket issued by a carrier to a passenger is not only a receipt for the fare paid but is the contract between the passenger and the carrier, of the passenger's right to ride in the CC's vehicle

c. Carrier’s obligations

i. Deliver the goods within the time stipulated or (if not time is stipulated) within a reasonable time

Code of Commerce Art. 370. If a period has been fixed for the delivery of the goods, it must be made within the same, otherwise the carrier shall pay the indemnity agreed upon in the bill of lading, neither the shipper nor consignee being entitled to anything else.

Should no indemnity have been agreed upon and the delay exceeds the time fixed in the bill of lading, the

carrier shall be liable for the damages which may have been caused by the delay.

Art. 358. Should no period within which goods are to be delivered be previously fixed, the carrier shall be under the obligation to forward them in the first shipment of the same or similar merchandise which he may make to the point of delivery; and should he not do so, the damages occasioned by the delay shall be suffered by him.

Where period fixed for delivery: the CC must deliver the goods within the time fixed --> for failure to do so, the CC shall pay indemnity stipulated in the B/L, neither the shipper nor the consignee being entitled to anything else --> however, under the Civil Code, damages shall be paid if the carrier refuses to pay the stipulated indemnity or is guilty of fraud in the fulfilment of his obligation (Art. 1126,NCC)

Under Article 370, it can be gathered that liquidated damages may be stipulated in a bill of lading. Such stipulations are binding unless a higher value of the goods was declared.

If no indemnity has been stipulated and the delay exceeds the time fixed in the B/L, the CC shall be liable for the damages that the delay may have caused, e.g. the difference between the MV of the goods at the time when they should have been delivered, and the price at the time when they were delivered to which may be added reasonable expenses caused by delay

A CC in GF may be held liable only for damages that were foreseen or might have been foreseen at the time the contract of transpo was entered into --> before a CC could be held liable for special damages, such as loss of profits on account of the delay or failure of deliver, he must have notice at the time of the delivery of the particular circumstances attending the shipment and which would probably lead to such special loss if he defaulted (Mendoza vs PAL)

If the CC incurs in delay in transporting the goods, a

natural disaster shall not free such carrier from responsibility; where the CC without cause delays the transportation of the goods, the contract limiting the


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CC's liability cannot be availed of in case of the loss, destruction or deterioration of the goods

Where property in the hands of a CC is not delivered

within a reasonable time after it has reached its destination, the CC in the absence of any legal exemption and after demand has been made and delivery refused, is liable for a conversion of the property --> the consignee may waive title to the property and sue for conversion and is entitled to the value of the goods at the time they should have been delivered to him --> subsequent tender of the goods by the CC is not available as a defense

If there has been demand and the CC tenders the goods, the consignee cannot refuse to receive the goods and sue for conversion; his sole remedy is an action for damages on account of the delay --> there can only be conversion if there has been demand and the CC refuses delivery

The time for delivery when no period fixed : the CC

shall be bound to forward them in the first shipment of the same or similar goods which he makes to the point where he must deliver them --> should he not do so, the damages caused by the delay shall be for his account

Art. 358 is not violated when though the goods were not shipped on the train agreed upon, they were shipped on another train which arrived earlier than the one agreed upon

ii. Deliver the goods in the same condition

as when these were shipped

Code of Commerce, Art. 363. With the exception of the cases prescribed in the second paragraph of Article 361, the carrier shall be obliged to deliver the goods transported in the same condition in which, according to the bill of lading, they were at the time of their receipt, without any damage or impairment, and should he not do so, he shall be obliged to pay the value of the goods not delivered at the point where they should have been and at the time the delivery should have taken place.

If part of the goods transported should be delivered the consignee may refuse to receive them, when he proves that he cannot make use thereof without the others.

Duty to deliver goods : duty to deliver the goods in the same condition in which according to the B/L they were found at the time they were received, without damage or impairment --> otherwise, the CC is liable for damages

Partial delivery: The consignee may refuse to receive the goods delivered, if he can prove that he cannot make use of them independently of those not delivered --> true solution depends upon the economic use which the goods transported have (consignee cannot be arbitrary and must justify his determination)

Estoppel of shipper by laches : neglect or delay of

shipper to demand immediately, or within a reasonable time, the return of the merchandise shipped or its value in case of non-delivery constitutes estoppel by laches places the CC at a disadvantageous position to show that it had fulfilled what it had undertaken; makes it difficult for the CC to prove delivery.

iii. Deliver the same goods it received

Code of Commerce, Art. 368. The carrier must deliver to the consignee without any delay or obstruction the merchandise received by him, by the mere fact of being designated in the bill of lading to receive it; and should he not do so he shall be liable for the damages which may arise therefrom.

The delivery must be made to the consignee. Where the B/L is issued to the order of the shipper, the CC is under a duty not to deliver the merchandise except upon presentation of the B/L duly indorsed by the shipper, and where the CC delivered the goods to another person who did not present the B/L, such CC is liable for misdelivery --> duty to transport the goods safely and to deliver them to the person indicated in the B/L

Misdelivery: Delivery to a person different from that indicated in the B/L --> different from non-delivery


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In case of conflicting orders of the shipper and the

consignee (where one orders the return and the other orders the delivery of the goods), there is no other recourse than to determine at what moment the right of the shipper to countermand the shipment terminates --> this moment can be no other than the time when the consignee or legitimate holder of the B/L appears with such B/L before the CC and makes himself a party to the contract (prior to that time, he is a stranger to the contract)

d. Carrier’s rights

i. Refuse packages unfit for transportation

Code of Commerce, Art. 356. Carriers may refuse to accept packages which appear unfit for transportation; and if said transportation is to be made by railway, and the shipment is insisted on, the company shall carry them, being exempt from all liability if its objections are so stated in the bill of lading.

GEN RULE: CC cannot refuse to carry a particular class of goods to the prejudice of the traffic in those goods

EXCEPT: when the goods or packages are unfit for transportation

BUT if transportation is insisted upon, CC cannot refuse to carry them, but they shall be exempt from all responsibility if their objections are made to appear in the B/L

ii. Inspect the goods prior to acceptance

Code of Commerce, Art. 357. If by reason of well-founded suspicions of falsity in the declaration of the contents of a package, the carrier should decide to examine it, he shall do so before witnesses, in the presence of the shipper or of the consignee. Should the shipper or consignee cited not appear, the examinations shall be made before a notary, who shall draft a certificate of the result of the examination, for such purposes as may be proper.

If the declaration of the shipper should be correct, the expenses caused by the examination and those of

carefully repacking the packages shall be defrayed by the carrier, and in a contrary case by the shipper.

In case of well-founded suspicions of falsity in the declaration of the contents of a package, the procedure indicated must be strictly complied with.

iii. Exercise its lien over the goods in case

of non-payment of freight

Code of Commerce Art. 374. The consignees to whom the remittance may have been made may not defer the payment of the expenses and transportation charges on the goods that they received after twenty-four hours have elapsed from the time of the delivery; and in case of delay in making this payment, the carrier may demand the judicial sale of the goods he transported to a sufficient amount to cover the transportation charges and the expenses incurred. Art. 375. The goods transported shall be specifically bound to answer for the transportation charges and for the expenses and fees caused by the same during their transportation, and until the time of their delivery. This special right shall be limited to eight days after the delivery has been made, and after said prescription the carrier shall have no further right of action than that corresponding to an ordinary creditor. Art. 376. The preference of the carrier to the payment of what is due him for the transportation and expenses of the goods delivered to the consignee shall not be affected by the bankruptcy of the latter, provided the action is brought within the eight days mentioned in the foregoing article.

TIMELINE: 24 hours 8 days Beyond 8 days (After Delivery) (Judicial Sale) (Collection Suit)

e. Carrier’s liability


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i. Risk of the shipper / Liability of the carrier

Code of Commerce Art. 361. The merchandise shall be transported at the risk and venture of the shipper, if the contrary was not expressly stipulated. Therefore, all damages and impairment suffered by the goods during the transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the shipper. The proof of these accidents is incumbent on the carrier. Art. 362. The carrier, however, shall be liable for the losses and damages arising from the causes mentioned in the foregoing article if it is proved that they occurred on account of his negligence or because he did not take the precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading, making him believe that the goods were of a class or quality different from what they really were. If, notwithstanding the precaution referred to in this article, the goods transported run the risk of being lost on account of the nature or by reason of an unavoidable accident, there being no time for the owners to dispose of the same, the carrier shall proceed to their sale, placing them for this purpose at the disposal of the judicial authority or of the officials determined by special provisions.

GEN RULE: The shipper has the risk; carrier is not liable.

EXCEPT: (1) If it is stipulated that the carrier has the risk; (2) if the damage arising from accident, force majeure, or by virtue of the nature or defect of the articles occurred on account of negligence of the carrier or because he did not take the precautions usually adopted by careful persons.

EXCEPTION TO THE EXCEPTION: If the shipper committed fraud in the bill of lading.

Tan Chiong Sian vs. Ynchausti

(1912)

FACTS: Ynchausti and Co. received from Tan Chiong SIan in Manila 205 bundles of goods to be conveyed by YC's steamer to Gubat in Sorsogon, and there to be transhipped to another vessel belonging to YC and transported to Catarman, in Samar. As the lorcha Pilar, which was to transport the goods to Catarman was not yet in Gubat when the cargo arrived, the cargo was stored in YC's warehouse. Several days later, the lorcha arrived and the goods were loaded. However, as the lorcha was being towed, a storm arose, drove the lorcha to the shore and wrecked it, scattering the goods on the beach. YC's laborers proceeded to gather up the goods. As it was impossible to preserve the goods, they were sold at a public auction. Tan Chiong Sian filed an action for damages for P 20,000. LC decided that plaintiff was entitled only to P 14,642.63. HELD: It was force majeure and according to Art. 361 of the Code of Commerce, merchandise shall be transported at the risk and venture of the shipper, unless the contrary be expressly stipulated. No such stipulation appears of record, therefore, all damages and impairment suffered by the goods in transportation, by reason of accident, force majeure, or by virtue of the nature or defect of the articles, are for the account and risk of the shipper. The carrier is exempt from liability if he is able to prove, as he did prove, that the loss or destruction of the merchandise was due to accident and force majeure and not to fraud, fault or negligence on the part of the captain or owner of the ship -- that the loss was a result of the stranding of Pilar because of the hurricane that overtook it.

Ganzon vs. CA (1988)

FACTS: Tumambing contracted the services of Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan to the port of Manila on board the lighter LCT Batman. When half of the scrap iron was already loaded, the mayor of Mariveles arrived and demanded P 5,000 from Tumambing. An argument resulted in the shooting of Tumambing. The loading of the scrap iron was resumed but the acting mayor arrived and ordered Captain Niza to dump the scrap iron. The acting mayor took the rest to the compound of NASSCO and took custody of the scrap iron. Tumambing filed an action for damages against


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Ganzon based on culpa contractual. The TC and CA held Ganzon liable. HELD: Ganzon failed to show that the loss was due to any causes under Art. 1734. We cannot sustain the theory of caso fortuito. The carrier raised the defense that the loss was due to an order or act of competent public authority. The carrier, however, failed to show that the acting mayor had the power to issue the disputed order or that it was lawful or issued under legal process of authority. The order was part of the pressure by the mayor to shakedown Tumambing for P 5,000. The order did not constitute valid authority for Ganzon to carry out. In any case, the intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. There is absence of sufficient proof that the issuance of the order was attended with such force or intimidation as to completely overpower the will of the carrier's EEs.

Melencio-Herrera, Dissenting: Through the order or act of competent public authority, the performance of the contract was rendered impossible. The captain has no control over the situation just as Tumambing had no control over the situation.

ii. Pay for the value of the goods that are not delivered

Code of Commerce, Art. 363. With the exception of the cases prescribed in the second paragraph of Article 361, the carrier shall be obliged to deliver the goods transported in the same condition in which, according to the bill of lading, they were at the time of their receipt, without any damage or impairment, and should he not do so, he shall be obliged to pay the value of the goods not delivered at the point where they should have been and at the time the delivery should have taken place. If part of the goods transported should be delivered the consignee may refuse to receive them, when he proves that he cannot make use thereof without the others.

iii. Pay for the difference in value of the

goods if there has been deterioration

or diminution in value due to the carrier’s fault

Code of Commerce, Art. 364. If the effect of the damage referred to in Article 361 should be only a reduction in the value of the goods, the obligation of the carrier shall be reduced to the payment of the amount of said reduction in value, after appraisal by experts.

Where all the goods are delivered but damage is to such an extent that their value is diminished, the obligation of the CC shall be reduced to the payment of the amount which, in the judgment of experts, constitute such difference in value --> subject of course to other damages under the NCC

iv. Pay for any value of the goods

rendered useless for sale and consumption

Code of Commerce, Art. 365. If, on account of the damage, the goods are rendered useless for sale or consumption for the use for which they are properly destined the consignee shall not be bound to receive them, and may leave them in the hands of the carrier, demanding payment of their value at the current market price that day. If among the goods damages there should be some in good condition and without any defect whatsoever, the foregoing provision shall be applicable with regard to the damaged ones, and the consignee shall receive those which are sound, this separation being made by distinct and separate articles, no object being divided for the purpose, unless the consignee proves the impossibility of conveniently making use thereof in this form. The same provision shall be applied to merchandise in bales or packages, with distinction of the packages which appear sound.

Where damage renders the goods useless for sale

and consumption for the purposes for which they are properly destined:

1.) if the damage affects all goods, the consignee may abandon all the goods to the CC who shall pay the corresponding damages


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2.) if the damage affects only some of the goods, the consignee may abandon only the damaged goods --> but if the consignee can prove that it is impossible to conveniently use the undamaged goods in that form, without the damaged goods, the law authorizes the consignee to abandon all the goods

v. Pay for damages in case of delay in delivery and consignee has abandoned the goods to the carrier

Code of Commerce, Art. 371. In cases of delay on account of the fault of the carrier, referred to in the foregoing articles, the consignee may leave the goods transported in the hands of the carrier, informing him thereof in writing before the arrival of the same at the point of destination. When this abandonment occurs, the carrier shall satisfy the total value of the goods, as if they had been lost or mislaid. Should the abandonment not occur the indemnity for loss and damages on account of the delays cannot exceed the current price of the goods transported on the day and at the place where the delivery was to have been made. The same provision shall be observed in all cases where this indemnity is due.

Right of abandonment: Exceptional but limited right.

The right must be exercised during the intervening period between the moment when the fault of the CC produces a delay, which is the generative cause of the action, until the moment just before the arrival of the goods at the place of delivery, by communicating such abandonment to the CC in writing. Where these conditions do not concur, the refusal to accept cannot be effective.

Damages for abandonment (par. 2) --> subject to Civil Code provisions.

Damages for delay (par. 3) : Provided there is no

express agreement as to indemnity in the B/L and there is no fraud on the part of the CC, and the goods have a known current price at the place and on the day they should have been delivered, the damages

shall not exceed such value --> subject to Civil Code provisions on damages in case of delay

Cases where consignee may abandon goods:

Art. 363, in case of partial non-delivery where the consignee proves that he cannot make use of the goods capable of delivery independently of those not delivered

Art. 365, where the goods are rendered useless for sale and consumption for the purposes for which they are properly destined

Art. 371, where there is delay through the fault of the carrier

f. Filing of the claims by the consignee i. For apparent loss, claim must be filed

at the time of receipt ii. For non-apparent loss, claim must be

filed within 24 hours

Code of Commerce, Art. 366. Within the twenty-four hours following the receipt of the merchandise a claim may be made against the carrier on account of damage or average found upon opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of the packages.

After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.

RATIO: To afford the CC a reasonable opportunity and facilities to check the validity of the claims while the acts are still fresh in the minds of the person who took part in the transaction and the documents are still available.

When period begins to run: period begins to run

when the consignee received possession of the goods such that he may exercise over it the ordinary control pertinent to ownership

There must be delivery of the merchandise by the CC to the consignee at the place of destination --> Art.


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366 applies only to cases of claims for damage to goods actually turned over by the CC and received by the consignee

The conditions under Art. 366 are not limitation of action but are conditions precedent to a cause of action --> if the shipper or consignee fails to allege and prove the conditions under 366, he shall have no right of action against the CC.

The CC may require in the B/L that the goods be examined at the time of delivery thereof --> the CC may likewise waive such right.

A stipulation in the B/L providing for a shorter period

than the statutory period within which to bring action for breach is valid --> does not in any way defeat the right to recover but merely requires that said right be asserted by action at an earlier period (filing of claims is different from filing of suits)

This stipulation is in the nature of a limitation upon the owner's right to recovery --> the burden of proof is on the CC to show that the limitation was reasonable and in proper form or within the time stated.

Art. 366 may be modified by a B/L prescribing a longer period for filing of written claim with the CC or its agent.

HOWEVER: The unilateral action of a CC in stamping a condition in the notice of arrival, requiring examination of bad order cargo by the ship's agent before removal from port authorities as condition precedent to an action for recovery cannot modify or add conditions to the B/L --> unreasonable and unfair in that it allows CC to avoid responsibility for the loss of or damage to their cargo when in packages or covered

The consignee may file a provisional claim: it is not necessary that such claim should state a detailed list of the loss or damage; they only have to contain descriptions of the shipments in question sufficient to have allowed the CC to make reasonable verifications of such claim --> the determination of the specific amount of damages claimed should be done carefully

and without haste and these can be done only in a formal claim which will be filed after the provisional claim

PHILAMGEN vs. Sweet Lines, Inc.

(1992) FACTS: The ship belonging to SCI Line took on board at Louisiana 7000 bags of Low Density Polyethylene consigned to the order of Far East Bank and Trust Company of Manila for shipment to Manila and later for transshipment to Davao City. The cargo was insured by TPI with Philamgen. Upon arrival in Davao, it was discovered that the cargo was damaged and there were shortages and losses. Of the shipment totaling 7,000 bags, only a total of 5,820 bags were delivered to the consignee in good order condition with a loss of 1,080 bags. SLI averred that Philamgen and TPI filed their claim out of time. The bill of lading stated: “Claims for shortage, damage, must be made at the time of delivery to consignee or agent if container shows exterior signs of damage or shortage. Claims for non-delivery, mis-delivery, loss or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or loss, non-delivery or mis-delivery shall be instituted within 60 days from date of accrual of right of action. Failure to file claims or institute judicial proceedings constitutes waiver of claim or right of action.” HELD: The claim was filed out of time. The filing of a claim with the carrier within the time limitation under Article 366 actually constitutes a condition precedent to the accrual of a right of action against a carrier for damages caused to the merchandise. As the requirements in Article 366, restated with a slight modification in the bill of lading, are reasonable conditions precedent, they are not limitations of action. Being conditions precedent, their performance must precede a suit for enforcement and the vesting of the right to file suit does not take place until the happening of these conditions. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. In the case at bar, there is neither any showing of compliance by petitioners with the requirement for the filing of a notice of claim within the prescribed period nor any allegation to that effect. The shipment in question was discharged into the


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custody of the consignee on May 15, 1977, and it was from this date that petitioners' cause of action accrued, with thirty (30) days therefrom within which to file a claim with the carrier for any loss or damage which may have been suffered by the cargo and thereby perfect their right of action. The findings of respondent court as supported by petitioners' formal offer of evidence in the court below show that the claim was filed with SLI only on April 28, 1978, way beyond the period provided in the bill of lading and violative of the contractual provision. the inevitable consequence of which is the loss of petitioners' remedy or right to sue. With regard to the shortened period for filing suit as contained in the bill of lading, the Court held that is not unreasonable and has in fact been generally recognized to be a valid business practice in the shipping industry.

New Zealand Insurance vs. Adriano (1955)

FACTS: The ship (owned by Adriano Choa) Joy received in good order and condition, 107 bundles of first class loose weight hemp from Lee Teh & Co., Inc., for transportation and delivery to Manila, under a bill of lading issued by the carrier to the shipper. The cargo failed to arrive in Manila because the vessel ran aground while entering the Laoang Bay, Samardue to the negligence of its captain, Jose Molina, who, in the investigation conducted by the Marine Board of Inquiry, was found negligent of his duties and was suspended from office for a period of three months. The cargo was insured by the New Zealand Insurance Co., Ltd., and because of the damage caused to said cargo while in transit, the losses were paid by New Zealand to Lee Teh & Co., Inc. The carrier refused to reimburse these damages despite demands made to that effect, so New Zealand, as subrogee of the shipper instituted the pan action before the Court of First Instance of Manila. The LC dismissed the case because of the failure of the shipper or of the consignee to file its claim for damages within 24 hours from receipt of the cargo as required by law. HELD: It is clear from Art. 366 that in order that the condition therein provided may be demanded there should be a consignment of goods, through a common carrier, by a consignor in one place to a consignee in another place. In

other words, there must be delivery of the merchandise by the carrier to the consignee at the place of destination. In the instant case, the consignor is the branch office of Lee Teh & Co., Inc., at Catarman, Samar, which placed the cargo on board the ship Jupiter, and the consignee, its main office at Manila. The lower court found that the cargo never reached Manila, its destination, nor was it ever delivered to the consignee, the office of the shipper in Manila, because the ship ran aground upon entering Laoang Bay, Samar on the same day of the shipment. Such being the case, it follows that the aforesaid article 366 does not have application because the cargo was never received by the consignee.

g. Filing of claims in case of multiple carriers

Code of Commerce, Art. 373. A carrier who delivers merchandise to a consignee by virtue of agreements or combined services with other carriers shall assume the obligations of the carriers who preceded him, reserving his right to proceed against the latter if he should not be directly responsible for the fault which gives rise to the claim of the shipper or of the consignee. The carrier making the delivery shall also assume all the actions and rights of those who may have preceded him in the transportation. The shipper and the consignee shall have an immediate right of action against the carrier who executed the transportation contract, or against the other carriers who received the goods transported without reservation. The reservations made by the latter shall not however exempt them from the liabilities they may have incurred by reason of their own act.

Successive carriers shall assume the obligations of previous carriers but have a right of action against previous carriers is the latter are directly responsible for the fault giving rise to the claim of the shipper

h. Liability of agents of carriers

Code of Commerce, Art. 379. The provisions contained in Article 349 et seq. shall also be understood as relating to persons who, although they do not personally effect the transportation of commercial goods, contract to do so


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through others, either as contracts for a special and fixed transaction or as freight and transportation agents. In either case they shall be subrogated to the place of the carriers with regard to the obligations and liability of the latter, as well as with regard to their right.

4. Carriage on charter party terms

a. Definition of a charter party

A charter party is a contract by virtue of which the owner or agent of a vessel binds himself to transport merchandise or persons for a fixed price. It is a contract by which the owner or agent of the vessel leases for a certain price the whole or a portion of the vessel for the transportation of goods or persons from one port to another.

i. Contract of carriage ii. Contract of affreightment

NOTE: In a contract of affreightment the ship owner is the one liable for damages. (acts as a common carrier)

Planters Products Inc. vs. CA

(1993) FACTS: Planters purchased urea fertilizer from Mitsubishi, New York. The fertilizer was shipped on MV Sun Plum, which is owned by KKKK, from Alaska to San Fernando, La Union. A time charter party was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner. Upon arrival in the port, PPI unloaded the cargo. It took PPI 11 days to unload the cargo. PPI hired a marine and cargo surveyor to determine if there was any shortage. A shortage and contamination of the fertilizer was discovered. PPI sent a claim letter to SSA, the resident agent of KKKK for the amount of the loss. An action for damages was filed. SSA contended that the provisions on CC do not apply to them because they have become private carriers by reason of the charter-party. The TC awarded damages. The CA reversed. HELD: A charter-party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use. There are 2 kinds : (1) contract of affreightment which involves the

use of shipping space or vessels leased by the owner in part or as a whole, to carry goods for others; and (2) charter by demise or bareboat charter where the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. It is not disputed that the carrier operates as a CC in the ordinary course of business. When PPI chartered the vessel, the ship captain, its officers and crew were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Thus it continued to be a public carrier. It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel, provided the charter is limited to the ship only, as in the case of a time-charter or a voyage-charter. It is only when the charter includes both the vessel and the crew, as in a bareboat or demise that a CC becomes private, insofar as such particular voyage is concerned. HOWEVER, in this case, the presumption of negligence on the part of respondent carrier has been overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the cargo. On the other hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

b. Contents of a charter party

Code of Commerce, Art. 652. A charter party must be drawn in duplicate and signed by the contracting parties, and when either does not know how or is not able to do so, by two witnesses at his request. The charter party shall include, besides the condition stipulated, the following circumstances: 1. The kind, name, and tonnage of the vessel. 2. Her flag and port or registry. 3. The name, surname, and domicile of the captain. 4. The name, surname, and domicile of the agent, if the latter should make the charter party.


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5. The name, surname, and domicile of the charterer, and if he states that he is acting by commission, that of the person for whose account he makes the contract. 6. The port of loading and unloading. 7. The capacity, number of tons or weight, or measure which they respectively bind themselves to load and transport, or whether it is the total cargo. 8. The freightage to be paid, stating whether it is to be a fixed amount for the voyage or so much per month, or for the space to be occupied, or for the weight or measure of the goods of which the cargo consists, or in any other manner whatsoever agreed upon. 9. The amount of primage to be paid the captain. 10. The days agreed upon for loading and unloading. 11. The lay days and extra lay days to be allowed and the rate of demurrage.

NOTE: The lay days need not be stipulated for time charters, since only the time is leased (only working days are paid)

Primage: Formerly, a small allowance or compensation payable to the master and marines of a ship; to the former for the use of his cables and ropes to discharge the goods of the merchant; to the latter for lading and unlading in any port of haven. At present, is no longer a gratuity to the master, unless especially stipulated; but it belongs to owners or freighters and is nothing but an increase of the freight rate.

c. Relationship between the charter party and the bill of lading

Code of Commerce, Art. 653. If the freight should be received without the charter party having been signed, the contract shall be understood as executed in accordance with what appears in the bill of lading, which shall be the only instrument with regard to the freight to determine the rights and obligations of the ship agent, of the captain, and of the charterer.

If the cargo is received without a charter party, the B/L shall be considered the contract of the parties

Q: If there is no charter party and B/L, would there be a valid contract? Taking Art. 653 literally, the answer is no. However, if we take into account the fact that delivery of the cargo does not constitute the making of a contract but rather the partial performance thereof, the mere fact of delivery and receipt of such cargo, the GF and mutual consent with which they have been made, should be a better substitute for the charter party than is the B/L which is nothing more than the proof of such delivery.

MADE vs. IAC

(1989) FACTS: MADE entered into a written barging and to wage contract with Uy for the shipment of the MADE's cargo from Iligan City to Kalibo, Aklan. (MADE was allowed 4 lay days and agreed to pay demurrage at the rate of P5,000 for every day of delay, or in excess of the stipulated allowance.) Upon completion of the loading, the parties agreed to divert the barge to Culasi, Roxas City, with the cargo being consigned per bill of lading to Modem Hardware in that City. This new agreement was not reduced to writing. The cargo was eventually unloaded and duly received by the consignee. About six months later, Uy demanded payment of demurrage charges in the sum of P40,855.40 for an alleged delay of eight days and 4/25 hours. 7. MADE ignored this demand, and Uy filed suit, contending that the first written contract was replaced by a new verbal agreement that did not contain any stipulation for demurrage. HELD: The first written contract had been cancelled and replaced by the second verbal contract because of the change in the destination of the cargo. While Article 652 of the Code of Commerce provides that "a charter party must be drawn in duplicate and signed by the contracting parties" and enumerates the conditions and information to be embodied in the contract, including "the lay days and extra lay days to be allowed and the demurrage to be paid for each of them", (clearly in writing) Article 653 just as clearly provides “if the cargo should be received without a charter party having been signed, the contract shall be understood as executed in accordance with what appears in the bill of lading…” The SC read this last provision as meaning that the charter


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party may be oral, in which case the terms thereof, not having been reduced to writing, shall be those embodied in the bill of lading.

d. Kinds of charter parties i. Time charters

Code of Commerce, Art. 658. The freightage shall accrue according to the conditions stipulated in the contract, and should they not be expressed, or should they be ambiguous, the following rules shall be observed: 1. If the vessel has been chartered by months or by days, the freightage shall begin to run from the day the loading of the vessel has begun. 2. In charters made for a fixed period, the freightage shall begin to run from that very day

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REMEMBER: Lay days need not be stipulated because only the time is leased. Therefore, demurrage is not relevant.

ii. Voyage charters

Code of Commerce, Art. 658. (last paragraph)

xxx 3. If the freightage is charged according to weight, the payment shall be made according to the gross weight, including the containers, such as barrels or any other objects in which the cargo is contained.

REMEMBER: Demurrage is relevant because the freight (tonnage / volume) is what is leased.

e. Demurrage charges

Code of Commerce, Art. 656. If in the charter party the time in which the loading and unloading are to take place is not stated, the usages of the port where these acts take place shall be observed. After the stipulated or customary period has passed, and should there not be in the freight contract an express provision fixing the indemnification

for the delay, the captain shall be entitled to demand demurrage for the lay days and extra lay days which may have elapsed in loading and unloading.

Demurrage: Sum which is fixed by the contract of carriage, or which is allowed, as remuneration to the owner of a ship for the detention of his vessel beyond the number of days allowed by the charter party for loading and unloading or for sailing; it is an extended freight or reward to the vessel in compensation for the earnings she is improperly caused to lose.

O’Farrel y Cia vs. Manila Electric Co.

(1929) FACTS: SCFC and MERALCO entered into a sale of 75,000 tons of dust coal; it was also stipulated that the dust coal should be loaded either in the stream or alongside the wharf or quay at Hongay, at the option of SCFC, “with quick despatch, vessels taking their turn in loading”. Because of this, MERALCO needed to make an arrangement with a shipping company, O’Farrel, the agent of SCFC in Manila, directed the attention of MEC to O’ Farrel y Cia. Thereafter, a contract between OC and MEC was executed. Delay occurred in taking on of the coal in Hongay, owing to the inability of SCFC to deliver the coal to the waiting boats. This was due to the fact that the cranes of SCFC at Hongay were defective and often out of order. The result was that OC’s boats were kept waiting in the port for 123 days. OC filed suit against MERALCO, seeking to recover, among others, the amount represented by the demurrage claimed by OC, at the rate of P600 per day, for the 123 days during which its ships were detained in Hongay awaiting their turn to take the coal. HELD: There is no stipulation in the contract between OC and MERALCO for demurrage incident to delay at Hongay; and on the contrary, it is stipulated, in the 3rd paragraph of the contract, that loading at Hongay should be “according to customary quick despatch subject to turn of mines.” It appears that the vessels desirous of lading coal at Hongay were laden according to the custom of the port, in


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strict rotation. The expression “subject to turn of mines” should be interpreted to mean that the lading of the vessels should be subject to the output of the mines and the order of ships seeking cargo at eh loading places. The expression “subject to turn of mines” was no doubt inserted in the contract in lieu of a stipulation for demurrage. The insertion of that expression made OC dependent upon the loading facilities of SCFC at Hongay and relieved MERALCO from any liability for demurrage by reason of delays that might occur in that port incident to the obtaining and loading of the coal. The stipulation of the contract making the loading of coal subject to the turn of mines renders article 656 inapplicable, this being a special stipulation determining the order of loading. MERALCO cannot be held responsible for the delay that occurred.

f. Liability of cargo to pay for freight

Code of Commerce, Art. 665. The cargo shall be specially liable for the payment of the freightage, expenses and duties arising therefrom, which must be reimbursed by the shippers, as well as for the part of the general average which may correspond to it; but it shall not be legal for the captain to delay unloading on account of suspicion that this obligation may not be complied with. Should there be reasons for distrust, the judge or court, at the instance of the captain, may order the deposit of the merchandise until he has been paid in full.

Goods required to pay freightage: (1) Art. 659 - goods sold by the captain to pay for the necessary repairs to the hull, machinery or equipment or for unavoidable and urgent needs --> but the freight may not be required to be paid in full (2) Art. 663 - goods which suffer deterioration or dimunition on account of (a) inherent defects or bad quality of packing, or of (b) fortuitous event (3) Art. 644 - goods that increase in size or weight by natural cause

Goods not required to pay freightage: (1) Art. 660 - goods jettisoned for the common safety but the amount of freightage that should have been paid shall be considered as a general

average and shall be computed in proportion to the distance covered when they were jettisoned. (General Average - expenses/damages deliberately caused in order to save the vessel, its cargo or both from a real and known risk.) (2) Art. 661 - merchandise lost by reason of shipwreck or stranding; if freight had been paid in advance, it shall be returned (3) Art. 661 - goods seized by pirates or enemies; freight paid in advance shall be returned

Overseas Factors Inc. vs. South Sea Shipping (1962)

FACTS: NARIC and the Overseas Factors, Inc. (OFI) entered contracts, where OFI agreed to supply NARIC w/ 5,000 metric tons of Kagnni rice. OFI and Overseas Factors, entered into a formal contract of charter party in Karachi, Pakistan.

The vessel sailed from Karachi, Pakistan and arrived in Manila. However, the captain and crew members of the SS Ocean Trader refused to unload the cargo of rice unless the balance of the freight and other charges due were paid by the charterers. OFI filed an action praying the Court to direct the captain and the crew of SS Ocean Trader to convert the amount in rupees paid by Overseas Factors and Carlos in Karachi, Pakistan, into British sterling pounds, computed at the legal rate of exchange as allowed by the Government of Pakistan and permit the unloading of the rice. HELD: According South Sea Shipping, the amount due from Overseas Factors and Carlos as freightage of the 7,621.6715 metric tons of rice at 100 shillings per metric ton was £38,108-7-1d and that the latter had paid it only £13,888-17-9d, as acknowledged by Yeung in a letter to Magsino, agent of Overseas Factors. However, South Sea Shipping denied having received the sum of £12,838-0-6d from Overseas Factors and Carlos and claim that the sum of 119,221-5-0 Pakistani rupees that Yeung received from Mavani could not be credited as part payment of the freight. By the evidence presented, the sum of £12,838-0-6d (in British Pound Sterling) due for freight on the Joshi rice shipped on board the SS Ocean Trader has not yet been paid to South Sea Shipping by Overseas Factors and


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Carlos in accordance with their contract. Moreover, payment of the sum of 119,221-5-0 Pakistani rupees to Yeung made by Mavani in check was held by Kazi & Kazi merely for the account of Overseas Factors and Carlos pending Government approval for transfer to the Office of South Sea Shipping in Hongkong. As held in NARIC vs. Macadaeg, the fact that the freight was already included in the purchase price paid did not free the cargo of rice from the carrier's lien provided for in article 665 of the Code of Commerce, if the freight has not yet been fully paid by the charterer. Hence, the captain and the crew acted lawfully in refusing to unload the rice.

g. Period when lien on freight subsists Code of Commerce, Art. 667. The goods loaded shall be liable in the first place for the freight and expenses thereof during twenty days, to be counted from the date of their delivery or deposit. During this period, the sale of the same may be requested, even though there be other creditors and the bankruptcy of the shipper or consignee should occur. This right may not he made use of, however, on the goods which, after being delivered, were turned over to a third person without malice on the part of the latter and for a valuable consideration. NOTE: This lien is in the nature of a possessory lien

(possession of the goods is necessary for its exercise). HOWEVER, remember that the lien subsists on the proceeds of the sale of the goods, even if possession of the goods themselves is already given to the buyer.

Ouano vs. CA (1992)

FACTS: Ouano leased a vessel to Rafols under a charter party for 60K per month, 30K downpayment and balance to be paid w/in 20 days after actual departure from port of call with a stipulation that Rafols cannot sublet or sub-charter the vessel without knowledge or consent of owner. Rafols sub-charters through “Fixture Note” the vessel to MADE and agrees to transport bags of cement from Iligan to GenSan, payable in two installments, 23K upon loading and 23K upon receipt of cargo. Ouano writes MADE not to pay Rafols but it pays anyways. The cement is shipped and delivered. Ouano files complaint for 23K + damages against MADE, SMC, and Rafols. Ouano argues

that since the first freight installment being unpaid, there is a lien on the cargo. HELD: The owner (Ouano) has no lien on cargo. Two kinds of charter party, the second being applicable in the case at bar: (1) Owner agrees to carry cargo; (2) Owner surrenders vessel to charterer which in this case, charterer becomes owner for the voyage. (Control and management of vessel is given to charterer.) In the second instance, the charterer has the lien on the cargo, as he substitutes the owner. Owner has no lien on the cargo. Assuming that Ouano had a lien, it was waived when cargo was unconditionally released to the consignee at the port of destination. Delivery of goods terminates the lien. Under Article 667 of the Code of Commerce, the period during which the lien shall subsist is 20 days. Parenthetically, this has been modified by the Civil Code, Article 2241 whereof provides that credits for transportation of the goods carried, for the price of the contract and incidental expenses shall constitute a preferred claim or lien on the goods carried until their delivery and for 30 days thereafter. During this period, the sale of the goods may be requested, even though there and other creditors and even if the shipper or consignee is insolvent. But, this right may not be made use of where the goods have been delivered and were turned over to a third person without malice on the part of the third person and for a valuable consideration. The case of Overseas Factors vs. South Sea Shipping Co. is ineffectual and unavailing. In said case, the cargo was still in the possession of the carrier whose officers and crew refused to unload the same unless the balance of the freight was paid. Herein, the cargo had already been unconditionally delivered to the consignee SMCI without protest.

h. Liability for dead freight

Code of Commerce, Art. 680. A charterer who does not complete the full cargo he bound himself to ship shall pay the freightage of the amount he fails to load, if the captain does not take other freight to complete the load


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of the vessel, in which case he shall pay the first charterer the difference should there be any.

The charterer is liable for the payment of dead freight.

NFA vs. CA

(1999) FACTS: NFA entered into an “agreement for vessel/barge hire” with Hongfil Shipping for the shipment of “200 bags of corn grains, more or less” from Cagayan de Oro to Manila. The freight rate agreed upon was P7.30 per bar or a total of P1.46 Million. However, less than 200 bags of corn grains was actually loaded and transported by Hongfil to Manila. As such, NFA only paid Hongfil P1.006 Million (representing only the bags actually transported). Hongfil sent NFA its billing, claiming payment for freight covering the shut-out load or deadfreight. NFA refused to pay the amount reflected in the billing. Hence, Hongfil brought an action against NFA, contending that since the charter for Hongfil’s vessel MV CHARLIE/DIANE was for the whole vessel, inasmuch as the agreement stipulated that Hongfil cannot accept any other cargo without NFA’s consent, NFA should be liable to pay the total amount of P1.46 Million representing the 200 bags indicated in the agreement. HELD: NFA is liable to pay Hongfil deadfreight. Deadfreight is defined as money payable to a person who has chartered a ship and only partly loaded her, in respect of the loss of freight caused to the ship-owner by the deficiency in cargo. The liability of the charterer for deadfreight under our jurisdiction is expressed in Art. 680 of the Code of Commerce. NFA’s assertion that its contract with Hongfil was for the transport of 200 bags, more or less, and not for exactly 200 bags is untenable. The words "more or less" when used in relation to quantity or distance, are words of safety and caution, intended to cover some slight or unimportant inaccuracy. In fact, it is further disclosed by the evidence that there was a communication from NFA Administrator to Manager of Hongfil Shipping Corporation, stating clearly that the vessel M/V CHARLIE/DIANE was chartered to "load our 200,000 bags corn grains from Cagayan de Oro to Manila at P7.30 per 50 kg./bag." Therefrom, it can be gleaned unerringly that

the charter party was to transport 200,000 bags of corn grains. C. Philippine law – Civil Code 1. Definition of common carrier

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

Requisites to be a Common Carrier Engaged in business of carrying or

transporting goods or passengers whether as principal or ancillary business and whether on regular/scheduled or occasional basis.

Offers its services to the public whether to the general population or narrow segment of general population

For compensation or fixed price or rate

Control of operation or cargo

De Guzman vs. CA (1988)

FACTS: Cendana was a junk dealer and was engaged in buying used bottles and scrap materials in Pangasinan and brought these to Manila for resale. He used two 6-wheeler trucks. On the return trip to Pangasinan, he would load his vehicles with cargo which various merchants wanted delivered to Pangasinan. For that service, he charged freight lower than regular rates. General Milk Co. contracted with him for the hauling of 750 cartons of mild. On the way to Pangasinan, one of the trucks was hijacked by armed men who took with them the truck and its cargo and kidnapped the driver and his helper. Only 150 cartons of milk were delivered. The Milk Co. sued to claim the value of the lost merchandise based on an alleged contract of carriage. Cendana denied that he was a common carrier and contended that he could not be liable for the loss since it was due to force majeure. The TC ruled that he was a common carrier. The CA reversed. HELD: Cendana is properly characterized as a common carrier even though he merely backhauled goods for other


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merchants, and even if it was done on a periodic basis rather than on a regular basis, and even if his principal occupation was not the carriage of goods. Art. 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. It also avoids making a distinction between a person or enterprise offering transportation services on a regular or scheduled basis and one offering service on an occasional, episodic or unscheduled basis. Neither does it make a distinction between a carrier offering its services to the general public and one who offers services or solicits business only from a narrow segment of the population. The fact that Cendana does not hold a CPC is no excuse to exempt him from incurring liabilities as a CC. Otherwise, it would be to reward persons who fail to comply with applicable statutory reqts. and would be offensive to public policy. The liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations. 2. Contract of carriage in general

NOTE: I did not include the complete set of provisions in this part since this is only an overview of the NCC provisions on transportation and they are discussed in detail on the latter part of the outline.

a. Carriage of passengers

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

b. Carriage of passengers’ luggage

NCC, Art. 1754. The provisions of Arts.1733 to 1753 shall apply to the passenger's baggage which is not in his personal custody or in that of his employees. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel keepers shall be applicable.

c. Carriage of goods

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

3. Contract for the carriage of passengers

a. Duty of the carrier to observe utmost diligence

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

NOTE: The contractual aspect of the obligation of

common carriers mean that their liability arises when there is a breach of their duty of providing safe carriage.

AGBAYANI: Common carriers must exercise extraordinary

diligence in carrying passengers - Art. 1755 shows clearly the high degree of care and extra-ordinary diligence required of a CC with respect to its passengers.

Extraordinary diligence required of common carriers -The law requires CC to exercise extra-ordinary diligence which means that they must render service with the greatest skill and utmost foresight.

Reasons for requiring extra-ordinary diligence - The

nature of the business of common carriers and the exigencies of public policy demand that they observe extra-ordinary diligence; the business of CC is impressed with a special public duty and therefore subject to control and regulation by the state. The


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public must of necessity rely on the care and skill of CC in the vigilance over the goods and safety of the passengers

Rigorous law on common carriers not applicable to special employment as carrier - The laws applicable to CC are rigorous and should not be extended to a person who has neither expressly assumed that character, nor by his conduct and from the nature of his business justified the belief on the part of the public that he intended to assume it.

Carrier's duty of extraordinary diligence extends also to crew members - The duty to exercise the utmost diligence on the part of CCs is for the safety of passengers as well as for the members of the crew or the complement operating the carrier. This must be so for any omission, lapse or neglect thereof will certainly result to the damage, prejudice, injuries or even death to all aboard the plane.

Air carrier can terminate services of pilot for serious

misconduct and drunkenness, because of its duty of extraordinary diligence - The CC can terminate the services of its drivers, pilots and EEs for serious misconduct and drunkenness because of its duty of extra-ordinary diligence. Whenever a passenger dies or is injured the presumption is that the CC is at fault notwithstanding the fact that it has exercised due diligence of a good father of a family in the selection and supervision of its EEs. Thus, extra-ordinary measures and diligence should be exercised by it for the safety of its passengers and their belongings. A CC can terminate an EE whose continued service is inimical to its interests and the safety of the passengers.

NCC, Art. 1757. The responsibility of the common carrier for the safety of passengers as required in Arts. 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise.

AGBAYANI: Ticket given to a passenger is a written contract -

Ticket given to passenger is a written contract with the ff. elements: (1) the consent of the contracting

parties manifested by the fact that the passenger boards the ship and the shipper consents or accepts him in the ship for transportation; (2) cause or consideration which is the fare paid by the passenger as stated in the ticket; (3) object, which is the transportation of the passenger from the place of departure to the place of destination which are stated in the ticket.

Passenger bound notwithstanding his failure to sign ticket containing stipulation limiting liability - Even if the passenger failed to sign the ticket, he is nevertheless bound by the provisions thereof. Such provisions are part of the contract of carriage, regardless of the passenger's lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion which is not entirely prohibited by law. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Accordingly, where the CC incurred delay, it is liable only for the amount printed in the ticket the passenger not having declared a higher value for his luggage nor paid addtl. charges.

GENERAL RULE: Under 1757, the extraordinary diligence required under 1733 and 1755 for the carriage of passengers cannot be dispensed with or lessened (1) by stipulation, (2) by the posting of notices, (3) by statements on tickets, or (4) otherwise. What cannot be stipulated in a carriage of passengers:

(1) absolutely exempting the CC from liability from the passenger's death or injuries;

(2) lessening the extraordinary diligence required by law to the diligence of a good father of a family

EXCEPT: Under 1758, the CC and the passenger may validly stipulate limiting the CC's liability for negligence where the passenger is carried gratuitously (but the parties cannot stipulate to entirely eliminate liability of CC)


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Brito Sy v. Malate Taxicab and Garage, Inc. (1955)

FACTS: Brito Sy hailed a cab owned by Malate Taxicab and Garage, Inc. to take him to Dencia's Restaurant where he was the general manager. Upon reaching Rizal Monument he told the driver to turn to the right, but the driver instead countered that they better pass along Katigbak Drive. At the intersection of Dewey Bolevard and Katigbak Drive, the taxi collided with a wagon driven by Dequito. Brito Sy was taken to the hospital. He had bruises, contusions and a fractured right leg. Sy filed an action against the Malate Taxicab based upon a contract of carriage. Malate Taxicab alleged that the collision was not due to the negligence of its driver, but of Dequito.

HELD: Malate Taxicab is liable. There was no need to make an express finding of fault or negligence on the part of Malate Taxicab in order to hold it responsible to pay the damages sought for by Brito Sy since the action is based on a contract of carriage and not on tort. When Brito Sy rode the taxicab, Malate Taxicab assumed the express obligation to transport him to his destination safely, and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it was therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. It is noteworthy, however, that at the hearing in the lower court Malate Taxicab failed to appear and has not presented any evidence at all to overcome and overwhelm the presumption of negligence imposed upon it by law.

Anuran v. Buño (1966)

FACTS: A passenger jeepney was parked on the road of Taal, Batangas. A motor truck speeding along, negligently bumped the jeepney from behind. Because of the collision, 3 people died and 2 others suffered injuries. During the incident, the jeepney had 14 passengers (the allowed maximum number of passengers: 11) and one of them was alighting the vehicle. The jeep was still parked askew (partially, a portion occupying the asphalted road) on the side of the road when water truck bumped it from behind which caused it to turn turtle into nearby ditch.

The aggrieved parties filed a claim against both the drivers and owners of the jeep and truck. The trial court made the truck parties liable. The Court of Appeals adopted lower court’s ruling and applied the doctrine of last clear chance. The truck party brought the matter to the Supreme Court and insisted that the jeep driver and owners should also be made liable.

HELD: The jeepney party should also be made liable. The obligation of the carrier to transport its passengers safely requires “utmost diligence” from the carriers (Article 1755) who are “presumed to have been at fault or to have acted negligently, unless they prove that they have observed extraordinary diligence” (Article 1756). There is legal presumption of negligence on the part of the jeepney party. It must follow that it must answer for injuries to its passengers.

The principle of last clear chance is a defense available between the jeepney and truck party or the two colliding vehicles. It does not arise when a passenger demands responsibility from the carrier to enforce contractual obligations. It would be inequitable to absolve a negligent party.

Philippine Rabbit Bus Lines vs. IAC (1990)

FACTS: Several passengers boarded the jeepney owned by spouses Mangune and driven by Manalo. Their contract with Manalo was P24 for the trip. Upon reaching Tarlac, the right wheel of the jeepney was detached, so it was running in an unbalanced position. Manalo stepped on the brake, making a sudden U-turn and encroaching on the right of way of the other vehicles. The Phil. Rabbit bus bumped from behind the jeepney. As a result of the collision, 3 persons died while the others sustained injuries. Cases were filed against the spouses Mangune, Manalo, Phil. Rabbit and De los Reyes (driver). HELD: The proximate cause of the accident was the negligence of Manalo and spouses Mangune. They did not observe extraordinary diligence required of common carriers. Also, the jeepney driver was convicted for Multiple Homicide and Multiple Serious Injuries with Damage to Property thru Reckless Imprudence, and the spouses are likewise liable because "[i]n an action for damages against the carrier for his failure to safely carry


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his passenger to his destination, an accident caused either by defects in the automobile or through the negligence of its driver, is not a caso fortuito which would avoid the carrier's liability for damages.” Also, the principle about the 'last clear chance' would call for application in a suit between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence.

i. Worthiness of the conveyance used

Necesito vs. Paras (1958)

FACTS: A mother and son boarded a passenger autotruck of the Phil. Rabbit Bus Lines. While entering a wooden bridge, its front wheels swerved to the right, the driver lost control and the truck fell into a creek. The mother drowned; the son was injured. HELD: The Court is forced to assume that the proximate cause of the accident was the reduced strength of the steering knuckle of the vehicle caused by defects in casting it since it is not likely that bus in question was driven over the deeply rutted road leading to the bridge at a speed of 50 mph, as such conduct on the part of the driver would have provoked instant and vehement protest from the passengers because of the attendant discomfort, and there is no trace of any such complaint in the records. While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held answerable for the flaws of its equipment if such flaws were discoverable. In the case at bar, records reveal that the only test applied to the steering knuckle in question was a purely visual inspection every thirty days, to see if any cracks developed. It nowhere appears that either the manufacturer or the carrier at any time tested the steering knuckle to ascertain whether its strength was up to standard, or that it had no hidden flaws would impair that strength. And yet the carrier must have been aware of the critical importance of the knuckle's resistance; that its failure or breakage would result in loss

of balance and steering control of the bus, with disastrous effects upon the passengers. The liability of the CC rests upon negligence or his failure to exercise the utmost degree of diligence that the law requires. The rationale of CC's liability for manufacturing defects is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no remedy against him. In this case, the defect could have been detected with the exercise of utmost diligence by the CC.

b. Presumption of fault on the part of the carrier

NCC, Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755. REMEMBER: A contract of carriage of passengers (in

the Philippines) is a contract of strict liability. But unlike other countries where strict

liability applies, we do not adhere to its attached concept of stipulated “limitation of liability” in contract of carriage of passengers. (BUT, for contracts of carriage of goods, limitation of liability is applicable)

AGBAYANI:

Presumption of negligence - CC’s are presumed to have been at fault or to have acted negligently in case of death or injuries to passengers. Consequently, in an action for damages, the issue is not WON the party seeking damages has adduced sufficient evidence to show the negligence of the CC but WON the carrier has presented the required quantum of proof to overcome the presumption that it has been at fault or that it acted negligently in the performance of its duty.

Court need not make express finding of carrier's fault or negligence - The court need not make an express finding of fault or negligence on the part of the CC in order to hold it responsible to pay the


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damages sought by the passenger. By the contract of carriage, the CC assumes the express obligation to observe extraordinary diligence in transporting the passenger This is an exception to general rule that negligence must be proved.

Carrier not precluded from proving negligence of other carrier involved in collision - While the plaintiff-passenger does not need to prove the negligence of the CC, he may not preclude the CC from proving the legal defense of negligence of the other vehicle involved in the collision (the CC may file a third-party complaint against the other vehicle for reimbursement)

"Last clear chance" rule not applicable to contracts

of carriage - The principle of last clear chance applies only in a suit between the owners and drivers of two colliding vehicles; it does not apply where a passenger demands responsibility from the CC to enforce its contractual obligation; it would be iniquitous to exempt the driver and his ER on the ground that the other driver was also negligent

Fores vs. Miranda

(1959)

FACTS: Miranda was a passenger of a jeep registered in the name of Fores but actually operated by Carmen Sackerman. While the jeep was descending at Sta. Mesa bridge at excessive speed, the driver lost control of it causing it to swerve and hit the bridge wall resulting to injuries to its passengers including respondent who suffered a fracture of the upper right humerus. In an action for damages, the CFI awarded actual damages. The CA reduced the actual damages and added moral damages and attorney's fees. HELD: In case of breach of contract (including one of transportation), proof of bad faith or fraud, i.e., wanton or deliberately injurious conduct, is essential to justify an award of moral damages. The exception to this is when a mishap results in the death of a passenger, in which a CC is liable to pay moral damages for the mental anguish by reason of the death of the passenger. So where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith.

Under the law, the presumption is that common carriers acted negligently but not maliciously. The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as mere carelessness) is too fundamental in our law to be ignored. A carrier's bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carrier's employees.

Philippine Rabbit Bus Lines vs. IAC (supra)

HELD: In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently, and this disputable presumption may only be overcome by evidence that he had observed extra-ordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil Code or that the death or injury of the passenger was due to a fortuitous event.

i. Defense available to the carrier is the exercise of extraordinary diligence

NCC Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755. Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to the circumstances of each case.

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

ii. Liability of the carrier for the willful or

negligent acts of its employees


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NCC Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carrier.

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

Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets, or otherwise.

Liability for negligence or willful acts of employees - Under 1759, CC are held liable for the death or injuries to passengers caused by the negligence or the willful acts of their EEs, although such EEs may have acted beyond the scope of their authority or in violation of the orders of the CC. The CC cannot escape liability by interposing the defense that its EEs have acted without any authority or against the orders of the CC.

The passenger is entitled to protection from

personal violence by the CC or its agents or EEs since the contract of transportation obligates the CC to transport a passenger safely to his destination and a CC is responsible for the misconduct of its EEs.

Reason for making the CC liable for the misconduct of its EEs in their own interest - The servant is clothed with delegated authority and charged with the duty by the CC, to execute his undertaking to carry the passenger safely; when the EE mistreats the passenger, he violates the contractual obligation of the CC for which he represents the CC

Common carrier is exempt from acts of EE not done

in line of duty - The CC is exempt from liability where the EE was never in a position in which it became his duty to his ER to represent him in discharging any duty of the CC towards the passenger; the EE is

deemed as a stranger or co-passenger since his act was not done in the line of duty

Defense of diligence in selection, etc., of employees

- CC cannot escape liability by interposing defense that he exercised due diligence in the selection and supervision of his EEs since his liability is based on culpa contractual.

Elimination or limitation of carrier's liability - Under 1760, the CC's liability for the negligence or willful acts of his EEs which cause death of or injury to passengers cannot be eliminated or limited by (1) stipulation, (2) by the posting of notice, (3) by statements on the tickets, or (4) otherwise

Cangco vs. Manila Railroad Co.

(1918) FACTS: Jose Cangco, an employee of MRR, was riding on its train. As it drew up to the station, the plaintiff made his exit. As he alighted, his foot stepped on a sack of watermelons causing him to slip and his right arm was crushed. This happened between 7 and 8 p.m. and as the railroad station was lighted dimly by a single light, objects on the platform were difficult to see. HELD: It cannot be doubted that the EEs of the railroad co. were guilty of negligence in piling sacks on the platform; their presence constituted an effective legal cause of the injuries sustained by Cangco. It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to exercise due care in its performance. Its liability is direct and immediate (culpa contractual), differing essentially, from that presumptive responsibility for the negligence of its servants, which can be rebutted by proof of the exercise of due care in the selection and supervision of EEs (culpa aquiliana). When the facts averred show a contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to specify in his pleadings whether the breach of the contract is due to wilful fault or


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to negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of its nonperformance is sufficient prima facie to warrant recovery. The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains. That duty, being contractual, was direct and immediate, and its nonperformance could not be excused by proof that the fault was morally imputable to defendant's servants.

Del Prado vs. MERALCO (1929)

FACTS: After one of MERALCO’s cars had stopped at its appointed place for taking on and letting off passengers it resumed its course at a moderate speed under the guidance of the motorman. The car had proceeded only a short distance, however, when the Del Prado, ran across the street to catch the car, his approach being made from the left. Del Prado upon approaching the car, raised his hand as an indication to the motorman of his desire to board the car, in response to which the motorman eased up a little, without stopping. Upon this the plaintiff seized, with his left hand, the front perpendicular handpost, at the same time placing his left foot upon the platform. However, before the plaintiff's position had become secure, and even before his raised right foot had reached the platform, the motorman applied the power, with the result that the car gave a slight lurch forward. This sudden impulse to the car caused the plaintiff's foot to slip, and his hand was jerked loose from the handpost. He therefore fell to the ground, and his right foot was caught and crushed by the moving car. HELD: The distinction between two sorts of negligence (one from culpa contractual and one from culpa aquiliana) is important in this jurisdiction, for the reason that where liability arises from a mere tort (culpa aquiliana), not involving a breach of positive obligation, an employer, or master, may exculpate himself, under the last paragraph of article 1903 of the Civil Code, by proving that he had exercised due diligence to prevent the damage; whereas this defense is not available if the liability of the master

arises from a breach of contractual duty (culpa contractual). The relation between a carrier of passengers for hire and its patrons is of a contractual nature; and a failure on the part of the carrier to use due care in carrying its passengers safely is a breach of duty (culpa contractual) under articles 1101, 1103, and 1104 of the Civil Code. Furthermore, the duty that the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom. (NOTE: The contract of carriage began from the moment Del Prado signaled the car and the car ease its motion lo let the passenger in.) Although the motorman of this car was not bound to stop to let the plaintiff on, it was his duty to do no act that would have the effect of increasing the plaintiff's peril while he was attempting to board the car. The premature acceleration of the car was a breach of this duty.

Maranan vs Perez (1967)

FACTS: A passenger in a taxicab was stabbed and killed by the driver. The driver claimed self defense since accdg to him, he was stabbed first by the passenger. The taxicab operator claimed caso fortuito. HELD: The New Civil Code unlike the Old Civil Code makes the CC absolutely liable for intentional assaults committed by its EEs upon its passengers (Art. 1754). It is enough that the assault happens within the course of the employee's duty. It is no defense that the act was done in excess of authority or in disobedience of the CC's orders. The CC's liability is absolute in the sense that it practically secures the passengers from assaults committed by its own EEs. When a common carrier’s employee injures a passenger through negligence or willful acts, the common carrier is liable for damages insofar as the employee’s acts were done in the course of his duty, even if such acts were beyond the scope of his authority. It is the CC's obligation to select its drivers with due regard not only to their technical competence and physical ability but also to their total personality, including patterns of behavior, moral fiber, and social attitude.


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iii. Effect of willful acts or negligence of other passengers or strangers

NCC, Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.

NOTE: There are two levels of diligence required in

this scenario: Extraordinary diligence – with respect to

safe carriage

Due diligence – with respect to particular willful act or negligence of other passengers or strangers

AGBAYANI:

The CC is responsible for such willful acts or negligence of other passengers or of strangers, provided that the CC's EEs could have prevented or stopped the act or omission through the exercise of ordinary diligence. If the injury could not have been avoided by the exercise of ordinary diligence on the part of the EEs of the CC, the CC is not liable

NOTE: The law speaks of injuries suffered by the passenger However, the word "injuries" should be interpreted to include "death."

Pilapil vs. CA

(1989) FACTS: While on a bus, an unidentified bystander hurled a stone at the bus and hit Pilapil above his left eye. He sustained some injuries to his eye.

HELD: The law does not make the CC an insurer of the absolute safety of its passengers. Art. 1755 qualifies the duty of the CC in exercising vigilance to only such as human care and foresight can provide. The presumption created by law against the CC is rebuttable by proof that the CC had exercised extraordinary diligence in the performance of its obligations and that the injuries suffered were caused by fortuitous events. The liability of the CC necessarily rests upon its negligence, or its failure

to exercise the degree of diligence required by law. Under Art. 1763, the diligence required, with regards to its liability in cases when intervening acts of strangers directly caused the injury, is the diligence only of a good father of a family and not the extraordinary diligence generally required. The rule is not so exacting as to require one charged with its exercise to take doubtful or unreasonable precautions to guard against unlawful acts of strangers. The CC would only be negligent if the tort caused by a third person could have been foreseen and prevented by them. The injury was in no way connected to the performance of the obligation of the bus company. It was caused by a stranger, over which the carrier had no control or even knowledge of, and which could not have been prevented.

Bataclan vs Medina (1957)

FACTS: The bus of Medina Trans left Cavite for Pasay with 18 passengers. Around dawn, the front tires burst and the vehicles began to zigzag until it fell into a canal and turned turtle. Some passengers were able to get out while four were trapped including Bataclan. Later, 10 men came to help, one of them carrying a lighted torch, fueled by petroleum. A fire started, burning the bus and the 4 passengers. Gas had leaked when the bus overturned.

HELD: The proximate cause of the death was the overturning of the vehicle which was followed by the negligence of the driver and the conductor who were on the road walking back and forth. They should have known that with the position of the bus, leakage was possible aside from the fact that gas when spilled can be smelled from a distance. The failure of the driver and conductor to have cautioned or taken steps to warn rescuers not to bring a lighted torch too near the bus constitutes negligence on the part of the agents of the carrier.

There was a breach of the contract of carriage and negligence on the part of the agent of the CC, the driver. At the time of the blowout of the tires, the bus was speeding. The proximate cause of the death was the overturning of the vehicle which was followed by the negligence of the driver and the conductor who were on the road walking back and forth. They should have known


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that with the position of the bus, leakage was possible aside from the fact that gas when spilled can be smelled from a distance. The failure of the driver and conductor to have cautioned or taken steps to warn rescuers not to bring a lighted torch too near the bus constitutes negligence on the part of the agents of the carrier. (NOTE: The contract of carriage has not yet been terminated so the driver and conductor should have still been vigilant.)

c. Rule in case of gratuitous carriage

NCC, Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid, but not for willful acts or gross negligence. The reduction of fare does not justify any limitation of the common carrier's liability.

AGBAYANI: REMEMBER: Under 1757, the extraordinary diligence

required under 1733 and 1755 for the carriage of passengers cannot be dispensed with or lessened (1) by stipulation, (2) by the posting of notices, (3) by statements on tickets, or (4) otherwise.

EXCEPT: Under 1758, the CC and the passenger may validly stipulate limiting the CC's liability for negligence where the passenger is carried gratuitously (but the parties cannot stipulate to entirely eliminate liability of CC)

Effect of reduction of fares - Under 1758 (2), the reduction of fare does not justify any limitation of the CC's liability.

The law is much stricter with respect to carriage of passengers as compared with carriage of goods: a stipulation limiting the CC's liability in writing, signed by the parties, supported by sufficient consideration, not contrary to law will still be void where the passenger is not carried gratuitously.

d. Duty of the passenger

i. Duty to observe due diligence

NCC, Art. 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself.

AGBAYANI: Law does not protect negligence of passenger - Law

does not protect negligence of passenger to the extent of doing harm or damage upon a public utility.

ii. Contributory negligence of the passenger

NCC, Art. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced. AGBAYANI:

Effect of negligence of passenger - Where the proximate cause of the death of or injury to the passenger is his own negligence, and not that of the CC, the CC is exempted from liability.

Effect of passenger's contributory negligence - Contributory negligence on the part of the passenger does not justify the CC's exemption from liability. Where it is not the proximate cause of the death or injury, he or his heirs are not barred from recovery of damages, provided of course that the CC is the proximate cause of his death or injury.

Isaac vs A.L. Ammen Transportation Co.

(1957) FACTS: Isaac boarded Ammen bus as a paying passenger from Albay. The facts of the case show that the bus and a pick-up were approaching each other head-on. The bus swerved to the right and went over a pile of stones and gravel. Despite the efforts of the bus driver, the pick up car still hit the rear left side of the bus. As a result, Isaac’s left arm was completely severed. He chose to hold defendant liable on its contractual obligation. The lower court dismissed holding the driver of the pick-up negligent and not that of the bus.


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HELD: The bus driver observed extra-ordinary diligence or the utmost diligence of a very cautious person in avoiding the collision. The sense of caution one should observe cannot always be expected from one who is placed suddenly in a predicament where he is not given enough time to take the proper course of action under ordinary circumstances. If the carrier's EE is confronted with a sudden emergency, he is not held to the same degree of care he would otherwise be required in the absence of such emergency. Furthermore, by placing his left arm on the window, the passenger is guilty of contributory negligence, and although contributory negligence cannot relieve the carrier but can only reduce his liability (Art. 1762), this is a circumstance which militates against plaintiff's position. It is negligence per se for passengers to protrude any part of his body and that no recovery can be had for an injury.

e. Contract for the carriage of the passengers’ luggage

NCC, Art. 1754. The provisions of Arts.1733 to 1753 shall apply to the passenger's baggage which is not in his personal custody or in that of his employees. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel keepers shall be applicable.

AGBAYANI:

Classes of baggage of passengers - The law makes a distinction between (1) baggage in the custody of the passengers; and (2) baggage not in such custody but in that of the CC.

i. Luggage in the custody of the carrier (checked-in luggage)

AGBAYANI:

Liability for baggage not in custody of passenger - This refers to baggage delivered to the custody of the CC and received by him, to be carried in the same manner as other goods being transported by him. As the CC has custody of such baggage and are carried

like any other goods, the provisions on carriage of goods shall apply (extra-ordinary diligence in the vigilance over the goods).

The moment the effects of a passenger are unconditionally placed in the possession of and received by a carrier for conveyance, the law immediately imposes on the CC extra-ordinary responsibility for the loss thereof which lasts until the actual or constructive delivery of the effects to the passenger as the person who has the right to receive them (presumption of negligence exists but may be rebutted by proof of exercise of extraordinary diligence or causes under 1734).

A CC is liable for the loss of baggage although not

declared and the charges not paid, if it accepted them for transportation

ii. Luggage in the custody of the

passenger (hand-carried luggage)

NCC, Art. 1998. The deposit of effects made by travelers in hotels and inns shall also be regarded as necessary. The keepers of hotels and inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.

AGBAYANI:

Liability for baggage in custody of passenger - Art. 1754 refers to Arts. 1998, 2000- 2003 concerning the responsibility of hotel keepers. Under 1998, the baggage of passengers in their personal custody or in that of their EEs while being transported shall be regarded as necessary deposits. The CC shall be responsible for such baggage as depositaries, provided that (1) notice was given to them or to their EEs, of the baggage brought by their passengers, and that (2) the passengers take the precautions which said CCs advised relative to the care and vigilance of their baggage.

Responsibility for acts of EEs, thieves - Under 2000,

a CC is responsible as a depositary for the loss of or


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injury to the baggage in the personal custody of passengers, caused by the CC's servants or EEs but not those caused by force majeure.

Under Art. 2001, the act of a thief or robber, who has entered the CC's vehicle is not deemed force majeure, unless it is done with the use of arms or through irresistible force.

Under Art. 2002, the CC is not liable if the loss of the baggage in the personal custody of the passenger is due to the acts of the passengers, his family, servants or visitors, OR if the loss arises from the character of the baggage.

Stipulations limiting liability - Under Art. 2003, a CC cannot free himself from responsibility by posting notices to the effect that he is not liable for the baggage brought by the passengers. Any stipulation diminishing the responsibility required under 1998 to 2001 shall be void.

iii. In the case of carriage by water

Code of Commerce, Art. 703. A passenger shall be considered a shipper of the goods he carries on board, and the captain shall not be responsible for what the former may keep under his immediate and special custody, unless the damage arises from an act of the captain or of the crew. Compare this with Art. 1754 of the CC.

f. Damages

NCC, Art. 1764. Damages in cases comprised in this Section shall be awarded with the title XVIII of this book concerning damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier.

REMEMBER: Liquidated damages may only be stipulated in carriage of goods, not passengers.

Fores vs. Miranda

(supra)

HELD: Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the CC was guilty of malice or bad faith. In the case at bar, there is no other evidence of such malice to support an award of moral damages. To award moral damages for breach of contract, without proof of bad faith or malice on the part of the CC, as required by Art. 2220, would be to violate the clear provisions of the law, and constitute unwarranted legislation. A CC's bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the CC's EEs. The exception is a mishap resulting to the death of a passenger in which case Art. 1764 makes the CC subject to Art. 2206 (award of moral damages).

Philippine Rabbit vs. Esguerra (1982)

FACTS: Esquerra was a paying passenger of Philippine Rabbit. He sat at the left-end of the fourth row behind the driver, close to the window. As the bus approached barrio San Marcos, Calumpit, Bulacan, a freight truck owned and operated by the Transport Contractors, Inc. sideswiped each the bus. The left forearm of Patrocinio Esguerra was hit by a hard blunt object, breaking the bones into small fragments while the soft tissues of the muscles and the skin were mascerated. The left arm was eventually amputated. Esguerra filed a case against the Philippine Rabbit Bus Lines, Inc. and the Transport Contractors, Inc., together with their respective drivers, seeking to recover moral damages, among others. HELD: Moral damages are not recoverable in actions for damages predicated on a breach of the contract of transportation, as in the instant case, in view of the provisions of Articles 2219 and 2220 of the New Civil Code. The exceptions are (1) where the mishap results in the death of a passenger, and (2) where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result. The two vehicles sideswiped each other at the middle of the road. In other words, both vehicles were in their respective lanes and that they did not invade the lane of the other. It cannot be said therefore that there was fraud


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or bad faith on the part of the carrier's driver. This being the case, no moral damages are recoverable.

Sulpicio Lines vs. CA (1995)

FACTS: M/V Dona Marilyn capsized due to huge waves caused by Typhoon Unsang. Passengers, father and daughter got separated while they were afloat at sea; only the father survived. A claim for damages was filed by the father with Sulpicio Lines in connection with the death of his daughter and the loss of his belongings worth P27,580.00. HELD: The crew of the vessel M/V Dona Marilyn took a calculated risk when it proceeded despite the typhoon brewing somewhere in the general direction to which the vessel was going. The crew assumed a greater risk when, instead of dropping anchor in or at the periphery of the Port of Calapan, or returning to the port of Manila which is nearer, proceeded on its voyage on the assumption that it will be able to beat and race with the typhoon and reach its destination before it (Unsang) passes. Hence, Sulpicio was made to pay actual, moral and exemplary damages. A common carrier is liable for actual or compensatory damages under Article 2206 in relation to Article 1764 of the Civil Code for deaths of its passengers (the daughter, in this case) caused by the breach of the contract of transportation. In breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger, even if the general rule is that said damages are not recoverable in culpa contractual except when the presence of bad faith was proven. Article 2232 of the Civil Code of the Philippines gives the Court the discretion to grant exemplary damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless manner. The SC is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea.

WRT to the lost luggage, there is no showing that the value of the contents of the lost pieces of baggage was based on the bill of lading or was previously declared by the passenger before he boarded the ship. Hence, there can be no basis to award actual damages in the amount of P27,850.00 for such lost luggage.

Air France vs Carrascoso (1966)

FACTS: Carrascoso was a member of a group of 48 Filipinos that left Manila for Lourdes on March 30, 1958. Air France, through its authorized agent, PAL, issued to plaintiff a first class round trip ticket from Manila to Rome. From Manila to Bangkok, he traveled first class, but at Bangkok, Air France forced him to vacate the first class seat that he was occupying because there was a white man who had a better right to the seat. There was a commotion when plaintiff first refused to give up his seat, but he was pacified by his fellow Filipino passengers to give up his seat and transfer to another class. The lower court sentenced Air France to pay P 25,000 as moral damages, P 10,000 as exemplary damages, the difference in fare between first class and tourist class plus P 3,000 for attorney's fees and costs of suit. The CA reduced the refund from P 393.20 to P 383.20. HELD: Petitioner's contract with Carrascoso is one attended with public duty. Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. The wrongful expulsion is a violation of public duty by the petitioner air carrier — a case of quasi-delict. "The act that breaks the contract may be also a tort". Damages are proper.

The SC awarded him with moral damages since the breach of contract was attended by bad faith. The manager not only prevented Carrascoso from enjoying his right to a first class seat; worst, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment – just to give way to another passenger


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whose right thereto has not been established. Certainly, this is bad faith. Also, upon the provisions of Article 2219 (10), Civil Code, moral damages are recoverable. (ART. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.)

The SC also awarded him with exemplary damages. The Civil Code gives the court ample power to grant exemplary damages — in contracts and quasi- contracts. The only condition is that defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." The manner of ejectment of respondent Carrascoso from his first class seat fits into this legal precept.

Lopez vs. Pan Am (1966)

FACTS: The Lopezes made first class reservations with Pan-Am air carrier, in its Tokyo-SF flight, which reservation was confirmed and first class tickets issued; but Pan-Am's agent by mistake canceled the Lopezes’ reservations and thereafter deliberately withheld from the Lopezes the information, letting them go on believing that their first class reservations stood valid and confirmed, expecting some cancellations of bookings would be made before the flight time, which failed to occur. Upon arrival in Tokyo, only then were the Lopezes informed that there were no accommodations for them in the first class, and they were constrained, due to pressing engagements in the US, to take the flight as tourist passengers, which they did under protest. The Lopezes sued the Pan-Am for moral and exemplary damages. The Rizal CFI awarded the Lopezes moral and exemplary damages and attorney's fees. Upon plaintiff's MFR, said damages were increased in amount. HELD: In so misleading the Lopezes into purchasing first class tickets in conviction that they had confirmed reservations when in fact they had none, Pan-Am willfully and knowingly placed itself into position of having breached its contract with the Lopezes. Such actions of the Pan-Am may indeed have been prompted by nothing more than the promotion of its self-interest in holding on to the Lopezes as passengers and foreclosing on their chances to seek the service of other airlines that may have been able to afford to them first

class accommodations. All the same, in legal contemplation, such conduct already amounts to action in BF. For bad faith means a breach of a known duty through some motive of interest of ill will. It may not be humiliating to travel as tourist passengers, but it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. The Lopezes are entitled to moral damages. Considering their official, political, social and financial standing, they are awarded P 200,000 as moral damages, P 75,000 as exemplary damages all with interest, and P 50,000 as attorney's fees considering the standing of Lopezes’ counsel.

Ortigas vs. Lufthansa (1975)

FACTS: Ortigas took a first class accommodation on Lufthansa Airlines in Rome for his trip to Manila, with confirmation of the airlines office, but its EE on seeing Ortigas' Filipino nationality in his passport, disallowed him to board the place and his seat was given to a Belgian. Ortigas having a heart ailment was advised by his physician to take only a first class seat, but he was compelled to take an economy seat with a promise of the Lufthansa EE that Ortigas will be transferred to first class in Cairo and onward to Hongkong. Upon arrival in Cairo, the promise was not complied with. Similar false representations were made to him at Dharnan and Calcutta. Ortigas sued the airlines for damages. TC awarded Ortigas moral and exemplary damages. HELD: It is the opinion of the SC that moral damages should be raised from P 100,000 to P 150,000 and exemplary damages be increased from P 30,000 to P 100,000. When it comes to contracts of common carriage, inattention and lack of care on the part of the CC resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to an award of moral damages in accordance with Art. 2220. In this case, the breach appears to be of graver nature, since the preference given to the Belgian passenger over Ortigas was done willfully and in wanton disregard of Ortigas's rights and his dignity as a human being and as a Filipino, who may not be discriminated against with


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impunity. Since both Alitalia and Lufthansa are members of IATA and are agents of each other, they are bound by the mistakes committed by a member such as the mistake of the Alitalia EE to inform Ortigas that he could travel first class instead of only being waitlisted. The award of higher damages is justified by the aggravation of the situation when the Lufthansa EE at Rome falsely noted on Ortigas' ticket that he was traveling economy from Rome to HK and which was repeated four times. Also taken into consideration was the heart condition of Ortigas which gave him added apprehension about traveling economy against the advice of the doctor.

i. Liability of registered owners for damages

AGBAYANI:

Registered owner primarily and solidarily liable with driver, under the "kabit system” - Registered owner is primarily and solidarily liable for the damage caused by the vehicle registered in his name, even if the said vehicle had already been sold, leased or transferred to another person who was, at the time of the accident, actually operating the vehicle. The operator of record continues to be the operator of the vehicle in contemplation of law, as regards the public and third persons, and as such is responsible for the consequences incident to its operation; such owner/operator of record is held in contemplation of law as the employer of the driver.

Kabit system - One whereby a person who has been granted a certificate of public convenience allows other persons who own vehicles to operate them under such license, for a fee or percentage of the earnings. This is contrary to public policy, and therefore, void and inexistent; "this is a pernicious system that cannot be too severely condemned; it constitutes an imposition upon the good faith of the govt."

Reason for holding registered owner liable - The law does not relieve the registered owner directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration -- where a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it

would be easy for him by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person or to one who possesses no property with which to respond financially for the damage or injury done; in case of an accident, the registered owner should not be allowed to disprove his ownership to the prejudice of the person injured or to be relieved from responsibility

Fores vs Miranda

(supra)

HELD: Fores contends that the sale of the jeepney was effective even without the apporval of the Public Service Commissioner since he did not convey authority to operate it. However, the provisions of the Public Service Act are clear and prohibit the sale, alienation, lease, or encumbrance of the property, franchise, certificate, privileges or rights, or any part thereof of the owner or operator of the public service Commission. The law was designed primarily for the protection of the public interest; and until the approval of the Public Service Commission is obtained the vehicle is, in contemplation of law, still under the service of the owner or operator, in this case Fores, standing in the records of the Commission which the public has a right to rely upon. (NOTE: The Certificate of Public Convenience may be sold but approval is also needed)

Tamayo vs. Aquino (1955)

FACTS: Aquino’s wife was aboard Tamayo’s truck when the truck bumped against a culvert on the side of the road. The impact was so strong that the roof of the truck was ripped and Epifania was thrown away from the vehicle with two pieces of wood embedded in her skull. She died. Aquino then filed a complaint for damages (P10k actual, P10k moral), based on a breach of contract of carriage against Tamayo, the holder of a certificate of public convenience to operate such truck. Tamayo then filed a third-party complaint against Rayos. Tamayo claims that he had sold the truck to Rayos before the accident even occurred, hence making Rayos liable for the damages sought. Rayos denied such transaction.


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HELD: Tamayo is directly liable to Aquino for damages. Although Tamayo really sold the truck to Rayos, Tamayo had not informed the Public Service Commission of the sale until a month after the accident. For all intents and purposes, Tamayo was still the “registered owner” of the truck “even if the said vehicle had already been sold, leased or transferred to another person who was, at the time of the accident, actually operating the vehicle.” Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done.” Though Tamayo is directly liable to Aquino for damages, being the registered owner of the truck, Rayos, who was operating the truck when the passenger died, is the one directly responsible for the accident and death, hence he should in turn be made responsible to Tamayo.

In operating the truck without transfer thereof having been approved by the Public Service Commission, Rayos acted merely as agent of Tamayo and should be responsible to Tamayo for any damages that he may cause the latter by his negligence.

4. Contract for the carriage of goods

a. Duty of the carrier to observe extraordinary diligence in the vigilance over the goods

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the

Summary of Contract of Carriage of Passengers (as noted down by Jecky)

Obligation of transfer/carriage of passengers always contractual

Liability of carrier Breach to carry to safety

Qualifying Circumstance as far as human care and foresight allowable takes in all circumstances

Diligence of a Very Cautious Person Utmost diligence with due

regard of the circumstances If death or injury attendant:

Presumption: Carrier liable strict liability payment of liability unlimited and subject to proof

Defense: Extraordinary diligence Only defense available

Liable for actual, moral, exemplary, nominal damages all depends on proof and circumstances of case Damages recoverable from death

or injury subject to proof Degree of Liability may be lessened

Gratuitous Carriage Discounted fare still gives

rise to full liability though Contributory Negligence

Must increase/ contribute to initial negligence of carrier

Carrier not liable If proximate cause is negligence of passenger and carrier exercised extraordinary diligence

Actions of passengers and strangers Required diligence:

Diligence of a good father of a family

Mandatory insurance is now a condition for Certificate of Public Convenience


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goods and for the safety of the passengers transported by them, according to the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5,6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.

Extraordinary diligence required of common carriers -The law requires CC to exercise extra-ordinary diligence which means that they must render service with the greatest skill and utmost foresight. The extra-ordinary diligence required of carriers in the handling of the goods of the shippers and consignees last from the time the cargoes are loaded in the vessels until they are discharged and delivered to the consignees.

i. Worthiness of the conveyance

Necesito vs Paras

(supra)

HELD: While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held answerable for the flaws of its equipment if such flaws were discoverable. The liability of the CC rests upon negligence or his failure to exercise the utmost degree of diligence that the law requires. The rationale of CC's liability for manufacturing defects is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no privity whatever with the manufacturer or vendor of the defective eqpt, the passenger has no remedy against him. In this case, the defect could have been detected with the exercise of utmost diligence by the CC. (NOTE: Carrier is deemed an agent of the manufacturer.)

Chan Keep vs. Leon Chan Gioco (1909)

FACTS: Keep delivered 20 cavans of rice to Gioco upon a contract for its transportation by boat (parao) from Luna Port to San Fernando Port, both in La Union, in consideration of P0.25/cavan. The boat, however sank, resulting in the loss of the rice.

Gioco contends that the loss of the rice was due to the sinking of the boat on which it was loaded, as a result of a strong wind which struck her as she was entering the port of San Fernando; and that he should not be held responsible therefor, the loss having resulted from an act of God or an unavoidable accident, and without blame upon his part. This evidence is based on the testimony of the captain and one crew member. HELD: Gioco should be held responsible for the loss of 120 cavans of rice. Since there was no stipulation to the contrary, it is to be presumed that the owner of the boat, Gioco, when he contracted to transport the rice in question over the high seas, obligated himself to furnish a boat suitable for the work which he undertook to perform, and a capable crew to man her. The blowing of strong winds must always be anticipated by men who go down into the sea in ships, and in the absence of evidence of some unusual intervening cause, we must hold that the exercise of due diligence in the performance of their duty by the patron and the members of his crew, had they been reasonably expert as seafaring men, could have and would have avoided the accident which actually occurred, provided the boat was suited to the work required of her.

b. Presumption of fault in the case of the loss of goods

NCC Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the ff. causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. Art. 1735. In all cases other than those mentioned in Nos. 1,2,3,4, and 5 of the preceding article, if the goods are


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lost, destroyed or deteriorated, CCs are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Art. 1733.

AGBAYANI:

Responsibility of common carriers - In general, CC are responsible for the loss, destruction, or deterioration of the goods carried by them. This responsibility arises from contract, as the relation between a carrier and its patrons is of a contractual nature. A failure on the carrier to use extra-ordinary care in carrying goods or passengers safely is a breach of contract and constitutes culpa contractual not culpa aquiliana. While the liability of a carrier as an insurer is not recognized in this jurisdiction, a carrier is liable for damages suffered by goods carried if such damages arise from its negligence. The carrier is also liable even in those cases where the cause of the loss or damage is unknown.

Presumption of negligence - Under Art. 1735, if the goods are proved to have been lost, destroyed or deteriorated, CC are presumed to have been at fault or to have acted negligently, unless they prove that they have observed the extra-o diligence required by law. The plaintiff needs only to prove that the goods he transported have been lost, destroyed or deteriorated CC must then prove that he has exercised extra-ordinary diligence required by law or that the loss, etc. was due to accident or some other circumstances inconsistent with its liability

Carrier has duty to keep and care for goods carried - It is the duty of the CC to properly and carefully handle, carry, keep and care for the goods carried and to exercise due care to ascertain and consider the nature of the goods offered for shipment and to use such methods for their care during the voyage as their nature requires. The carrier is liable for injury to, or loss of, cargo resulting from the failure to properly care for and handle the cargo en route; and it is required to provide adequate ventilation for the safe carriage of the cargo, and provide reasonable and ordinary inspection and care in and about the transportation of cargo. A vessel should not accept

cargo unless it can be given the type of storage that its character requires, for placing of conditions in a bill of lading does not relieve the vessels of obligation to take appropriate care of the cargo.

Duty of carrier to deliver cargo in good condition as when loaded - There is no absolute obligation for a CC to accept cargo. It should not be accepted unless it can be given the type of storage that its character requires. Where a vessel accepts a cargo for shipment for valuable consideration, it takes the risk of delivering it in good condition as when it was loaded. And if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom.

In the exercise of extra-ordinary diligence required by law, the CC must give due regard to all circumstances and take all steps necessary to insure the safety of the passengers and the goods given the circumstances.

Eastern Shipping Lines vs. IAC

(1987)

FACTS: These two cases, both for the recovery of value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo. The insurers paid the corresponding marine insurance values and were subrogated to the rights of the latter as the insured. They filed suits against the petitioner Carrier and won (affirmed by the CA). Eastern Shipping claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity." HELD: Fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. As the peril of fire is not comprehended within the exceptions in Article 1734, Article 1735 of the Civil Code provides that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to


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have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. And even 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 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss," AND that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster." Eastern Shipping has also failed to establish satisfactorily. Negligence was established based on the following facts:

when the smoke was noticed, the fire was already big;

that the fire must have started twenty-four (24) hours before the same was noticed;

that carbon dioxide was ordered released and the crew was ordered to open the hatch covers of No. 2 hold for commencement of fire fighting by sea water;

that all of these efforts were not enough to control the fire.

after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage.

the crew could not even explain what could have caused the fire.

Belgian Overseas vs. Philippine First (2002)

FACTS: CMC Trading A.G. shipped 242 coils of various Prime Cold Rolled Steel sheets for transportation from Hamburg to Manila consigned to the Philippine Steel Trading Corporation. The ship arrived at the port of Manila and discharged the subject cargo. Four coils were found to be in bad order. Finding the four coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. Consequently, Philippine First Insurance paid Philippine Steel Trading and was subrogated to the latter’s rights and causes of action against Belgian.

HELD: Common carriers are bound to observe extraordinary diligence with respect to the safety of the goods and the passengers they transport. Owing to this high degree of diligence required, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. Exception: If carrier proves that it exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence Also the presumption will not arise if the loss is due to any of the causes enumerated in Art. 1734, which is a closed list. Hence, if the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable therefor. Belgian also failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow, to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery. The master should have known at the outset that “rust stained and slightly dented” metal envelopes would eventually deteriorate when not properly stored in transit. Equipped with knowledge of the nature of steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to avoid possible deterioration of the cargo. None of these measures was taken. Petitioners failed to discharge the burden of proving that they have exercised the extraordinary diligence and are liable for damage to the coils.

c. Period of liability of the carrier

NCC Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Art. 1738.


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Art. 1737. The common carrier's duty to observe extra-ordinary diligence in the vigilance over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu. Art. 1738. The extra-ordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination until the consignee has been advised of the arrival of the goods and has reasonable opportunity thereafter to remove them or otherwise dispose of them.

AGBAYANI: When carrier's responsibility begins - Under Art.

1738, the extraordinary responsibility of the CC begins from the time the goods are delivered to the carrier. The delivery to the CC must place the goods to be transported unconditionally in the possession of the CC and the CC must receive them. Otherwise, the extra-ordinary responsibility of the CC will not commence.

When carrier's responsibility terminates - Under 1738, the extra-ordinary responsibility of the CC is terminated at the time the goods are delivered to the consignee or the person who has a right to receive them (actual or constructive delivery).

Constructive delivery: Notice by the CC that the cargo had already arrived, placing them at the disposal of the shipper or consignee releases CC from extra-ordinary responsibility. From such moment the consignee or shipper should exercise over the cargo the ordinary control pertinent to ownership (should unload cargo from the CC)

Effect of storing in transit - Under 1737, the temporary unloading or storage of the goods during the time that they are being transported does not interrupt the extra-ordinary responsibility of the CC.

EXCEPT: Where the shipper or owner exercises its right of stoppage in transitu (the act by which the unpaid vendor of goods stops their progress and resumes possession of them, while they are in the course of transit from him to the purchaser, and not

yet actually delivered to the latter. This is exercised when the buyer is or becomes insolvent.)

Responsibility of carrier when right of stoppage in transit is exercised - The extra-ordinary responsibility of the CC ceases when the goods being transported are temporarily unloaded or stored in transit be reason of the exercise of the right of stoppage in transitu by the unpaid seller. The CC holds the goods in the capacity of an ordinary bailee or warehouseman upon the theory that the exercise of the right of stoppage in transitu terminates the contract of carriage (ordinary diligence is required)

Effect of storage in warehouse of carrier - Under 1738, the extra-ordinary responsibility of the CC does not cease notwithstanding the fact that the goods being transported are stored in the warehouse of the CC at the place of destination. Extra-ordinary responsibility ceases only after the consignee has been advised of the arrival of the goods and has had reasonable opportunity to remove them or otherwise dispose of them.

Liability as a warehouseman (ordinary diligence) arises only when the consignee has been advised of the arrival of the goods and has had reasonable opportunity to remove them or otherwise dispose of them

In this scenario, the extraordinary liability of the carrier continues:

From LA to Davao

In all three stops

Until such reasonable time to enable the consignee to claim the goods

Lu Do vs. Binamira

(1957) FACTS: Delta Co. of NY shipped six cases of films and photographic supplies consigned to Binamira. The


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shipped arrived in Cebu and discharged her cargo, placing it in the possession and custody of the arrastre operator appointed by the Bureau of Customs. The cargo was checked both by the stevedoring co. as well as by the arrastre operator and was found in good order. In the contract of carriage, however, it was stipulated that the carrier is no longer liable for the cargo upon its delivery to the hands of the custom authorities. The cargo was delivered to Binamira and some goods were missing. HELD: The general rule is that CC's responsibility to observe extra-ordinary diligence lasts from the time the goods are placed in the possession of the carrier until they are delivered to the consignee. BUT this rule applies only when the loss, destruction and deterioration of the goods takes place while the goods are in the possession of the carrier and not after it has lost control of them. While the goods are in its possession, it is but fair that it exercise extra-ordinary diligence in protecting them from damage and if loss occurs, the law presumes that it was due to its fault or negligence. While delivery to the customs authorities is not delivery to the consignee, the parties may however, agree to limit the liability of the carrier considering that the goods have still to go through the inspection of the customs authorities before they are actually turned over to the consignee. This stipulation is not contrary to morals or public policy. This is a situation where the CC loses control of the goods because of custom regulations and it is unfair that it be made responsible for any loss or damage during such interregnum.

Servando vs. Philippine Steam Navigation (1982)

FACTS: Servando and Uy Bico each loaded on board Phil. Steam Navigation’s vessel FS-176 for carriage from Manila to Negros Occidental, cartons of colored paper, toys and general merchandise and 1,528 cavans of rice respectively. The vessel arrived at Pulupandan and the cargoes were discharged, complete and in good order, unto the warehouse of the Bureau of Customs. In the afternoon of the same day, said warehouse was razed by a fire of unknown origin, destroying said cargoes. Uy Bico, however, was able to withdraw 907 cavans of rice sometime before the fire.

The TC said that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss is chargeable against the appellant. HELD: Philippine Steam is not liable. The SC upheld a clause in the bills of lading issued for the cargoes limiting the carrier’s responsibility for the loss or damage that may be caused to the shipment, to wit:

“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 . ...”

The Court further said that Clause 14 is a mere iteration of Article 1174 of the Civil Code, on fortuitous events:

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.

Also, the SC noted that the carrier was not in delay and that it had not only notified the consignees of the arrival of their shipment, but had demanded that the same be withdrawn such that Uy Bico had taken delivery of 907 cavans of rice before the burning of the warehouse. AQUINO, separate opinion: The shippers also had reasonable opportunity to remove the goods from the warehouse before the fire occurred in compliance with Article 1738 of the Civil Code, hence it would be unfair to make the carrier liable for such fortuitous event.

Saludo vs CA (1992)


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FACTS: After the death of Saludo's mother, in Chicago, CMAS, made the necessary preparations and arrangements for the shipment of the body from Chicago to the Philippines. It booked the shipment with PAL. PAL Airway Bill was issued for the route from Chicago to SF on board TWA Flight 131, and from SF to Manila, on board PAL Flight 107, and from Manila to Cebu on board PAL Flight 149. However, the said body was mixed up with another one at the Chicago airport and it ended up in Mexico, therefore causing a one-day delay in its arrival. The Saludos’ filed a case against PAL. HELD: The airway bill was issued, not as evidence of receipt of delivery but merely as confirmation for the booking made for the SF-Manila flight scheduled on October 27, 1976. It was not until Oct. 28 that PAL received physical delivery of the body at SF. The extraordinary responsibility of CC begins from the time the goods are delivered to the carrier. This responsibility remains in force even when they are temporarily unloaded or stored in transit, unless the shipper exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance of the goods by the consignee or other person entitled to receive them. For such duty to commence, there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally esablished can the reqt. of extraordinary responsibility arise. As found by the CA, the body was really received by PAL on Oct. 28, 1976 and it was from such date that it became responsible for the agreed cargo under the airway bill. Consequently, for the switching of caskets prior thereto which was not caused by them and subsequent events caused thereby, PAL cannot be held liable.

d. Defenses available to the carrier i. Exercise of extraordinary diligence

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

Presumption of negligence - Under Art. 1735, if the

goods are proved to have been lost, destroyed or deteriorated, CC are presumed to have been at fault or to have acted negligently, unless they prove that they have observed the extra-o diligence required by law.

The plaintiff needs only to prove that the goods he transported have been lost, destroyed or deteriorated. CC must then prove that he has exercised extra-ordinary diligence required by law or that the loss, etc. was due to accident or some other circumstances inconsistent with its liability.

REMEMBER: Mere proof of delivery of goods in order to a carrier, and of their arrival at the place of destination in bad order makes out a prima facie case against the CC.

Compare with Art. 361 of the Code of Commerce - Transportation of the merchandise "at the risk and venture of the shipper" means that the shipper will suffer losses and deterioration arising from fortuitous event, force majeure, or inherent nature and defects of the goods. It does not mean that the carrier is free from liability for losses and deterioration arising from his negligence or fault, w/c is presumed. Thus construed, par. 1 of Art. 361 is not inconsistent with Art. 1735 of the NCC.

Code of Commerce, Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the shipper. Proof of these accidents is incumbent upon the carrier.

ii. Loss arose from any of the exempting

circumstances

NCC, Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the ff. causes only:


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(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.

Lu Do vs. Binamira

(supra) HELD: The general rule is that CC's responsibility to observe extra-ordinary diligence lasts from the time the goods are placed in the possession of the carrier until they are delivered to the consignee. BUT this rule applies only when the loss, destruction and deterioration of the goods takes place while the goods are in the possession of the carrier and not after it has lost control of them. While the goods are in its possession, it is but fair that it exercise extra-ordinary diligence in protecting them from damage and if loss occurs, the law presumes that it was due to its fault or negligence.

De Guzman vs. CA (1988)

HELD: The hijacking of the carrier's truck does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. The standard of extraordinary diligence did not require private respondent to retain a security guard to ride with the truck and to engage brigands in a firefight at the risk of his own life and the lives of the driver and his helper. The limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the

goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." The occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event.

e. Exempting circumstances i. Flood, storm, earthquake, lightning, or

other natural disaster or calamity

NCC Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the ff. causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

xxx Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in Art. 1734 (2).

Art. 1740. If the CC negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility.

AGBAYANI: Requisites for defense of natural disaster:

1. Art. 1739: The natural disaster must have been the proximate and only cause of the loss

2. Art. 1739: The CC must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of flood, storm, or other natural disaster. If the CC does not exercise due diligence in minimizing the loss, he may yet be held liable notwithstanding the fact that the loss, destruction or


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deterioration of the goods arose out of natural disaster.

3. Art. 1740: The CC must not be in delay. If the CC incurs in delay, a natural disaster shall not free it from responsibility. Under Art. 1165 par. 3, if the obligor incurs delay, he shall be responsible for any fortuitous event until he has effected delivery.

HOWEVER: if between the delay or refusal of the CC to transport the goods and the loss of the goods due to an act of God there intervened the shipper's negligence, thus causing a break in the chain of causation between the act of God which caused their loss and the CC's fault, the act of God is the proximate cause of the loss and the carrier's delay or refusal to transport the goods, is merely the remote cause. In such cases, the shipper is not even entitled to set up the claim of contributory negligence. It is then necessary that it be established that the CC was guilty of a willful or negligent act and that between this willful or negligent act and the act of God, no negligence on the part of the shipper intervened.

Accident due to defects of carrier not caso fortuito - Accidents caused either by defects in the carrier or through the negligence of the carrier is not caso fortuito. The passenger or shipper has every right to presume that the carrier is perfectly in good condition and could transport him safely and securely to his destination

PHILAMGEN vs. CA (1993)

FACTS: Davao Union Marketing Corporation shipped on board a vessel operated by the Transpacific Towage, Inc. cargo consisting of union brand GI sheets bags of union Pozzolan and union Portland Cement. The cargo was consigned to the Bicol Union Center. The cargo was insured by PHILAMGEN. When the vessel arrived at the port of destination, the discharging could not be affected immediately and continuously because of certain reasons:

1. the buoys were installed only on September 11, 1985

2. the discharge permit was secured by the consignee only on September 13, 1985

3. a wooden catwalk had to be installed and extension of the wharf had to be made, which was completed only on September 26, 1985

4. the discharging was not continuous because there were intermittent rains and the stevedores supplied by the consignee did not work during the town fiesta

The discharging of the cargo had to be suspended due to the heavy downpour, strong winds, and turbulent sea, caused by a typhoon. To prevent damage to the cargo all hatches of the vessel were closed and secured. However, despite several efforts by the shipmaster and crew, the vessel together with its remaining cargo, were still lost. HELD: Transpacific Towage, as a common carrier, is not responsible for the loss of the insured cargo. While it is true that there was indeed delay in discharging the cargo from the vessel, we agree with the Court of Appeals that neither of the parties herein could be faulted for such delay, for the same (delay) was due not to negligence, but to several factors earlier discussed. The cargo having been lost due to typhoon "Saling", and the delay incurred in its unloading not being due to negligence, private respondent is exempt from liability for the loss of the cargo, pursuant to Article 1740 of the Civil Code. The records also show that before, during and after the occurrence of typhoon "Saling", private respondent through its shipmaster exercised due negligence to prevent or minimize the loss of the cargo:

1. the shipmaster tried to maneuver the vessel amidst strong winds and rough seas;

2. when water started to enter the engine room and later the engine broke down, the shipmaster ordered the ship to be abandoned, but he sought police assistance to prevent pilferage of the vessel and its cargo;

3. after the vessel broke into two parts and sank partially, the shipmaster reported the incident to the Philippine Coast Guard, but unfortunately, despite the presence of three coast guards, nothing could be done to stop the pilferage as almost the entire barrio folk came to loot the vessel and its cargo, including the G.I. sheets.


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PHILAMGEN vs. MCG Marine Services

(1993) FACTS: A vessel carrying the San Miguel cargo was supposed to travel from Mandaue to Surigao. However it sank. PHILAMGEN filed this case as subrogee of San Miguel. The Board of Marine Inquiry conducted an investigation and exonerated the Captain and his crew from administrative liability due to a finding that the sinking of the vessel was solely due to strong winds and huge waves, a fortuitous event included in Article 1734 (1). HELD: Article 1734 provides for a list of circumstances that would absolve the common carrier from this presumed negligence. However, Article 1739 made the standard stricter in requiring that the natural disaster or calamity must be the proximate and the only cause of the loss. Moreover, jurisprudence also requires that there must be an entire exclusion of human agency from the cause of the loss. Furthermore, even if the natural disaster is the proximate and only cause of the loss, Article 1739 also provides that the common carrier is still required to exercise due diligence (or the ordinary care which the particular circumstances require) to prevent or minimize loss before, during, and after the occurrence of the natural disaster. In this case, it was found that the carrier exercised this duty, as supported by the following facts:

1. The strong winds and huge waves were unforeseeable.

2. the vessel was initially seaworthy: it has 3 diesel engines, 3 propellers, an operating generator pumps for emergency, has undergone emergency drydocking and repair before the accident, has competent and experienced captain and crew, and was awarded the SOLAS clearance by the Philippine Coast Guard.

3. when strong winds and huge waves began pounding the ship, the crew took emergency measures. Upon the ingress of water, the crew continuously pumped the sea water out to prevent the ship from sinking. However, because

the crack was at the bottom of the hull below the buoyancy tank’s port side, it was not accessible to the crew. Hence they were not able to control the volume of water, which caused the listing and eventual sinking of the vessel.

ii. Act of the public enemy in war,

whether international or civil

NCC, Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

xxx

(2) Act of the public enemy in war, whether international or civil;

AGBAYANI: Acts of public enemy - This defense is not absolute.

Under 1739, in order for the CC to be exempted from liability, (1) the act of the public enemy must have been the proximate and only cause; and (2) the CC must have exercised due diligence to prevent or minimize the loss before, during and after the act of the public enemy causing the loss, destruction or deterioration of the goods.

iii. Act or omission of the shipper or owner of the goods

NCC

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

xxx

(3) Act or omission of the shipper or owner of the goods;

xxx Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which, however, shall be equitably reduced.


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AGBAYANI:

Act or omission of the shipper - The act or omission of the shipper must be the proximate cause of the loss, destruction or deterioration of the goods. If the shipper merely contributed to the loss, etc. and the proximate cause is still the negligence of the CC, the CC shall still be liable for damages although the damages shall be equitably reduced.

Cia Maritima vs. CA (1988)

FACTS: Concepcion shipped with COMPAÑIA a payloader, and several other construction equipment. While the payloader was about two (2) meters above the pier in the course of unloading, the swivel pin of the heel block of the port block of Hatch No. 2 gave way, causing the payloader to fall. The payloader was damaged and was thereafter taken to COMPAÑIA's compound in Cagayan de Oro City. Concepcion filed a case for damages against COMPAÑIA; COMPAÑIA argues that Concepcion misdeclared the weight of the payloader. HELD: COMPAÑIA is still liable since it failed to take the necessary and adequate precautions for avoiding damage to, or destruction of, the payloader entrusted to it for safe carriage and delivery to Cagayan de Oro City. It cannot be reasonably concluded that the damage caused to the payloader was due to the alleged misrepresentation of private respondent Concepcion as to the correct and accurate weight of the payloader. The fact is that COMPAÑIA used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy cargo like a payloader. It must be noted that the weight submitted by Concepcion was entered into the bill of lading by COMPAÑIA, thru Pacifico Fernandez, a company collector, without seeing the equipment to be shipped and that he never checked the information entered in the bill of lading. While the act of Concepcion in furnishing COMPAÑIA with an inaccurate weight of the payloader cannot successfully be used as an excuse by COMPAÑIA to avoid liability to the damage thus caused, said act constitutes a contributory circumstance to the damage caused on the payloader, which mitigates the liability for damages of

COMPAÑIA in accordance with Article 1741 of the Civil Code.

iv. Character of the goods or defects in the packing or in the containers

NCC Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

xxx

(4) The character of the goods or defects in the packaging or in the containers;

xxx Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss.

AGBAYANI:

Character of Goods - Claims for damages must be made at the time the goods are delivered unless the indications of the damage cannot be ascertained from the exterior of the package, in which case such written claims must be made w/in 24 hours from delivery.

RULE: As long as the damage to the goods was due purely to the inherent nature or defect of the goods or of the containers thereof, the CC cannot be held responsible. HOWEVER: Under Art. 1742, the CC must exercise due diligence to forestall or lessen the loss for it to completely escape liability.

v. Order or act of competent public authority

NCC

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:


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xxx

(5) Order or act of competent public authority.

xxx Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue the order.

AGBAYANI: Order or act of competent authority - Under 1743,

the CC is not responsible for the loss, etc. of the goods if the public authority had power to issue the order. Where the officer acts without legal process, the CC will be held liable.

vi. Other exempting circumstances

De Guzman vs. CA

(1988)

HELD: The hijacking of the carrier's truck does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. The standard of extraordinary diligence did not require private respondent to retain a security guard to ride with the truck and to engage brigands in a firefight at the risk of his own life and the lives of the driver and his helper. The limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force." The occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. Common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or

are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

f. Limitation of liability NOTE: Liability may be limited by the carrier, the shipper or by statute (i.e., COGSA) AGBAYANI:

Kinds of stipulation limiting liability - The following stipulations are often made in a bill of lading bill of lading:

1. stipulation exempting the CC from any and all liability for loss or damage occasioned by its own negligence - VOID

2. stipulation providing for an unqualified limitation of such liability to an agreed stipulation - VOID

3. stipulation limiting the liability of the CC to an agreed valuation unless the shipper declares a higher value and pays a higher rate of freight -- VALID and ENFORCEABLE

i. As to diligence required 1) General rule

NCC

Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss or destruction, or deterioration of the goods to a degree less than extra-ordinary diligence shall be valid, provided it be:

(1) In writing, signed by the shipper or owner;

(2) Supported by a valuable consideration other than the service rendered by the CC; and

(3) Reasonable, just and not contrary to public policy.

Art. 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or owner if the CC refused to carry the goods unless the former agree to such stipulation.

AGBAYANI:


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When stipulation limiting liability valid - Under 1744,

the shipper or owner and the CC may stipulate to limit the liability of the CC for the loss, destruction or deterioration of goods to a degree less than extra-ordinary diligence :

1. the stipulation must be in writing and signed by both parties; 2. the stipulation must be supported by valuable consideration other than the service rendered by the CC; 3. the stipulation must be reasonable, just and not contrary to public policy. NOTE: This applies only when the CC is acting as such but not when it acts as a private carrier.

NOTE: The lowest degree of diligence that can be stipulated is “due diligence”. The parties may stipulate that the diligence to be exercised by the CC be less than extra-ordinary diligence, provided that the requirements under Article 1744 are complied with. However, the parties cannot reduce the diligence to less than that of a good father of a family. Art. 1745 provides for 7 stipulations which shall be considered unreasonable, unjust and contrary to public policy.

Construction of stipulations limiting common

carrier's liability - An exemption in general words not expressly relating to negligence, even though the words are wide enough to include loss by negligence or default of CC's servants, must be construed as limiting the liability of the CC as assurer, and not as relieving him from the duty of exercising reasonable skill and care

Examples of valid stipulations:

1. 1748 - an agreement limiting the CC's liability for delay on account of strikes or riots

2. 1749, Heacock vs Macondray - a stipulation that the CC's liability is limited to the value of the goods appearing in bill of lading unless the shipper or owner declares a greater value

3. 1750 - a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods, if it is

reasonable and just under the circumstances, and has been fairly and freely agreed upon

Take it or Leave it Situation - Under 1746, an agreement limiting the CC's liability may be annulled by the shipper or owner if the CC refused to carry the goods unless the former agreed to such stipulation. The effect of the shipper's consent obtained by means of refusal on the part of the carrier to carry the goods is to make the agreement limiting the CC's liability voidable at the instance of the shipper.

Effect of delay in transportation, etc - Under 1747, the CC cannot avail of the contract limiting his liability in these cases : (1) where the CC delays the transportation of the goods; (2) where the CC changes the stipulated or usual route [in both cases, the delay or change of route must be without just cause]

Home Insurance Co. vs American Steamship Agencies (1968)

FACTS: A Peruvian firm shipped fishmeal through the SS Crowborough consigned to the SMB and insured by the Home Insurance Co. The cargo arrived with shortages. SMB demanded and Home Insurance Co. paid P14,000 in settlement of SMB's claim. Home Insurance filed for recovery from American Steamship Agencies. American Steamship contended that it was not liable because of a stipulation in the charter party that the charterer and not the shipowner was to be liable for any loss or damage to the cargo. The CFI absolved ordered American Steamship to reimburse the P14,000 to Home Insurance, declaring that Art. 587 of the Code of Commerce makes the ship agent civilly liable for damages in favor of third persons due to the conduct of carrier's captain and that the stipulation in the charter party exempting owner from liability is against public policy under Art. 1744 of NCC.

HELD: The stipulation is valid. The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agents is not against public policy and is deemed valid.


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The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of the agent would be void only if the strict public policy governing CC is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered (as in this case) for the use of a single party. Based on the stipulation, recovery cannot be had, for loss or damage to the cargo against shipowners, unless the same is due to personal acts or negligence of said owner or its managers, as distinguished from agents or employees. No personal act or negligence has been proved.

In a charter of the entire vessel, the bill of lading issued by the master to the charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title and not a contract, for the contract is the charter party.

2) Void stipulations

NCC, Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

(1) That the goods are transported at the risk of the owner or shipper;

(2) That the common carrier will not be liable for any loss, destruction or deterioration of the goods;

(3) That the common carrier need not observe any diligence in the custody of the goods;

(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movable transported;

(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished;

(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of

the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.

3) Effect of delay in general

NCC, Art. 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods.

AGBAYANI: Effect of delay in transportation, etc - Under 1747,

the CC cannot avail of the contract limiting his liability in these cases : (1) where the CC delays the transportation of the goods; (2) where the CC changes the stipulated or usual route (NOTE: In both cases, the delay or change of route must be without just cause)

4) Effect of delay in case of

strikes

Art. 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid.

ii. As to amount of liability 1) Applicable law

For land and air transport

NCC

Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.


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For land transport

Code of Commerce, Art. 372. The value of the goods which the carrier must pay in case of their being lost or mislaid shall be fixed in accordance with what is stated in the bill of lading, no proofs being allowed on the part of the shipper that there were among the goods declared therein articles of greater value, and money.

Horses, vehicles, vessels, equipments, and all the other principal and accessory means of transportation, shall be especially obligated in favor of the shipper, although with respect to railroads said obligation shall be subordinated to the provisions of the laws of concession with regard to property and to those of this Code with regard to the manner and form of making attachments and seizures against the said companies.

NOTES:

The value of the goods stated in the B/L is conclusive between the parties and the shipper is not allowed to prove a higher value

It is only when the CC's fault is so gross as to amount to actual fraud, that the actual amount of the losses and damages suffered may be proved by the shipper against the carrier

Par. 2 especially binds the horses, vehicles, vessels and equiptment and all other principal and accessory means of the CC in favor of the shipper --> this lien is a security for the payment of the value of the goods which the CC must pay in case of loss or misplacement

Ong Yiu vs CA (1979)

FACTS: Ong Yiu was a passenger on a PAL Cebu-Butuan flight to attend court hearings in Butuan. His suitcase was accidentally sent to Manila. PAL-Manila sent the suitcase to Butuan but the lock had been opened and a folder containing court documents was missing. Plaintiff refused to accept the luggage. PAL-Cebu delivered the luggage to Ong Yiu with the promise to investigate the matter. Plaintiff sued and was awarded moral and exemplary damages. CA reversed holding that PAL was guilty of

simple negligence and denied moral and exemplary damages but ordered PAL to pay P100, the baggage liability assumed by it under the condition of carriage printed on the back of the ticket. HELD: PAL incurred delay in the delivery of petitioner's luggage. However, there was no bad faith. The liability of PAL was limited to the stipulations printed on the back of the ticket. While the passenger had not signed the plane ticket, he is nevertheless bound by the provision thereof; such provisions have been held to be part of the contract of carriage and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion wherein one party imposes a ready-made form of contract on the other; it is not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. A contract limiting liability upon an agree valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. Considering that Ong Yiu had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P 100.00. Besides, passengers are advised not to place valuable items inside their baggage. Also, there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner.

2) NCC provisions, in relation to COGSA and Code of Commerce

NCC

Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.


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COGSA, Sec. 4(5). Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.

Code of Commerce Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freightage he may have earned during the voyage. Art. 590. The co-owners of a vessel shall be civilly liable, in the proportion of their contribution to the common fund, for the results of the acts of the captain, referred to in Article 587. Each part owner may exempt himself from this liability by the abandonment before a notary of the part of the vessel belonging to him. Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage earned during the voyage

NOTES:

RULE: A ship agent is liable notwithstanding the insolvency of the principal/owner

BUT the ship agent may exempt himself from liability by abandoning the vessel with all her equipment and the freight it may have earned during the voyage (NOTE: The effect of abandonment is to extinguish the liability of the ship agent)

The ship agent's liability is confined to that which he

is entitled as a matter of right to abandon: the vessel with all her equipment and the freight it may have earned during the voyage and to the insurance thereof.

Limited liability is not applicable when no abandonment of vessel is made.

Effect of abandonment - An abandonment amounts to an offer of the value of the vessel, of her equipment, and freight money earned --> results in the cessation of the responsibility of the owner/agent

Abandonment cannot be refused by creditors

This applies to all cases where the owner/agent may be held liable for the negligent or illicit acts of the captain

Effect of loss or destruction of vessel - The ship agent's liability is merely co-extensive with his interest in the vessel such that the total loss thereof results in its extinction --> the total destruction of the vessel extinguishes a maritime lien as there is no longer any res to which it can attach.

Three (3) cases where the loss of the vessel extinguishes the liability of the shipowner:

(1) under 587, liability arising from the conduct of the captain in the vigilance of the goods and for the safety of the passengers and for any liability arising from the negligent or illicit acts of the captain for which the shipowner or ship agent may be held liable

(2) under 643, liability for the wages of the captain and the crew and for advances made by the shipagent if the vessel is lost by shipwreck or capture

(3) under 837, liability for collision

Exceptions:

(1) Doctrine does not apply where ship owner is at fault - the doctrine is premised on the condition that the death or injury to the passenger occurred by reason of the fault or negligence of the captain only


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(2) Doctrine does not apply in cases of Workmen's Compensation - such compensation has nothing to do with maritime commerce; it is an item in the cost of production which must be included in the budget of any well-managed industry

(3) Total destruction of the vessel does not affect the liability of the owner for repairs on the vessel completed before its loss - owners of a vessel are liable for necessary repairs; its liability for repairs remains unaffected by the loss of the thing

NOTE: When the vessel is insured, the proceeds of the insurance will take the place of the vessel in satisfying the liabilities incurred.

Reason for limited liability: This doctrine had its origin when maritime trade and sea voyage was attended by innumerable hazards and perils --> to offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, eqpt. and freight or insurance, if any

Limited liability is evidence of the real and hypothecary nature of maritime law - (1) limitation of liability to the actual value of the vessel and freight; (2) right to retain the cargo and the embargo and detention of the vessel in cases where the ordinary civil law would not allow more than a personal action against the debtor or personal liable --> the maritime creditor may attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person

Eastern and Australian Steamship vs. Great American Insurance

(1981) FACTS: Jackson and Spring shipped one case of impellers for warman pump through a vessel owned and operated by Eastern & Australian Steamship, under Bill of Lading 31, for delivery to Manila, Philippines in favor of consignee Benguet Consolidated, Inc. The shipment was insured with Great American Insurance. The vessel arrived in Manila but failed to discharge the shipment or any part thereof, eventually admitting it was lost. As a

consequence of the loss of the shipment, Great American Insurance Co. was compelled to pay the Benguet. Great American filed a complaint against Eastern & Australian Steamship; Eastern and Australian Shipping and F.E Zuellig argued that their liability to the stipulated amount in the Bill of Lading, which is roughly equivalent to P1,544.00. The CFI of Manila declared the stipulation in the Bill of Lading limiting petitioners’ liability to P1,544.00 void for being contrary to Sec. 4(5) of the COGSA. HELD: The stipulation in the Bill of Lading limiting petitioners’ liability is valid. Article 1749 of the New Civil Code expressly allows the limitation of the carrier’s liability. The CFI’s interpretation of Sec.4(5) of the COGSA would render ineffective the very intent of the law setting the sum of $500 as the maximum liability of the carrier, per package, in the absence of a higher valuation of the goods as indicated in the Bill of Lading. By providing that $500 is the maximum liability, the law does not disallow an agreement for liability at a lesser amount.

Eastern Shipping vs. IAC (supra)

HELD: It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of the COGSA on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties. In this case, there is no stipulation in the respective Bills of Lading limiting the carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Eastern Shipping’s liability should not exceed US $500 per package, or its peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained”.


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Sea-Land Service vs. IAC (1987)

FACTS: Seaborne shipped cargo, consigned to Sen Hiap Hing, through Sea-Land Service. The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The shipment arrived in Manila and there discharged into the custody of the arrastre contractor and the customs and port authorities. While awaiting trans-shipment to Cebu, the cargo was stolen by pilferers and has never been recovered. Sea-Land offered to settle for US$4,000.00, asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. Cue, the consignee, rejected the offer and thereafter sued Sea-Land for damages. HELD: The stipulation in the bill of lading limiting the liability of Sea-Land for loss or damages to the shipment covered by said bill to US$500 per package unless the shipper declares the value of the shipment and pays additional charges is valid and binding on Cue. The liability of petitioner Sea-Land to the respondent consignee is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code of Commerce and special laws. One of these suppletory special laws is the Carriage of Goods by Sea Act which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by CA 65. Even if said section 4(5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. Freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill are valid.

Yangco vs. Laserna (1941)

FACTS: Yangco is the owner of steamer S.S. Negros, which left the port of Romblon on its return trip back to Manila. Typhoon signal no. 2 was then up, of which the fact the captain was duly advised and his attention was called by the passengers themselves before the vessel set sail. In an attempt to return to port after experiencing strong winds, S.S. Negros was caught sidewise by a big wave which caused it to capsize and sink. Many of the passengers died from the mishap, among them was daughter of respondent Manuel Laserna.

HELD: The shipowner/agent may be held liable HOWEVER his liability is limited. The principle of limited liability is provided in Articles 587 and 590 of the Code of Commerce, which accords a ship owner or agent the right of abandonment; and by necessary implication, his liability is confined to that which he is entitled as of right of abandonment. Article 590 merely reiterates the principle embodied in Article 587 where the vessel is owned by several persons. In cases of shipwrecks, the liability of the shipowner/agent is limited to the vessel and does not extend further.

Chua Yek Hong vs. IAC (1988)

FACTS: Chua loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel, owned by Guno and Olit. for shipment from Puerta Galera to Manila. Cargo did not reach Manila because the vessel capsized and sank with all its cargo. Chua filed a complaint for damages based on breach of contract of carriage against the ship owners. Guno and Olit averred that their liability had been extinguished by reason of the total loss of said vessel. HELD: The doctrine of limited liability applicable and therefore the ship owners’ liability is extinguished. The primary law is the Civil Code (Arts. 1732-1766) and in default thereof, the Code of Commerce and other special laws are applied. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in this case.


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The ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach.

Aboitiz vs. CA

(1990) FACTS: A vessel owned and operated by Aboitiz Shipping Corporation, took on board in Hongkong for shipment to Manila some cargo, consigned to the Philippine Apparel, Inc., insured with GAFLAC and covered by Bill of Lading No. 505-M. In the bill of lading there is a stipulation that the liability of the carrier is US$500.00 per package/container/customary freight. Unfortunately, on its way to Manila the vessel sank and it was declared lost with all its cargoes. GAFLAC paid the consignee for the lost cargo. As GAFLAC was subrogated to all the rights, interests and actions of the consignee against Aboitiz, it filed an action for damages against Aboitiz. TC found Aboitiz negligent and therefore liable. HELD: The description of the nature and the value of the goods shipped are declared and reflected in the bills of lading. Thus, it is the basis of the liability of the carrier as the actual value of the loss. Moreover, the goods shipped were insured for P278,530.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put it in its power to have taken the whole cargo. A stipulation limiting the carrier's liability to $500.00 per package of silk when the value of such package was P2,500.00 unless the true value had been declared and the corresponding freight paid was 'void as against public policy. Furthermore, a carrier cannot limit its liability for injury or loss of goods shipped where such injury or loss was caused by its own negligence. Here to limit the liability of Aboitiz Shipping to $500.00 would nullify the policy of the law imposing on common carriers the duty to observe extraordinary diligence in the carriage of goods. Moreover, it is absurd to interpret "container," as provided in the bill of lading to be valued at US$500.00 each, to refer to the container which is the modern substitute for the hold of the vessel. The

package/container contemplated by the law to limit the liability of the carrier should be sensibly related to the unit in which the shipper packed the goods and described them, not a large metal object, functionally a part of the ship, in which the carrier caused them to be contained. Such "container" must be given the same meaning and classification as a "package" and "customary freight unit."

iii. Rules of construction regarding stipulations limiting carrier’s liability

NCC, Art. 1751. The fact that the common carrier has no competitor along the line or route or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier's liability is reasonable, just, and in consonance with public policy.

AGBAYANI:

Effect of lack of competitor to common carrier.-- Under 1751, the lack of competition of the CC shall be considered in determining WON a stipulation limiting CC's liability is reasonable, just and in consonance with public policy.

iv. Rules of construction on limitation of

liability regarding carrier’s presumption of fault

NCC, Art. 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration.

AGBAYANI:

The Civil Code governs the liability of the CC in case of loss, damage or deterioration. Under 1766, in all matters not regulated by the Civil Code, the rights and obligations of CC shall be governed by the Code of Commerce and by special laws which are suppletory to the provisions of the Civil Code.


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American President Lines vs. Klepper (1960)

FACTS: Klepper shipped on a vessel of American President Lines one lift van containing personal and household effects, covered by a bill of lading which did not state the value of the said cargo. The ship arrived in Manila and while the lift van was being unloaded by the Gantry crane operated by Delgado Brothers, it fell on the pier. Its contents were spilled and scattered. A survey showed that Klepper suffered damages totaling P6,729 of the breakage, denting and smashing of goods. TC ordered American President Lines to pay P6729 plus P500 as their sentimental value. TC further ordered Delgado Brothers to reimburse American President Lines. HELD: The bill of lading states that in case of any loss or damage to or in connection w/ goods whose value exceeds $500 per package, the value shall be deemed to be $500 per package. On this basis the freight is adjusted and the carrier’s liability shall be determined on the basis of $500 per package or pro rata in case of partial loss or damage. This rule doesn’t apply when the nature of the goods and a valuation higher than $500 has been declared in writing by the shipper upon delivery to the carrier and inserted in the bill of lading, and extra freight paid if required. In the latter case, if the actual value of the goods per package exceeds the declared value, the carrier’s liability shall not exceed the declared value and partial loss or damage shall be adjusted pro rate according to the declared value. On the face of the bill of lading are the words “In accepting this bill of lading the shipper, consignee and owner of the goods agree to be bound by all its stipulations, exceptions, and conditions whether written, printed or stamped on the front or back hereof, any local customs or privileges to the contrary notwithstanding.” Klepper cannot now elude such provisions simply because they prejudice him and take advantage of those that are beneficial. The contention as to the COGSA application is of no moment. Based on Art.1753, Philippine law governs the present case since the Philippines is the destination country. Art.1766 states that in matters not regulated by the CC, the Code of Commerce and special laws may apply. In this case Art.1736, 1737 and 1738 govern the

rights and obligations making the COGSA merely suppletory.


HELD: The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. As the cargoes in question were transported from Japan to the Philippines, the liability of Eastern Shipping is governed primarily by the Civil Code. However, in all matters not regulated by said 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.


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Summary of Carriage of Goods (as noted down by Jecky)

Rule 1: Contractual obligation Rule 2: Carrier obliged to exercise

extraordinary diligence over vigilance of goods Must provide suitable vehicle, cargo,

voyage, personnel worthy vessel and competent crew

Presumption of Negligence in case of damage or loss

Carrier’s liability starts from moment goods haded to carrier until actually or constructively delivered to consignee

Extraordinary Diligence Exceptions Stoppage in transitu Storage ion warehouse when advised

Instances when carrier may escape liability Flood, storm, natural calamity

o Proximate and only cause o Due diligence exercises

before, during, after to prevent/minimize loss

o Except: Negligent duty to transport

Act of Public Enemy in War o Due diligence before, during,

after Act or omission of shipper/owner of

goods o Must be only cause o If contributory, liability

mitigated Character of goods, defects

o Due diligence by carrier to forestall or lessen the loss

Order of public authority o Must be within power of

public officers authority Act of thieves or robbers

o Irresistible force, threat, intimidation, violence

When Carrier Limits Liability 2 Ways

o Diligence Can stipulate due diligence Requirements:

In writing and signed

Valuable consideration

Reasonable and just and not contrary to public policy

o Amount Can limit amount

but carrier has to give chance to shipper to declare a higher value

Applies to all kinds of cargo

Fixed amount valid so long as fair, just and freely agreed upon

May be contractually stipulated by carrier, shipper or by statute

Amount agreed upon may be that stipulated in carrier if absence provided in law

Recovery may not be more than value of what was lost

When Can’t Limit o Delay will cause carrier to

lose its limited liability o In case of riots or strikes

Valid but qualified in that carrier has no control over

Absence of competition used in determining reasonableness of limitation

Fact that carrier limits liability does not negate presumption of negligence


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D. Carriage of Goods by Sea Act (COGSA) 1. Application of the law

COGSA, Sec. 1. That the provisions of Public Act No. 521 of the 74th Congress of the United States, approved on April 16, 1936, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade: Provided, that nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is not in force, or as limiting its application.

NOTE: The COGSA is applicable to international carriage by

sea to and from Philippine ports, on negotiable BL terms. Otherwise, the Civil Code will govern.

HOWEVER: The parties may stipulate that COGSA will apply.

Title I, Sec. 1. When used in this Act-

(a) The term "carrier" includes the owner or the charterer who enters into a contract of carriage with a shipper.

(b) The term "contract of carriage" applies only to contracts of carriage covered by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same.

(c) The term "goods" includes goods, wares, merchandise, and articles of ever kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried.

(d) The term "ship" means any vessel used for the carriage of goods by sea.

(e) The term "carriage of goods" covers the period from the time when the goods are loaded to the time when they are discharged from the ship

NOTE:

Period of liability begins from loading of the goods and terminates at the discharge of the goods (“tackle to tackle”).

In the NCC, period of liability begins from the actual delivery to the carrier of the goods and terminates upon actual / constructive delivery of the goods to the consignee.


HELD: The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. As the cargoes in question were transported from Japan to the Philippines, the liability of Eastern Shipping is governed primarily by the Civil Code. However, in all matters not regulated by said 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. Duties of the carrier

a. Provide a seaworthy ship

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to- (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; (c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation NOTE:

c.f. with NCC provisions – The NCC requires extraordinary diligence, without enumerating the particulars. Whereas the COGSA provide for due diligence and the particular duties included therein.

Three main duties WRT ship – Seaworthiness, Proper manning, and cargoworthiness.


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Caltex vs. Sulpicio Lines (1999)

FACTS: The MT Vector was en route to Masbate with 8,800 barrels of petroleum (from Caltex) when it collided with the MV Dona Paz, a passenger and cargo vessel owned and operated by Sulpicio Lines. Of the 4,000 passengers aboard the Dona Paz, only 24 survived. Among those who perished were Sebastian and Corazon Canezal (father-daughter). The board of marine inquiry after investigation found that the MT Vector, its registered operator Francisco Soriano and its owner Vector Shipping were at fault and responsible for the collision. Teresita and Sotera Canezal (wife and mother of Sebastian) filed a complaint for “damages arising from breach of contract of carriage” against Sulpicio Linjes. Sulpicio, in turn filed a 3rd party complaint Vector Shipping Corp and Caltex. Sulpicio alleged that Caltex chartered the MT Vector with gross and evident bad faith knowing full well that the MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation. It alleged that Caltex did not take steps to have MT Vectors certificate of inspection renewed and proceeded to ship despite defects found and even witnessed MT Vector submitting fake documents. HELD: Caltex, the charterer of a MT, is not liable for damages since Caltex and Vector Shipping entered into a contract of affreightment, in which the vessel is in the general possession of the owner of the ship and the rights and responsibilities of ownership rest on the owner with the charterer free from liability. Under Carriage of Goods by Sea Act carrier is bound to make the ship seaworthy. 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. Failure to maintain such is a clear breach of its duty under 1755 of the Civil Code. Because of the implied warranty of seaworthiness, shippers of goods when transacting with common carriers are not expected to inquire into the vessel’s seaworthiness and compliance with maritime laws. Caltex as a mere voyage charterer had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness.

NOTE: The SC merely used the COGSA provision to determine WON the degree of diligence (extraordinary diligence) required by the NCC was met.

b. Properly care for the cargo

COGSA Sec. 3. (2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

c. Issue a bill of lading

COGSA Sec. 3. (3) After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things- (a) The loading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, in such a manner as should ordinarily remain legible until the end of the voyage. (b) Either the number of packages or pieces, or the quantity or weight, as the case may be, as furnished in writing by the shipper. (c) The apparent order and conditions of the goods: Provided, that no carrier, master, or agent of the carrier, shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received or which he has had no reasonable means of checking. Sec. 3. (7) After the goods are loaded the bill of lading to be issued by the carrier, master, or agent of the carrier to the shipper shall if the shipper so demands, be a "shipped" bill of lading: Provided, that if the shipper shall have previously taken up any document of title to such goods, he shall surrender the same as against the issue of the "shipped" bill of lading, but at the option of the carrier such document of title may be noted at the port of shipment by the carrier, master, or agent with the name or names of the ship or ships upon which the goods have


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been shipped and the date or dates of shipment, and when so noted the same shall for the purpose of this section be deemed to constitute a "shipped" bill of lading.

d. Indicate the apparent order and condition of the

goods COGSA Sec. 3. (3) After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things-

xxx (c) The apparent order and conditions of the goods: Provided, that no carrier, master, or agent of the carrier, shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received or which he has had no reasonable means of checking. Sec. 3. (4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with paragraphs (3) (a), and (c), of this section: (The rest of the provision is not applicable to the Philippines).

3. Duties of the shipper

a. Provide leading marks of the goods

COGSA, Sec. 3. (3) After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things- (a) The loading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, in such a manner as should ordinarily remain legible until the end of the voyage.

b. Provide the number, quantity, or weight of the

goods

COGSA, Sec. 3. (3) After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things-

xxx (b) Either the number of packages or pieces, or the quantity or weight, as the case may be, as furnished in writing by the shipper.

c. Guarantee the accuracy of the information

given

Sec. 3. (5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity, and weight, as furnished by him; and the shipper shall indemnify the carrier against all loss, damages, and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper.

d. Duty not to load dangerous cargo

Sec. 4 (6) Goods of an inflammable, explosive, or dangerous nature to the shipment whereof, the carrier, master or agent of the carrier, has not consented with knowledge of their nature and character, may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment. If any such goods shipped with such knowledge and consent shall become a danger to the ship or cargo, they may in like manner be landed at any place, or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to general average if any.

4. Exempting circumstances

COGSA, Sec. 4 (2) Neither the carrier not the ship shall be responsible for loss or damage arising or resulting from-


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(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship; (b) Fire, unless caused by the actual fault or privity of the carrier; (c) Perils, dangers, and accidents of the sea or other navigable water; (d) Act of God; (e) Act of war; (f) Act of public enemies; (g) Arrest or restraint of princes, rulers, or people, or seizure under legal process; (h) Quarantine restrictions; (i) Act or omission of the shipper or owner of the goods, his agent or representative; (j) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided, that nothing herein contained shall be construed to relive a carrier from responsibility for the carrier's own acts: (k) Riots and civil commotions; (l) Saving or attempting to save life or property at sea; (m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods; (n) Insufficiency of packing; (o) Insufficiency or inadequacy of marks; (p) Latent defects not discoverable by due diligence; and (q) Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this

exception to show that neither the actual fault or privity of the carrier not the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.

NOTES:

Civil Code vs. COGSA - Article 1734, CC: Carrier is responsible UNLESS - COGSA: Carrier is not liable Contrary to Philippine law

(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship – contrary to the CC (1745(5) (b) Fire – not in CC (Eastern Shipping)

COGSA exceptions akin to CC provisions Art. 1734 (1) - Natural disaster

(c) Perils, dangers, and accidents of the sea or other navigable water; (d) Act of God; (e) Act of war;

Art. 1734 (2) - Public enemy

(f) Act of public enemies Art. 1734 (5) - Public Authority

(g) Arrest or restraint of princes, rulers, or people, or seizure under legal process; (h) Quarantine restrictions;

Art. 1734 (3) - Shipper’s Fault

(i) Act or omission of the shipper or owner of the goods, his agent or representative;

Article 1748

(j) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided, that nothing herein contained shall be construed to relive a carrier from responsibility for the carrier's own acts; (k) Riots and civil commotions;

Article 1747 (life only)

(l) Saving or attempting to save life or property at sea;

Art. 1734 (4) - Inherent Defects Of Goods (m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods; (n) Insufficiency of packing;


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(o) Insufficiency or inadequacy of marks; (p) Latent defects not discoverable by due diligence;

5. Filing of claims

COGSA, Sec. 3 (6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery. Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, that, if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods.

NOTES:

a. Apparent loss – notice upon delivery of the goods.

notice in writing must be given by persons entitled to delivery.

b. Non-apparent loss – notice within three days

from delivery.

if no notice is given, there is prima facie evidence of delivery of goods as described in the bill of lading.

notice is not needed if goods jointly surveyed or inspected at time of their receipt.

if misdelivery, prescriptive period for suit is 10 years for breach of written contract or 4 years for quasi-delict.

c. Filing of action to recover loss of or damage to cargo

whether notice of loss/ damage is given or not, suit must be filed within 1 year after delivery or when goods should have been delivered; otherwise PRESCRIBED.

NOTE: Only the carrier’s liability is extinguished if no suit is filed within 1 year by shipper, consignee, or insurer. The prescriptive period does not apply to suits by insured against insurer.

Chua Kuy vs. Everett Steamship Corp.

(1953) FACTS: The Columbia Pacific Distributing Company loaded at the port of Portland, Oregon, on board the S/S H.H. Raymond of the American Mail Line, Ltd., consigned to the order of the China Banking Corporation and Min Sheng Trading, Manila. When the contents of the cases were unpacked, Chua Kuy, the consignee, discovered that the cargo delivered to him consisted of 500 cases of 48 babies of evaporated milk, and not 96 babies as ordered by him. He immediately gave notice to Everrett Shipping of the shortage in the cargo delivered, and later on filed with the latter a formal claim for said loss which amounted to P3,911.06. The amicable settlement failed; hence, Chua Kuy went to court. HELD: The action of Chua Kuy has already prescribed. There is no dispute in the evidence that the cargo in question was brought to the City of Manila, Philippines, from Portland, Oregon on board a foreign ship; that the cargo was unloaded at Manila and delivered on February


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26, 1947; that the alleged shortage in the cargo was discovered by Chua Kuy on the same date; and that this action was given to respondent, as local agent of the owner of the ship, also on the same date; and that this action was commenced only on May 7, 1948, or after the lapse one year, two months and nine days from the delivery. The claim that the prescriptive period contained in said act can only invoked by the shipper, excluding all other parties to the transaction, is untenable. From the language of Sec. 3 (6) of the COGSA, it seems clear that the notice of loss or damage is required to be filed not necessarily by the shipper but also by the consignee or any legal holder of the bill of lading. In fact, said section requires that the notice be given at the port of discharge and the most logical party to file the notice is either the consignee or the endorsee of the bill of lading. Also, the rule is well-settled that a mere proposal for arbitration or the fact that negotiations have been made for the adjustment of a controversy, even if the proposal is not acted upon, or the adjustment is not carried out, does not suspend the running of the period of prescription, unless there is an express agreement to the contrary. Here there is no such agreement. Insurance Company of North America vs. Philippine Ports

Terminals, Inc. (1955)

FACTS: The steamship "PRESIDENT VAN BUREN" discharged into the custody of the PPT, one case of machine knives but said merchandise was never delivered by PPT to the consignee, Central Saw Mill. Insurance Company of North America was subrogated to the rights of the Central Saw Mill, Inc., by way of payment of insurance and filed a suit against PPT. PPT, argues that the complaint was filed after one year from the time that the cause of action accrued. HELD: The COGSA, particularly the prescriptive period, is not applicable to the present case. PPT is neither a charterer nor a ship. Consequently, the COGSA does not apply to it. However, the ordinary period of four years (for quasi-delicts) fixed by the Code of Civil Procedure will apply. The action in this case has been brought within that time.

Ang vs. American Steamship Agencies

(1967) FACTS: Yau Yue, through Tokyo Boeki Ltd of Japan, shipped galvanized steel from Japan, aboard a ship of American Steamship under a shipping agreement, BL No. WM-2, consigned "to order of the shipper with Herminio ...” The BL was indorsed to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a demand draft together with the BL against Teves, through the HSBC. When the articles arrived in Manila HSBC notified Teves of the arrival of the goods and requested payment of the demand draft representing the purchase price of the articles. However, Teves did not pay the demand draft. The bank protested and returned the BL and demand draft to Yau Yue, who indorsed the said BL to Domingo Ang. Teves, however, succeeded in securing a "Permit To Deliver Imported Articles" from American Steamship, which he presented to the Bureau of Customs which in turn released to him the articles covered by the bill of lading. So, when Ang sought to claim the articles covered by the BL, American Steamship informed him that it had delivered the articles to Teves. Ang sued American Steamship for having allegedly wrongfully delivered and/or converted the goods covered by the BOL belonging to plaintiff Ang, to the damage and prejudice of the latter. American Steamship argues that Ang’s action has prescribed. HELD: In a case where the goods shipped were neither last nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. There being no loss or damage to the goods, Sec 3(6) par 4 of the COGSA providing for 1-year period of prescription for filing action to recover loss or damage to cargo, DOES NOT APPLY. For suits predicated on alleged misdelivery (or conversion) of the goods, as in the case at bar, the applicable rule on prescription is that found in the Civil Code, namely, either 10 years for breach of a written contract or 4 years for quasi-delict. In either case, plaintiff's cause of action has not vet prescribed, since his right of action would have


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accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October 30, 1963.

Filipino Merchants Insurance Company vs. Alejandro (1986)

FACTS: A Frota vessel which was discharged the goods at the port of Manila on December 13, 1976. The said goods were delivered to the arrastre operator E. Razon, Inc., on December 17, 1976 and on the same date were received by Choa. Eight months later, Choa filed a complaint against the Filipino Merchants for recovery of a sum of money under the marine insurance policy on cargo. Choa alleged that the goods he insured sustained loss and damage in the amount of P35,987.26. On January 9, 1978, Filipino filed a third-party complaint against the carrier, private respondent Frota and the arrastre contractor, E. Razon, Inc. for indemnity, subrogation, or reimbursement in the event that it is held liable to the plaintiff. Frota, argues prescription against Filipino Merchants. HELD: The one-year prescriptive period within which to file a claim against the carrier also applies to a claim filed by an insurer who stands as a subrogee to the insured. Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if we follow the petitioner's argument that the insurer can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having "matters affecting transportation of goods by sea be decided in as short a time as possible" and by avoiding incidents which would "unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation.

In the case at bar, the petitioner's action has prescribed under the provisions of the Carriage of Goods by Sea Act. Hence, whether it files a third-party complaint or chooses to maintain an independent action against herein respondents is of no moment. Had Choa filed an action against the petitioner after the one-year prescriptive

period, then the latter could have successfully denied liability on the ground that by their own doing, the plaintiffs had prevented the petitioner from being subrogated to their respective rights against the herein respondents by filing a suit after the one-year prescriptive period. The situation, however, does not obtain in the present case. The plaintiffs in the civil cases below gave extra-judicial notice to their respective carriers and filed suit against the petitioner well within one year from their receipt of the goods. Filipino Merchants had plenty of time within which to act. In this case, Filipino Merchants had 4-5 months (from the time the insured claimed from them until December 17, 1976) to file a third-party complaint. However, the petitioner failed to file the appropriate action.

Mayer Steel Pipe vs. CA

(1997) FACTS: Prior to the shipping, Mayer insured the pipes and fittings to be shipped against all risks with South Sea and Charter. Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached the consignee, it was discovered that a substantial portion thereof was damaged. Mayer filed a claim against private respondents for indemnity under the insurance contract. TC ruled in favor of Mayer but CA but set it aside due to prescription based on the period of limitation established in Sec. 3(6) of COGSA since the action was filed more than two years from the time the goods were unloaded from the vessel. HELD: The relationship between a shipper and an insurer is governed by the Insurance Code and not by the COGSA. Under this Sec. 3(6) of the COGSA, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance.

The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipper's claim is the "all risks" insurance


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policies issued by private respondents to petitioner Mayer.

Mitsui O.S.K. Lines Ltd. vs. CA (1998)

FACTS: Mitsui undertook to deliver Lavine Loungewear goods to France 28 days from initial loading. However, the goods were not transshipped immediately upon arrival in Taiwan, thus resulting in delay of delivery to the consignee of the goods in France. The consignee of the goods paid only half the value of the shipment, as the goods arrived when they were already “off season” in France. The other half was then charged against the account of the Lavine. Lavine, in turn, demanded payment from Mitsui through its agent. And because Mitsui denied Lavine’s claim, Lavine filed a case in RTC against Meister and Mitsui (as represented by Magsaysay). Mitsui filed a motion to dismiss alleging that the claim against it had prescribed under the COGSA. HELD: The loss suffered by private respondent does not fall within the meaning of “loss” or “damage” in §3(6) of the COGSA. Hence, as the suit is not for “loss or damage” to goods contemplated in §3(6), the question of prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code, which provides for a prescriptive period of ten years. (NOTE: Economic loss is not a loss contemplated in this COGSA provision) As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, “loss” contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. 6. Limitation of liability

COGSA, Sec. 4 (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in

other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.

By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained.

Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading.

NOTES:

Liability under the COGSA: 1. Maximum of $500 per package or, if not shipped in packages, per customary freight unit (e.g. metric ton). 2. Nature and value of goods may be declared by shipper and inserted in bill of lading; declaration is prima facie evidence and not conclusive on carrier. 3. The shipper and carrier may agree on another maximum amount, but not more than amount of damage actually sustained. NOTE: When the packages are shipped in a container supplied by carrier and the number of such units is stated in the bill of lading, each unit and not the container constitute the “package”.

No Liability under COGSA: 1. If nature or value of goods knowingly and fraudulently misstated by shipper. 2. If damage resulted from dangerous nature of shipment loaded without consent of carrier. 3. If unseaworthiness not due to negligence of carrier. 4. If deviation was to save life or property at sea.


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Aboitiz vs. CA

(supra) HELD: The description of the nature and the value of the goods shipped are declared and reflected in the bills of lading. Thus, it is the basis of the liability of the carrier as the actual value of the loss. Moreover, the goods shipped were insured for P278,530.50, which may be taken as their value. To limit the liability of the carrier to $500.00 would obviously put it in its power to have taken the whole cargo. A stipulation limiting the carrier's liability to $500.00 per package of silk when the value of such package was P2,500.00 unless the true value had been declared and the corresponding freight paid was 'void as against public policy. Moreover, it is absurd to interpret "container," as provided in the bill of lading to be valued at US$500.00 each, to refer to the container which is the modern substitute for the hold of the vessel. The package/container contemplated by the law to limit the liability of the carrier should be sensibly related to the unit in which the shipper packed the goods and described them, not a large metal object, functionally a part of the ship, in which the carrier caused them to be contained. Such "container" must be given the same meaning and classification as a "package" and "customary freight unit."

American President Lines vs. Klepper (supra)

HELD: The bill of lading states that in case of any loss or damage to or in connection w/ goods whose value exceeds $500 per package, the value shall be deemed to be $500 per package. On this basis the freight is adjusted and the carrier’s liability shall be determined on the basis of $500 per package or pro rata in case of partial loss or damage. This rule doesn’t apply when the nature of the goods and a valuation higher than $500 has been declared in writing by the shipper upon delivery to the carrier and inserted in the bill of lading, and extra freight paid if required. In the latter case, if the actual value of the goods per package exceeds the declared value, the carrier’s liability shall not exceed the declared value and partial loss or damage shall be adjusted pro rate according to the declared value.

Phoenix Assurance Company vs. Macondray & Co., Inc (1975)

FACTS: SS Fernbank, received a shipment of 2 cartons containg textile machinery spare parts from South Carolina, consigned to the order of the Commercial Bank and Trust Company, with arrival notice to Floro Spinning Mills. The shipment was insured with Phoenix Assurance Company. The bill of lading shows on its face that the shipper paid to the vessel’s agent at the port of loading the sum of $46.20 as freightage based on the gross weight of the shipment. On the back of the bill lading is a printed stipulation limiting the carrier’s liability for loss or damage to $500 per package unless the shipper in writing declares the nature of the goods and a higher valuation and pays additional freightage on the basis of such higher valuation.

SS Fernbank arrived in Manila and it was found that the second carton was in bad order and was almost empty. Floro filed claims with Macondray., the agent of SS Fernbank for the amount of $1,512.78 (including freight, insurance premium and other charges). Macondray replied that the maximum limit of the vessel’s liability was $500 per package. Phoenix Assurance however, paid Floro Spinning the whole amount of its claim. Phoenix Assurance, as subrogee of Floro Spinning, now filed an action against Macondray.

HELD: Phoenix Assurance is only entitled to the peso equivalent of the $500 stipulated in the bill of lading. The Court ruled that the decisive fact in this case is that the shipper paid the freight on the basis of the weight of the cargo and not on the basis of its actual value which has not been properly declared. It was not an ad valorem (according to value) shipment. Having failed to declare the value of the shipment and pay higher freightage, Macondray could only be held liable for $500. Moreover, Clause 17 which limits Macondray’s liability is sanctioned by section 4(5) of the COGSA. The foregoing provisions on limited liability are as much a part of the Bill of lading as though physically in it and as much a part thereof as though placed therein by agreement of the parties


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Eastern and Australian Steamship vs. Great American

Insurance (supra)

HELD: The stipulation in the Bill of Lading limiting petitioners’ liability is valid. Article 1749 of the New Civil Code expressly allows the limitation of the carrier’s liability. The CFI’s interpretation of Sec.4(5) of the COGSA would render ineffective the very intent of the law setting the sum of $500 as the maximum liability of the carrier, per package, in the absence of a higher valuation of the goods as indicated in the Bill of Lading. By providing that $500 is the maximum liability, the law does not disallow an agreement for liability at a lesser amount. E. International carriage 1. Law of the contract – varying domestic regimes usually guided by applicable international conventions

a. Carriage by sea (Not applicable since the Philippines is not a party to the convention)

i. Cargo – Hague Rules as amended by the Visby Protocol and the SDR Protocol

ii. Passengers and their luggage – Athens Convention

b. Carriage by air (Warsaw Convention) When the Warsaw Convention Applicable

The Convention is applicable to: 1. International transport by air 2. Transport of persons, baggage, or goods

“International Transportation by Air” Under the

Warsaw Convention Under the Warsaw Convention, there are two categories of “international transportation by air”:

1. That where the place of departure and the place of destination are situated within the territories of two High Contracting Parties regardless of whether or not there be a break in the transportation or a transshipment; and

2. That where the place of departure and the place of destination are within the territory of a single High Contracting Party if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though the power is not a party to the Convention.

Liabilities under the Convention The liabilities are:

1. Damage sustained in the event of the death or wounding of a passenger taking place on board the aircraft or in the course of any of the operations of embarking or disembarking;

2. Loss or damage to any check baggage or goods sustained during the transport by air;

3. Delay in the transport by air of passengers, baggage, or goods NOTE: Enumeration of causes of action as above stated is not an exclusive list.

Transport by Air It is the period during which the baggage or goods are in the charge of the carrier, whether in an airport or on board an aircraft, or in the case of landing outside an airport, in any place whatsoever

When must an Action for damages be brought at the

option of the plaintiff? It must be brought, either:

1. Before the court of the domicile of the carrier;

2. Court of principal place of business of carrier;

3. Court where he has a place of business through which the contract has been made;

4. Before the court at the place of destination

Limitations in Liability under the Convention 1. The Convention provides for a limitation of

liability: 2. For each passenger - limited to 250,000

francs 3. For goods and checked in baggage – limited

to 250 francs per kilogram


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4. For hand carry - limited to 5,000 francs per passenger

When can a common carrier not avail of this

limitation? 1. Willful misconduct 2. Default amounting to willful misconduct 3. Accepting passengers without ticket 4. Accepting goods without airway bill or

baggage without baggage check

When is a Right to Damages extinguished? The right to damages shall be extinguished if an action is not brought within 2 years from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped.

i. Extent of airline liability to passengers

Alitalia vs. IAC

(1990) FACTS: Pablo, an associate professor of UP was invited to take part at a meeting sponsored by the United Nations in Ispra, Italy. She accepted the invitation and was then scheduled by the organizers to read her paper. on “The Fate of Radioactive Fusion Products Contaminating Vegetable Crops.” To fulfill this engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA. She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set by ALITALIA. She was, however, told by the ALITALIA personnel at Milan that her baggage (including her suitcase containing her presentation paper) was “delayed inasmuch as the same x x (was) in one of the succeeding flights from Rome to Milan.” By then feeling desperate, she went to Rome to try to locate the bags herself. However, her baggage could not be found. Completely distraught and discouraged, she returned to Manila without attending the meeting at Ispra. Once back in Manila, she demanded that ALITALIA make reparation for the damages thus suffered by her. She rejected ALITALIA’s offer “for airline tickets” and forthwith commenced the action for damages. ALITALIA argued that the Warsaw Convention should have been applied to limit ALITALIA’s liability.

HELD: The Warsaw Convention’s limit on liability is inapplicable here. Under the Warsaw Convention, the carrier is made liable for damages for, among others, a delay in the transportation by air of passengers, luggage or goods. The liability of the airline for such delay of luggage is limited to “250 francs per kilogram” under Art. 22. However, under Art. 25, the Warsaw Convention should be deemed a limit of liability only in those cases where the cause of death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any willful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible; and there is otherwise no special or extraordinary form of resulting injury. In the case at bar, while no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner, nevertheless, some special species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her luggage and failed to deliver it to her at the time appointed – a breach of its contract of carriage, to be sure – with the result that she was unable to read the paper and make the scientific presentation (consisting of slides, etc.) that she has painstakingly labored over, at the prestigious international conference, to attend which she had traveled hundreds of miles, to her chagrin, and embarrassment and the disappointment and annoyance of the organizers.

ii. Limitation on liability

Pan Am vs. IAC (1988)

FACTS: Pangan's luggages didn't arrive w/ his flight. As a conse¬quence the film exhibitions he set up & promoted for, was can¬celled. CFI ordered PanAm to pay for P83,000 for actual damages. PanAm contended that such award was beyond the limitation of liability set forth in the Warsaw Con., the provisions of such being found at the back of the ticket. HELD: Pangan is bound by such Warsaw provisions & hence is entitled only to $600 ($20 standard X 30 kilos). Such provisions have been held to be part of the contract of carriage, and is valid and binding upon the passenger


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regardless of the latter's lack of knowledge or assent to the regulation. A contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. Inasmuch as Pangan failed to declare any higher value for his luggage & to pay additional charges, Pan Am's liability is limited to $600, as stipulated at the back of the ticket.

iii. Applicability of Warsaw Convention

PAL vs. CA (1990)

FACTS: Co arrived at the Manila International Airport with his wife and son. They had taken PAL Flight 107 from San Francisco. Co proceeded to the baggage retrieval area taking with him his checks for his luggage. 8 pieces of luggage were found but the 9th wasn’t located despite diligent search. The contents were shown by invoices to be worth $500-600. Co notified PAL through employee Guevarra, the in-charge of the claim counter. Guevarra filled out the Property Irregularity Report acknowledging that the luggage was missing. Guevarra and Co signed the document. In accordance w/ procedure, Guevarra asked Co to surrender to him the 9 claim checks. Co called PAL on several occasions to pursue his complaint but to no avail. He finally wrote, through his lawyer, a demand letter to PAL. However, PAL never found Co’s luggage or paid its corresponding value. Thus, Co sued the airline for damages. PAL contends that under the Warsaw Convention its liability can’t exceed $20 based on weight since Co didn’t declare the contents of his baggage nor pay traditional charges before the flight. HELD: The Warsaw Convention limits don’t apply. The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is governed by the NCC. In all matters not regulated by the NCC, the Code of Commerce and special laws shall govern the rights and oblis of common carriers. The destination in this case was the Philippines thus Philippine law governs the liability of the carrier for the loss of the luggage. PAL failed to

overcome the presumption and the evidence showing that PAL’s negligence was the proximate cause of the loss of the baggage. PAL also acted in bad faith when it faked a retrieval receipt.

iv. Award of damages

Lufthansa vs. IAC (1999)

FACTS: Alcantara shipped thirteen (13) pieces of luggage through petitioner Lufthansa from Teheran to Manila. Alcantara did not declare an inventory of the contents or the value of the luggages when he delivered them to Lufthansa. After the luggages arrived in Manila, the consignee was able to claim from the cargo broker only twelve (12) out of the thirteen (13) pieces of luggage. The Alcantaras filed a complaint for breach of contract with damages against Lufthansa. Lufthansa, argues that Warsaw Convention limits the liability of the carrier, if any, with respect to cargo to a sum of 250 francs per kilo ($20.00 per kilo or $9.07 per pound), unless a higher value is declared in advance and additional charges are paid by the passenger and the conditions of the contract as set forth in the air waybill expressly subject the contract of carriage of cargo to the Warsaw Convention. HELD: The Warsaw Convention does not apply. The loss of one luggage belonging to the private respondents while the same was in the custody of the petitioner is not disputed. The contract of air carriage generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees could be given as ground for an action for damages.

The Convention does not operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the language of the Convention. The Convention's provisions do not "regulate or exclude liability for other breaches of contract by the carrier" or misconduct of its officers and employees, or for some particular or exceptional type of damage. Otherwise, "an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd."


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Furthermore, the CA found that Lufthansa waived the applicability of the Warsaw Convention to the case at bar when it offered private respondent a higher amount than that which is provided in the said law and failed to raise timely objections during the trial when questions and answers were brought out regarding the actual claims and damages sustained by Alcantara which were even subjected to lengthy cross examination by Lufthansa's counsel.

v. Proper forum

Santos III vs. Northwest Airlines

(1992) FACTS: A Filipino minor was informed by Northwest that he had no reservations for his flights, and had to be waitlisted, despite a previous confirmation. He sued for damages. Northwest moved to dismiss on the ground of lack of jurisdiction based on Art. 28 (1) of the Warsaw Convention. HELD: Philippine courts do not have jurisdiction in this case. Art. 28 (1) provides where an action for damage must be brought at the option of the plaintiff. In this case:

(1) court of domicile is Minnesota, U.S.A; (2) principal place of business of carrier is also U.S.A; (3) place of business where contract was made was in San Francisco; (4) place of destination is also San Francisco, Santos having purchased a round trip-ticket from SFO-TYO-MNL, then back to TYO- SFO. The "ultimate destination" being San Francisco.

The court called upon to determine the applicability of the limitation provision must first be vested with the appropriate jurisdiction. If the carrier is indeed is indeed not guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But it can be done only if the action has first been commenced properly under the rules set forth in Art.28 (1).

vi. Non-delivery of luggage

PAL vs. IAC (1992)

FACTS: The spouses Lorenzana checked in two pieces of baggage, before boarding their PAL flight. On the Tokyo-Honolulu leg, they changed planes from PAL to Pan Am. When they arrived in Honolulu, only one luggage was located. Efforts exerted to report and claim the missing bag were futile and instead, private respondents were requested to follow-up the matter during their stay in Honolulu. It was only after a year that the missing luggage was returned to them. The spouses sued PAL. PAL countered by saying that that the missing bag was merely delayed hence, its liability under the Warsaw Convention is limited, in the absence of a declaration from the passenger, of a higher value. HELD: The limited liability of the Convention will not apply. It was not until more than a year thereafter, or on December 5, 1975, when the luggage was finally delivered to private respondents. There is thus no occasion to speak of delay since the baggage was not delivered at all to the passenger for purposes of the trip in contravention of a common carrier's undertaking to transport the goods from the place of embarkation to the ultimate point of destination. The limited liability provisions under the Warsaw Pact merely declare the carrier liable for damages in the enumerated cases, if conditions therein specified are present. Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier.

vii. Period of limitation

United Airlines vs. Uy (1992)

FACTS: Uy purchased a ticket from United Airlines (UA) for the San Franciso-Manila route. Upon check-in, he was informed that one piece of luggage was overweight. He was allegedly rebuked, “to his utter humiliation,” by an employee, saying that he should have known better and that he should have packed his bags accordingly. In a loud voice, he was told to repack his things. This he did, but the luggage was still overweight. He was billed overweight charges and when he tried to pay for it w/ a


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miscellaneous charge order, it was refused by the petitioner. He paid for the charges w/ his American Express Credit Card. Upon arrival in Manila, he discovered that one of his bags had been slashed and its contents stolen. He filed a complaint for damages. United AIrlines moved to dismiss the complaint, on the ground that the cause of action had already prescribed based on Art. 29 of the Warsaw Convention HELD: WRT the theft of his possessions, which falls within the provisions of the Warsaw Convention, the 2 year prescriptive period should apply. The transcripts show that the 2 year period was meant to be an absolute bar to bringing actions. Art 29 (2) will only apply after the action is filed within the allowed time, therefore our laws regarding the tolling of prescription will not apply. It appears that the action was filed beyond the 2 years and should be barred. HOWEVER, the SC notes that the respondent delayed in filing the suit because he tried to negotiate an out-of-court settlement w/ the petitioner almost immediately after the incident; something which he cannot be faulted for. Hence, despite the express mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within two (2) years from the arrival at the place of destination, such rule shall not be applied in the instant case because of the delaying tactics employed by petitioner airline itself. Thus, private respondent's second cause of action cannot be considered as time-barred under Art. 29 of the Warsaw Convention.

Summary of Warsaw Convention (as noted by Jecky) Warsaw Convention

Imposes limitation on liability Compensatory Safety Measure

Allows recovery for loss of life or destruction, loss, damage to any registered luggage of goods

Convention applies only with regard to international carriage

Applies even if there’s an intervening international flight

Applies also with co-loading Ex. Connecting flights with

different carriers In co-loading, break down

carriers into particular segments served

Convention applies to gratuitous carriage or with compensation

Contract of Carriage broken into 3 Passenger Ticket

Must have citation of Warsaw Convention and ability to limit liability

Luggage Ticket Must cite limitation of liability

under Warsaw Convention Every piece of luggage must

have a separate luggage ticket Air Consignment Note

Issued to carriage of cargo (unaccompanied luggage/cargo)

Must also cite limitation of liability under the Warsaw


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c. Law of the country of destination

NCC, Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.

END

“Last Station, Santolan Terminal Station” – LRT Purple Line”

Thanks to Jecky and Raina.

No necessity of Document of Title for Air Carriage (Airway Bill is what is given)

Ownership always with consignor Rights of Consignee

Delivery of Goods Can Demand

Notice Of arrival, loss and/or damage

Right of Action if goods not delivered at destination

Period of Liability For passengers – from embarking to

disembarking For cargo/ luggage – Minute cargo

turned over to care of carrier up to receipt of goods by consignee

Limits of Liability Life

250,000 francs or 16, 000 SDR (special drawing rights)

If higher limit desired, must declare and pay higher value

Luggage and Cargo Per kilo payment

Handcarried items 5,000 francs or 332 SDR

Carrier cannot limit liability if guilty of wilful misconduct

Time Bar: 2 years from date of arrival or supposed arrival or when carrier stopped

Notice of Damage Apparent Loss – immediately Non – Apparent Loss

For luggage – 7 days

[transpo] uranza notes

Documents

tan chiong

professor

professor

professor

professor

professor

cagayan de

ss ocean trader