2E

TRANSPORTATION
LAW

CASE
DIGESTS
PROFESSOR:
Atty. Randolph Pascasio
TOPIC:
Definition Presumption of Negligence
HOMEWORK FOR:
July 31, 2015, Friday

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TABLE OF CONTENTS
I. CONCEPT OF COMMON CARRIER
1. Definition
1. De Guzman v. CA,

2. Characteristics
2. Fisher v. Yangco Steamship Co., .................................................................................. 4
3. US v. Quinahon, ........................................................................................................... 5
4. Loadstar Shipping Co., Inc. v. CA, ................................................................................ 6
5. First Phil. Industrial v. CA
6. Virgines Calvo v. UCPB General Insurance Co.,
7. Philippine American General Insurance Co. v. PKS Shipping Co., 8. Asia Lighterage and
Shipping, Inc. v. Court of Appeals, et al.,
9. Spouses Cruz v. Sun Holidays, Inc

3. Distinguished from Private Carrier

10. Home Insurance Co. v. American Steamship .............................................................. 8
11. San Pablo v. Pantranco ............................................................................................... 9
12. National Steel Corp. v. CA,
13. Planters Products Inc. v. CA, ..................................................................................... 10

4. Government Regulation of Common Carriers Business

14. KMU Labor Center v. Garcia, Jr., ................................................................................ 12
15. Tatad v. Garcia, Jr., ..................................................................................................... 14

5. Governing Law
16. Samar Mining Co., Inc. v. Nordeutscher Lloyd, ............................................................ 15
17, Eastern Shipping Lines v. IAC....................................................................................... 16

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18. National Development Co. v. Court of Appeals, ................................................................ 16

a. Registered Owner Rule
19. Gelisan v. Alday, ............................................................................................................... 18
20. Benedicto v. IAC, ............................................................................................................... 19
21. Philtranco Service Enterprises, Inc. v. CA ......................................................................... 20
22. Equitable Leasing Corporation v. Lucita Suyon, et al., ...................................................... 22
b. Kabit System
23. Santos vs. Sibug.................................................................................................................. 23
24. Lita Enterprises, Inc. vs. CA................................................................................................ 25
25. Teja Marketing vs. IAC........................................................................................................ 26
c. Boundary System
26. Magboo vs. Bernardo.......................................................................................................... 27
..

II. TRANSPORTATION OF GOODS

1. Extraordinary Diligence
27. Eastern Shipping v. Court of Appeals ................................................................................ 28
28. Delsan Transport v. Court of Appeals................................................................................ 29
29. Philippine Charter Insurance Corp. v. Unknown Owner of Vessel M/V National Honor,
National Shipping Corp. and International Container Services, Inc., ....................................... 30
30. Saludo v. Court of Appeals,................................................................................................ 32
31. Lorenzo Shipping v. BJ Marthel,. ....................................................................................... 33
32. Sealoader Shipping v. Grand Cement Manufacturing......................................................... 35
2. Presumption of Negligence
33. Delsan Transport v. American Home ..................................................................................37
34. Delsan Transport Lines v. CA ..........................................................................................38
35. Maersk Lines v. Court of Appeals. ...................................................................................... 39
36. FGU Insurance v. Court of Appeals,
37. DSR-Senator v. Federal ...................................................................................................... 40
38. Philamgen v. Court of Appeals............................................................................. . 41
39. Belgian Overseas Chartering and Shipping, N. V. v. Philippine First Insurance Co..... 42
40. Cokaliong Shipping Lines v. WCPB, Gen. Insurance Co..................................................... 43
41. Sarkies Tours Phil., Inc. v. CA, ............................................................................................ 45
42. Valenzuela Hardwood and Industrial Supply v. CA...............................................................47
43. Yobido v. CA......................................................................................................................... 48

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I. CONCEPT OF COMMON CARRIER

1. Definition
1. De Guzman v. CA, G.R. No. L-47822, 22 December 1988
2. Characteristics
2. Fisher v. Yangco Steamship Co., G.R. No. L-8095 31 March 1915
CASE 2
F.C. Fisher v. Yangco Steamship Co.
FACTS:
The directors of Yangco Steamship Company adopted a resolution that declares and provides that goods
that are to be carried by their vessels shall not include dynamite, powder or other explosives.
J.S Stanley, acting collector general of the Philippine Islands however demanded and required the
company to accept and carry such explosives for carriage. That despite the demands of FC Fisher, other
managers and agents of the company declined and refuse to cease the carriage of explosives on the
ground that by reason of the severity of the penalties with which they are threatened upon failure to carry
such explosives. FC Fisher contends further that the Acting Collector of Customs erroneously construed
the provisions of Act 98 in holding that they require the company to accept and carry such explosives
despite the resolution.
Act No. 98 Sec. 2 provides that it shall be unlawful for common carrier engaged in the transportation of
passenger of property to make or give unnecessary or unreasonable preference or advantage to any
particular person, company, firm, corporation or locality, or any particular traffic in any respect
whatsoever, or to subject any person to any undue and unreasonable prejudice or discrimination.
Fisher prays that a writ of prohibition restraining Yangco Steamship Company from carrying dynamite,
powder or other explosive substance in accordance with the resolution of the board of directors and of
shareholders of said company and that another writ of prohibition be issued to enjoin Stanley from
obligating Yangco to carry such prohibited substances.
ISSUE:
May Yangco Steamship Company be prohibited from carrying dynamite, powder or other explosives
pursuant to the resolution adopted by the directors of the company. And if such prohibition shall cause
unnecessary or unreasonable advantage or preference.
RULING:
The said provision which provides that no common carrier shall under the pretense whatsoever, fail or
refuse to receive for carriage any person or property is not to be construed in its literal sense and without
regard to the context, so as to impose an imperative duty to all common carriers to accept and carry all
and any kind of freight which may be offered for carriage without regard to their facilities. The statute
more so does not require of a common carrier, as a condition to the continuing in said business, that he
must carry anything and
everything, and thereby renders useless the facilities she may have for the carriage of certain types of
freight. The prayer for petition cannot be granted. It cannot be doubter that the refusal of the said
company, owner of a large number of vessels engaged in trade to receive for carriage such explosives in
any of their vessels would subject the traffic of such goods to manifest prejudice and discrimination. Such
prejudice and discrimination being unnecessary and unreasonable given the fact that it has not been

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alleged that dynamite, gunpowder, and other explosives cannot be transported with reasonable safety
on board a vessel engaged in the business of common carriers. Further, it has not been alleged that the
companys vessels are unsound for such purposes.
The mere fact that violent and destruct can be obtained by the use of dynamite would not be sufficient in
itself to justify the refusal of the vessel, duly licensed as common carrier of merchandise to accept if for
carriage. If it cannot be proven that the condition which it is to be transported offers real danger to the
carriage or that there be reasonable fear that the vessel will be exposed to unnecessary risks then such
refusal is a violation of the prohibition against discrimination prohibited by the Act.

3. US v. Quinahon, 31 Phil 189 (1915)

CASE 3
U.S. v. Quinajon and Quitoriano
FACTS:
Defendants Pascual Quinajon and Eugenio Quitoriano have been engaged for more than four years in the
transportation of passengers and merchandise in the port of Currimao by means of virayes. They, by means of their
virayes and employees, unloaded 5,986 sacks of rice belonging to the provincial government of Ilocos
Norte from Manila and demanded from the provincial treasurer for the unloading of each one 10 centavos
which amounted to P598.60.
The prosecuting attorney of the Province of Ilocos Norte filed a complaint against the defendants stating that the provincial
government of Ilocos Norte suffered damaged in the sum of 359.16, inasmuch as it should have paid only 239.44, in
accordance with the said normal rate of 6 centavos for each package.
The provincial fiscal presented witnesses to prove that defendants entered into a special contract with certain merchants, under
and by virtue of the terms of which they charged and collected, for loading merchandise in said port, the sum of 6 centavos for
each package, without reference to its size or weight.
Defendants were charged of violating Act No. 98 of the Civil Commission.
Said Act No. 98 is "An Act to regulate commerce in the Philippine Islands." Its purpose, so far as it is possible, is to
compel common carriers to render to all persons exactly the same or analogous service for exactly the
same price, to the end that there may be no unjust advantage or unreasonable discrimination. It applies
to persons or corporation engaged as common carriers of passengers or property. A common carrier is a
person or corporation whose regular business is to carry passengers or property for all persons who may
choose to employ and remunerate him. A common carrier is a person or corporation who undertakes to
carry goods or persons for hire.
The appellants admit that they are common carriers. They were found guilty and sentenced to pay a fine of P200 and
costs, and to return to the provincial government of the Province of Ilocos Norte the sum of P359.16.
From that sentence each of the defendants appealed to this court.
Issue:
Whether or not the defendants and appellants have violated Act No. 98.

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RULING:
YES.
It will be noted that the law requires common carriers to carry for all persons, either passengers or property, for exactly the same
charge for a like or contemporaneous service in the transportation of like kind of traffic under substantially similar
circumstances or conditions. The law prohibits common carriers from subjecting any person, etc., or locality, or any
particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever. The law does not
require that the same charge shall be made for the carrying of passengers or property, unless all the conditions are alike
and contemporaneous. It is not believed that the law prohibits the charging of a different rate for the
carrying of passengers or property when the actual cost of handling and transporting the same is
different. it is not believed that the law intended to require common carriers to carry the same kind of
merchandise, even at the same price, under different and unlike conditions and where the actual cost is
different.
4. Loadstar Shipping Co., Inc. v. CA, G.R. No. 131621, 28 September 1999
CASE 4
Loadstar Shipping Corporation Inc. vs Court of Appeals
GR No 131621
FACTS:
19 November 1984, Loadstar Shipping Corporation Inc. received on board its M/V Cherokee (vessel
herein is insured by Prudential Guarantee and Assurance, Inc. (PGAI)) a) 705 bales of lawanit hardwood,
b) 27 boxes and crates of tilewood assemblies and others; and c) 49 bundles of mouldings R & W (3)
Apitong Bolidenized for shipping, all amounting to P6,067,178 (goods herein insured by Manila Insurance
Co. (MIC)). On 20 November 1984, on its way to Manila from the port of Nasipit, Agusan del Norte, the
vessel, along with its cargo, sank off Limasawa Island.
On 4 February 1985, MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of
the vessel was due to the fault and negligence of Loadstar and its employees. It also prayed that PGAI be
ordered to pay the insurance proceeds from the loss of the vessel directly to MIC, said amount to be
deducted from MICs claim from LOADSTAR.
Loadstar denied any liability and claimed that the sinking of its vessel was due to force
majeure. PGAI averred that MIC had no cause of action against it, Loadstar being the party insured. PGAI
was later dropped as a party defendant after it paid the insurance proceeds to LOADSTAR.
Regional Trial Court rendered judgment in favor of MIC, which was affirmed by the trial court.

Petitioner's (Loadstar) Contention:

Loadstar submits that the vessel was a private carrier because it was not issued a certificate of public
convenience, it did not have a regular trip or schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo.
While it is true that the vessel had on board only the cargo of wood products for delivery to one
consignee, it was also carrying passengers as part of its regular business. Moreover, the bills of
lading in this case made no mention of any charter party but only a statement that the vessel was a
general cargo carrier. Neither was there any special arrangement between LOADSTAR and the
shipper regarding the shipment of the cargo. The singular fact that the vessel was carrying a
particular type of cargo for one shipper is not sufficient to convert the vessel into a private carrier.

Petitioner argues that as a private carrier, it cannot be presumed to have been negligent, and the
burden of proving otherwise devolved upon MIC.

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Loadstar also maintains that the vessel was seaworthy. Before the fateful voyage, the vessel was
allegedly dry docked was duly inspected and certified fit for voyage by the maritime safety engineers
of the Philippine Coast Guard. Its crew at the time was experienced, licensed and unquestionably
competent. Therefore it exercised the diligence of a good father of a family in ensuring the vessels
seaworthiness.

Loadstar further claims that it was not responsible for the loss of the cargo, such loss being due
to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte the weather was
fine until the next day when the vessel sank due to strong waves.

Loadstar goes on to argue that, being a private carrier, any agreement limiting its liability, such as
what transpired in this case, is valid. Since the cargo was being shipped at owners risk, LOADSTAR
was not liable for any loss or damage to the same.

Private Respondent's (Manila Insurance Co.) Answer:

MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo
was due to force majeure, because the same concurred with LOADSTARs fault or negligence.

The limited liability theory is not applicable in the case at bar because LOADSTAR was at fault or
negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is tantamount to negligence.

ISSUE/S:
(1) Is the M/V Cherokee a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?

RULING:
Petition of Loadstar DENIED; CA's decision AFFIRMED
(1) LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the carriage of the goods in question
was periodic, occasional, episodic or unscheduled.
The records do not disclose that the M/V Cherokee, undertook to carry a special cargo or was
chartered to a special person only. There was no charter party. The bills of lading failed to show any
special arrangement, but only a general provision to the effect that the M/V Cherokee was a general
cargo carrier. Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper,
which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a
private carrier, especially where, as in this case, it was shown that the vessel was also carrying
passengers.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the Civil Code provisions governing
common carriers. To exempt private respondent from the liabilities of a common carrier because he has
not secured the necessary certificate of public convenience, would be offensive to sound public policy;
that would be to reward private respondent precisely for failing to comply with applicable statutory
requirements.
(2) The Court finds that the M/V Cherokee was not seaworthy when it embarked on its voyage on 19
November 1984. The vessel was not even sufficiently manned at the time. For a vessel to be seaworthy,
it must be adequately equipped for the voyage and manned with a sufficient number of competent officers

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and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.
Neither do we agree with LOADSTARs argument that the limited liability theory should be applied
in this case. The doctrine of limited liability does not apply where there was negligence on the part of the
vessel owner or agent.
5. First Phil. Industrial v. CA, G.R. No. 125948, 29 December 1998
6. Virgines Calvo v. UCPB General Insurance Co., G.R. No. 148496, 19 March 2002
7. Philippine American General Insurance Co. v. PKS Shipping Co., G.R. No. 149038, 09 April
2003
8. Asia Lighterage and Shipping, Inc. v. Court of Appeals, et al., G.R. No. 147246, 19 August
2003
9. Spouses Cruz v. Sun Holidays, Inc., G.R. No. 186312, 29 June 2010
3. Distinguished from Private Carrier
10. Home Insurance Co. v. American Steamship, G.R. No. L-25599, 04 April 1968
CASE 10
Home Insurance Co. vs American Steamship
GR No. L-25599
FACTS:
Consorcio Pesquero del Peru of South America shipped freight pre-paid at Chimbate, Peru,
21,740 jute bags of Peruvian fish meal through SS Crowborough. The cargo, consigned to San Miguel
Brewery, Inc., now San Miguel Corporation, and insured by Home Insurance Company arrived in Manila
on March 7, 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo
was delivered to consignee San Miguel Brewery Inc., there were shortages, causing the latter to lay
claims against Luzon Stevedoring Corporation, Home Insurance Company and the American Steamship
Agencies, owner and operator of SS Crowborough.
Home Insurance Company paid the consignee the insurance value of the loss, as full settlement
of the claim. Having been refused reimbursement by both the Luzon Stevedoring Corporation and
American Steamship Agencies, Home Insurance Company, as subrogee to the consignee, filed against
the before the Court of First Instance of Manila a complaint for recovery amount paid to consignee with
legal interest, plus attorney's fees.
Luzon Stevedoring Corporation answered that it delivered with due diligence the goods in the
same quantity and quality that it had received the same from the carrier.
American Steamship Agencies denied liability by alleging that under the provisions of the Charter
party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or
damage of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and
that as a mere forwarding agent, it was not responsible for losses or damages to the cargo.
CFI absolved Luzon Stevedoring Corporation and ordered American Steamship Agencies to pay plaintiff,
prompting the latter to appeal directly to SC.

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ISSUE: Is the stipulation in the charter party of the owner's non-liability valid so as to absolve the
American Steamship Agencies from liability for loss?
RULING: Yes. 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 agent is not against public policy, and is deemed valid.
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 its agent would be void only if the strict public policy governing common carriers
is applied. Such policy has no force where the public at large is not involved, as in the case of a ship
totally chartered for the use of a single party.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the
goods caused by personal want of due diligence on its part or its manager to make the vessel in all
respects seaworthy and to secure that she be properly manned, equipped and supplied or by the
personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the
vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of
the captain or crew or some other person employed by the owner on board, for whose acts the owner
would ordinarily be liable except for said paragraph. (CFI declared that the above stipulation is contrary to
Art 587 of Code of Commerce and Art 1744 of NCC and that held unreasonable and contrary to the public
policy on common carriers; however this was reversed by SC.)
11. San Pablo v. Pantranco

, G.R. No. L-61461, 21 August 1987

CASE 11
EPITACIO SAN PABLO vs. PANTRANCO SOUTH EXPRESS, INC.
FACTS:
Pantranco South Express, Inc. is a domestic corp. engaged in the land transportation business with
PUB service for passengers and freight and various certificates for public conveniences to operate
passenger buses from Metro Manila to Bicol Region and Eastern Samar. Then after, Pantranco wrote
Maritime Industry Authority (MARINA) to request to operate a ferry boat service from Matnog, Sorsogon
to Allen, Samar for their company buses and their freight trucks that have to cross San Bernardo Strait,
but MARINA rejected their request.
Pantranco nevertheless acquired the vessel MV Black Double, then requested the Board of
Transportation (BOT) to be able to operate and carry its passengers, buses and freight trucks between
Allen and Matnog. Due this request, BOT asked the legal opinion of Minister of Justice Ricardo Puno,
who said that there is no need for bus companies to secure another certificate of public convenience
(CPC) to operate a ferryboat because when the bus company proposes to add a ferry service to its Pasay
to Sorsogon to Tacloban route, it merely does so in the discharge of its current certificate of public
convenience as the ferry is a mere continuation of the hiway which is only interrupted by a small body of
water. So, the BOT rendered its decision that the Ferry boat service is part of the CPC to operate from
Pasay to Samar, and the BOT merely amended Pnatrancos CPC so as to reflect the same.
Due this, Epitacio San Pablo and Cardinal Shipping Corp., who are franchise holders of Ferry Service
in the area that Pantranco wants to operate at, filed a Petition for Review on Certiorari to the Supreme
Court, contesting that Pantranco is not merely a private carrier/ferry service who operates exclusively to

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transport its buses, passengers and freights and does not offer its services to the general public, so as to
be excused from applying for a separate Certficate of Public Convenience, but that it is a coastwise or
interisland shipping service, which still needs to secure a separate Certificate of Public Convenience,
aside from the one it currently has.
ISSUE: Is Pantranco merely a private carrier/ferry service which can operate its ferry boat without need of
another CPC, or is it operating as a coastwise shipping service with the need to secure a separate CPC
aside from the one it currently has to operate land transportation?
RULING: Petition is granted and the deicision of Board of Transportation is reversed and set aside. The
distance between Matnog and Allen is about 23 kilometers for to 2 hours and the ocean at times is
choppy and rough. Considering the environmental circumstances, the conveyance of passengers, trucks
and cargo from Matnog to Allen is certainly not a ferry service, but a coastwise or interisland shipping
service. Matnog and Allen are separated by an open sea and not a small body of water, so this open sea
cannot be considered a continuation of the hiway.
Pantranco does not deny that it charges passengers separately from the bus trips and issues separate
tickets for boarding MV Black Double, and Pantranco cannot pretend that in issuing this tickets to its
passengers, it did so as a private carrier and not a common carrier.
Before Pantranco can operate its water transport, it must secure first a separate CPC for the operation
of said service as a common carrier.
*At the beginning pantranco planned to operate the ferry boat service as a common carrier so
it requested authority from MARINA to purchase MV Black double, but MARINA denied its
request, as the routes to be used by pantranco are adequately serviced by existing operators.
12. National Steel Corp. v. CA, G.R. No. 112287, 12 December 1997
13. Planters Products Inc. v. CA, G.R. No. 101503, 15 September 1993
CASE 13
PLANTERS PRODUCTS, INC. vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES,
KYOSEI KISEN KABUSHIKI KAISHA
FACTS:
Planters Products, Inc. (PPI) purchased from Mitsubishi International Corp., New York, USA,
9,329.7069 metric tons of Urea 46% fertilizer which the latter shipped in bulk aboard the vessel MV Sun
Plum, owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Alaska to San Fernando La Union.
Previously, a time charter party on the vessel MV Sun Plum was entered into by Mitsubishi as
shipper/charterer and KKKK as shipowner. The time charter party was entered into in Tokyo, Japan. After
the urea was loaded in bulk by stevedores under the supervision of shipper, the steel hatches were
closed with heavy iron lids, covered with three layers of tarpaulin, then tied with steel bonds. Upon arrival
at port of call, petitioner unloaded the cargo from the holds into the dump trucks using metal scoops
attached to the ship. Each time a dump truck was filled, its load of urea was covered with tarpaulin before
it was transported to the warehouse of petitioner.
Cargo Superintendents Co., hired by petitioner to determine the outturn of the cargo, reported that
there was a shortage in the cargo of 106.726 metric tons of urea fertilizer and 18 metric tons were
contaminated with dirt. Petitioner also had a certificate of shortage/damaged cargo showing a shortage of

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94.839 metric tons and about 23 metric tons were rendered unfit for commerce, having been polluted with
sand, rust, dirt.
Petitoner Planters (PPI) sent a claim letter to Soriamont Steamship Agencies, the resident agent of
carrier KKKK, for 245,969.31 pesos representing the cost of the alleged shortage in the goods shipped
and the diminution in value of that portion said to have been contaminated with dirt, but Soriamont argued
that they had nothing to do with the discharge of the shipment. The defendant carrier also argued that
strict public policy regarding common carriers does not apply to them because they have become
private carriers by reason of the charter party.
*A common carrier is presumed negligent in case of loss or damage of the goods it contracts to
transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by
the carrier of the goods and to delivery by it of less than what it received.
Petitioner filed an action for damages at CFI Manila. CFI sustained the claim of petitioner against
defendant carrier. Defendant appealed at Court of Appeals. Court of Appeals reversed the lower court
ruling, and ruled that the cargo vessel MV Sun Plum owned by KKKK is a private carrier by reason of the
time charterer-party, and the Civil Code provisions on common carriers which set forth a presumption of
negligence do not find application, so it was incumbent upon petitioner planters to adduce sufficient
evidence to prove negligence, but it failed to prove the alleged negligence.
Petitioner planters filed to the Supreme Court a petition for review assailing the decision of the Court of
Appeals.

ISSUE: Is MV Sun Plum owned by KKKK a common carrier so as to subject it to the presumption of
negligence, or is it a private carrier by virtue of the time charter party that Mitsubishi and KKKK entered
into?
*charter party- defined as a contract by which an entire ship or some principal part thereof is let
by the owner to another person for a specified time or use, a contract of affreightment by which
the owner of the ship or the vessel lets the whole or a part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in consideration of the payment of freight.

RULING: Respondent carrier is a common carrier, in the ordinary course of business, operates as a
common carrier transporting goods indiscriminately for all persons. The vessels ship captain, its officers
and compliment were under the employ of the ship owner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer Mitsubishi, with the duty of caring for
the cargo when the charterer did not have any control of the means in doing so. It is therefore that the
public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one
or more persons, provided that 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 its crew that a common carrier
becomes private.
However, for the Court, respondent carrier has overcome the presumption of negligence, as no proof
was adduced by petitioner planters showing that the carrier was remise in the exercise of due diligence in
order to minimize the loss or damage to the goods carried. The master of the vessel, Capt. Lee Tae Bo,
in his deposition, even testified that the hatches were cleaned, dried, fumigated, then after loading the

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cargo, the steel pontoon hatches were closed and sealed with iron lids, then covered with three layers of
serviceable tarpaulins which were tied with steel bonds. That even the vessel was in good condition,
foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. The period by which respondent was to observe the degree of diligence required of a public
carrier began from the time the cargo was placed in the vessels holds until it reaches its destination and
its hull was reexamined by the consignee, but prior to unloading.
A chemical engineer, witness of respondent carrier, even testified that in unloading fertilizer in bulk
with use of clamped shell losses due to spillage during such operation amounting to one percent against
the bill of lading is deemed "normal" or "tolerable." The primary cause of these spillages is the clamped
shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during the
unloading process. The dissipation of quantities of fertilizer, or its deterioration in value, is caused either
by an extremely high temperature in its place of storage, or when it comes in contact with water. When
Urea is drenched in water, either fresh or saline, some of its particles dissolve. But the salvaged portion
which is in liquid form still remains potent and usable although no longer saleable in its original market
value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles
was made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the
inimical effects of the elements and the grimy condition of the various pieces of equipment used in
transporting and hauling it.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo.
It rained from time to time at the harbor area while the cargo was being discharged according to the
supply officer of Petitioner planters, who also testified that it was windy at the waterfront and along the
shoreline where the dump trucks passed enroute to the consignee's warehouse.
The Court dismissed the Petition.

4. Government Regulation of Common Carriers Business

14. KMU Labor Center v. Garcia, Jr., G.R. No. 115381, 23 December 1994
CASE 14
KILUSANG MAYO UNO LABOR CENTER vs. HON. JESUS B. GARCIA, JR., the LAND
TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL BUS
OPERATORS ASSOCIATION OF THE PHILIPPINES
G.R.

No.

115381

December

23,

1994

FACTS:
Then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to then LTFRB
Chairman, Remedios A.S. Fernando 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. This range was
later increased by LTFRB thru a Memorandum Circular No. 92-009 providing, among others, that "The
existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall
be widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or
reference
rate
as
the
basis
for
the
expanded
fare
range."
Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the

Page | 12

DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare 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.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of
bus fares, which the LTFRB dismissed for lack of merit. Hence, the instant petition for certiorari with an
urgent prayer for a TRO.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to
provincial bus operators to set a fare range of plus or minus fifteen (15%) percent, later increased to plus
twenty (20%) and minus twenty-five (-25%) percent, over and above the existing authorized fare without
having to file a petition for the purpose, is unconstitutional, invalid and illegal. Second, the establishment
of a presumption of public need in favor of an applicant for a proposed transport service without having to
prove public necessity, is illegal for being violative of the Public Service Act and the Rules of Court.
ISSUE:
Is the authority given by respondent LTFRB to provincial bus operators unconstitutional, invalid and
illegal?
RULING:
YES. Under section 16(c) of the Public Service Act, the Legislature delegated to the defunct
Public Service Commission the power of fixing the rates of public services. Respondent LTFRB, the
existing regulatory body today, is likewise vested with the same under Executive Order No. 202 dated
June 19, 1987. x x x However, nowhere under the aforesaid provisions of law are the regulatory bodies,
the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator,
or other public service. In the case at bench, the authority given by 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. Potestas delegata non delegari potest. What
has been delegated cannot be delegated.
Furthermore, LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and
contradictory policy guideline on the issuance of a CPC pursuant to Section 16(a) of the Public Service
Act, the following requirements must be met before a CPC may be granted, to wit:
(i)

(ii)
(iii)

the applicant must be a citizen of the Philippines, or a corporation or co-partnership,

association or joint-stock company constituted and organized under the laws of the
Philippines, at least 60 per centum of its stock or paid-up capital must belong entirely to
citizens of the Philippines;
the applicant must be financially capable of undertaking the proposed service and
meeting the responsibilities incident to its operation; and
the applicant must prove 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. It is understood that there must be proper notice and hearing before the PSC
can exercise its power to issue a CPC.

Basic convenience is the primary consideration for which a CPC is issued, and that fact alone must be
consistently borne in mind. Also, existing operators in subject routes must be given an opportunity to offer
proof and oppose the application. Therefore, an applicant must, at all times, be required to prove his
capacity
and
capability
to
furnish
the
service
which
he
has
undertaken
to
render. And all this will be possible only if a public hearing were conducted for that purpose.

Page | 13

15. Tatad v. Garcia, Jr., G.R. No. 114222, 06 April 1995

CASE 15
FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON, vs.HON. JESUS B. GARCIA,
JR., in his capacity as the Secretary of the Department of Transportation and Communications,
and EDSA LRT CORPORATION, LTD
G.R. No. 114222 April 6, 1995
FACTS:
In 1989, the government planned to build a railway transit line along EDSA (EDSA LRT III). No
bidding was made but certain corporations were invited to prequalify. However, after determination the
only corporation to qualify was the EDSA LRT Consortium which was obviously formed for this particular
undertaking. An agreement was then made between the government, through the Department of
Transportation and Communication (DOTC), and EDSA LRT Consortium. The agreement was based on
the Build-Operate-Transfer (BOT) scheme provided for by law (RA 6957, amended by RA 7718). Under
the agreement, EDSA LRT Consortium shall build the facilities, i.e., railways, and shall supply the train
cabs. Every phase that is completed shall be turned over to the DOTC and the latter shall pay rent for the
same for 25 years. By the end of 25 years, it was projected that the government shall have fully paid
EDSA LRT Consortium. Thereafter, EDSA LRT Consortium shall sell the facilities to the government for
$1.00.
However, petitioners, Senators Francisco Tatad, John Osmea, and Rodolfo Biazon opposed the
implementation of said agreement as they averred that EDSA LRT Consortium is a foreign corporation as
it was organized under Hongkong laws; (2) that the negotiation and the build-lease-transfer scheme is not
recognized in RA 6957 that as such, it cannot own a public utility such as the EDSA railway transit
because this falls under the nationalized areas of activities . The petition was filed against Jesus Garcia,
Jr. in his capacity as DOTC Secretary.
ISSUE: Will the petition shall prosper?
RULING:
NO. The Supreme Court made a clarification. The phrasing of the question is erroneous; it is
loaded. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations,
terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities
to serve the public, they do not by themselves constitute a public utility. What constitutes a public utility is
not their ownership but their use to serve the public. The right to operate a public utility may exist
independently and separately from the ownership of the facilities thereof. One can own said facilities
without operating them as a public utility, or conversely, one may operate a public utility without owning
the facilities used to serve the public. The devotion of property to serve the public may be done by the
owner or by the person in control thereof who may not necessarily be the owner thereof. Furthermore, it
cannot be said that EDSA LRT Consortium will be the one operating the public utility for it will be DOTC
that will operate the railway transit. DOTC will be the one exacting fees from the people for the use of the
railway and from the proceeds, it shall be paying the rent due to EDSA LRT Consortium.
Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated
by the BOT Law has now been rendered moot and academic by R.A. No. 7718 which amended the
aforementioned law, RA 6957. Section 3 of the former law authorizes all government infrastructure
agencies, government-owned and controlled corporations and local government units to enter into
contract with any duly prequalified proponent for the financing, construction, operation and maintenance
of any financially viable infrastructure or development facility through a BOT, BT, BLT, BOO (Build-own-

Page | 14

and-operate), CAO (Contract-add-operate), DOT (Develop-operate-and-transfer), ROT (Rehabilitateoperate-and-transfer), and ROO (Rehabilitate-own-operate)
5. Governing Law
16. Samar Mining Co., Inc. v. Nordeutscher Lloyd, G.R. No. L-28673, 23 October 1984
CASE 16
Samar Mining Co., Inc. v. Nordeutscher Lloyd
G.R. No. L-28673,
October 23, 1984 Cuevas, J.
FACTS: The case arose from an importation made by the plaintiff, Samar of one crate Optima welded
wedge wire sieves through the M/S Schwabenstein a vessel owned by defendant, Nordeutscher Lloyd,
which shipment is covered by Bill of Lading No. 18 duly issued to consignee Samar Mining Company, Inc.
Upon arrival of the aforesaid vessel at the port of Manila, the importation was unloaded and delivered in
good order and condition to the bonded warehouse of AMCYL. The goods were, however, never
delivered to, nor received by, the consigned at the port of destination-Davao.
ISSUE: Whether or not the provisions of the Civil Code should govern.
RULING: The liability of the common carrier for the loss, destruction or deterioration of the goods
transported from foreign country to the Philippines is governed primarily by the Civil Code. In all matters
not regulated by said code, the rights and obligations of common carriers shall be governed by the Code
of Commerce and by special laws.
Article 1736 is applicable to the instant suit. Under the said article, the carrier may be relieved of the
responsibility for the loss or damage to the goods upon actual or constructive delivery of the same by the
carrier to the consignee, or to the person who has a right to receive them. There is actual delivery in
contracts for the transport of goods when possession has been turned over the consignee or his duly
authorized agent and a reasonable time has been given to him to remove the goods. The a quo found
that there was actual delivery to the consignee through its duly authorized agent, the carrier. The Court
ruled that the personality of the respondent changes from that of carrier to that of agent of the consignee.
Thus, the character of respondents possession also changes, from possession in its own name as carrier
to possession in the name of the consignee as the latters agent. Such being the case, there was, in
effect, actual delivery of the goods from respondent as carrier to the same respondent as agent of the
consignee. Upon such delivery, the respondent , an erstwhile carrier, ceases to be responsible for any
loss or damage that may befall the goods from that point onwards. However, in the case at bar, the
records fail to prove the negligence, deceit or fraud committed by the respondent. Thus, they incur no
liability for the loss of the goods in question.

Page | 15

17, Eastern Shipping Lines v. IAC, G.R. No. L-69044, 29 May 1987
CASE 17
Eastern Shipping Lines, Inc. v. IAC and Development Insurance & Surety Corp.
G.R. No. L-69044, May 29, 1987
Eastern Shipping Lines, Inc. v. The Nisshin Fire and Marine Insurance Co., and Dowa Fire &
Marine Insurance Co., Ltd.
G.R. No. 71478, May 29, 1987
Melencio-Herrera, J.
FACTS: These two cases, both for the recovery of the value of cargo insurance, arose from the same
incident, the sinking of the M/S Asiatica when it caught fire resulting to the total loss of ship and cargo. In
G.R. No. 69044, the M/S Asiatica, a vessel operated by petitioner Eastern Shipping Lines (Petitioner
carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 colorized lance pipes in 28 packages
consigned to the Philippine Blooming Mills, Co. and 7 cases of spare parts consigned to Central Textile
Mills, Inc. Both sets of goods were insured against marine risk. In G.R. No. 71478, during the same
period, the same vessel took on board 128 cartons of garment fabrics and accessories, in 2 containers,
consigned to Mariveles Apparel Co., and 2 cases of surveying instruments consigned to Aman
Enterprises and General Merchandise. En route for Kolba, Japan to Manila, the vessel caught fire and
sank, resulting in the total loss of the ship and cargo. The respective respondent insurers paid the
corresponding marine insurance values.
ISSUE: Whether or not the provisions of the Civil Code on Common Carriers should govern.
RULING: The law of the country to which the goods are to be transported governs the liability of the
common carrier oin case of their loss, destruction or deterioration. As the cargoes were transported from
Japan to the Philippines, the liability of Petitioner carrier is governed primarily by the Civil Code. However,
in all matters not regulated by 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 (COGSA), a
special law, is suppletory to the provisions of the Civil Code.

18. National Development Co. v. Court of Appeals, G.R. No. L-49407, 19 August 1988
CASE 18
National Development Company v. Court of Appeals
164 SCRA 593
FACTS:
In accordance with a memorandum agreement entered into between defendants NDC and MCP on
September 13, 1962, defendant NDC as the first preferred mortgagee of three ocean going vessels
including one with the name 'Dona Nati' appointed defendant MCP as its agent to manage and operate
said vessel for and in its behalf and account. Thus, on February 28, 1964 the E. Philipp Corporation of
New York loaded on board the vessel "Dona Nati" at San Francisco, California, a total of 1,200 bales of
American raw cotton consigned to the order of Manila Banking Corporation, Manila and the People's
Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation. Also loaded on the same vessel at Tokyo, Japan, were the cargo

Page | 16

of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En route to Manila the vessel Dofia Nati
figured in a collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS
Yasushima Maru' as a result of which 550 bales of aforesaid cargo of American raw cotton were lost
and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the General
Average Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost. The damaged and
lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside Mills
Corporation as holder of the negotiable bills of lading duly endorsed. Also considered totally lost were the
aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila Banking Corporation,
Manila, acting for Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer paid to
Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as
insurer the total amount of P364,915.86 to the consignees or their successors-in-interest, for the said lost
or damaged cargoes. Hence, plaintiff filed this complaint to recover said amount from the defendantsNDC and MCP as owner and ship agent respectively, of the said 'Dofia Nati' vessel.
The trial court rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to
DISC the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the
complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said decision,
the trial court granted MCP's crossclaim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after
its motion to set aside the decision was denied by the trial court in its order dated February 13,1970.
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the
trial court.
ISSUE:
The pivotal issue in these consolidated cases is the determination of which laws govern loss or
destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability as well
as the rules of prescription provided thereunder.

RULING:
In Easter Shipping Lines, Inc., v. IAC, 150 SCRA 469 (1987), we held under similar circumstances that
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. Thus, the rule was specifically laid down that for cargoes
transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code
and 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 especial laws (Article 1766, Civil Code). Hence, the carriage
of Goods by Sea Act, a special law, is merely supplemental to the provisions of the Civil Code. The
goods in question were being transported from San Francisco, California and Tokyo, Japan to the
Philippines and that they were lost or damaged due to a collision which was found to have been caused
by negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that
laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters,
such as Ise Bay, Japan. It appears, however, that collision falls among matters not specifically regulated
by the Civil Code, so that no reversible error can be found in respondent courts application to the
case at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with
collision of vessels. Article 826 of the Code of Commerce provides that where collision is imputable to the
personnel of a vessel, the owner of the vessel at fault shall indemnify the losses and damages incurred
after an expert appraisal. But more in point to the instant case in is Article 827 of the same Code, which
provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both
shall be solidarily responsible for the losses and damages suffered by their cargoes. There is, therefore,
no room for NDCs interpretation that the Code of Commerce should apply only to domestic trade and not

Page | 17

to foreign trade.MCP next contends that it cannot be liable solidarily with NDC because it is merely the
manager and operator of the vessel Doa Nati, nor a ship agent. As the general managing agent,
according, to MCP, it can only be liable if it acted in excess of its authority. The Memorandum Agreement
of September 13, 1962 shows that NDC appointed MCP as agent, a term broad enough to include the
concept of ship agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of
the vessel, including the power to contract in the name of the NDC. Consequently, under the
circumstances, MCP cannot escape liability. It is well-settled that both the owner and agent of the
offending vessel are liable for the damage done where both are impleaded.
a. Registered Owner Rule
19. Gelisan v. Alday, 154 SCRA 388 (1987)
CASE 19
Bienvenido Gelisan vs Benito Alday
154 SCRA 388
FACTS:
Bienvenido Gelisan is the owner of a freight truck. He and Roberto Espiritu entered into a contract under
which Espiritu hired the freight truck Gelisan for the purpose of hauling sugar, flour, and fertilizers. It also
stipulated that Espiritu shall bear the loss and damage attending the goods to be hauled by him. Benito
Alday, a trucking operator who knew of Espiritu, had a contract to haul the fertilizers of Atlas Fertilizer
Corporation from Pier 4, North Harborn, to Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the
latter offered the use of his truck with the driver and helper. Alday accepted and instructed the checker to
let Espiritu hau fertilizer. Espiritu managed 200 bags of fertilizer per trip. The fertilizer was delivered to the
driver and maid with the necessary way bill receipt. However, Espiritu never delivered the fertilizer to the
Atlas Fertilizer bodega in Mandaluyong.
Hence, Alday was compelled to pay for the loss of 400 tags to Atlas Fertilizer Corporation and filed a
complaint against Espiritu and Gelisan with the CFI Manila. While the CFI ruled that Espiritu alone is
liable, the Court of Appeals ruled to include Gelisan.
ISSUE: Whether or not Gelisan be held solidarily liable with Espiritu.

RULING:
The court ruled in the affirmative, Gelisan being the registered owner of the truck. The court has held
invariably in several decisions that the registered owner of a public service vehicle is responsible for
damages that may arise from consequences incidental to its operation or that may be caused by any of
the passengers therein. The claim that the petitioner is not liable in view of the lease contract executed
by and between him and Roberto Espiritu which exempts him from liability to third persons cannot be
sustained because it appears that the lease contract, adverted to, had not been approved by the Public
Service Commission.
It is settled in our jurisprudence that if a property covered by a franchise is transferred or leased to
another without the requisite approval, the transfer is not binding upon the public and third persons. We
also find no merit in the petitioner's argument that the rule requiring the previous approval by the Public
Service Commission, of the transfer or lease of the motor vehicle, may be applied only in cases where
there is no positive Identification of the owner or driver, or where there are very scant means of
Identification, but not in those instances where the person responsible for damages has been fixed or
determined beforehand, as in the case at bar.

Page | 18

However, Gelisan is not without recourse. He has a right to be indemnified by Roberto Espiritu for the
amount that he may be required to pay as damages for the injury caused to Benito Alday, since the lease
contract in question, although not effective against the public for not having been approved by the Public
Service Commission, is valid and binding between the contracting parties.
20. Benedicto v. IAC, 187 SCRA 547 (1990)
CASE 20
Benedicto v. Intermediate Appellate Court
G.R. No. 70876, July 19, 1990
FACTS:
Greenhills Wood Industries - bound itself to sell and deliver to Blue Star Mahogany, Inc. 100,000 board
feet of sawn lumber with the understanding that an initial delivery would be made.
Greenhills resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a
cargo truck, to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan; this cargo
truck was registered in the name of Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business
enterprise engaged in hauling freight
the Manager of Blue Star called up Greenhills
president informing him that the sawn lumber on board the subject cargo truck had not yet arrived in
Valenzuela, Bulacan; because of the delay in delivery Blue Star was constrained to look for other
suppliers
Greenhills filed criminal case against driver Licuden for estafa; and a civil case
for recovery of the value of the lost sawn lumber plus damages against Benedicto
Benedicto denied liability as she was a complete stranger to the contract of carriage, the subject truck
having been earlier sold by her to Benjamin Tee; but the truck had remained registered in her name
because Tee have not yet fully paid the amount of the truck; be that as it may, Tee had been operating
the said truck in Central Luzon from that and
Licuden was Tees employee and not hers.
ISSUE:
Whether or not Benedicto, being the registered owner of the carrier, should be held liable for the value of
the undelivered or lost sawn lumber
RULING:
Yes. The registered owner liable for consequences flowing from the operations of the carrier, even though
the specific vehicle involved may already have been transferred to another person. This doctrine rests
upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the
right to assume that the registered owner is the actual or lawful owner thereof It would be very difficult
and often impossible as a practical matter, for members of the general public to enforce the rights of
action that they may have for injuries inflicted by the vehicles being negligently operated if they should be
required to prove who the actual owner is. Greenhills is not required to go beyond the vehicles certificate
of registration to ascertain the owner of the carrier.

Page | 19

21. Philtranco Service Enterprises, Inc. v. CA, 273 SCRA 562 (1997)
CASE 21
PHILTRANCO vs. Court of Appeals
G.R. No. 120553, June 17, 1997
FACTS:
Ramon Acuesta, while riding in his bicycle, was bumped and ran over by a defendants bus which
resulted to his death.
As expected, the heirs of Ramon filed a suit for damages with the trial court which eventually ordered,
after trial, that the petitioners to jointly and severally pay the private respondents the following amounts:
1) P55, 615.72 as actual damages;
2) P200,000 as death indemnity for the death of the victim Ramon A. Acuesta;
3) P1 million as moral damages;
4) P500,000 by way of exemplary damages;
5) P50,000 as attorney's fees; and
6) the costs of suit.
On appeal, the CA affirmed the trial courts decision.
ISSUE:
Whether or not the damages awarded are improper and excessive.
RULING:
Yes. The trial court erroneously fixed the "death indemnity" at P200,000. The private respondents
defended the award in their Opposition to the Motion for Reconsideration by saying that "[i]n the case of
Philippine Airlines, Inc. vs. Court of Appeals, 185 SCRA 110, our Supreme Court held that the award of
damages for death is computed on the basis of the life expectancy of the deceased." In that case, the
"death indemnity" was computed by multiplying the victim's gross annual income by his life expectancy,
less his yearly living expenses. Clearly then, the "death indemnity" referred to was the additional
indemnity for the loss of earning capacity mentioned in Article 2206(1) of the Civil Code, and not the basic
indemnity for death mentioned in the first paragraph thereof. This article provides as follows:
Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity
shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by
the court, unless the deceased on account of permanent physical disability not caused by the defendant,
had no earning capacity at the time of his death;
We concur with petitioners' view that the trial court intended the award of "P200,000.00 as death
indemnity" not as compensation for loss of earning capacity. Even if the trial court intended the award as
indemnity for loss of earning capacity, the same must be struck out for lack of basis. There is no evidence
on the victim's earning capacity and life expectancy.

Page | 20

Only indemnity for death under the opening paragraph of Article 2206 is due, the amount of which has
been fixed by current jurisprudence at P50,000.
The award of P1 million for moral damages to the heirs of Ramon Acuesta has no sufficient basis and is
excessive and unreasonable. This was based solely on the testimony of one of the heirs, Atty. Julio
Acuesta, x x x. Since the other heirs of the deceased did not take the witness stand, the trial court had no
basis for its award of moral damages to those who did not testify thereon.
Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They
are awarded only to allow the former to obtain means, diversion, or amusements that will serve to
alleviate the moral suffering he has undergone due to the defendant's culpable action and must, perforce,
be proportional to the suffering inflicted. 20 In light of the circumstances in this case, an award of P50,000
for moral damages is in order.
The award of P500,000 for exemplary damages is also excessive. In quasi-delicts, exemplary damages
may be awarded if the party at fault acted with gross negligence. The Court of Appeals found that there
was gross negligence on the part of petitioner Manilhig. Under Article 2229 of the Civil Code, exemplary
damages are imposed by way of example or correction for the public good, in addition to the moral,
temperate, liquidated, or compensatory damages. Considering its purpose, it must be fair and reasonable
in every case and should not be awarded to unjustly enrich a prevailing party. In the instant case, an
award of P50,000 for the purpose would be adequate, fair, and reasonable.
Finally, the award of P50,000 for attorney's fees must be reduced. The general rule is that attorney's fees
cannot be recovered as part of damages because of the policy that no premium should be placed on the
right to litigate. Stated otherwise, the grant of attorney's fees as part of damages is the exception rather
than the rule, as counsel's fees are not awarded every time a party prevails in a suit. Such attorney's fees
can be awarded in the cases enumerated in Article 2208 of the Civil Code, and in all cases it must be
reasonable. In the instant case, the counsel for the plaintiffs is himself a co-plaintiff; it is then unlikely that
he demanded from his brothers and sisters P100,000 as attorney's fees as alleged in the complaint and
testified to by him. He did not present any written contract for his fees. He is, however, entitled to a
reasonable amount for attorney's fees, considering that exemplary damages are awarded. Among the
instances mentioned in Article 2208 of the Civil Code when attorney's fees may be recovered is "(1) when
exemplary damages are awarded." Under the circumstances in this case, an award of P25,000 for
attorney's fees is reasonable.
The petitioners did not contest the award for actual damages fixed by the trial court. Hence, such award
shall stand.

Page | 21

22. Equitable Leasing Corporation v. Lucita Suyon, et al., G.R. No. 143360, 05 September 2002
CASE 22
Equitable Leasing Corp. Vs. Lucita Suyom, Marissa Enano, Myrna Tamayo and Felix Oldean
G.R. No. 143360 | September 5, 2002 | Panganiban, J.| Registered Owner Rule
FACTS:

On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house cumstore of Myrna
Tamayo located at Pier 18, Vitas, Tondo, Manila.A portion of the house was destroyed.Pinned to death
under the engine of the tractor were Respondent Myrna Tamayos son, Reniel Tamayo, and Respondent
Felix Oledans daughter, Felmarie Oledan. Injured were Respondent Oledan himself, Respondent Marissa
Enano, and two sons of Respondent Lucita Suyom.
Tutor was charged with and later convicted of reckless imprudence resulting in multiple homicide and
multiple physical injuries in Criminal Case No. 296094-SA, Metropolitan Trial Court of Manila, Branch 12.
Upon verification with the Land Transportation Office, respondents were furnished a copy of Official
Receipt No. 62204139 and Certificate of Registration No. 08262797, showing that the registered owner of
the tractor was Equitable Leasing Corporation/leased to Edwin Lim.On April 15, 1995, respondents filed
against Raul Tutor, Ecatine Corporation (Ecatine) and Equitable Leasing Corporation (Equitable) a
Complaint for damages docketed as Civil Case No. 95-73522 in the RTC of Manila, Branch 14.
The trial court, upon motion of plaintiffs counsel, issued an Order dropping Raul Tutor, Ecatine and Edwin
Lim from the Complaint, because they could not be located and served with summonses. On the other
hand, in its Answer with Counterclaim, petitioner alleged that the vehicle had already been sold to Ecatine
and that the former was no longer in possession and control thereof at the time of the incident.It also
claimed that Tutor was an employee, not of Equitable, but of Ecatine.
After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and moral
damages and attorneys fees to respondents. It held that since the Deed of Sale between petitioner and
Ecatine had not been registered with the Land Transportation Office (LTO), the legal owner was still
Equitable. Thus, petitioner was liable to respondents.
Upon Appeal to the CA. The court held that petitioner was still to be legally deemed the owner/operator of
the tractor, even if that vehicle had been the subject of a Deed of Sale in favour of Ecatine. It cited that
the Certificate of Registration on file with the LTO still remained in petitioners name. In order that a
transfer of ownership of a motor vehicle can bind third persons, it must be duly recorded in the LTO. It
also upheld the claim for moral damages considering Tutor to be an agent of the registered owner.
ISSUE:
Whether or not Petitioner is liable for the accident despite a valid deed of sale in favour of Ecatine.
RULING:
We hold petitioner liable for the deaths and the injuries complained of, because it was the registered
owner of the tractor at the time of the accident on July 17, 1994. The Court has consistently ruled that,

Page | 22

regardless of sales made of a motor vehicle, the registered owner is the lawful operator insofar as the
public and third persons are concerned; consequently, it is directly and primarily responsible for the
consequences of its operation. In contemplation of law, the owner/operator of record is the employer of
the driver, the actual operator and employer being considered as merely its agent. The same principle
applies even if the registered owner of any vehicle does not use it for public service.
Since Equitable remained the registered owner of the tractor, it could not escape primary liability for the
deaths and the injuries arising from the negligence of the driver.
We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO should not
prejudice respondents, who have the legal right to rely on the legal principle that the registered vehicle
owner is liable for the damages caused by the negligence of the driver.Petitioner cannot hide behind its
allegation that Tutor was the employee of Ecatine.This will effectively prevent respondents from
recovering their losses on the basis of the inaction or fault of petitioner in failing to register the sale.The
non-registration is the fault of petitioner, which should thus face the legal consequences thereof.
b. Kabit System
23. Santos vs. Sibug

104 SCRA 520 (1981)

CASE 23
Adolfo Santos vs. Abraham Sibug and Court of Appeals
G.R. No. L-26815| May 26, 1981 | Melencio-Herrera., J.| Kabit System
Petitioners: Adolfo L. Santos
Respondent: Abraham Sibug and Court of Appeals, respondents.
Summary: Adolfo Santos (SANTOS) , owner of a jeep did not have a Certificate of Public Convenience
(CPC) .In order to operate his jeep, he fictitiously sold it to Vicente Vidad (VIDAD) an authorized jeepney
operator with a CPC ( kabit system). On April 26, 1963 one of Vidads jeep struck Abraham Sibug
(SIBUG) and was ordered by Branch XVII to pay damages. The Sherriff of Manila levied on a motor
vehicle registered under VIDAD ( actually owned by Santos) and scheduled an auction sale. Santos
opposed the sale as a third party claimant thus Branch X ordered the sheriff to stop. Upon Appeal by
Sibug to the CA, the same order to cancel the auction was annulled for interference with an equal courts
orders. The Supreme Court upheld the decision of the CA.
FACTS:
Adolfo L. Santos (SANTOS) was the owner of a passenger jeep, but he had no certificate of public
convenience for the operation of the vehicle as a public passenger jeep. Santos then transferred his jeep
to the name of Vicente U. Vidad (VIDAD) , a duly authorized passenger jeepney operator, so that it could
be operated under the latters CPC. In other words Santos became what is known in ordinary parlance as
a kabit operator. For the protection of Santos, Vidad executed a re-transfer document to the former,
which was to be a private document presumably to be registered if and where it was decided that the jeep
of Santos was to be withdrawn from the kabit arrangement.
On April 26, 1963, Abraham Sibug (SIBUG) was bumped by a passenger jeep operated by Vidad and
driven by Severe Gragas. Sibug filed a complaint for damages against Vidad and Gragas with CFI Branch
XVII. The Court awarded damages to Sibug totalling P4006.20.

Page | 23

The Sheriff of Manila then levied upon a jeep owned by Vidad ( actually owned by Santos)and scheduled
a public auction sale on May 8, 1964. Prior to the sale, Santos presented a third party claim admitting of
the arrangement he had with VIDAD regarding the CPC alleging actual ownership of the motor vehicle.
Sibug then submitted to the Sherrif a bond issued y Philippine Surety Insurance Company.
Before the auction, Santos instituted an action for Damages and injunction with a prayer for preliminary
mandatory injunction against Sibug, Vidad and the sherrif, along with the bond company in CFI Branch X.
Branch X issued a Restraining Order enjoining the Sheriff from conducting the public auction sale. The
restraining order however was issued wrongfully for no Branch of the same court has the power to
restrain a sheriff under orders of an equal court. Branch X then affirmed the ownership of Santos over the
jeep and ordered payment of damages to Sibug until the jeep can be returned.
Sibug turned to the CA, who rendered the challenged decision nullifying the judgment of Branch X and
permanently restraining V from taking cognizance of the Branch X case. It noted that Branch X hand
encroached and interfered with the judgement of Branch XVII.
It further held that Santos may not be permitted to prove his ownership over a particular vehicle
being levied upon but registered in anothers name in a separated action. It Stated:
As the vehicle in question was registered in the name of Vicente U. Vidad, the government or any
person affected by the representation that said vehicle is registered under the name of a particular
person had the right to rely on his declaration of ownership and registration: and the registered
owner or any other person for that matter cannot be permitted to repudiate said declaration with
the objective of proving that said registered vehicle is owned by another person and not by the
registered owner (sec. 68, (a), Rule 123, and art. 1431, New Civil Code)
Were we to allow a third person to prove that he is the real owner of a particular vehicle and not
the registered owner it would in effect be tantamount to sanctioning the attempt of the registered
owner of the particular vehicle in evading responsibility for it cannot be dispelled that the door
would be opened to collusion between a person and a registered owner for the latter to escape
said responsibility to the public or to any person. ...

ISSUE: Whether or not petitioner may still prove his ownership over the levied motor vehicle.
RULING:
The judgment rendered in Santos favor by Branch X, declaring him to be the owner of the property, did
not as a basic proposition, constitute interference with the powers or processes of Branch XVII which
rendered the judgment, to enforce which the was levied upon. And this is so because property belonging
to a stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in custodia
legis, and should not be interfered with without the permission of the proper Court, the property must be
one in which the defendant has proprietary interest. Where the Sheriff seizes a stranger's property, the
rule does not apply and interference with his custody is not interference with another Court's Order of
attachment.

Page | 24

However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court
nullifying the Decision of Branch X permanently enjoining the auction sale, should be upheld. Legally
speaking, it was not a "stranger's property" that was levied upon by the Sheriff pursuant to the judgment
rendered by Branch XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment
debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved.
Whatever legal technicalities may be invoked, we find the judgment of respondent Court of Appeals to be
in consonance with justice.
WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on certiorari
filed by Adolfo L. Santos is dismissed with costs against the petitioner.
24. Lita Enterprises, Inc. vs. CA G.R. No. 64693. April 27, 1984
CASE 24
G.R. No. L-64693

April 27, 1984

LITA ENTERPRISES, INC., petitioner,

vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and
FRANCISCA P. GARCIA, respondents.
ESCOLIN, J.

FACTS:
Sometime in 1966, spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to
be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner
through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in
consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. The
aforesaid cars were registered in the name of petitioner. Possession, however, remained with spouses
Ocampo who operated and maintained the same under the petitioner's trade name, Acme Taxi.
About a year later, one of the taxicabs driven by their employee, Emeterio Martin, collided with a
motorcycle causing the death of its driver, Florante Galvez. A criminal case was filed against Martin, while
a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against
petitioner as registered owner of the taxicab. Petitioner was adjudged liable for damages in the amount of
P25,000.00 and P7,000.00 for attorney's fees.
Meanwhile, two (2) other taxicabs were levied upon and sold at public auction. Thereafter, respondent
Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner to
turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a
complaint for reconveyance of motor vehicles with damages wherein petitioner is ordered to transfer the
registration certificate of the three Toyota cars not levied upon.
On appeal, the IAC modified the decision. Petitioner, then, came to this Court praying that the decision of
lower court be amended and that Spouses Ocampo be liable to Rosita Galvez.
ISSUE:
Whether or not the petition holds merit.

Page | 25

RULING:
No. Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system", whereby a person who has been granted a certificate of public convenience allows another
person who owns motors vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced. Although not outrightly penalized as a criminal offense, the "kabit
system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent
under Article 1409 of the Civil Code. Further, it was a flagrant error on the part of both the trial and
appellate courts to have accorded the parties relief in pursuant to Article 1412 of the Civil Code.
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts.

25. Teja Marketing vs. IAC

148 SCRA 347 (1987)

CASE 25
G.R. No. L-65510

March 9, 1987

TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner, vs. HONORABLE INTERMEDIATE

APPELLATE COURT * AND PEDRO N. NALE, respondents.
PARAS, J.:
FACTS:
On May 9, 1975, Angel Jaucian bought a motorcycle with complete accessories and a sidecar for a
purchase price of P8,000 from Pedro Nale. Jaucian gave a down payment of P1,700 with a promise to
pay the balance within sixty (60) days. A chattel mortgage was constituted as a security for the payment
of the purchase price. Having failed to comply with his promise and so upon his own request, the period
was extended to one year in monthly installments until January 1976 when he stopped paying. Nale
made demands but Jaucian still failed to comply.
Jaucian did not dispute the sale and the outstanding balance of P1,700. He claims that he was persuaded
to buy because of the condition that Nale would be the one to register every year with the Land
Transportation Commission (LTC). In 1976, however, Nale failed to register both the chattel mortgage
and the motorcycle notwithstanding the fact that Jaucian gave him payment for the mortgage fee and
registration fee and had the motorcycle insured. Because of this failure to register the motorcycle, Jaucian
claims he suffered damages on insurance indemnity for the more than two times that the motorcycle
figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning October
1976 when the motorcycle was impounded.
Nale, in his answer, claimed that his failure to register the motorcycle was due to Jaucians non-payment
of insurance premiums and that Jaucian was hiding the motorcycle from him.
Upon investigation, the records of the LTC show that the same motorcycle was first mortgaged to
petitioner herein, Teja Marketing, by Jaucian though the Teja Marketing and Angel Jaucian are one and

Page | 26

the same. It was made to appear that way because Jaucian had no franchise of his own and he attached
the unit to Nale's own transportation line which is duly registered.
Petitioner filed an action for "Sum of Money with Damages" against Nale in the City Court of Naga City.
The Court rendered judgment in favor of the petitioner. IAC affirmed the judgment and dismissed the case
citing both parties are in "pari delicto". Thus, Nale filed a petition for review.

ISSUE:
Whether or not respondent court erred in applying the doctrine of "pari delicto."
RULING:
No. Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system" whereby a person who has been granted a certificate of public convenience allows another
person who owns motor vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of the
prevalence of graft and corruption in the government transportation offices.
Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as
being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code.
The defect of in existence of a contract is permanent and cannot be cured by ratification or by
prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.
'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129
SCRA 81.)
c. Boundary System
26. Magboo vs. Bernardo

7 SCRA 952 (1963)

CASE 26
Urbano Magboo and Emilia Magboo v. Delfin Bernardo
G.R. No. L-16790 April 30, 1963
Makalintal, J.
FACTS:
Cesar Magboo, 8 years old and child of spouses Magboo was killed in a motor vehicle accident
involving a passenger jeepney driven by Conrado Roque
The contract between Roque and Bernardo was that Roque was to pay to Bernardo the sum of P8.00
for the privilege of driving the jeepney; and whatever earnings Roque could make out of the use of the
jeepney in transporting passengers from one point to another in the City of Manila would belong entirely
to him
As a consequence of the accident and as a result of the death of Cesar, Roque was prosecuted for
homicide thru reckless imprudence
Roque served his sentence but he was not able to pay the indemnity because he was insolvent

Page | 27

 Spouses Magboo filed an action against Bernardo for the enforcement of his subsidiary liability as
employer in accordance with Article 103, Revised Penal Code

The trial court ordered defendant to pay plaintiffs P3,000.00 and costs.
Delfin Bernardo, the appellant, contends that the relationship is essentially that of lessor and lessee and
not that of an employee-employee.

ISSUE: WON an employer-employee relationship exists between a jeepney-owner and a driver under a
boundary system arrangement.
RULING: Yes. The fact that the driver does not receive a fixed wage but gets only the excess of the
receipt of fares collected by him over the amount he pays to the jeep-owner and that the gasoline
consumed by the jeep is for the account of the driver are not sufficient to withdraw the relationship
between them from that of employer and employee.
Ratio: Indeed to exempt from liability the owner of a public vehicle who operates it under the boundary
system on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public
Service law but also to place the riding public at the mercy of reckless and irresponsible drivers

II. TRANSPORTATION OF GOODS

3. Extraordinary Diligence
27. Eastern Shipping v. Court of Appeals, G.R. No. 94151 April 30, 1991.
CASE 27
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE COURT OF APPEALS and THE FIRST NATIONWIDE ASSURANCE CORPORATION,
respondents.
G.R. No. 94151

April 30, 1991

FACTS:

On September 4, 1978, thirteen coils of uncoated 7-wire stress relieved wire strand for prestressed

concrete were shipped on board the vessel "Japri Venture," owned and operated by the defendant
Eastern Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in
Manila.
On September 16, 1978, the carrying vessel arrived in Manila and discharged the cargo to the custody
of the defendant E. Razon, Inc. from whom the consignee's customs broker received it for delivery to
the consignee's warehouse.
On February 19, 1979, the plaintiff indemnified the consignee in the amount of P171,923.00 for damage
and loss
The plaintiff now seeks to recover from the defendants what it has indemnified the consignee.
It appears that while enroute from Kobe to Manila, the carrying vessel "encountered very rough seas
and stormy weather" for three days, more or less, which caused it to roll and pound heavily. The coils
wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel
which was flooded with water about one foot deep causing rust to the thirteen coils.
Private respondent, First Nationwide Assurance Co., sued the petitioners which was however
dismissed by RTC Manila.
CA set aside the lower court's decision and ordered the petitioners to pay the appellant.
The petitioner claims it should not be held liable as the shipment was discharged and delivered
complete into the custody of the arrastre operator under clean tally sheets.

Page | 28

ISSUE: W/N the petitioner can be held liable for the damages incurred by the private respondent.
DECISION: The petition is DISMISSED.
RULING:
Plainly, the heavy seas and rains referred to in the master's report were not caso fortuito, but normal
occurrences that an ocean-going vessel, particularly in the month of September which, in our area, is a
month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor
unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the
ordinary course of a voyage. That rain water (not sea water) found its way into the holds of the Jupri
Venture is a clear indication that care and foresight did not attend the closing of the ship's hatches so that
rain water would not find its way into the cargo holds of the ship.
The presumption, therefore, that the cargo was in apparent good condition when it was delivered by the
vessel to the arrastre operator by the clean tally sheets has been overturned and traversed. The evidence
is clear to the effect that the damage to the cargo was suffered while aboard petitioner's vessel.
28. Delsan Transport v. Court of Appeals, G.R. No. 127897, November 15, 2001.
CASE 28
DELSAN TRANSPORT LINES, INC., petitioner,vs.
THE HON. COURT OF APPEALS and AMERICAN HOME ASSURANCE CORPORATION,
respondents.
G.R. No. 127897 November 15, 2001
FACTS:
Carrier Delsan Transport Lines Inc.
Shipper Caltex Philippine
Insurer American Home Assurance Corporation
Caltex entered into a contract with Delsan Transport Lines to transport its petroleum goods from
BatangasBataan
Refinery
to
Zamboanga
City.
The
shipment
was
insured
by
private respondentAmerican Home Assurance Corp. MT Maysum set sail from Batangas for
Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf
in the Visayas taking with it the entire cargo of fuel oil. Subsequently, private respondent paid Caltex the
sum of(P5,096,635.67) representing the insured value of the lost cargo. Exercising its right of
subrogation, the private respondent demanded of the petitioner the same amount it paid to Caltex. Delsan
failed to pay its obligation the American Home Assurance Corp. Hence, the latter institutes an action to
recover the amount paid. The regional trial court ruled in favor of petitioner stating that MT Maysum, was
seaworthy as certified by Philippine Coastguard and the incident was caused by unexpected inclement
weather condition or force majeure. I the court of appeals, it reversed the trial courts decision by giving
credence to the weather report issued by the PAG-ASA that the sea was calm during the voyage.
ISSUE:
W/N petitioner should be held liable for damages.

Page | 29

RULING:
YES. From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of passengers
transported by them, according to all the circumstance of each case. In the event of loss, destruction or
deterioration of the insured goods, common carriers shall be responsible unless the same is brought
about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity. In all
other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. The
tale of strong winds and big waves by the said officers of the petitioner however, was effectively rebutted
and belied by the weather report from the PAGASA, showing that from 2:00 oclock to 8:00 oclock in the
morning on August 16, 1986, the wind speed remained at ten (10) to twenty (20) knots per hour while the
height of the waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf
where the subject vessel sank. Thus, as the appellate court correctly ruled, petitioners vessel, MT
Maysun, sank with its entire cargo for the reason that it was not seaworthy. There was no squall or bad
weather or extremely poor sea condition in the vicinity when the said vessel sank. Thus not having
overturned the evidence presented, (that it observed extraordinary diligence) the presumption of
negligence stands, and therefore it is but right and proper to rule that petitioner should be held liable for
damages.
29. Philippine Charter Insurance Corp. v. Unknown Owner of Vessel M/V National Honor,
National Shipping Corp. and International Container Services, Inc., G.R. No. 161833, July 08,
2005
CASE 29
PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE VESSEL M/V
NATIONAL HONOR, NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and
INTERNATIONAL
CONTAINER
SERVICES,
INC.
[G.R.
No.
161833.
July
8,
2005]
FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment on board the
vessel M/V National Honor, represented in the Philippines by its agent, National Shipping Corporation of
the Philippines (NSCP). The M/V National Honor arrived at the Manila International Container Terminal
(MICT). The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of
the crate cargo list and bill of lading, and it knew the contents of the crate. The following day, the vessel
started discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a
winchman from the ICTSI, exclusive arrastre operator of MICT. Denasto Dauz, Jr., the checker-inspector
of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the cargo.
They inspected the hatches, checked the cargo and found it in apparent good condition. Claudio Cansino,
the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was
fastened on the mid-portion of the crate. In Dauzs experience, this was a normal procedure. As the crate
was being hoisted from the vessels hatch, the mid-portion of the wooden flooring suddenly snapped in
the air, about five feet high from the vessels twin deck, sending all its contents crashing down hard,
resulting in extensive damage to the shipment. PCIC paid the damage, and as subrogee, filed a case
against M/V National Honor, NSCP and ICTSI. Both RTC and CA dismissed the complaint.
ISSUE:
Whether

or

not

the

presumption

of

negligence

is

applicable

in

the

instant

case.

Page | 30

RULING:
No. I agree with the contention of the petitioner that common carriers, from the nature of their business
and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the circumstances of
each case. he Court has defined extraordinary diligence in the vigilance over the goods as follows:
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the
greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise due care in the handling and stowage, including such
methods
as
their
nature
requires.
The common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time
the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier
for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the
person entitled to receive them.] >When the goods shipped are either lost or arrive in damaged condition,
a presumption arises against the carrier of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable. To overcome the presumption of negligence in the case of
loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary
diligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any
of
the
following
causes:
1.
2.
3.
4.
5.

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

It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common
carrier for the loss or damage to the cargo is a closed list. To exculpate itself from liability for the
loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the
aforecited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence
is
shifted
to
the
shipper
to
prove
that
the
carrier
is
negligent.
Defect is the want or absence of something necessary for completeness or perfection; a lack or
absence of something essential to completeness; a deficiency in something essential to the proper use
for the purpose for which a thing is to be used. On the other hand, inferior means of poor quality,
mediocre, or second rate. A thing may be of inferior quality but not necessarily defective. In other words,
defectiveness
is
not
synonymous
with
inferiority.
In the present case, the trial court declared that based on the record, the loss of the shipment was caused
by
the
negligence
of
the
petitioner
as
the
shipper:
The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and
the total destruction of its contents were not imputable to any fault or negligence on the part of said
defendant in handling the unloading of the cargoes from the carrying vessel, but was due solely to the
inherent defect and weakness of the materials used in the fabrication of said crate. The crate should have
three solid and strong wooden batten placed side by side underneath or on the flooring of the crate to
support the weight of its contents.

Page | 31

30. Saludo v. Court of Appeals, G.R. No. 95536, March 23, 1992.

CASE 30
30. SALUDO VS. COURT OF APPEALS
GR# 95536, March 23, 1992
Regalado, J.
Parties of the Case: Pomierski and Son Funeral Home (Shipper), Petitioner Maria Saludo (Consignee),
Transworld Airlines (TWA) Chicago San Francisco, and Philippine Airlines (PAL)- San Francisco
Manila (Carrier)
Facts:
When petitioners mother, Crispina Galdo Saludo, died in Chicago Illinois, shipper Pomierski and Son
Funeral Home of Chicago made the necessary preparations and arrangements for the shipment of the
remains from Chicago to the Philippines. The remains were sealed by Philippine Vice Consul Bienvenido
M. Llaneta who sealed such in an airtight and waterproof casket. On the same date, October 26, 1976,
Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago)
which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service
used by undertakers to throughout the nation (U.S.A.). C.M.A.S. booked the shipment with PAL thru the
carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the
consignee. The requested routing was from Chicago to San Francisco on board TWA Flight 131 of
October 27, 1976 and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and
from Manila to Cebu on board PAL Flight 149 of October 29, 1976. Maria Saludo upon arriving at San
Francisco Airport, she then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes informed him that
the remains were on a plane to Mexico City, that there were two bodies at the terminal, and somehow
they were switched. The following day October 28, 1976, the shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on board American Airlines. This shipment was transferred to or
received by PAL at 7:45 p.m. This casket bearing the remains of Crispina Saludo, which was mistakenly
sent to Mexico and was opened (there), was resealed by Crispin F. Patagas for shipment to the
Philippines. The shipment was immediately loaded on PAL flight for Manila that same evening and arrived
(in) Manila on October 30, 1976, a day after its expected arrival on October 29, 1976. Aggrieved by the
incident, the petitioners instituted an action against respondents and were asked to pay for damages.
Petitioner alleges: that private respondents received the casketed remains of petitioners' mother on
October 26, 1976, as evidenced by the issuance of PAL Air Waybill by Air Care International as carrier's
agent; and from said date, private respondents were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged switching of the caskets on October 27, 1976, or
one day after private respondents received the cargo, the latter must necessarily be liable.
RTC - absolved the two respondent airlines companies of liability. CA - affirmed the decision of the lower
court in toto.
ISSUE
Is the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of
respondent airline companies?
HELD:
NO. The Court AFFIRMED the CA decision and just awarded P40,000 damages to petitioners
since the switching of caskets prior thereto was not caused by respondents. The facts belie the averment
that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the
body intended to be shipped as agreed upon was really placed in the possession and control of PAL on
October 28, 1976 and it was only from that date that private respondents became responsible for the

Page | 32

agreed cargo under their undertakings in PAL Airway Bill. Therefore, they cannot be held liable for
subsequent events caused thereby.
The bill of lading in this case, particularly PAL Airway Bill issued on October 27, 1976, was not
evidence of evidence of receipt of delivery of the cargo but merely as confirmation of the booking thus
made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not until
October 28, 1976 that PAL received physical delivery of the body at San Francisco.
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the
common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in
full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or
owner exercises the right of stoppagein transitu, and terminates only after the lapse of a reasonable time
for the acceptance, of the goods by the consignee or such other person entitled to receive them. And,
there is delivery to the carrier when the goods are ready for and have been placed in the exclusive
possession, custody and control of the carrier for the purpose of their immediate transportation and the
carrier has accepted them. Where such a delivery has thus been accepted by the carrier, the liability of
the common carrier commences eo instanti.
31. Lorenzo Shipping v. BJ Marthel, G.R. No. 145483, November 19, 2004.
CASE 31

31. LORENZO SHIPPING CORP VS. BJ MARTHEL

G.R. No. 145483
November 19, 2004
Chico-Nazario, J.
Parties to the case: Lorenzo Shipping Corporation (Petitioner), BJ Marthel International Inc
(Respondent)
Facts:
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in coastwise
shipping. It used to own the cargo vessel M/V Dadiangas Express while respondent BJ Marthel
International, Inc. is a business entity engaged in trading, marketing, and selling of various
industrial commodities. It is also an importer and distributor of different brands of engines and
spare parts. Respondent supplied petitioner with spare parts for the latter's marine engines.
Respondent supplied petitioner with spare parts for the latter's marine engines. According to the
quotation it sent, deliveries of such items are within 2 months after receipt of firm order.
Petitioner thereafter issued to respondent Purchase Order No. 13839 for the procurement of one
set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas Express. The purchase
order was co-signed by Jose Go, Jr., petitioner's vice-president, and Henry Pajarillo, respondents
sales manager.
Instead of paying the 25% down payment (indicated in the purchase order) for the first cylinder
liner, petitioner issued in favor of respondent 10 postdated checks supposedly representing the
full payment of the cylinder liner.
Subsequently, petitioner issued Purchase Order No. 14011, for another unit of cylinder liner. This
purchase order stated the term of payment to be "25% upon delivery, balance payable in 5 bimonthly equal installments." Like the first purchase order, the second purchase order did not
state the date of the cylinder liner's delivery.
On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January
1990, however, the same was dishonored by the drawee bank due to insufficiency of funds. The
remaining nine postdated checks were eventually returned by respondent to petitioner.
Petitioner claimed that it replaced said check with a good one, the proceeds of which were
applied to its other obligation to respondent. For its part, respondent insisted that it returned said
postdated check to petitioner.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in Manila.
The sales invoices evidencing the delivery of the cylinder liners both contain the notation "subject
to verification" under which the signature of petitioner's warehouseman, appeared.

Page | 33

Respondent sent a Statement of Account and respondent's vice-president sent a demand letter
dated to petitioner requiring the latter to pay. Petitioner sent the former a letter offering to pay only
P150,000 for the cylinder liners. In said letter, petitioner claimed that as the cylinder liners were
delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner) would have
to sell the cylinder liners in Singapore and pay the balance from the proceeds of said sale.
Respondent filed an action for sum of money and damages before the RTC. Prior to the filing of a
responsive pleading, respondent filed an amended complaint with preliminary attachment. The
amendments also pertained to the issuance by petitioner of the postdated checks and the
amounts of damages claimed.
RTC - granted respondent's prayer for the issuance of a preliminary attachment. Petitioner filed
an Urgent Ex-Parte Motion to Discharge Writ of Attachment attaching thereto a counter-bond
which the RTC allowed.
Petitioner afterwards filed its Answer alleging therein that time was of the essence in the delivery
of the cylinder liners and that the delivery on 20 April 1990 of said items was late as respondent
committed to deliver said items "within two (2) months after receipt of firm order."
Respondent filed a Second Amended Complaint with Preliminary Attachment which dealt solely
with the number of postdated checks issued by petitioner as full payment for the first cylinder liner
it ordered from respondent. (In the first amended complaint, only nine postdated checks were
involved, in its second amended complaint, there were ten postdated checks).
Petitioner filed a Motion alleging therein that the cylinder liners run the risk of obsolescence and
deterioration to the prejudice of the parties to this case. Thus, petitioner prayed that it be allowed
to sell the cylinder liners at the best possible price and to place the proceeds of said sale in
escrow. This motion was granted.
The RTC dismissed the complaint which ordered the plaintiff to pay P50,000.00 to the defendant.
It held respondent bound to the quotation it submitted to petitioner particularly with respect to the
terms of payment and delivery of the cylinder liners. It also declared that respondent had agreed
to the cancellation of the contract of sale when it returned the postdated checks issued by
petitioner.
CA - reversed the decision of the RTC.

ISSUES
1. W/N respondent incurred delay in performing its obligation under the contract of sale - NO
2. Whether or not said contract was validly rescinded by petitioner. NO
HELD:
The Court DENIED since time was not of the essence in the contract, as depicted from the actual
or intention of the parties. The delivery of the cylinder liners on 20 April 1990 was made within a
reasonable period of time considering that respondent had to place the order for the cylinder liners with its
principal in Japan and that the latter was, at that time, beset by heavy volume of work. There having been
no failure on the part of the respondent to perform its obligation, the power to rescind the contract is
unavailing to the petitioner. Therefore, it can be said that respondent exercised due diligence in the
performance of its obligation.

Page | 34

32. Sealoader Shipping v. Grand Cement Manufacturing, G.R. Nos. 167363 & 177466, 15
December 2010.
CASE 32
G.R. No. 167363. December 15, 2010.
SEALOADER SHIPPING CORPORATION, petitioner v.
GRAND CEMENT MANUFACTURING CORPORATION, JOYCE LAUNCH &
TUG CO., INC.
LEONARDO-DE CASTRO, J p:
FACTS:
These are two petitions for Review on Certiorari under Rule 45 of the Rules of Court, both seeking to
challenge the Amended Decision of the Court of Appeals by reducing by 50% the award of actual
damages that was previously granted
in the Decision of the Regional Trial Court of Cebu City.
The antecedent facts are as follows:
Sealoader Shipping Corporation, herein petitioner, is a domestic corporation engaged in the business of
shipping and hauling cargo from one point to another using seagoing inter-island barges. Grand Cement
Manufacturing Corporation, on the other hand, is a domestic corporation engaged in the business of
manufacturing and selling cement through its authorized distributors and, for which purposes, it maintains
its own private wharf in San Fernando, Cebu, Philippines. On March 24, 1993, petitioner executed a Time
Charter Party Agreement with Respondent (Joyce Launch & Tug Co., Inc.), which operated and owned
the motor tugboat M/T Viper. Sealoader chartered the M/T Viper in order to tow the former's unpropelled
barges for a minimum period of 15 from the date of acceptance, renewable on a 15-day basis upon
mutual agreement of the parties.
Sealoader then entered into a contract with Grand Cement for loading of cement clinkers and the
delivery to Manila. March 31, 1994, Sealoaders barge, D/B Toploader, arrived at the wharf of Grand
Cement tugged by the M/T Viper. The D/B Toploader, however, was not immediately loaded with its
intended cargo as the employees of Grand Cement were still loading another vessel.
April 4, 1994, Typhoon Bising struck the Visayas area (120 km/hr; Public storm signal no. 3). As the winds
blew stronger and the waves grew higher, the M/T Viper tried to tow the D/B Toploader away from the
wharf when the towing line connecting the two vessels snapped. The following day, the employees of
Grand Cement discovered the D/B Toploader situated on top of the wharf, apparently having rammed the
same and causing significant damage thereto.
The Grand Cement filed a Complaint for Damages against Sealoader; Romulo Diantan, the Captain of
the M/T Viper; and Johnny Ponce, the Barge Patron of the D/B Toploader. Grand Cement claimed,
among others, that when the D/B Toploader arrived at its wharf on March 31, 1994, the same was not
properly secured. Grand Cement stated that after it received the weather updates for that day, it
immediately advised Romulo Diantan and Johnny Ponce to move their respective vessels away from the
wharf to a safer berthing area. Both men allegedly refused to do so. Because of the strong winds of
Typhoon Bising, the D/B Toploader was forced to smash against the wharf of Grand Cement.
Sealoader maintained that Joyce Launch should be held liable for the negligent acts of the latter are
employees who were manning the M/T Viper to which Grand Cement included Joyce Launch as one of
the party defendants. Sealoader insist to argue that Joyce Launch had the sole duty and responsibility to
secure the M/T Viper and the D/B Toploader in order to avert any damage to the properties of third
parties. Sealoader filed an Answer maintaining that it only had the right to use the M/T Viper for the

Page | 35

purposes for which the tugboat was chartered and nothing more. Sealoader pointed out that Grand
Cement did not initiate the loading of the D/B Toploader notwithstanding the fact that the said barge had
been docked at the latter's wharf long before Typhoon Bising came on April 4, 1994. As the typhoon was
a force majeure, the damage it brought upon the wharf of Grand Cement was allegedly beyond the
control of Sealoader.
Grand Cement presented ex parte witnesses:
Wennie C. Saniel pertinently stated that, on April 4, 1994, he gave instructions for the pullout of
the D/B Toploader from the wharf in view of the incoming typhoon. As the instructions were
ignored, Grand Cement resultantly suffered damages estimated to be around P2.4 million.
Sealoaders motion to take the testimonies of its witnesses:
Marita S. Santos was taken by Sealoader in order to prove that the damage to the wharf of Grand
Cement was caused by force majeure, as well as the negligent acts and omissions of Grand
Cement and Joyce Launch. The Grand Cement was notified that the D/B Toploader was ready to
load. The crew of the barge then waited as Grand Cement had three days from notice to load
cargo into the barge.
At around 3:00 p.m. when the typhoon came, the crew of the barge found Diantan trying to
maneuver the M/T Viper to tow the D/B Toploader away from the wharf. The M/T Viper failed to
tow the barge since the mooring lines were not cast off and the arrastre responsible for the same
were not at the wharf. If Grand Cement could have loaded the D/B Toploader with cargo before
the typhoon (April 4, 1994), the accident could have averted and the D/B Toploader had no
engine, the M/T Viper was responsible for towing the barge to safety.
RTC ruled in favor of Grand Cement and that Sealoaders, Joyce Launch, and Johnny Ponce are guilty of
negligence, which caused damage to the Grand Cements wharf. CA still found merit in Sealoaders
appeal and rendered its judgement partially modifying by reducing the award for actual damages by 50%
or half. The appellate court decided that Grand Cement did not take any precaution to avoid the damages
brought by the storm and due to its contributory negligence for merely instructing the Petitioners to leave
the wharf the day before the storm, Grand Cement must carry part of the brunt of the damages. CA
subsequently found that Grand Cement likewise did not exercise due diligence since it belatedly informed
Sealoader of the approaching typhoon and, thereafter, still continued to load another vessel.
ISSUE: Who should be liable for the damage sustained by the wharf of Grand Cement?
RULING:
Sealoader cannot pass to Grand Cement the responsibility of casting off the mooring lines connecting the
D/B Toploader to the wharf. People at the wharf could not just cast off the mooring lines without any
instructions from the crew of the D/B Toploader and the M/T Viper. As the D/B Toploader was without an
engine, casting off the mooring lines prematurely might send the barge adrift or even run the risk of the
barge hitting the wharf sure enough. Thus, Sealoader should have taken the initiative to cast off the
mooring lines early on or, at the very least, requested the crew at the wharf to undertake the same. In
failing to do so, Sealoader was manifestly negligent.
Contrary to the judgement of the CA, Grand Cement was not guilty of negligent acts, which contributed to
the damage that was incurred on its wharf. Court holds that Sealoader had the responsibility to inform
itself of the prevailing weather conditions in the areas where its vessel was set to sail. Sealoader cannot
merely rely on other vessels for weather updates and warnings on approaching storms, as what
apparently happened in this case.
Hence, the petition for review was DENIED.

Page | 36

4. Presumption of Negligence
33. Delsan Transport v. American Home, G.R. No. 149019, 15 August 2006
CASE 33
G.R. No. 149019. August 15, 2006.
DELSAN TRANSPORT LINES, INC., petitioner v.
AMERICAN HOME ASSURANCE CORPORATION, respondent .
GARCIA, J p:
FACTS:
This is a petition for review on certiorari under Rule 45 of the Rules of Court wherein petitioner assails
and seeks to set aside the Decision of the CA, affirming an earlier decision of RTC of Manila in two
separate complaints for damages.
The facts are as follows:
Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand,
respondent American Home Assurance Corporation is a foreign insurance company duly licensed to do
business in the Philippines through its agent, the American-International Underwriters, Inc. (Phils.). It is
engaged, among others, in insuring cargoes for transportation within the Philippines.
On August 5, 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l
Automotive Diesel Oil at the Bataan Refinery Corporation for transportation and delivery to the bulk depot
in Bacolod City of Caltex Phils., pursuant to a Contract of Afreightment. The shipment was insured by
respondent AHAC against all risks under Inland Floater Policy.
When they were successfully discharging the diesel oil on Aug. 7, 1984 in Bacolod, at about 10:30PM,
they had to stopped on account of the discovery that the port bow mooring of the vessel was intentionally
cut or stolen by unknown persons. Because there was nothing holding it, the vessel drifted westward,
dragged and stretched the flexible rubber hose attached to the riser, broke the elbow into pieces, severed
completely the rubber hose connected to the tanker from the main delivery line at sea bed level and
ultimately caused the diesel oil to spill into the sea. To avoid further spillage, the vessel's crew tried water
flushing to clear the line of the diesel oil but to no avail.
In the meantime, the shore tender, who was waiting for the completion of the water flushing, was
surprised when the tanker signaled a "red light" which meant stop pumping. Unaware of what happened,
the shore tender, thinking that the vessel would, at any time, resume pumping, did not shut the storage
tank gate valve. As all the gate valves remained open, the diesel oil that was earlier discharged from the
vessel into the shore tank backflowed.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the
latter refused to pay. As insurer, AHAC paid Caltex the sum of P479,262.57 for spillage and
P1,939,575.37 for backflow of the diesel oil pursuant to Inland Floater Policy.
American Home Assurance Corp., as Caltex subrogee, instituted a civil case against Delsan for loss
caused by the spillage and another for the loss caused by the backflow.
RTC ruled in favor of American Home Assurance Corp. holding Delsan liable for the loss of the cargo for
it negligence in its duty as a common carrier. CA also agreed with the decision of the RTC stating that
Delsan
failed
to
exercise
the
extraordinary
diligence.
Hence, petitioner filed this case arguing that CA erred in ruling that Article 1734 of the Civil Code cannot
absolve it from liability for the loss of the subject cargo and in not applying the rule on contributory

Page | 37

negligence against Caltex, the shipper-owner of the cargo, and in not taking into consideration the fact
that the loss due to backflow occurred when the diesel oil was already completely delivered to Caltex.
Delsan would have the Court absolve it from liability for the loss of its cargo on two grounds. First , the
loss through spillage was partly due to the contributory negligence of Caltex; and Second, the loss
through backflow should not be borne by Delsan because it was already delivered to Caltex's shore tank.
ISSUE: Will the arguments of the Petitioner prosper?
RULING:
Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there was a
contributory negligence on the part of the owner of the goods Caltex and the Court sees no reason to
depart therefrom. As the Court saw it, the crew of the vessel should have promptly informed the shore
tender that the port mooring line was cut off but Delsan did not do so on the
lame excuse that there was no available banca. As it is, Delsan's personnel signaled a "red light" which
was not a sufficient warning because such signal only meant that the pumping of diesel oil had been
finished. Neither did the blowing of whistle suffice considering the distance of more than 2 kilometers
between the vessel and the Caltex Bulk Depot, aside from the fact that it was not the agreed signal.
Delsan, being a common carrier, should have exercised extraordinary diligence in the performance of its
duties. Consequently, it is obliged to prove that the damage to its cargo was caused by one of the
excepted causes if it were to seek exemption from responsibility. Having failed to do so, Delsan must
bear the consequences.
Hence, the petition was DENIED.
34. Delsan Transport Lines v. CA, G.R. No. 127897, 15 November 2001

CASE 34
DELSAN TRANSPORT LINES V CA
GR No. 127897, Nov. 15, 2007

FACTS:
Caltex Philippines entered into a contract of affreightment with the petitioner, Delsan Transport Lines,
Inc., for a period of one year whereby the said common carrier agreed to transport Caltex's industrial fuel
oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took
on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the
Caltex Oil Terminal in Zamboanga City which was insured by private respondent, American Home
Assurance Corporation.
MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early
morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex P5,096,635.57 representing the insured value of the lost
cargo. Exercising its right of subrogation, the private respondent demanded of the petitioner the same
amount it paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint

Page | 38

with the RTC. The RTC dismissed the complaint when it found that the vessel, MT Maysun, was
seaworthy to undertake the voyage as determined by the Philippine Coast Guard and the incident was
caused by unexpected inclement weather condition or force majeure.
CA reversed the decision which held that in the absence of any explanation as to what may have caused
the sinking of the vessel coupled with the finding that the same was improperly manned, petitioner is
liable.
Before the Court, petitioner theorized that when private respondent paid Caltex the value of its lost cargo,
the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel was
seaworthy; otherwise, private respondent was not legally liable to Caltex due to the latter's breach of
implied warranty under the marine insurance policy that the vessel was seaworthy.
ISSUE: Whether or not the payment made by the private respondent to Caltex for the insured value of the
lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for
recovery against the petitioner.
RULING: NO. The payment made by the private respondent for the insured value of the lost cargo
operates as waiver of its (private respondent) right to enforce the term of the implied warranty against
Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an
automatic admission of the vessel's seaworthiness by the private respondent as to foreclose recourse
against the petitioner for any liability under its contractual obligation as a common carrier.
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner
attributes the sinking of MT Maysun to fortuitous event or force majeure. From the testimonies of Jaime
Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it appears that a
sudden and unexpected change of weather condition that day contending that there were strong winds
with velocity of 30 knots per hour and waves 18-20 feet high. However, this tale was rebutted by the
weather report from PAGASA which showed that the wind speed was only at 10-20 knots and waves .7-2
meters high. Thus, as the appellate court correctly ruled, petitioner's vessel, MT Maysun, sank with its
entire cargo for the reason that it was not seaworthy. There was no squall or bad weather or extremely
poor sea condition in the vicinity when the said vessel sank.
Petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to Caltex for its
failure to rebut the presumption of fault or negligence as common carrier occasioned by the unexplained
sinking of its vessel, MT Maysun, while in transit.

35. Maersk Lines v. Court of Appeals, 222 SCRA 108, G.R. 94761, May 17, 1993.
CASE 35
MAERSK LINES V CA
GR. No. 94761, May 17, 1993
FACTS:
Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the
Philippines through its general agent Compania de Tabacos de Filipinas, while private respondent
Efren Castillo is the proprietor of Ethegal Laboratories, a firm engaged in the manufacture of
pharmaceutical products.

Page | 39

On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of Puerto Rico 600,000 empty gelatin capsules for
the manufacture of his pharmaceutical products. The capsules were placed in 6 drums of 100,000
capsules each valued at US$1,668.71. Shipper Eli Liily,Inc. advised Castillo through a Memorandum of
Shipment that the products were already shipped on board MV Anders Maesrkline and date of arrival to
be April 3, 1977.
However, for unknown reasons, said cargoes of capsules were diverted to Richmond, VA and then
transported back to Oakland, CA and with the goods finally arriving in the PI on June 10, 1977.
Consignee Castillo refused to take delivery of the goods on account of its failure to arrive on time, and
filed an action for rescission of contract with damages against Maersk and Eli Lilly alleging gross
negligence and undue delay.
Maersk contends that it is liable only in case of loss, destruction or deterioration of goods under Art 1734
NCC while Eli Lilly in its cross claim argued that the delay was due solely to the negligence of Maersk
Line. Trial Court dismissed the complaint against Eli Lilly and the latter withdrew cross claim but TC still
held Maersk liable and CA affirmed with modifications.
ISSUE: WON the common carrier is liable for damages.
RULING: The SC has carefully reviewed the decisions of respondent court and the trial court and both of
them show that, in finding petitioner liable for damages for the delay in the delivery of goods, reliance was
made on the rule that contracts of adhesion are void. Added to this, the lower court stated that the
exemption against liability for delay is against public policy and is thus, void. Besides, private
respondent's action is anchored on Article 1170 of the NCC and not under the law on Admiralty.
In the case at bar, a delay in the delivery of the goods spanning a period of two 2 months and seven 7
days falls was beyond the realm of reasonableness. Described as gelatin capsules for use in
pharmaceutical products, subject shipment was delivered to, and left in, the possession and custody of
petitioner-carrier for transport to Manila via Oakland, California. But through petitioner's negligence was
mishipped to Richmond, Virginia. Petitioner's insistence that it cannot be held liable for the delay finds no
merit.
36. FGU Insurance v. Court of Appeals, 454 SCRA 337, G.R. No. 137775, March 31, 2005.
37. DSR-Senator v. Federal, 413 SCRA 14, G.R. No. 135377, October 07, 2003.
CASE 37
DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners, vs. FEDERAL PHOENIX
ASSURANCE CO., INC., respondent.
[G.R. No. 135377. October 7, 2003]
FACTS:
Berde Plants, Inc. delivered 632 units of artificial trees to C.F. Sharp and Company, Inc., the General
Ship Agent of DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the
consignee, Al-Mohr International Group, in Riyadh, Saudi Arabia. The cargo was loaded in M/S Arabian
Senator. Federal Phoenix Assurance Company, Inc. insured the cargo against all risks in the amount of
P941,429.61. On June 7, 1993, M/S Arabian Senator left the Manila South Harbor for Saudi Arabia with
the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded on board DSR-

Page | 40

Senator Lines feeder vessel, M/V Kapitan Sakharov, bound for Port Dammam, Saudi Arabia. However,
while in transit, the vessel and all its cargo caught fire. Consequently, Federal Phoenix Assurance paid
Berde Plants P941,429.61 corresponding to the amount of insurance for the cargo. On February 8, 1994,
Federal Phoenix Assurance sent a letter to C.F. Sharp demanding payment of P941,429.61 on the basis
of the Subrogation Receipt. C.F. Sharp denied any liability on the ground that such liability was
extinguished when the vessel carrying the cargo was gutted by fire.
ISSUE:
Whether DSR-Senator Lines and C.F. Sharp are liable for the loss of the cargo
RULING:
Yes, petitioners are liable to Federal Phoenix Assurance Co., Inc. for payment of the loss of the cargo.
Article 1734 of the Civil Code provides:
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:
(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.
Fire is not one of those enumerated under the above provision which exempts a carrier from liability for
loss or destruction of the cargo. When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable. Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have
been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very
few instances when the presumption of negligence does not attach and these instances are enumerated
in Article 1734.

38. Philamgen v. Court of Appeals, 222 SCRA 155, G.R. No. 101426, May 17, 1993.
CASE 38
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs.
COURT OF APPEALS and TRANSPACIFIC TOWAGE, INC., respondents.
[G.R. No. 101426; May 17, 1993]
FACTS:
On September 4, 1985 the Davao Union Marketing Corporation of Davao City shipped on board the
vessel M/V "Crazy Horse" operated by the Transpacific Towage, Inc. cargo consisting of 9,750 sheets of

Page | 41

union brand GI sheets with a declared value of P1,086,750.00 and 86,860 bags of union Pozzolan and
union Portland Cement with a declared value of P4,300,000.00.
The wharf where the vessel had to dock was shallow and rocky, hence it had to drop anchor some
distance away in a private port. Buoys had to be constructed in order that the vessel may properly
moored. After the buoys were installed a wooden stage had to be constructed so that the stevedores
could reach the vessel. For this they needed a floating crane which was not immediately available. The
barges that were to load the cargo from the vessel could not go near the wharf because of the shallow
and rocky condition. A catwalk had to be installed between the barge and the wharf. This necessitated the
dismantling of the wooden stage previously installed.
Apart from these preparations and constructions that had to be made, the weather was not cooperative.
Even before the typhoon struck there were intermittent rains, hence the unloading was not continuous.
The actual unloading started on September 13, 1985 and could have been finished in 4 or 5 days but
because of the rains it was delayed. Another factor that caused further delay was the fact that the fiesta of
the Virgin of Penafrancia was celebrated and for the length of time that the celebrations were held, the
stevedores who were from the place refused to work.
ISSUE:
Whether the delay involved in the unloading of the goods is deemed negligently incurred in so as not to
free private respondent from responsibility
RULING:
No, the delay incurred in the unloading of the goods was not due to the negligence of the parties but was
occasioned by causes that may not be attributed solely to human factors, among which were the natural
conditions of the port where the M/V "Crazy Horse" had docked, the customs of the place, and the
weather conditions. Under Art. 1740 of the New Civil Code, if the common carrier negligently incurs in
delay in transporting the goods, a natural disaster shall not free the carrier from responsibility. 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.

39. Belgian Overseas Chartering and Shipping, N. V. v. Philippine First Insurance Co., G.R. No.
143133, 05 June 2002
CASE 39
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT
SERVICES, INC., petitioners, vs. PHILIPPINE FIRST INSURANCE CO., INC., respondent.
[G.R. No. 143133. June 5, 2002]
FACTS:
On June 13, 1990, CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242
coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine
Steel Trading Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the
subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally

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sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose,
the consignee Philippine Steel Trading Corporation declared the same as total loss.
Despite receipt of a formal demand, defendants-appellees refused to submit to the consignees claim.
Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos
(P506,086.50), and was subrogated to the latters rights and causes of action against defendantsappellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by
them, to the consignee as insured.
ISSUE: Whether petitioners have overcome the presumption of negligence of a common carrier
RULING:
No, petitioners have not overcome the presumption of negligence of a common carrier. Well-settled is the
rule that common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers
they transport. The extraordinary responsibility lasts from the time the goods are unconditionally placed in
the possession of and received for transportation by the carrier until they are delivered, actually or
constructively, to the consignee or to the person who has a right to receive them. Owing to this high
degree of diligence required of them, common carriers, as a general rule, are presumed to have been at
fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they
prove that they exercised extraordinary diligence in transporting the goods. However, the presumption of
fault or negligence will not arise if the loss is due to any of the following causes enumerated in Article
1734 of the New Civil Code. Corollary to the foregoing, mere proof of delivery of the goods in good order
to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the
loss or the destruction of the goods happened, the transporter shall be held responsible.

40. Cokaliong Shipping Lines v. WCPB, Gen. Insurance Co., G.R. No. 146018, 25 June 2003
CASE 40
Cokaliong Shipping Lines v. UPCB
G.R. No. 146018 / 25 June 2003
FACTS:
On 11 December 1991, Nestor Angelia, both the shipper and consignee, delivered to the petitioner,
Cokaliong Shipping Lines, cargo consisting of one carton of Christmas decorations and two sacks of
plastic toys, to be transported on board the M/V Tandag scheduled to depart the following day from Cebu
City to Surigao del Sur. Zosimo Mercado, also the shipper and consignee of cargo, likewise delivered to
the petitioner two cartons of plastic toys and Christmas decor, one roll of floor matting, and one bundle of
assorted goods for transportation. The cargoes were both insured against all risk by Feliciana Legaspi
through the UCPB General Insurance Co. for PHP150,000.00.
When the vessel left port, it had thirty-four passengers and assorted cargo on board, including the goods
of Legaspi. However, after the vessel had passed by the Mandaue-Mactan Bridge, a fire broke out in the
engine room which threatened the lives of everyone on board. Despite earnest efforts of the officers and
crew of the vessel to safeguard the cargoes, the fire ultimately engulfed and destroyed the entire vessel
resulting in the loss of the vessel and the cargoes therein.

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As a result of the sinking, Legaspi filed a claim with the respondent which was subsequently approved
with the issuance of a check for PHP P148,500.00 as payment for the lost goods. Having been issued a
Subrogation Receipt for both insured cargoes, the UPCB filed a claim anchored on torts against
Cokaliong Shipping Lines and sought to collect the sum it payed to Legaspi plus legal interest, attorneys
fees, and the cost of the suit. They principal claim upon which UPCB anchors its case is that the loss of
the cargo was due to the negligence of the officers of the shipping company which makes them liable to
pay for damages by reason of their carelessness.
The petitioners, on the other hand, alleged that they had already been cleared by the Board of Marine
Inquiry of any negligence in the burning of the vessel and the shippers/consignee had already been paid
the value of the goods as stated in the Bill of Lading and, hence, they cannot be held liable for the loss of
the cargo beyond the value thereof declared in the Bills of Lading a total of PHP20,500.00 for both
cargoes it had issued to Legaspi Marketing Corporation and Nestor Angelia which supposedly
extinguishes their liability with the respondent.
Both the Regional Trial Court and the Court of Appeals found the case in favor of the respondent. While it
was true that the petitioner had paid PHP14,000.00 to Legaspi Marketing, the appellate court held that
the payment did not extinguish the petitioners obligation to pay the insurance price because there was no
evidence that Feliciana Legaspi was the same owner of Legaspi Marketing. They also pointed out the
impropriety of treating the claim covering the cargo valued therein at P6,500 as a setoff against Nestor
Angelias account with Chester Enterprises, Inc. Finally, it ruled that the UPCB is not bound by the
valuation of the cargo under the Bills of Lading issued because the goods were insured with the
respondent for the total amount of PHP150,000.00.
ISSUE:
Can the petitioner be liable for the lost goods? If it is, what is the extent of their liability?
RULING:
Yes, the petitioner is liable for the lost cargoes. The uncontroverted findings of the Philippine Coast Guard
show that the M/V Tandag sank due to a fire, which resulted from an unchecked and untended crack in
the auxiliary engine fuel oil service tank from which fuel spurted out and dripped to the heating exhaust
manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank,
which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and
care by the crew.
The law provides that a common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported therewith. Where loss of cargo results
from the failure of the officers of a vessel to inspect their ship frequently so that they would have
discovered the existence of cracked, that loss cannot be attributed to force majeure or even be
considered as a caso fortuito, but solely to the negligence of those officials who were supposed to have
inspected the worthiness of their vessel before departure.
With respect to the extent of its liability, the respondent contended that the petitioners liability should be
based on the actual insured value of the goods while the petitioner claimed that its liability should be
limited to the value declared by the shipper/consignee in the Bill of Lading.
A stipulation in a Bill of Lading limiting the common carriers liability for loss or destruction of a cargo to a
certain sum, unless the shipper or owner declares a greater value, is sanctioned by Articles 1749 and
1750 of the New Civil Code. The purpose of the limiting stipulations in Bills of Lading is to protect the

Page | 44

common carrier from exorbitant liabilities since such it obliges the shipper/consignee to notify the common
carrier of the amount that the latter may be liable for in case of loss of the goods. The common carrier can
then take appropriate measures to protect itself from harm.
Pursuant to the aforementioned provisions of law, it then must be required that the stipulation limiting the
common carriers liability for loss must be reasonable and just under the circumstances, and has been
freely and fairly agreed upon. In the present case, however, in their desire to obtain lower freightage fees,
Zosimo Mercado and Nestor Angelia willfully misled the petitioner by undervaluing the goods in their
respective Bills of Lading, hence, the petitioner was exposed to a risk that was deliberately hidden from it,
and from which it could not protect itself. Not only did it violate a valid contractual stipulation, they likewise
committed a fraudulent act which sought to make the common carrier liable for more than the amount
declared in the Bills of Lading.
Considering these circumstances then, in addition to the facts that the insurance company was paid the
correct higher premium by Feliciana Legaspi while the petitioner was paid a fee lower than what it was
entitled to for transporting the goods that had been deliberately undervalued by the shippers in the Bills of
Lading they prepared, it is in accordance with justice and equity that between the two of them, UPCB
should bear the loss in excess of the value declared in the Bills of Lading.

41. Sarkies Tours Phil., Inc. v. CA, 280 SCRA 58, G.R. No. 108897. October 2, 1997
CASE 41
Sarkies Tours Philippines, Inc. v. CA
G.R. No. 108897/ 2 October 1997
FACTS:
On 31 August 1984, Fatima boarded the petitioners De Luxe Bus No. 5 in Manila on her way to Legazpi
City. Her brother, Raul, helped her load three pieces of luggage containing all of her optometry review
books, materials, equipment, trial lenses, trial contact lenses, passport and visa, as well as her mothers
US Immigration Green Card, among other important documents and personal belongings. Her belongings
were kept in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that
all but one bag remained in the open compartment. The others passengers, including Fatima, suggested
retracing the route to try to recover the lost items, but the driver ignored them and instead proceeded to
Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to petitioners office in Legazpi City
and later at its head office in Manila. The latter, however, merely offered her P1,000.00 for each piece of
luggage lost which she turned down. After returning to Bicol, they asked assistance from the radio
stations and even from Philtranco bus drivers who plied the same route on August 31st. The effort paid
off when one of Fatimas bags was recovered. Marisol also reported the incident to the National Bureau of
Investigations field office in Legazpi City, and to the local police.
On 20 September 1984, respondents, through counsel, formally demanded satisfaction of their complaint
from petitioner. In a letter dated 1 October 1984, the latter apologized for the delay and said that (a) team
has been sent out to Bicol for the purpose of recovering or at least getting the full detail of the incident.
However, after more than nine months of fruitless waiting, the respondents decided to instead file a case

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for damages to recover the value of the remaining lost items, as well as moral and exemplary damages,
attorneys fees, and expenses of litigation.
The respondents claimed that the loss was due to petitioners failure to observe extraordinary diligence in
the care of Fatimas luggage and that petitioner dealt with them in bad faith from the start. The petitioner,
on the other hand, disowned any liability for the loss on the ground that Fatima allegedly did not declare
any excess baggage upon boarding its bus. In the end, both the trial and appellate courts resolved the
matter in favor of the respondents in declaring Sarkies Tours liable for the losses. Hoping to turn the
decision around, the petitioner elevated the case to the Supreme Court for review.
ISSUE:
Is the petitioner liable for the lost luggage?
RULING:
Yes, they are. Despite what the petitioner would have the Court believe, the documentary and testimonial
evidence presented at the trial established that Fatima indeed boarded the bus and brought three pieces
of luggage with her, one of them was even recovered with the help of a Philtranco bus driver.
Furthermore, in its letter on 1 October, the petitioner tacitly admitted its liability by apologizing to
respondents and assuring them that efforts were being made to recover the lost items.
The records also reveal that respondents went to great lengths just to salvage their loss. The incident was
reported to the police, the NBI, and the regional and head offices of petitioner. Marisol even sought the
assistance of Philtranco bus drivers and the radio stations. To expedite the replacement of her mothers
lost immigration documents, Fatima also had to execute an affidavit of loss. Clearly, they would not have
gone through all that trouble in pursuit of a fancied loss. In fact, Fatima was not the only one who lost her
luggage as well as other passengers have testified to have suffered similar fates as well.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods transported by them, and
this liability 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, to the person who
has a right to receive them, unless the loss is due to any of the excepted causes under Article 1734
thereof.
The cause of the loss in the case at bar was the petitioners negligence in not ensuring that the doors of
the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all the
luggage was lost to the prejudice of the paying passengers. Where the common carrier accepted its
passengers baggage for transportation and even had it placed in the vehicle by its own employee, its
failure to collect the necessary freight charge is the common carriers own lookout, but it is nevertheless
still responsible for the consequent loss of the baggage.

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42. Valenzuela Hardwood and Industrial Supply v. CA, 274 SCRA 642, G.R. No. 102316. June
30, 1997
CASE 42
Valenzuela Hardwood vs. CA (GR 102316, 30 June 1997)
FACTS:
Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) entered into an agreement with the Seven
Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers
lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. VHIS insured
the logs against loss and/or damage with South Sea Surety and Insurance Co.
The said vessel sank resulting in the loss of VHIS insured logs. VHIS demanded from South Sea Surety
the payment of the proceeds of the policy but the latter denied liability under the policy for non-payment of
premium. VHIS likewise filed a formal claim with Seven Brothers for the value of the lost logs but the latter
denied the claim.
The RTC ruled in favor of the petitioner.Both Seven Brothers and South Sea Surety appealed. The Court
of Appeals affirmed the judgment except as to the liability of Seven Brothers.South Sea Surety and VHIS
filed separate petitions for review before the Supreme Court. In a Resolution dated 2 June 1995, the
Supreme Court denied the petition of South Sea Surety. The present decision concerns itself to the
petition for review filed by VHIS.
ISSUE: Is a stipulation in a charter party that the owners shall not be responsible for loss, split, shortlanding, breakages and any kind of damages to the cargo valid?
RULING:
Yes. It is undisputed that private respondent had acted as a private carrier in transporting petitioners
lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by
petitioner may not be applied unless expressly stipulated by the parties in their charter party.
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests
solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused
even by the negligence of the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is
valid because it is freely entered into by the parties and the same is not contrary to law, morals, good
customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of
adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in a contract involving a common carrier,
private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on
common carriers protecting the general public cannot justifiably be applied to a ship transporting

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commercial goods as a private carrier. Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.
The general public enters into a contract of transportation with common carriers without a hand or a voice
in the preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it
cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common
carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices or other
documents over which the riding public has no understanding or, worse, no choice. Compared to the
general public, a charterer in a contract of private carriage is not similarly situated. It can -- and in fact it
usually does -- enter into a free and voluntary agreement. In practice, the parties in a contract of private
carriage can stipulate the carriers obligations and liabilities over the shipment which, in turn, determine
the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy,
may opt to set aside the protection of the law on common carriers. When the charterer decides to
exercise this option, he takes a normal business risk.

43. Yobido v. CA, 281 SCRA 1, G.R. No. 113003. October 17, 1997
CASE 43
YOBIDO vs. CA and TUMBOY G.R. No. 113003 October 17, 1997
FACTS:
Spouses Tito and Leny Tumboy and their minor children boarded at Mangagoy, Surigao del Sur a Yobido
Liner bus bound for Davao City. Along Picop Road in, the left front tire of the bus exploded. The bus fell
into a ravine and struck a tree. The incident resulted in the death of Tito Tumboy and physical injuries to
other passengers.
The winding road was not cemented and was wet due to the rain; it was rough with crushed rocks. The
bus which was full of passengers had cargoes on top. Leny testified that it was running fast and she
cautioned the driver to slow down but he merely stared at her through the mirror.
However, Salce, the bus conductor, testified that the bus was running speed for only 50-60 kmh. The left
front tire that exploded was a brand new Goodyear tire that he mounted on the bus only 5 days before the
incident. She stated that all driver applicants in Yobido Liner underwent actual driving tests before they
were employed.
The defendant is invoking that the tire blowout was a caso fortuito.

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ISSUES:
1. WON the tire blowout was purely caso fotuito? NO
2. WON the defendant bus liner is liable for damages resulting from the death of Tito? YES
RULING:
1.
The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory
defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there
may have been adverse conditions on the road that were unforeseeable and/or inevitable, which could
make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known does not relieve
the carrier of liability.
There are human factors involved in the situation. The fact that the tire was new did not imply that it was
entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the
fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the
conclusion that it could not explode within five days use. Be that as it may, it is settled that an accident
caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that
would exempt the carrier from liability for damages.
2.
A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone.
The common carrier must still prove that it was not negligent in causing the death or injury resulting from
an accident. Having failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence, petitioners are hereby held liable for damages.
Moral damages are generally not recoverable in culpa contractual except when bad faith had been
proven. However, the same damages may be recovered when breach of contract of carriage results in
the death of a passenger. Because petitioners failed to exercise the extraordinary diligence required of a
common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly (Article
1756).

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