UP Abridged Transpo

TRANSPORTATION AND MARITIME
LAW
Based on the outline of Prof. Rodrigo Quimbo
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Public Utility
• A public utility is a business or service engaged in regularly supplying

the public with some commodity or service of public consequence such
as electricity, gas, water, transportation, telephone or telegraph
service. Apart from statutes which define the public utilities that are
within the purview of such statutes, it would be difficult to construct a
definition of a public utility which would fit every conceivable case. As
its name indicates, however, the term public utility implies a public
use and service to the public. (Am. Jur. 2d V. 64, p.549.) (Albano vs
Reyes)
Public Service
• The term public service includes every person that now or hereafter
may operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-way
motor vehicle, either for freight or passenger, or both with or without
fixed route and whatever may be its classification, freight or carrier
service or any class, express service, steamboat, or steamship line,
pontines, ferries, and water craft, engaged in the transportation of
passengers and freight or both, shipyard, marine repairshop,
[warehouse], wharf or dock, ice plant, ice refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and
power, petroleum, sewerage system, wire or wireless communications
system, wire or wireless broadcasting stations and other similar public
services: Provided, however, that a person engaged in agriculture, not
otherwise a public service, who owns a motor vehicle and uses it
personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third
parties engaged in agriculture, not itself or themselves a public
service, for operation by the latter for a limited time and for a specific
purpose directly connected with the cultivation of his or their farm, the
TRANSPORTATION AND MARITIME LAW
transportation, processing, and marketing of agricultural products of

such third party or third parties shall not be considered as operating a
public service for the purposes of this Act.
Transportation
• A contract of transportation is one whereby a certain person or

association of persons obligate themselves to transport persons,
things, news from one place to another for a fixed price. It is the
removal of goods or persons from one place to another.
Certificate of Public Convenience (CPC)
• A CPC is any authorization to operate a public service issued by the

PSC. A CPC is an authorization issued by the Commission for the
operation of public services for which no franchise, either municipal or
legislative, is required by law (e.g. auto-trucks and motor vehicles).
Certificate of Public Convenience and Necessity (CPCN)
• A CPCN is issued by the PSC to a public service to which any political

subdivision has granted a franchise under Act 667 after the PSC has
approved the same under Section 16(b). A CPCN is an authorization
issued by the PSC for the operation of public services for which a
franchise is required by law (e.g. electric, telephone services).
Nature of certificate
• It constitutes neither a franchise nor a contract, confers no property

rights and is a mere license or privilege, and such privilege is forfeited
when the grantee fails to comply with his commitments behind which
lies the paramount interest of the public, for public necessity cannot
be made to wait, nor sacrificed for private convenience.
• However, certificates represent property rights to the extent that if the

rights which any public utility is exercising pursuant to lawful orders of
the PSC has been invaded by another public utility, in appropriate
cases actions may be maintained by the complainant public utility.
Owners of public utilities have the right to maintain appropriate
actions against other public utilities not authorized to operate in
competition with the complainant.
• Certificates are considered as property as used in Civil Procedure as

they have material value and are material assets. They are subject to
attachment and seizure by legal process, and may be acquired by
purchase.
Determination of WON an issuance of a certificate is for public

convenience
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1. financial responsibility of the applicant
2. reliability of the applicant
3. priority of filing the application for a certificate, and
4. priority of operation
Prior operator rule
• to carry out the purpose and intent for which the PSC was created the
law contemplates that the first licensee will be protected in his
investment and will not be subjected to a ruinous competition. It is
not therefore the policy of the law for the PSC to issue a CPC to a
second operator to cover the same field and in competition with a first
operator who is rendering sufficient, adequate and satisfactory service,
and who in all things and respects is complying with the rules and
regulations of the PSC. Accordingly, a CPC or CPCN ought not to be
granted where there is no complaint as to existing rates and the co. in
the field is rendering adequate services.
• regular operators are preferred over irregular operators
• prior operator is given opportunity to improve service
• prior operator given opportunity to extend lines
• basis of rule : to prevent ruinous and wasteful competition in order

that the interests of the public would be conserved and preserved; so
long as the operator complied with the terms and conditions of the
license and the reasonable demands of the public, it is the duty of the
PSC to protect rather than to destroy its investment
Private nature: rights and obligations of parties inter se arising from

transactions relating to transportation
Contract of Transportation, Defined
• One whereby a certain person or association of persons obligate

themselves to transport persons, things or news from one place to
another for a fixed price
PARTIES TO THE CONTRACT
Shipper
• One who gives rise to the contract of transportation by agreeing to

deliver the things or news to be transported, or to present his own
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person or those of other or others in the case of transportation of

passengers.
Carrier or Conductor
• One who binds himself to transport persons, things, or news as the

case may be or one employed in or engaged in the business of
carrying goods for others for hire.
• Persons or corporations who undertake to transport or convey goods,

property, or persons from one place to another, gratuitously or for
hire, and are classified as private or special carriers and common or
public carriers.
Regulation of the Transportation Industry
The Department of Transportation and Communications
• The DOTC shall be the primary policy, planning, programming,

coordinating, implementing, regulating, and administrative entity of
the Executive Branch of the govt. in the promotion, devt. and
regulation of dependable and coordinated networks of transportation
and communication systems, as well as in the fast, safe, efficient, and
reliable postal, transportation and communication services.
Powers and Functions
To accomplish its mandate, the Dept. shall have the ff. powers and functions:
(a) formulate and recommend national policies and guidelines for the
preparation and implementation of integrated and comprehensive
transportation and communications systems at the national, regional
and local levels;
(b) establish and administer comprehensive and integrated programs for

transportation and communications, xxx call on any agency, corp., or
organization xxx to participate and assist in the preparation and
implementation of such program;
(c) assess, review and provide direction to xxx research and devt.
programs of the govt xxx;
(d) administer and enforce all laws xxx in the field of transportation and
communication;
(e) coordinate with the DPWH in the design, location, devt, rehabilitation,
improvement, etc. of all infrastructure projects and facilities of the
Dept. xxx
(f) establish, operate and maintain a nationwide postal system xxx;
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(g) issue certificates of public convenience for the operation of public land
and rail transportation utilities and services;
(h) accredit foreign aircraft and manufactures xxx;
(i) establish and prescribe rules and regulations for identification of

routes, zones and/or areas of operation of particular operator of public
land services;
(j) establish and prescribe rules xxx for the establishment, operation and
maintenance of such telecommunication facilities in areas not
adequately served by the private sector xxx;
(k) establish and prescribe rules xxx operation and maintenance of a

nationwide postal system xxx;
(l) establish and prescribe rules xxx issuance of CPCs for public land
transportation utilities, such as motor vehicles, trimobiles, and
railways;
(m) establish and prescribe rules xxx inspection and registration of air and
land transportation facilities, such as motor vehicles, trimobiles, and
aircrafts;
(n) establish and prescribe rules xxx issuance of licenses xxx;
(o) establish and prescribe rules xxx enforcement of laws governing

transportation xxx;
(p) determine, fix and/or prescribe charges and/or rates pertinent to the
operation of public air and land transportation utility facilities and
services xxx;
(q) establish and prescribe rules xxx accreditation of driving schools;
(r) administer and operate the Civil Aviation Training Center xxx;
(s) perform such other powers and functions as it may be prescribed by

law, or as may be necessary, incidental, or proper to its mandate, or
as may be assigned from time to time by the President.
Air Transportation Office
The Civil Aeronautics Board is hereby transferred from the Dept. of

Tourism to the Dept. as an attached agency The Secretary of Transportation
and Communications or his designated representative shall be the Chairman
of the Board
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Sec. 25, RA 776. The Civil Aeronautics Administration shall be under

the administrative supervision and control of the Dept. of Commerce and
Industry (now the DOTC) xxx
Civil Aeronautics Board
RA 776, as amended
Section 5. The Civil Aeronautics Board shall be composed of the

Secretary of Commerce and Industry (now DOTC) as Chairman, the CAB
Administrator, the Commanding Officer of the Phil. Air Force, and 2 others to
be appointed by the President xxx
Section 10 (A) Except as otherwise provided herein, the Board shall

have the power to regulate the economic aspect of air transportation, and
shall have the general supervision and regulation of, and jurisdiction and
control over, air carriers, as well as their property, property rights,
equipment, facilities, and franchise, in so far as may be necessary for the
purpose of carrying out the provisions of this Act.
Powers and Duties of the CAB
1. issue, deny, amend, revise, alter, modify, cancel, suspend, or revoke

any temporary operating permit or CPCN
2. fix and determine reasonable individual, joint or special rates, charges,

or fares which an air carrier may demand, collect or receive for any
service in connection with air commerce
3. authorize charters whether domestic or international and special air

services or flights
4. approve or disapprove increase of capital, sale of equipment of an air

carrier engaged in air commerce, consolidation, merger, purchase,
lease, operating contract, or acquisition and control between domestic
air carriers
5. inquire into the mgmt. of the business of any air carrier
6. require annual, monthly, periodical and special reports from any

carrier
7. prescribe the forms of any and all accounts, records, and memoranda
of the movement of traffic, as well as of the receipt and expenditures
of money and the length of time such accounts, records, and
memoranda shall be preserved
8. require each officer and director of any air carrier to transmit a report
describing the shares of stock or other interest held by such air carrier
with any person engaged in any phase of aeronautics, and the holding
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of the stock in, and control of, other persons engaged in any phase of
aeronautics.
(b) Land
(i) Land Transportation Office
(ii) Land Transportation Franchising and Regulatory Board
Powers and functions
a. prescribe and regulate routes of service, xxx zones or areas of

operation of public land transportation services provided by motorized
vehicles xxx;
b. issue, amend, revise, suspend or cancel CPCs or permits authorizing

the operation of public land transportation services provided by
motorized vehicles xxx;
c. determine, prescribe, approve and periodically review and adjust

reasonable fares, rates and other related charges, relative to the
operation of public land transportation services provided by motorized
vehicles;
d. issue preliminary or permanent injunction xxx;
e. punish for contempt of the Board, both direct and indirect xxx;
f. issue subpoena and subpoena duces tecum and to summon witnesses

to appear in any proceedings of the Board, to administer oaths and
affirmations;
g. conduct investigations and hearings of complaints for violation of the

public service laws on land transportation and of the Board's rules and
regulations xxx;
h. to review motu proprio the decisions, actions of the Regional

Franchising and Regulatory Office herein created;
i. promulgate rules and regulations governing proceedings before the

Board and the Regional Franchising and Regulatory Office xxx;
j. fix, impose, and collect, and periodically review and adjust reasonable
fees and other related charges for services rendered;
k. formulate, promulgate, administer, implement and enforce rules and

regulations on land transportation public utilities, standards of
measurements and/or design, and rules and regulations requiring
operators of any public land transportation service to equip, install and
provide in their utilities and in their stations such devices, eqpt.
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facilities and operating procedures and techniques as may promote

safety, protection, comfort and convenience to persons and property in
their charges as well as the safety of persons and property within
their areas of operations;
l. coordinate and cooperate with other govt. agencies and entities xxx;
m. perform such other functions and duties as may be provided by law, or

as may be necessary, or proper or incidental to the purposes and
objectives of this Executive Order.
(c) Water
(i) Maritime Industry Authority
• The Maritime Industry Authority is hereby retained and shall have the
ff. functions:
a. develop and formulate plans, policies, projects xxx geared toward the
promotion and devt. of the maritime industry, the growth and effective
regulation of shipping enterprises, and for the national security
objectives of the country;
b. establish, prescribe and regulate routes, zones and/or areas of

operation of particular operators of public water services;
c. issue CPCs for the operation of domestic and overseas water carriers;
d. register vessels as well as issue certificates, licenses or document

necessary or incident thereto;
e. undertake the safety regulatory functions pertaining to vessel

construction and operation including the determination or manning
levels and issuance of certificates of competency to seamen;
f. enforce laws, prescribe and enforce rules and regulations, including

penalties for violations thereof, governing water transportation and the
Phil. merchant marine xxx;
g. undertake the issuance of licenses to qualified seamen and harbor,

bay and river pilots;
h. determine, fix, prescribe charges/rates pertinent to the operation of

public water transport utilities xxx;
i. accredit marine surveyors and maritime enterprises engaged in

shipbuilding, ship repair xxx;
j. issue and register the continuous discharge book of Filipino seamen;
PAGE 8
k. establish and prescribe rules and regulations, standards and

procedures for the efficient and effective discharge of the above
functions;
l. perform such other functions as may now or hereafter be provided by

law.
COMMON CARRIERS
Common Carriers
• Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their
services to the public.
Transportation defined
• A contract of transportation is one whereby a certain person or

association of persons obligate themselves to transport persons,
things, or news from one place to another for a fixed price
Classification :
1. As to object
(1) things;
(2) persons;
(3) news
2. As to place of travel:
(1) land;
(2) water;
(3) air
Parties to contract of transportation
Shipper or Consignor.
• The person to be transported; one who gives rise to the contract of

transportation by agreeing to deliver the things or news to be
transported, or to present his own person or those of other or others in
the case of transportation of passengers.
PAGE 9
Carrier or Conductor.
• One who binds himself to transport persons, things, or news as the

case may be; one employed in or engaged in the business of carrying
goods for other for hire.
Consignee.
• The party to whom the carrier is to deliver the things being

transported; one to whom the carrier may lawfully make delivery in
accordance with its contract of carriage (but the shipper and the
consignee may be one person)
Freight defined
• The price or compensation paid for the transportation of goods by a

carrier, at sea, from port to port.
• The hire paid for the carriage of goods on land from place to place, or
on inland streams or lakes.
• The goods or merchandise transported at sea, on land, or inland

streams or lakes..
• Thus the term is used in 2 senses:
1. to designate the price for the carriage, also called freightage,or
2. to designate the goods carried.
Contracts through transportation agents
• A contract of transportation is not changed, altered or affected by the

mere fact that the obligor avails of other parties to effect the
transportation agreed upon, as in the case of transportation agents.
Carriers defined
• Persons or corporations who undertake to transport or convey goods,

property or persons, from one place to another, gratuitously or for
hire, and are classified as private or special carriers, and common or
public carriers
Private carriers defined.
• Those who transport or undertake to transport in a particular instance

for hire or reward
Common carriers vs Private carriers:
PAGE 10
the common carrier holds himself out the private carrier agrees in some
in common, that is, to all persons special case with some private
who choose to employ him, as ready individual to carry for hire
to carry for hire; no one can be a
common carrier unless he has held
himself out to the public as a carrier
in such a manner as to render him
liable to an action if he should
refuse to carry for anyone who
wished to employ him
a common carrier is bound to carry a private carrier is not bound to carry
all who offer such goods as it is for any reason, unless it enter into a
accustomed to carry and tender special agreement to do so
reasonable compensation for carrying
them
a common carrier is a public service a private carrier does not hold itself
and is therefore subject to regulation out as engaged in the business for
the public, and is therefore not
subject to regulation as a common
carrier
Test for a common carrier
1. He must be engaged in the business of carrying goods for others as a

public employment, and must hold himself out as ready to engage in
the transportation of goods for persons generally as a business, and
not a casual occupation.
2. He must undertake to carry goods of the kind to which his business is

confined.
3. He must undertake to carry by the methods by which his business is

conducted, and over his established roads.
4. The transportation must be for hire.
• The true test is whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business
actually transacted, or the number and character of the conveyances
used in the employment (the test is therefore the character of the
business actually carried on by the carrier.)
• An airplane owner is a common carrier where he undertakes for hire to

carry all persons who apply for passage indiscriminately as long as
there is room and no legal excuse for refusing; airlines engaged in the
passenger service on regular schedules on definite routes, who solicit
patronage of the traveling public, advertise schedules for routes, times
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of leaving and rates of fare, and make the usual stipulation as to

baggage are common carriers
Characteristics of common carriers:
1. The common carrier undertakes to carry for all people indifferently; he

holds himself out as ready to engage in the transportation of goods for
hire as a public employment and not as a casual occupation, and he
undertakes to carry for all persons indifferently, within the limits of his
capacity and the sphere of the business required of him, so that he is
bound to serve all who apply and is liable for refusal, without sufficient
reason, to do so
2. The common carrier cannot lawfully decline to accept a particular class

of goods for carriage to the prejudice of the traffic in those goods.
Exception : for some sufficient reason, where the discrimination in

such goods is reasonable and necessary (substantial grounds)
3. No monopoly is favored - the Commission has the power to say what is

a reasonable compensation to the utility and to make reasonable rules
and regulations for the convenience of the traveling public and to
enforce them
4. Public convenience - for the best interests of the public
Meaning of Public Use.
• It is not confined to privileged individuals, but is open to the indefinite

public; there must be a right which the law compels the owner to give
to the general public. Public use is not synonymous with public
interest. The true criterion is whether the public may enjoy it by right
or only by permission
The law prohibits unreasonable discrimination by common carriers.
• 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 (CC) from subjecting any person, etc. or
locality, or any kind of traffic, to any undue or unreasonable prejudice
or discrimination whatsoever.
• Exception: When the actual cost of handling and transporting is

different, then different rates may be charged
PAGE 12
o Merchandise of like quantity may not be considered alike - the quantity, kind
and quality may be exactly the same, and yet not be alike, so far as the cost
of transportation is concerned.
o shipments may be alike although composed of different classes of

merchandise - difference in the charge for handling and transporting may
only be made when the difference is based upon actual cost
Determination of justifiable refusal
• This involves a consideration of the following--
1. suitability of the vessels of the company for the transportation

of such products;
2. reasonable possibility of danger or disaster, resulting from their

transportation in the form and under the conditions in which
they are offered for carriage;
3. the general nature of the business done by the carrier;
4. all the attendant circumstances which might affect the question

of the reasonable necessity for the refusal by the carrier to
undertake the transportation of this class of merchandise
o The mere fact that the carriage of dynamites may lead to

destructive explosions is not sufficient to justify refusal if it can
be proven that in the condition in which it is offered for carriage
there is no real danger to the carrier nor reasonable ground to
fear that the vessel and those on board will be exposed to
unnecessary or unreasonable risks
• The true criterion by which to judge the character of the use is

whether the public may enjoy it by right or only by permission.
• As a private carrier, a stipulation exempting the owner from liability

for the negligence of its agents is not against public policy and is
deemed valid.
Power of State to Regulate
• The Board of Transportation may, on its own motion or on petition of

any interested party, after due hearing, cancel the certificate of public
convenience granted to any common carrier that repeatedly fails to
comply with his or its duty to observe extraordinary diligence.
Common carriers are subject to legislative regulation.
PAGE 13
• The business of a common carrier holds such a peculiar relation to the

public interest that there is superinduced upon it the right of public
regulation. The business of a common carrier is affected with public
interest. When, therefore, one devotes his property to a use in which
the public has an interest, he, in effect, grants to the public an interest
in that use, and must submit to be controlled by the public for the
common good, to the extent of the interest he had thus created.
Limitation on power to regulate.
• Such regulations must not have the effect of depriving an owner of his
property without due process of law, nor of confiscating, or
appropriating private property without just compensation, nor of
limiting or prescribing irrevocably vested rights or privileges lawfully
acquired under a charter or franchise [just compensation, due process
of law]
When judiciary may interfere with legislative regulation of common

carriers.
• The judiciary ought not to interfere with legislative regulations unless

they are so plainly and palpably unreasonable as to make their
enforcement equivalent to the taking of property for public use without
such compensation as under all circumstances is just both to the
owner and to the public.
Nature and Basis of Liability
• Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to the circumstances of each case.
• 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 packaging or

in the containers;
(5) Order or act of competent public authority. (Art. 1734)
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• 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. (Art. 1735)
• A common carrier is bound to carry the passengers safely as far

as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all circumstances. (Art.
1755)
• In case of death of or injuries to passengers, common carriers

are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence. (Art.
1756)
Extraordinary diligence required of common carriers
• The law requires COMMON CARRIER to exercise extra-ordinary

diligence which means that they must render service with the greatest
skill and utmost foresight. The extra-ordinary diligence required of
carriers in the handling of the goods of the shippers and consignees
last from the time the cargoes are loaded in the vessels until they are
discharged and delivered to the consignees.
Reasons for requiring extra-ordinary diligence.
• The nature of the business of common carriers and the exigencies of

public policy demand that they observe extra-ordinary diligence; the
business of common carrier is impressed with a special public duty and
therefore subject to control and regulation by the state. The public
must of necessity rely on the care and skill of common carrier in the
vigilance over the goods and safety of the passengers
Rigorous law on common carriers not applicable to special

employment as carrier
• The laws applicable to COMMON CARRIER are rigorous and should not
be extended to a person who has neither expressly assumed that
character, nor by his conduct and from the nature of his business
justified the belief on the part of the public that he intended to assume
it.
Registered owner primarily and solidarily liable with driver, under

the "kabit system."
• Registered owner is primarily and solidarily liable for the damage

caused by the vehicle registered in his name, even if the said vehicle
had already been sold, leased or transferred to another person who
was, at the time of the accident, actually operating the vehicle. The
PAGE 15
operator of record continues to be the operator of the vehicle in

contemplation of law, as regards the public and third persons, and as
such is responsible for the consequences incident to its operation;
such owner/operator of record is held in contemplation of law as the
employer of the driver.
Kabit system
• One whereby a person who has been granted a certificate of public

convenience allows other persons who own vehicles to operate them
under such license, for a fee or percentage of the earnings. This is
contrary to public policy, and therefore, void and inexistent; "this is a
pernicious system that cannot be too severely condemned; it
constitutes an imposition upon the good faith of the govt."
Reason for holding registered owner liable
• The law does not relieve the registered owner directly of the
responsibility that the law fixes and places upon him as an incident or
consequence of registration -- where a registered owner allowed to
evade responsibility by proving who the supposed transferee or owner
is, it would be easy for him by collusion with others or otherwise, to
escape said responsibility and transfer the same to an indefinite
person or to one who possesses no property with which to respond
financially for the damage or injury done; in case of an accident, the
registered owner should not be allowed to disprove his ownership to
the prejudice of the person injured or to be relieved from responsibility
Cangco vs MRR, 38 Phil 768
When the facts averred show a contractual undertaking by defendant for the
benefit of plaintiff, and it is alleged that plaintiff has failed or refused to
perform the contract, it is not necessary for plaintiff to specify in his
pleadings whether the breach of the contract is due to wilful fault or to
negligence on the part of the defendant, or of his servants or agents. Proof
of the contract and of its nonperformance is sufficient prima facie to warrant
recovery.
The contract of defendant to transport plaintiff carried with it, by

implication, the duty to carry him in safety and to provide safe means of
entering and leaving its trains. That duty, being contractual, was direct and
immediate, and its nonperformance could not be excused by proof that the
fault was morally imputable to defendant's servants.
Medina vs Cresencia, 99 Phil 506
The law requires the approval of the PSC, in order that a franchise, or any
privilege pertaining thereto, may be sold or leased without infringing the
PAGE 16
certificate issued to the grantee; and that if property covered by the

franchise is transferred or leased without this requisite approval, the transfer
is not binding against the public or the PSC; and in contemplation of law, the
grantee of record continues to be responsible under the franchise in relation
to the PSC and to the public. Since a franchise is personal in nature, any
transfer or lease thereof should be notified to the PSC so that the latter may
take proper safeguards to protect the interest of the public.
Plaintiff's action is based on the breach of the carrier's contractual

obligation to carry his passengers safely to their destination (culpa
contractual). The liability of the carrier is direct and immediate.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
A common carrier is bound to carry the passengers safely as far as human

care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all circumstances. This extra-ordinary diligence
required of common carriers is calculated to protect the passengers from the
tragic mishaps that frequently occur in connection with rapid modern
transportation. This high standard of care is imperatively demanded by the
preciousness of human life and by the consideration that every person must
in every way be safeguarded against all injury.
Principles as to liability of Common Carrier
(1) the liability of a carrier is contractual and arises upon breach of its
obligation; there is breach if it fails to exert extra-ordinary diligence
accdg. to all the circumstances of each case
(2) a carrier is obliged to carry its passenger with the utmost diligence of
a very cautious person, having due regard for all the circumstances
(3) a carrier is presumed to have been at fault or to have acted

negligently in case of death of, or injury to, passengers, it being it duty
to prove that it exercised extra-ordinary diligence
(4) the carrier is not an insurer against all risks of travel.
Fores vs Miranda, 105 Phil 266
A transfer made without the requisite approval of the PSC is not effective and
binding in so far as the responsibility of the grantee under the franchise in
relation to the public is concerned. The law was designed primarily for the
protection of the public interest.
Under the law, the presumption is that common carriers acted negligently
but not maliciously. The distinction between fraud, bad faith or malice in the
sense of deliberate or wanton wrong doing and negligence (as mere
carelessness) is too fundamental in our law to be ignored. A carrier's bad
PAGE 17
faith is not to be lightly inferred from a mere finding that the contract was
breached through negligence of the carrier's employees.
Phil. Rabbit Bus Lines vs IAC, 189 SCRA 159
The principle of last clear chance would call for application in a suit between
the owners and drivers of two colliding vehicles. It does not arise where a
passenger demands responsibility from the carrier to enforce its contractual
obligations. For it would be inequitable to exempt the negligent driver of the
jeepney and its owners on the ground that the other driver was likewise
guilty of negligence.
On the presumption that the drivers who bump the rear of another
vehicle are guilty and the cause of the accident, unless contradicted by other
evidence, the SC held that the jeep made a sudden U-turn which was so
abrupt that the other driver did not anticipate the sudden U-turn.
In culpa contractual, the carrier is presumed to have been at fault or to
have acted negligently, and this disputable presumption may only be
overcome by evidence that he had observed extra-ordinary diligence or that
the death or injury of the passenger was due to a fortuitous event.
The driver cannot be held jointly liable with the owners of the jeep in
case of breach of the contract of carriage. The contract of carriage is
between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible therefore to the passenger,
even if such breach be due to the negligence of the driver. To make the
driver jointly liable would make the carrier's liability personal instead of
merely vicarious and consequently, the victim is entitled to recover only the
share which corresponds to the driver.
Laws applicable
• In all matters not regulated by this Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by
special laws. (Art. 1766)
New Civil Code primarily governs common carriers
• The Provisions of the Civil Code [1732-1766] primarily govern common

carriers and the provisions of the Code of Commerce [Overland
Transportation and Maritime Commerce] and special laws [Carriage of
Goods by Sea Act; Salvage Act] have only subsidiary application to
common carriers.
• The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration. (Art. 1753, NCC)
PAGE 18
• The provisions of the NCC primarily govern contracts of carriage of

goods from foreign ports to Philippine ports
B. Common Carriers
1. Liability and presumption of negligence
Responsibility of common carriers
• In general, common carriers are responsible for the loss, destruction,

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

in selection and supervision of persons to handle goods
• The law requires common carriers to exercise extra-ordinary diligence

which means that they must render service with the greatest skill and
utmost foresight.
• The extra-ordinary diligence required of common carriers in the

handling of the goods of the shipper and the consignees lasts from the
time the cargoes are loaded in the vessels until they are discharged
and delivered to the consignees.
• To comply with this obligation, common carrier should be afforded the

right of having a wide discretion in the selection and supervision of
persons who will handle the goods.
Air carrier can terminate services of pilot for serious misconduct

and drunkenness, because of its duty of extraordinary diligence
• The common carrier can terminate the services of its drivers, pilots
and employees for serious misconduct and drunkenness because of its
duty of extra-ordinary diligence. Whenever a passenger dies or is
injured the presumption is that the common carrier is at fault
notwithstanding the fact that it has exercised due diligence of a good
father of a family in the selection and supervision of its employees.
Thus, extra-ordinary measures and diligence should be exercised by it
for the safety of its passengers and their belongings. A common
PAGE 19
carrier can terminate an employee whose continued service is inimical

to its interests and the safety of the passengers.
Carrier has duty to keep and care for goods carried
• It is the duty of the common carrier to properly and carefully handle,

carry, keep and care for the goods carried and to exercise due care to
ascertain and consider the nature of the goods offered for shipment
and to use such methods for their care during the voyage as their
nature requires. The carrier is liable for injury to, or loss of, cargo
resulting from the failure to properly care for and handle the cargo en
route; and it is required to provide adequate ventilation for the safe
carriage of the cargo, and provide reasonable and ordinary inspection
and care in and about the transportation of cargo.
• A vessel should not accept cargo unless it can be given the type of
storage that its character requires, for placing of conditions in a bill of
lading does not relieve the vessels of obligation to take appropriate
care of the cargo.
Duty of carrier to deliver cargo in good condition as when loaded
• There is no absolute obligation for a common carrier to accept cargo.

It should not be accepted unless it can be given the type of storage
that its character requires.
• Where a vessel accepts a cargo for shipment for valuable

consideration, it takes the risk of delivering it in good condition as
when it was loaded. And if the fact of improper packing is known to
the carrier or his servants, or apparent upon ordinary observation, but
it accepts the goods notwithstanding such condition, it is not relieved
of liability for loss or injury resulting therefrom.
• In the exercise of extra-ordinary diligence required by law, the

common carrier must give due regard to all circumstances and take all
steps necessary to insure the safety of the passengers and the goods
given the circumstances.
Presumption of negligence
• Under Art. 1735, if the goods are proved to have been lost, destroyed
or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they have
observed the extra-ordinary diligence required by law.
• The plaintiff needs only to prove that the goods he transported have
been lost, destroyed or deteriorated
PAGE 20
• Common carrier must then prove that he has exercised extra-ordinary

diligence required by law or that the loss, etc. was due to accident or
some other circumstances inconsistent with its liability.
• Mere proof of delivery of goods in order to a carrier, and of their arrival

at the place of destination in bad order makes out a prima facie case
against the common carrier.
Defenses available to common carriers
1. Art. 1734
2. Art. 1735 (exercise of extra-ordinary diligence required by law)
3. Natural disaster: The CC is exempt from liability if he proves that
the loss or destruction of the merchandise was due to accident and force
majeure and not to fraud, fault or negligence on the part of the EEs and
owners of the CC.
CC cannot interpose the defense that it exercised due diligence in the
selection and supervision of EEs. The liability of the CC arises from breach of
the contract of carriage and not from culpa aquiliana. It is however the duty
of CC to teach their drivers not to overload vehicles, not to exceed safe and
legal speed limits, and other safety precautions.
Carrier not insurer
• Common carriers are not required to exercise all the care, skill and
diligence of which the human mind can conceive nor such as will free
the transportation of passengers from all possible perils. A common
carrier is not an insurer of the safety of the passengers and is not
absolutely and at all events to carry them safely and without injury.
Ynchausti Steamship Co. vs Dexter 41 Phil 289
The mere proof of delivery of goods in good order to a carrier, and of

their arrival at the place of destination in bad order, makes out a prima facie
case against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is incumbent upon
the carrier to prove that the loss was due to accident or some other
circumstance inconsistent with its liability.
Mirasol vs Dollar 53 Phil 124
Where it appears that a bill of lading was issued to a shipper containing a

clause limiting the carrier's liability, printed in fine letters on the back of the
bill of lading, which the shipper did not sign and of which he was not advised,
the shipper is not bound by the clause limiting liability and the stipulation is
void or against public policy.
Shippers who are forced to ship goods in an ocean liner have legal
rights. When the goods are delivered on board the ship in good order and
condition and the carrier delivers them to the shipper in bad order and
PAGE 21
condition, in an action for damages, the burden of proof shifted and it

devolves upon the carrier to both allege and prove that the goods were
damaged by reason of some act which legally exempts it from liability.
EXEMPTION FROM LIABILITY
Natural disaster
Act of public enemy
Act or omission of shipper
Character of goods
Order of competent authority
Natural disaster
• In order that the common carrier may be exempted from

responsibility, the natural disaster must have been the proximate and
only cause of the loss. However, the common carrier must exercise
due diligence to prevent or minimize loss before, during and after the
occurrence of flood, storm, or other natural disaster in order that the
common carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods. (Art. 1739)
• If the CC negligently incurs in delay in transporting the goods, a

natural disaster shall not free such carrier from responsibility. (Art.
1740)
Effect of New Civil Code
• Transportation of the merchandise "at the risk and venture of the

shipper" means that the shipper will suffer losses and deterioration
arising from fortuitous event, force majeure, or inherent nature and
defects of the goods. It does not mean that the carrier is free from
liability for losses and deterioration arising from his negligence or
fault, which is presumed.
Requisites for defense of natural disaster
1. Art. 1739 -- natural disaster must have been the proximate and only
cause of the loss
2. The common carrier must exercise due diligence to prevent or

minimize the loss before, during and after the occurrence of flood,
storm, or other natural disaster. If the common carrier does not
exercise due diligence in minimizing the loss, he may yet be held liable
notwithstanding the fact that the loss, destruction or deterioration of
the goods arose out of natural disaster.
3. Art. 1740 -- the common carrier must not be in delay. If the common
carrier incurs in delay, a natural disaster shall not free it from
responsibility. Under Art. 1165 par. 3, if the obligor incurs delay, he
PAGE 22
shall be responsible for any fortuitous event until he has effected

delivery.
• However, if between the delay or refusal of the common carrier to

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

negligence of the carrier is not caso fortuito. The passenger or shipper
has every right to presume that the carrier is perfectly in good
condition and could transport him safely and securely to his
destination
Tan Chiong San vs Ynchausti & Co., 22 Phil 152
Loss of a ship and of its cargo, in a wreck due to accident or force majeure
must, as a general rule, fall upon their respective owners, except in cases
where the wrecking or stranding of the vessel occurred through malice,
carelessness or lack of skill on the part of the captain or because the vessel
put to sea is insufficiently repaired and prepared. (Art. 841, Code of
Commerce)
Martini Ltd. vs Macondray & Co., 39 Phil 934
• In every contract of affreightment, losses by dangers of the seas are

excepted from the risk which the carrier takes upon himself whether
the exception is expressed in contract or not. The exception is made
by law and falls within the general principle that no one is responsible
for fortuitous events. But then this general law is subject to the
exception that when the inevitable accident is preceded by fault of the
carrier, without which it would not have happened, then he becomes
responsible for it.
• The carrier is responsible for safe and proper storage of the cargo, and
there is no doubt that by the general maritime law he is bound to
secure the cargo safely under deck. If he carries the goods on deck
without the consent of the shipper and the goods are damaged or lost
in consequence of being exposed, the carrier cannot protect himself by
PAGE 23
showing that they were damaged or lost by the dangers of the sea.
When the shipper consents to his goods being carried on deck, he
takes the risk upon himself.
• If goods shipped are found to have been damaged, the burden of proof
is on the carrier to show that the damage was due to fortuitous events.
But, even if the damage is caused by one of the excepted causes, the
carrier is still responsible if the injury might have been avoided by the
exercise of reasonable skill and attention on their part. However, in
this case, where the shipper consented to the conditions of carriage,
the burden of proof is shifted to the shipper.
• As there is no allegation or proof of negligence on the part of the

carrier in protecting the cargo from rain or sea water and as the
complaint clearly indicates that the damage was due to it being kept
on deck, and such manner of carriage having been consented to by the
plaintiff, the defendant is absolved. It is not permissible for the court,
in the absence of any allegation or proof of negligence, to attribute
negligence to the ship's employees in the matter of protecting the
goods from rains and storms.
Eastern Shipping Lines vs IAC, 150 SCRA 463
• Fire may not be considered a natural disaster or calamity. This must

be so as it arises almost invariably from some act of man or by human
means. It does not fall within the category of an act of God unless
caused by lightning or by another natural disaster or calamity. It may
even be caused by the actual fault or privity of the carrier. Art. 1680
which considers fire as an extra-ordinary fortuitous event does not
apply since it refers only to leases of rural lands where a reduction of
rent is allowed when more than 1/2 of the fruits have been lost due to
such event.
Acts of public enemy
• This defense is not absolute. In order for the common carrier to be

exempted from liability,
1. the act of the public enemy must have been the proximate and
only cause; and
2. the common carrier must have exercised due diligence to

prevent or minimize the loss before, during and after the act of
the public enemy causing the loss, destruction or deterioration
of the goods.
Act or omission of the shipper
PAGE 24
• The act or omission of the shipper must be the proximate cause of the
loss, destruction or deterioration of the goods. If the shipper merely
contributed to the loss, etc. and the proximate cause is still the
negligence of the common carrier, the common carrier shall still be
liable for damages although the damages shall be equitably reduced.
Character of goods
• Claims for damages must be made at the time the goods are delivered
unless the indications of the damage cannot be ascertained from the
exterior of the package, in which case such written claims must be
made within 24 hours from delivery.
• As long as the damage to the goods was due purely to the inherent
nature or defect of the goods or of the containers thereof, the common
carrier cannot be held responsible. However, under 1742, the common
carrier must exercise due diligence to forestall or lessen the loss for it
to completely escape liability.
Order or act of competent authority
The common carrier is not responsible for the loss, etc. of the goods if the
public authority had power to issue the order. Where the officer acts without
legal process, the common carrier will be held liable.
Duration of Extraordinary Responsibility
• The extraordinary responsibility of the common carrier lasts from the

time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them. (Art. 1736)
• The common carrier's duty to observe extra-ordinary diligence in the

vigilance over the goods remains in full force and effect even when
they are temporarily unloaded or stored in transit, unless the shipper
or owner has made use of the right of stoppage in transitu. (Art. 1737)
• The extra-ordinary liability of the common carrier continues to be

operative even during the time the goods are stored in a warehouse of
the carrier at the place of destination until the consignee has been
advised of the arrival of the goods and has reasonable opportunity
thereafter to remove them or otherwise dispose of them. (Art. 1738)
When carrier's responsibility begins
PAGE 25
• The extra-ordinary responsibility of the common carrier begins from

the time the goods are delivered to the carrier. The delivery to the
common carrier must place the goods to be transported
unconditionally in the possession of the common carrier and the
common carrier must receive them. Otherwise, the extra-ordinary
responsibility of the common carrier will not commence.
When carrier's responsibility terminates
• The extra-ordinary responsibility of the common carrier is terminated

at the time the goods are delivered to the consignee or the person
who has a right to receive them (actual or constructive delivery). (Art.
1738)
Constructive delivery
• Notice by the common carrier that the cargo had already arrived,
placing them at the disposal of the shipper or consignee releases the
common carrier from extra-ordinary responsibility. From such moment
the consignee or shipper should exercise over the cargo the ordinary
control pertinent to ownership (should unload cargo from the common
carrier).
Shipper bound to observe all diligence in obtaining delivery of

goods
• The shipper is bound to observe all diligence in obtaining delivery of

the goods. Once the goods are delivered, the extra-ordinary
responsibility of the common carrier ceases.
Liability of shipper for delay in obtaining delivery of goods,

demurrage
• The shipper is liable for lost earnings occasioned by the unnecessary

delay in the use of the vehicles belonging to the carrier, due in turn to
the failure of the former, upon receipt of notice of the arrival of the
goods at the place of destination, to unload forthwith and take away
the cargo from the vehicles. This is a charge for demurrage (additional
service provided by common carrier).
Effect of storing in transit
• The temporary unloading or storage of the goods during the time that
they are being transported does not interrupt the extra-ordinary
responsibility of the common carrier. (Art. 1737)
• Exception: Where the shipper or owner exercises its right of stoppage

in transitu.
Stoppage in transitu.
PAGE 26
• The act by which the unpaid vendor of goods stops their progress and
resumes possession of them, while they are in the course of transit
from him to the purchaser, and not yet actually delivered to the latter.
This is exercised when the buyer is or becomes insolvent.
Responsibility of carrier when right exercised
• The extra-ordinary responsibility of the common carrier ceases when

the goods being transported are temporarily unloaded or stored in
transit be reason of the exercise of the right of stoppage in transitu by
the unpaid seller. The common carrier holds the goods in the capacity
of an ordinary bailee or warehouseman upon the theory that the
exercise of the right of stoppage in transitu terminates the contract of
carriage (ordinary diligence is required).
Effect of storage in warehouse of carrier
• The extra-ordinary responsibility of the common carrier does not cease

notwithstanding the fact that the goods being transported are stored
in the warehouse of the common carrier at the place of destination.
Extra-ordinary responsibility ceases only after the consignee has been
advised of the arrival of the goods and has had reasonable opportunity
to remove them or otherwise dispose of them. (Art. 1738)
• Liability as a warehouseman (ordinary diligence) arises only when the

consignee has been advised of the arrival of the goods and has had
reasonable opportunity to remove them or otherwise dispose of them
Cia Maritima vs Insurance Co. of North America, 12 SCRA 213
• The test as to whether the relation of shipper and carrier had been
established is: Had the control and possession of the goods been
completely surrendered by the shipper to the common carrier.
Whenever the control and possession of goods passes to the carrier
and nothing remains to be done by the shipper, then it can be said
with certainty that the relation of shipper and carrier has been
established.
• The bill of lading is not indispensable to a contract of carriage. It is

merely documentary proof of the agreement of the parties.
Lu Do vs Binamira, 101 Phil 120
• The general rule is that common carrier's responsibility to observe

extra-ordinary diligence lasts from the time the goods are placed in
the possession of the carrier until they are delivered to the consignee.
BUT this rule applies only when the loss, destruction and deterioration
of the goods take place while the goods are in the possession of the
PAGE 27
carrier and not after it has lost control of them. While the goods are in
its possession, it is but fair that it exercise extra-ordinary diligence in
protecting them from damage and if loss occurs, the law presumes
that it was due to its fault or negligence.
• While delivery to the customs authorities is not delivery to the

consignee, the parties may however, agree to limit the liability of the
carrier considering that the goods have still to go through the
inspection of the customs authorities before they are actually turned
over to the consignee. This stipulation is not contrary to morals or
public policy. This is a situation where the common carrier loses
control of the goods because of custom regulations and it is unfair that
it be made responsible for any loss or damage during such
interregnum.
Agreement Limiting Liability
As to diligence required
• A stipulation between the common carrier and the shipper or owner

limiting the liability of the former for the loss or destruction, or
deterioration of the goods to a degree less than extra-ordinary
diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service

rendered by the CC; and
(3) Reasonable, just and not contrary to public policy. (Art. 1744)
• Any of the following or similar stipulations shall be considered

unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the
custody of the goods;
(4) That the common carrier shall exercise a degree of diligence

less than that of a good father of a family, or of a man of
ordinary prudence in the vigilance over the movable
transported;
PAGE 28
(5) That the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) That the common carrier's liability for acts committed by

thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage. (Art. 1745)
• The fact that the common carrier has no competitor along the line or
route, or a part thereof, to which the contract refers shall be taken into
consideration of the question of whether or not a stipulation limiting
the common carrier's liability is reasonable, just and in accordance
with public policy. (Art. 1751)
As to amount liability
• A stipulation that the common carrier's liability is limited to the value

of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding. (Art. 1749)
• A contract fixing the sum that may be recovered by the owner or

shipper for the loss, destruction, or deterioration of the goods is valid,
if it is reasonable and just under the circumstances, and has been
fairly and freely agreed upon. (Art. 1750)
Ysmael vs Barreto, 51 Phil 90
• The validity of stipulations limiting the carrier's liability is to be

determined by their reasonableness and their conformity to the sound
public policy. It cannot lawfully stipulate for exemption from liability
unless such exemption is just and reasonable and unless the contract
is freely and fairly made. No contractual limitation is reasonable which
is subversive of public policy. A common carrier cannot limit its
liability for injury or loss where such is caused by its own negligence,
unskillfulness or carelessness of its employees. The rule rests on public
policy. The shipper and common carrier are not on equal terms; the
shipper is entirely at the mercy of the common carrier unless
protected by the law. Such contracts are wanting in the element of
voluntary assent.
Heacock vs Macondray, 42 Phil 205
PAGE 29
• Three kinds of stipulations have often been made in a bill of lading.
o First, one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence.
o Second, one providing for an unqualified limitation of such liability to an

agree valuation.
o Third, one limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value and pays a higher rate of freight.
• The first and second stipulations are invalid as contrary to public

policy. The third is valid and enforceable.
• A stipulation in the bill of lading limiting the liability of the CC to a

specified amount unless the shipper declares a higher value and pays
a higher freight is valid and enforceable. If a common carrier gives to
a shipper the choice of 2 rates, the lower of them conditioned upon his
agreeing to a stipulated valuation of his property in case of loss, even
by the carrier's negligence, if the shipper makes the choice
understandingly and freely, and names his valuation, he cannot
thereafter recover more than the value which he thus places upon his
property.
Shewaram vs PAL, 17 SCRA 606
• Two requisites must be fulfilled in order that the liability of PAL be

limited according to the stipulations behind the ticket stub : (1) the
contract is just and reasonable under the circumstances; and (2) it has
been fairly and freely agreed upon. (Art. 1750)
• The fact that the conditions are printed at the back of the ticket stub in
letters so small that they are hard to read would not warrant the
presumption that plaintiff was aware of those conditions such that he
had "fairly and freely agreed" to those conditions. PAL has admitted
that passengers do not sign the ticket. Also the carrier cannot limit his
liability for injury or loss of goods shipped when such injury or loss was
caused by its own negligence. (Arts. 1734, 1735)
Ong Yiu vs CA, 91 SCRA 223
• PAL incurred delay in the delivery of petitioner's luggage. However,

there was no bad faith. The liability of PAL was limited to the
stipulations printed on the back of the ticket.
PAGE 30
• While the passenger had not signed the plane ticket, he is

nevertheless bound by the provision thereof; such provisions have
been held to be part of the contract of carriage and valid and binding
upon the passenger regardless of the latter's lack of knowledge or
assent to the regulation. It is what is known as a contract of adhesion
wherein one party imposes a ready made form of contract on the
other; it is not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his
consent. A contract limiting liability upon an agree valuation does not
offend against the policy of the law forbidding one from contracting
against his own negligence.
• Considering that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P 100.00.
Besides, passengers are advised not to place valuable items inside
their baggage. Also, there is nothing in the evidence to show the
actual value of the goods allegedly lost by petitioner.
PAN AM vs IAC, 164 SCRA 268
• Pan Am cited Ong Yiu vs CA. Such case is squarely applicable in this
case. The ruling in Shewaram vs PAL is inapplicable since it was
premised on the fact that the conditions printed at the back of the
ticket were so small and hard to read.
• The SC reversed the CA ruling awarding respondent damages for lost

profits. The rule laid down in Mendoza vs PAL provides that before
damages can be awarded for loss of profits on account of delay or
failure of delivery, it must have appeared that the common carrier had
notice at the time of delivery to him of the particular circumstances
attending the shipment, and which probably would lead to such special
loss if he defaulted. In the absence of a showing that Pan Am's
attention was called to the special circumstances requiring prompt
delivery of the luggage, it cannot be held liable for the cancellation of
respondent's contracts as it could not have foreseen such an
eventuality when it accepted the luggage for transit.
Pan Am vs Rapadas, 209 SCRA 67
• There is no dispute that there was a notice appearing on page 2 of the

ticket stating that the Warsaw Convention governs in case of death or
injury to a passenger or of loss, damage or destruction to a
passenger's luggage. Such notice should be sufficient notice showing
the applicability of the Warsaw limitations. The passenger, upon
contracting with the airline and receiving the plane ticket, was
expected to be vigilant insofar as his luggage is concerned. If the
passenger fails to adduce evidence to overcome the stipulations, he
cannot avoid the application of the liability limitations.
PAGE 31
• While contracts of adhesion are not entirely prohibited, neither is blind

reliance on them encouraged. In the face of facts showing they should
be ignored because of their basically one- sided nature, the Court does
not hesitate to rule out blind adherence to their terms. The SC is not
saying that passengers are always bound to the stipulated amounts
printed on a ticket, found in a contract of adhesion, or printed
elsewhere but referred to in handouts or forms. The Court simply
recognizes that the reasons behind stipulations on liability limitations
arise from the difficulty, if not impossibility, of establishing with a clear
preponderance of evidence the contents of a lost suitcase. Unless the
contents are declared, it will always be the word of a passenger
against that of the airline. If the loss of life or property is caused by the
gross negligence or arbitrary acts of the airline or the contents of the
lost luggage are proved by satisfactory evidence other than the self-
serving declarations of one party, the Court will not hesitate to
disregard the fine print in a contract of adhesion. Otherwise, the Court
is constrained to rule that we have to enforce the contract as it is the
only reasonable basis to arrive at a just award.
Kinds of stipulation limiting liability
• The following stipulations are often made in a bill of lading bill of

lading:
1. stipulation exempting the common carrier from any and all

liability for loss or damage occasioned by its own negligence –
VOID
2. stipulation providing for an unqualified limitation of such

liability to an agreed stipulation – VOID
3. stipulation limiting the liability of the common carrier to an

agreed valuation unless the shipper declares a higher value and
pays a higher rate of freight -- VALID and ENFORCEABLE
When stipulation limiting liability valid
• The shipper or owner and the CC may stipulate to limit the liability of
the CC for the loss, destruction or deterioration of goods to a degree
less than extra-ordinary diligence :
1. the stipulation must be in writing and signed by both parties;
2. the stipulation must be supported by valuable consideration

other than the service rendered by the common carrier;
PAGE 32
3. the stipulation must be reasonable, just and not contrary to

public policy. (Art. 1744)
• This applies only when the CC is acting as such but not when it acts as
a private carrier [in Home Insurance vs American Steamship Co., the
SC held that the Civil Code provisions on CC should not be applied
where the common carrier is not acting as such but as a private
carrier; such policy has no force where the public at large is not
involved]
• The parties may stipulate that the diligence to be exercised by the

common carrier be less than extra-ordinary diligence, provided that
the requirements under Article 1744 are complied with. However, the
parties cannot reduce the diligence to less than that of a good father
of a family. Art. 1745 provides for 7 stipulations which shall be
considered unreasonable, unjust and contrary to public policy.
Construction of stipulations limiting common carrier's liability
• An exemption in general words not expressly relating to negligence,

even though the words are wide enough to include loss by negligence
or default of common carrier's servants, must be construed as limiting
the liability of the common carrier as assurer, and not as relieving him
from the duty of exercising reasonable skill and care.
Effect of lack of competitor to common carrier
The lack of competition of the common carrier shall be considered in

determining WON a stipulation limiting common carrier's liability is
reasonable, just and in consonance with public policy. (Art. 1751)
Effect of delay in transportation, etc
The common carrier cannot avail of the contract limiting his liability in these
cases:
(1) where the common carrier delays the transportation of the

goods;
(2) where the common carrier changes the stipulated or usual route
[in both cases, the delay or change of route must be without just
cause] (Art. 1747)
Presumption as to negligence in case of limited liability
The presumption continues even when there is an agreement limiting the

liability of the common carrier in the vigilance of the goods. This presumption
is disputable or rebuttable by evidence that the common carrier exercised
extra-ordinary diligence. (Art. 1752)
PAGE 33
Applicable Law in foreign trade
• The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration. (Art. 1753)
• The Civil Code governs the liability of the common carrier in case of
loss, damage or deterioration. Under 1766, in all matters not
regulated by the Civil Code, the rights and obligations of the common
carier shall be governed by the Code of Commerce and by special laws
which are suppletory to the provisions of the Civil Code.
Rules on Passenger Baggage
• Common carriers are bound to observe extraordinary diligence in the

vigilance over the goods of the passengers transported by them.
• The rules concerning the responsibility of hotelkeepers shall be

applicable to common carriers.
• The deposit of effects made by passengers in common carriers shall be

regarded as necessary. The common carrier shall be responsible for
them as depositaries, provided that notice was given to them, or to
their employees, of the effects brought by the passengers and that, on
the part of the latter, they take the precautions which said common
carriers or their employees advised relative to the care and vigilance
of their effects.
• The act of a thief or robber, who has entered the common carrier is not
deemed force majeure, unless it is done with the use of arms or
through irresistible force.
• The common carrier is not liable for compensation if the loss is due to
the acts of the passenger, or if the loss arises from the character of the
things brought into the common carrier.
• The common carrier cannot free himself from responsibility by posting

notices to the effect that he is not liable for the articles brought by the
passenger. Any stipulation between the common carrier and the
passenger where the responsibility of the former is suppressed or
diminished shall be void.
Classes of baggage of passengers
• The law makes a distinction between
PAGE 34
(1) baggage in the custody of the passengers or their employees;

and
(2) baggage not in such custody but in that of the common carrier.
Liability for baggage in custody of passenger
• The baggage of passengers in their personal custody or in that of their

EEs while being transported shall be regarded as necessary deposits.
The common carrier shall be responsible for such baggage as
depositaries, provided that
(1) notice was given to them or to their EEs, of the baggage

brought by their passengers, and that
(2) the passengers take the precautions which said CCs advised
relative to the care and vigilance of their baggage.
Responsibility for acts of employees, thieves
• A common carrier is responsible as a depositary for the loss of or injury

to the baggage in the personal custody of passengers, caused by the
common carrier's servants or employees but not those caused by force
majeure.
• The act of a thief or robber, who has entered the common carrier's
vehicle is not deemed force majeure, unless it is done with the use of
arms or through irresistible force.
• The common carrier is not liable if the loss of the baggage in the
personal custody of the passenger is due to the acts of the
passengers, his family, servants or visitors, OR if the loss arises from
the character of the baggage.
Stipulations limiting liability
• A common carrier cannot free himself from responsibility by posting

notices to the effect that he is not liable for the baggage brought by
the passengers. Any stipulation diminishing the responsibility required
under 1998 to 2001 shall be void.
Liability for baggage not in custody of passenger
• This refers to baggage delivered to the custody of the common carrier

and received by him, to be carried in the same manner as other goods
being transported by him. As the common carrier has custody of such
baggage and are carried like any other goods, the provisions on
carriage of goods shall apply (extraordinary diligence in the vigilance
over the goods).
PAGE 35
• The moment the effects of a passenger are unconditionally placed in

the possession of and received by a carrier for conveyance, the law
immediately imposes on the common carrier extraordinary
responsibility for the loss thereof which lasts until the actual or
constructive delivery of the effects to the passenger as the person who
has the right to receive them (presumption of negligence exists but
may be rebutted by proof of exercise of extraordinary diligence or
causes under 1734).
• A common carrier is liable for the loss of baggage although not

declared and the charges not paid, if it accepted them for
transportation
Common Carrier of Passengers
Nature and extent of responsibility
Art. 1733. Common carriers, from the nature of their business

and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7,
while the extraordinary diligence for the safety of the passengers is
further set forth in Articles 1755 and 1756.
• A common carrier is bound to carry the passengers safely as far as

human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all circumstances. (Art.
1755)
Common carriers must exercise extraordinary diligence in carrying

passengers
• Art. 1755 shows clearly the high degree of care and extraordinary
diligence required of a common carrier with respect to its passengers.
Carrier's duty of extraordinary diligence extends also to crew

members
• The duty to exercise the utmost diligence on the part of common

carrier is for the safety of passengers as well as for the members of
the crew or the complement operating the carrier. This must be so for
any omission, lapse or neglect thereof will certainly result to the
damage, prejudice, injuries or even death to all aboard the plane.
Cangco vs MRR, 38 Phil 768
PAGE 36
• The conduct of plaintiff in undertaking to alight while the train was yet
slightly underway was not characterized by imprudence and that he
was not guilty of contributory negligence.
• It is not negligence per se for a traveler to alight from a slowly moving
train.
• MRR failed to exercise due care in not providing for safe exit of its
passengers. It also failed to provide adequate lighting for its station.
• The foundation of the legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the damage which
plaintiff has suffered arises, if at all, from the breach of that contract
by reason of the failure of defendant to exercise due care in its
performance. Its liability is direct and immediate (culpa contractual),
differing essentially, from that presumptive responsibility for the
negligence of its servants, which can be rebutted by proof of the
exercise of due care in the selection and supervision of employees
(culpa aquiliana).
• The liability of masters and employers for the negligent acts or
omissions of their servants or agents, when such act or omissions
cause damage which amount to the breach of a contract, is not based
upon a mere presumption of the master's negligence in their selection
or control, and proof of exercise of the utmost diligence and care in
this regard does not relieve the master of his liability for the breach of
his contract. When the facts averred show a contractual undertaking
by defendant for the benefit of plaintiff, and it is alleged that plaintiff
has failed or refused to perform the contract, it is not necessary for
plaintiff to specify in his pleadings whether the breach of the contract
is due to willful fault or to negligence on the part of the defendant, or
of his servants or agents. Proof of the contract and of its
nonperformance is sufficient prima facie to warrant recovery.
• The contract of defendant to transport plaintiff carried with it, by
implication, the duty to carry him in safety and to provide safe means
of entering and leaving its trains. That duty, being contractual, was
direct and immediate, and its nonperformance could not be excused
by proof that the fault was morally imputable to defendant's servants.
Strong vs Iloilo-Negros Air Express, 40 OG 269
• In aviation, inevitable accident is defined as one that is not occasioned

in any degree remotely or directly by want of such skill or care as the
law holds for what man is bound to exercise. Airplane companies are
not required to exercise all the care. Passengers necessarily should
take upon the usual and ordinary perils to airplane travel. A carrier is
not an insurer against all risks.
• A carrier is not liable for defects of ignition cables used on his plane,
nor of the installation thereof, which cables were purchased from a
competent and reputable manufacturer in the absence of a showing
PAGE 37
that it knew those defects or that such kind of ignition cable is not
ordinarily used on the airplane operated by it.
• The doctrine of res ipsa loquitor cannot be applied when there is no

proof that according to the general experience of mankind, the
accident was such that it does not usually occur in the ordinary course
of events without the negligence on the part of those in control.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
• If the carrier's employee is confronted with a sudden emergency, he is

not held to the same degree of care he would otherwise be required in
the absence of such emergency.
• By placing his left arm on the window, the passenger is guilty of

contributory negligence, and although contributory negligence cannot
relieve the carrier but can only reduce his liability (Art. 1762), this is a
circumstance which militates against plaintiff's position. It is
negligence per se for passengers to protrude any part of his body and
that no recovery can be had for an injury.
• A common carrier is bound to carry the passengers safely as far as

human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all circumstances. This
extraordinary diligence required of common carriers is calculated to
protect the passengers from the tragic mishaps that frequently occur
in connection with rapid modern transportation. This high standard of
care is imperatively demanded by the preciousness of human life and
by the consideration that every person must in every way be
safeguarded against all injury.
Principles as to liability of common carrier
(1) The liability of a carrier is contractual and arises upon breach of its
obligation; there is breach if it fails to exert extraordinary diligence accdg. to
all the circumstances of each case
(2) A carrier is obliged to carry its passenger with the utmost diligence
of a very cautious person, having due regard for all the circumstances
(3) A carrier is presumed to have been at fault or to have acted
negligently in case of death of, or injury to, passengers, it being its duty to
prove that it exercised extraordinary diligence
(4) The carrier is not an insurer against all risks of travel
Landingin vs Pantranco, 33 SCRA 284
Held : In Lasam vs Smith, the court held that accidents caused by defects in
the automobile are not caso fortuito. The rationale is that the passenger has
neither the choice nor control over the carrier in the selection and use of the
equipment and appliances in use by the carrier.
PAGE 38
When the passenger dies or is injured, the presumption is that the CC

is at fault or acted negligently. This is only rebutted by proof on the carrier's
part that it observed extraordinary diligence required in Art. 1733 and the
utmost diligence of very cautious persons required in Art. 1755.
It does not appear that the carrier gave due regard for all the
circumstances with cross joints' inspection the day previous to the accident.
The bus was heavily laden, and it would be traversing mountainous,
circuitous and ascending road. Thus the entire bus would naturally be taxed
more heavily than it would be under the ordinary circumstances. The mere
fact that the bus was inspected only recently and found to be in order would
not exempt carrier from liability unless it is shown that the particular
circumstances under which the bus would travel were also considered.
Landicho vs BTC, 52 OG 764
Held : The facts show that the cage was not about to fall. Plaintiff was
probably dizzy or sleepy that he fell from the truck.
It is true that defendant being a CC is bound to transport its
passengers from the point of origin to the place of destination, but the duty
does not encompass all the risks attendant to a passenger in transit, for then
the co. would be a good source of stipend for a family who would like to end
it all by simply boarding, paying the fare and intentionally falling off. It is
enough for the CC's EEs to see to it that the passenger places himself safely
inside the vehicle, that it is operated carefully and that its mechanism is
perfectly alright to prevent mishaps. It would be unreasonable to exact upon
operators to determine beforehand whether a passenger is likely to fall dizzy
or sleepy on the way, for that is the lookout of the passenger himself. A
passenger must see to it that he seats himself in a safe portion of the
vehicle.
Necesito vs Paras, 105 Phil 75
Held : While the carrier is not an insurer of the safety of the passengers, it
should nevertheless be held answerable for the flaws of its equipment if such
flaws were discoverable. The liability of the CC rests upon negligence or his
failure to exercise the utmost degree of diligence that the law requires. The
rationale of CC's liability for manufacturing defects is the fact that the
passenger has neither choice nor control over the carrier in the selection and
use of the eqpt. and appliances in use by the carrier. Having no privity
whatever with the manufacturer or vendor of the defective eqpt, the
passenger has no remedy against him. In this case, the defect could have
been detected with the exercise of utmost diligence by the CC.
2. Duration of responsibility
4 Agbayani:
PAGE 39
When relationship of carrier and passenger terminates.-- The relation

of CC and passenger does not cease at the moment that the passenger
alights from the CC's vehicle at a place selected by the CC at the point of
destination, but continues until the passenger had reasonable time or a
reasonable opportunity to leave the CC's premises. What is a reasonable
time or a reasonable delay within this rule is to be determined from all the
circumstances
La Mallorca vs CA, 17 SCRA 739
Held: Whether or not the relation between carrier and passenger does not
cease at the moment the passenger alights from the carrier's premises is to
be determined from the circumstances.
In this case, there was no utmost diligence. The driver stopped the
bus but did not turn off the engine. He started to run the bus even before
the conductor gave him the signal. The presence of passengers near the bus
was not unreasonable and the duration of the responsibility still exists.
Bataclan vs Medina, 102 Phil 181
Held: The proximate cause of the death was the overturning of the vehicle
which was followed by the negligence of the driver and the conductor who
were on the road walking back and forth. They should have known that with
the position of the bus, leakage was possible aside from the fact that gas
when spilled can be smelled from a distance. The failure of the driver and
conductor to have cautioned or taken steps to warn rescuers not to bring a
lighted torch too near the bus constitutes negligence on the part of the
agents of the carrier.
Aboitiz vs CA 179 SCRA 95
Held: Aboitiz is still liable for his death under the contract of carriage. The
relation of carrier and passenger continues until the passenger has been
landed at the port of destination and has left the vessel owner's dock. Once
created the relationship will not ordinarily terminate until the passenger has
safely alighted from the carrier's conveyance or had reasonable opportunity
to leave the carrier's premises. All persons who remain on the premises a
reasonable time after leaving the conveyance are to be deemed passengers
and what is reasonable time is to be determined from all circumstances and
includes a reasonable time to see after his baggage and prepare for his
departure. The CC-passenger relationship is not terminated merely by the
fact that the person transported has been carried to his destination if the
person remains in the premises to claim his baggage.
The test is the existence of a reasonable cause as will justify the
presence of the passenger near the vessel.
PAGE 40
A CC is bound to carry its passengers as far as human care and

foresight can provide, using the utmost diligence of a very cautious person
with due regard for all circumstances.
PAL vs CA, G.R. 82619, Sept. 1993
Held: The passenger's complaint touched on PAL's indifference and

inattention to his predicament and not on PAL's refusal to comply with his
demand for priority over the other passengers. He claimed that he was
exposed to the peril of Muslim rebels and that he suffered mental anguish,
mental torture, social humiliation, besmirched reputation and wounded
feeling. He referred to PAL's apathy.
The contract of air carriage is a peculiar one. Being imbued with
public interest, the law requires common carriers to carry the passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.
In Air France vs Carrascoso, the SC held that the contract to transport
passengers is quite different from any contractual relation in that it invites
people to avail of the comforts and advantages it offers. The diversion of the
flight was due to a fortuitous event. However, such did not terminate PAL's
contract with its passengers. Being in the business of air carriage, PAL is
deemed equipped to deal with situations like the case at bar. The relation of
carrier and passenger continues until the latter has been landed at the port
of destination and has left the CC's premises. Hence, PAL necessarily would
still have to exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of the stranded passengers until they have reached
their final destination. PAL was therefore remiss in its duty of extending
utmost care to Zapatos while being stranded in Cotabato City.
The CA held : "While the failure of Zapatos to reach his destination xxx
in accordance with the contract of carriage was due to the closure of the
airport on account of rain and inclement weather xxx it becomes the duty of
PAL to provide all means of comfort and convenience to its passengers when
they would have to be left in a strange place in case of such by-passing. If
the cause of non-fulfillment of the contract is due to a fortuitous event, it has
to be the sole and only cause. Since part of the failure to comply with the
obligation to deliver its passengers safely to their destination lay in PAL's
failure to provide comfort and convenience to its stranded passengers using
extraordinary diligence, the cause of non-fulfillment is not solely and
exclusively due to fortuitous event, but due to something that PAL could have
prevented, PAL becomes liable to the passenger." However the SC found that
although PAL was remiss in its duty of extending utmost care to Zapatos
while being stranded in Cotabato City, there was no sufficient basis to
conclude that PAL failed to inform him about his other options.
3. Presumption of negligence
Art. 1756. In case of death of or injuries to passengers,

common carriers are presumed to have been at fault or to have
PAGE 41
acted negligently, unless they prove that they observed

extraordinary diligence as prescribed in articles 1733 and 1755.
4 Agbayani:
Presumption of negligence.-- CCs are presumed to have been at fault or

to have acted negligently in case of death or injuries to passengers. This
disputable presumption may only be overcome by superior evidence that he
had observed extraordinary diligence prescribed in 1733, 1755, 1756
Where death or injury results to the passenger because of the
negligence of the CC's Es, the CC is liable, notwithstanding the fact that he
had exercised all the diligence of a good father of a family, in the selection
and supervision of his EEs
xxx
Consequently, in an action for damages, the issue is not WON the
party seeking damages has adduced sufficient evidence to show the
negligence of the CC but WON the carrier has presented the required
quantum of proof to overcome the presumption that it has been at fault or
that it acted negligently in the performance of its duty.
In the exercise of extraordinary diligence, the CC must give due regard
for all circumstances in connection with the transport of passengers
How presumption of negligence overcome.-- To overcome such

presumption, it must be shown that the CC had observed the required
extraordinary diligence or that the accident was caused by fortuituos event.
In order to constitute caso fortuito that would exempt a person from
responsibility, it is necessary that :
1. The event must be independent of human will;
2. The occurrence must render it impossible for the obligor to fulfill his
obligation in a normal manner;
3. The obligor must be free of a concurrent or contributory fault or
negligence. [Estrada vs Consolacion, 71 SCRA 523]
Carrier not precluded from proving negligence of other carrier

involved in collision.-- While the plaintiff-passenger does not need to
prove the negligence of the CC, he may not preclude the CC from proving the
legal defense of negligence of the other vehicle involved in the collision (the
CC may file a third-party complaint against the other vehicle for
reimbursement)
"Last clear chance" rule not applicable to contracts of carriage.--

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

negligence.-- The court need not make an express finding of fault or
negligence on the part of the CC in order to hold it responsible to pay the
PAGE 42
damages sought by the passenger. By the contract of carriage, the CC

assumes the express obligation to observe extraordinary diligence in
transporting the passenger This is an exception to general rule that
negligence must be proved.
Carriers not ordinarily liable for injuries to passengers due to fires

or explosions caused by articles brought into conveyance by other
passengers.-- CC is not ordinarily liable for injuries to passengers due to
fires or explosions caused by articles brought into conveyance by other
passengers. Fairness demands that in measuring the CC's duty towards its
passengers, allowance should be given to the reliance that should be reposed
on the sense of responsibility of all the passengers in regard to their common
safety (that the passenger will not take with him anything dangerous to his
co-passengers.) For the carrier to be liable, he must be aware, through his
EEs of the nature of the article or must have had some reason to anticipate
danger therefrom (circumstances must show that there are causes for
apprehension that the passenger's baggage is dangerous and that the CC
fails to act in the fact of such evidence) [Nocum vs Laguna Bus Co., 1969]
4. Force Majeure
Bachelor Express vs CA 188 SCRA 217
Held : The CC is liable for the death of the passengers.

Bachelor Express as a CC is bound to carry its passengers safely as far
as human care and foresight can provide using the utmost diligence of very
cautious person, with due regard for all the circumstances. In this case
where passengers suffered injuries which caused their death, under 1756,
the CC is presumed to have acted negligently unless it can prove that it had
observed extraordinary diligence. The CC raised the defense of caso fortuito.
Art. 1174 provides that no person shall be responsible for those events which
could not be foreseen or which though foreseen were inevitable. In Lasam vs
Smith, the SC held that a caso fortuito must have the following elements: (1)
The cause of the unforeseen and unexpected occurrence must be
independent of the human will; (2) It must be impossible to foresee the
event; (3) The occurrence must be so as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (4) The obligor must
be free from any participation in the aggravation of the injury resulting to the
creditor. The running amuck of the passenger was the proximate cause of
the incident and is within the context of force majeure.
However, in order that a CC may be absolved from liability in case of
force majeure, it is not enough that the accident was caused by force
majeure. The CC must still prove that it was not negligent in causing the
injuries resulting from such accident. It must prove that there was no
negligence or lack of care and diligence on the part of the CC.
The TC and the CA had conflicting findings of fact. The SC upheld the
findings of the CA-- the driver did not immediately stop the bus at the height
of the commotion; the bus was speeding from a full stop; the victims fell
from the bus door when it was opened or gave way while the bus was still
PAGE 43
running; the conductor panicked and blew his whistle after people had
already fallen off the bus; the bus was not properly equipped with doors in
accordance with law. It is therefore clear that the petitioners have failed to
overcome the presumption of fault and negligence found in the law
governing CCs.
The CC's argument that it is not an insurer of its passengers deserves
no merit in view of the failure of the CC to prove that the deaths of the 2
passengers were exclusively due to force majeure and not to the failure of
the CC to observe extra-ordinary diligence in transporting safely the
passengers to their destinations as warranted by law.
5. Limitation of liability; validity of stipulations
Art. 1757. The responsibility of the common carrier for the

safety of passengers as required in Arts. 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a

stipulation limiting the common carrier's liability for negligence is
valid, but not for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the
common carrier's liability.
Ticket given to a passenger is a written contract.-- Ticket given to

passenger is a written contract with the ff. elements: (1) the consent of the
contracting parties manifested by the fact that the passenger boards the ship
and the shipper consents or accepts him in the ship for transportation; (2)
cause or consideration which is the fare paid by the passenger as stated in
the ticket; (3) object, which is the transportation of the passenger from the
place of departure to the place of destination which are stated in the ticket.
Passenger bound notwithstanding his failure to sign ticket

containing stipulation limiting liability.-- Even if the passenger failed to
sign the ticket, he is nevertheless bound by the provisions thereof. Such
provisions are part of the contract of carriage, regardless of the passenger's
lack of knowledge or assent to the regulation. It is what is known as a
contract of adhesion which is not entirely prohibited by law. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he
gives his consent. Accordingly, where the CC incurred delay, it is liable only
for the amount printed in the ticket the passenger not having declared a
higher value for his luggage nor paid addtl. charges.
Dispensing with or limiting liability.-- General rule: Under 1757, the

extraordinary diligence required under 1733 and 1755 for the carriage of
passengers cannot be dispensed with or lessened (1) by stipulation, (2) by
the posting of notices, (3) by statements on tickets, or (4) otherwise
What cannot be stipulated in a carriage of passengers :
PAGE 44
(1) absolutely exempting the CC from liability from the passenger's

death or injuries;
(2) lessening the extraordinary diligence required by law to the
diligence of a good father of a family
Exception: Effect of gratuitous carriage.-- Under 1758, the CC and

the passenger may validly stipulate limiting the CC's liability for negligence
where the passenger is carried gratuitously (but the parties cannot stipulate
to entirely eliminate liability of CC)
Effect of reduction of fares.-- Under 1758 (2), the reduction of fare

does not justify any limitation of the CC's liability -- the law requires
gratuitous passage.
The law is much stricter with respect to carriage of passengers as

compared with carriage of goods: a stipulation limiting the CC's liability in
writing, signed by the parties, supported by sufficient consideration, not
contrary to law will still be void where the passenger is not carried
gratuitously.
Liability of owner of CC to accommodation passengers or invited

guests.-- [Lara vs Valencia, 1958] an owner of an automobile owes a guest
the duty to exercise ordinary or reasonable care to avoid injuring him; since
one riding in an automobile is no less a guest because he asked for the
privilege of doing so, the same obligation of care is imposed upon the driver
and owner as in the case of one expressly invited to ride
6. Responsibility for acts of EEs
Art. 1759. Common carriers are liable for the death of or

injuries to passengers through the negligence or willful acts of the
former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of
the common carrier.
The liability of the common carrier does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.
Art. 1760. The common carrier's responsibility prescribed in

the preceding article cannot be eliminated or limited by stipulation,
by the posting of notices, by statements on the tickets, or
otherwise.
4 Agbayani:
Liability for negligence or willful acts of employees.-- Under 1759, CC

are held liable for the death or injuries to passengers caused by the
negligence or the willful acts of their EEs, although such EEs may have acted
beyond the scope of their authority or in violation of the orders of the CC.
PAGE 45
The CC cannot escape liability by interposing the defense that its EEs have
acted without any authority or against the orders of the CC
The passenger is entitled to protection from personal violence by the
CC or its agents or EEs since the contract of transportation obligates the CC
to transport a passenger safely to his destination and a CC is responsible for
the misconduct of its EEs
Cardenas vs Fernando, 54 OG no. 4, p. 1043 (1957): (1) extraordinary

diligence required of CC: calculated to protect the passengers as demanded
by the preciousness of human life and by the consideration that every person
must in every way be safeguarded against all injury; (2) liability for injury of
passenger is based on a breach of contract of carriage for failure to bring the
passenger safely to his destination
Reason for making the CC liable for the misconduct of its EEs in
their own interest.-- The servant is clothed with delegated authority and
charged with the duty by the CC, to execute his undertaking to carry the
passenger safely; when the EE mistreats the passenger, he violates the
contractual obligation of the CC for which he represents the CC
Liability of CC for defects of its equipment.-- A passenger is entitled to

recover damages from a CC for an injury resulting from a defect in an
appliance purchased from a manufacturer, whenever it appears that the
defect would have been discovered by the CC if it had exercised the degree
of care which under the circumstances was incumbent upon it, with regard to
inspection and application of the necessary tests; for the purposes of this
doctrine, the manufacturer is considered as being in law the agent or servant
of the CC, as far as regards the work of constructing the appliance
Common carrier is exempt from acts of EE not done in line of duty.--

The CC is exempt from liability where the EE was never in a position in which
it became his duty to his ER to represent him in discharging any duty of the
CC towards the passenger; the EE is deemed as a stranger or co-passenger
since his act was not done in the line of duty
Defense of diligence in selection, etc., of employees.-- CC cannot

escape liability by interposing defense that he exercised due diligence in the
selection and supervision of his EEs; his liability is based on culpa contractual
When relationship of carrier and passenger terminates.-- The relation

of CC and passenger does not cease at the moment that the passenger
alights from the CC's vehicle at a place selected by the CC at the point of
destination, but continues until the passenger had reasonable time or a
reasonable opportunity to leave the CC's premises. What is a reasonable
time or a reasonable delay within this rule is to be determined from all the
circumstances
Elimination or limitation of carrier's liability.-- Under 1760, the CC's

liability for the negligence or willful acts of his EEs which cause death of or
PAGE 46
injury to passengers cannot be eliminated or limited by (1) stipulation, (2) by

the posting of notice, (3) by statements on the tickets, or (4) otherwise
Bataclan vs Medina, 104 Phil 181
Held : There was a breach of the contract of carriage and negligence on the
part of the agent of the CC, the driver. At the time of the blowout of the
tires, the bus was speeding. The proximate cause of the death was the
overturning of the vehicle which was followed by the negligence of the driver
and the conductor who were on the road walking back and forth. They
should have known that with the position of the bus, leakage was possible
aside from the fact that gas when spilled can be smelled from a distance.
The failure of the driver and conductor to have cautioned or taken steps to
warn rescuers not to bring a lighted torch too near the bus constitutes
negligence on the part of the agents of the carrier.
De Gillaco vs MRR, 97 Phil 884
Held : While a passenger is entitled to protection from personal violence by

the CC or its agents or EEs, the responsibility of the CC extends only to those
acts that the CC could foresee or avoid through the exercise of the degree of
care and diligence required of it. The OCC did not impose upon CC the
absolute liability for assaults of their EEs upon the passengers.
The act of the guard was entirely unforeseeable by MRR which had no
means to ascertain or anticipate that the two would meet nor could it foresee
every personal rancor that might exist between its EEs and its passengers.
The shooting was a caso fortuito, both being unforeseeable and inevitable
under the circumstances.
When the crime took place, the guard had no duties to discharge. His
position would be that of a passenger also waiting transportation and not of
an EE assigned to discharge duties.
Maranan vs Perez, 20 SCRA 412
Held: The NCC unlike the OCC makes the CC absolutely liable for intentional
assaults committed by its EEs upon its passengers (Art. 1754). The CC's
liability is based on either (1) respondeat superior or (2) the CC's implied
duty to transport the passenger safely. Under respondeat superior (w/c is the
minority view), the CC is liable only when the act of the EE is within the
scope of his authority and duty. Under the second view, the CC is liable as
long as the assault occurs within the course of the performance of the EE's
duty. It is no defense that the act was done in excess of authority or in
disobedience of the CC's orders. The CC's liability is absolute in the sense
that it practically secures the passengers from assaults committed by its own
EEs. Three cogent reasons underlie this rule : (1) the special undertaking of
the CC requires that it furnish the passengers the full measure of protection
PAGE 47
afforded by the exercise of the high degree of care prescribed in the law,
from violence and insults in the hands of strangers, other passengers, and
from its own servants charged with the passenger's safety; (2) liability is
based on the CC's confiding in the servant's hands the performance of his
contract to safely transport the passenger, delegating therewith the duty of
protecting the passenger with utmost care prescribed by law; (3) as between
the CC and the passenger, the CC must bear the risk of wrongful acts or
negligence of the CC's EEs against passengers since it has the power to
select and remove them.
It is the CC's obligation to select its drivers with due regard not only to
their technical competence and physical ability but also to their total
personality, including patterns of behavior, moral fiber, and social attitude.
7. Responsibility for acts of strangers and co-passengers
Art. 1763. A common carrier is responsible for injuries

suffered by a passenger on account of the willful acts or negligence
of other passengers or of strangers, if the common carrier's
employees through the exercise of the diligence of a good father of
a family could have prevented or stopped the act or omission.
4 Agbayani:
The CC is responsible for such willful acts or negligence of other passengers

or of strangers, provided that the CC's EEs could have prevented or stopped
the act or omission through the exercise of ordinary diligence. If the injury
could not have been avoided by the exercise of ordinary diligence on the part
of the EEs of the CC, the CC is not liable
Notice that the law speaks of injuries suffered by the passenger but
not his death. However, there appears to be no reason why the common
carrier should not be held liable under such circumstances. The word
"injuries" should be interpreted to include "death." (Aguedo F. Agbayani,
COMMERCIAL LAW REVIEWER, 1988 ed.)
Pilapil vs CA 180 SCRA 546
Held: The law does not make the CC an insurer of the absolute safety of its
passengers. Art. 1755 qualifies the duty of the CC in exercising vigilance to
only such as human care and foresight can provide. The presumption
created by law against the CC is rebuttable by proof that the CC had
exercised extraordinary diligence in the performance of its obligations and
that the injuries suffered were caused by fortuitous events. The liability of
the CC necessarily rests upon its negligence, or its failure to exercise the
degree of diligence required by law. Under Art. 1763, the diligence required,
with regards to its liability in cases when intervening acts of strangers
directly caused the injury, is the diligence only of a good father of a family
and not the extraordinary diligence generally required. The rule is not so
exacting as to require one charged with its exercise to take doubtful or
PAGE 48
unreasonable precautions to guard against unlawful acts of strangers. The

CC would only be negligent if the tort caused by a third person could have
been foreseen and prevented by them.
The injury was in no way connected to the performance of the
obligation of the bus company. It was caused by a stranger, over which the
carrier had no control or even knowledge of, and which could not have been
prevented.
Bachelor Express vs CA, 180 SCRA 217
Held: The CC raised the defense of caso fortuito. The running amuck of the
passenger was the proximate cause of the incident and is within the context
of force majeure. However, in order that a CC may be absolved from liability
in case of force majeure, it is not enough that the accident was caused by
force majeure. The CC must still prove that it was not negligent in causing
the injuries resulting from such accident. It must prove that there was no
negligence or lack of care and diligence on the part of the CC.
The TC and the CA had conflicting findings of fact. The SC upheld the
findings of the CA-- the driver did not immediately stop the bus at the height
of the commotion; the bus was speeding from a full stop; the victims fell
from the bus door when it was opened or gave way while the bus was still
running; the conductor panicked and blew his whistle after people had
already fallen off the bus; the bus was not properly equipped with doors in
accordance with law. It is therefore clear that the petitioners have failed to
overcome the presumption of fault and negligence found in the law
governing CCs.
The CC's argument that it is not an insurer of its passengers deserves
no merit in view of the failure of the CC to prove that the deaths of the 2
passengers were exclusively due to force majeure and not to the failure of
the CC to observe extraordinary diligence in transporting safely the
passengers to their destinations as warranted by law.
8. Duty of passenger; effect of contributory negligence
Art. 1761. The passenger must observe the diligence of a

good father of a family to avoid injury to himself.
Art. 1762. The contributory negligence of the passenger does

not bar recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common carrier,
but the amount of damages shall be equitably reduced.
Law does not protect negligence of passenger.-- Law does not protect
negligence of passenger to the extent of doing harm or damage upon a
public utility
Diligence required of passenger.-- Diligence of a good father of a family

to avoid injury to himself.
PAGE 49
Effect of negligence of passenger.-- Where the proximate cause of the

death of or injury to the passenger is his own negligence, and not that of the
CC, the CC is exempted from liability
Effect of passenger's contributory negligence.-- Contributory

negligence on the part of the passenger does not justify the CC's exemption
from liability. Where it is not the proximate cause of the death or injury, he
or his heirs are not barred from recovery of damages, provided of course that
the CC is the proximate cause of his death or injury
Cangco vs MRR 38 Phil 768
Held: The conduct of plaintiff in undertaking to alight while the train was yet
slightly underway was not characterized by imprudence and that he was not
guilty of contributory negligence.
The circumstances show that it was no means so risky for him to get off
while the train was yet moving. It is not negligence per se for a traveler to
alight from a slowly moving train.
Isaac vs A. L. Ammen
Held: By placing his left arm on the window, the passenger is guilty of
contributory negligence, and although contributory negligence cannot relieve
the carrier but can only reduce his liability (Art. 1762), this is a circumstance
which militates against plaintiff's position. It is negligence per se for
passengers to protrude any part of his body and that no recovery can be had
for an injury.
In this case, the bus driver had done what a prudent man could have
done to avoid the collision. The injury was due to passenger's fault.
Liability of air carrier under the Warsaw Convention (Oct. 12, 1929)
Art. 17. The carrier shall be liable for damages sustained in the
event of death or wounding of a passenger or any other bodily injury
suffered by a passenger, if the accident which caused the damage so
sustained took place on board the aircraft or in the course of any of the
operations of embarking or disembarking.
Art. 18. (1) The carrier shall be liable for damage sustained in the
event of the destruction or loss of, or of damage to, any checked baggage
or any goods, if the occurrence which caused the damage so sustained
took place during the transportation by air.
(2) The transportation by air within the meaning of the preceding
paragraph shall comprise the period during which the baggage or goods
are in the charge of the carrier, whether in an airport or on board an
aircraft, or, in case of a landing outside an airport, in any place
whatsoever.
PAGE 50
(3) The period of the transportation by air shall not extend to any
transportation by land, by sea, or by river performed outside an airport. If
however, such transportation takes place in the performance of a contract
for transportation by air, for the purpose of loading, delivery, or
transshipment, any damage is presumed, subject to proof to the contrary,
to have been the result of an event which took place during the
transportation by air.
Art. 19. The carrier shall be liable for damages occasioned by delay
in the transportation by air of passengers, baggage or goods
SC has held that these provisions merely declare the carrier liable for
damages in the enumerated cases, if the conditions therein specified are
present. Neither said provisions nor others in the Convention regulate or
exclude liability for other breaches of contract by the carrier.
D. Damages Recoverable from Common Carriers
1. In general
Art. 1764. Damages in cases comprised in this Section shall be

awarded with the title XVIII of this book concerning damages.
Article 2206 shall also apply to the death of a passenger caused by
the breach of contract by a common carrier.
Art. 2197. Damages may be:

(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated;
(6) Exemplary or corrective.
2. Actual or compensatory
Art. 2199. Except as provided by law or by stipulation, one is

entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation referred
to as actual or compensatory damages.
Art. 2201. In contracts and quasi-contracts, the damages for

which the obligor who acted in good faith is liable shall be those
that are natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted.
PAGE 51
In case of fraud, bad faith, malice or wanton attitude, the

obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation.
Art. 2203. The party suffering loss or injury must exercise

diligence of a good father of a family to minimize the damages
resulting from the act or omission in question.
Art. 1764. Damages in cases comprised in this Section shall be

awarded with the title XVIII of this book concerning damages.
Article 2206 shall also apply to the death of a passenger caused by
the breach of contract by a common carrier.
Art. 2206. The amount of damages for death caused by a

crime or quasi-delict shall be at least P 3,000 (now P50,000), 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;
(2) If the deceased was obliged to give support according to
the provisions of article 291, the recipient who is not an heir called
to the decedent's inheritance by the law of testate or intestate
succession, may demand support from the person causing the
death, for a period not exceeding five years, the exact duration to
be fixed by the court;
(3) The spouses, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.
Cariaga vs LTBCo., 110 Phil 346
Held: The train driver was not negligent. He sounded the train's whistle four
times before the intersection, which were heard even by the bus passengers.
The bus did not slow down but instead the bus driver tried to pass the
intersection before the train. In addition, another LTBC bus which arrived
ahead of the bus in this case, at the crossing heeded the train whistle by
stopping and allowing the train to pass. Clearly, the bus driver was negligent
in totally disregarding the warning. On the other hand, MRR cannot be held
to be contributorily negligent because LTBC was not able to discharge its
burden of proof when it alleged that MRR violated its charter by failing to ring
the locomotive bell.
The evidence shows that Ed C. had been rendered physically and
mentally invalid by the accident. He suffered head injuries specifically a
fractured right forehead necessitating the removal of all the right frontal lobe
of his brain, which reduced his intelligence by 50% so that he can no longer
PAGE 52
finish his medical course. In addition, he has to lead a quiet and retired life
because if the tantalum plate which replaced a portion of his skull is pressed
in or dented, it would cause his death.
LTBC admitted that under Art. 2201, it is liable for damages that are
the natural and probable consequences of the breach and which the parties
had foreseen or could have reasonably foreseen at the time the obligation
was constituted. It however claims that the said provision contemplates only
the medical, hospital, and other expenses in the total sum of P 17,719.75.
The SC ruled that the income which Ed could earn if he should finish the
medical course, and pass the corresponding board exams must be deemed
included because they could have reasonably been foreseen by the parties at
the time he boarded the bus.
While his scholastic record may not be first rate, it is sufficient to
justify the assumption that he could have finished his course and would have
passed the board exams in due time. As regards the income that he could
possibly earn as a doctor, P 300 (accdg. to LTBC witness, Dr. Doria) could
easily be expected as minimum monthly income of Ed C. had he finished his
studies. Compensatory damages should be increased to P 25,000.
The claim for moral damages could not be granted because Art. 2219
enumerates the instances when moral damages may be recovered and the
present case does not fall under any of them, even par. (2) thereof because
this case is not one of quasi-delict and could not be considered as such
because of a pre-existing contractual relation between Ed C. and LTBC.
Neither could LTBC be liable under Art. 2220 because it did not act
fraudulently or in bad faith. Attorney's fees could also not be granted
because this case does not fall under Art. 2208.
The claim by the parents for actual and compensatory damages is also
without merit because the present action is based upon a breach of contract
of carriage and the parents were not a party thereto, and were not
themselves injured as a result of the collision.
Pan Am vs IAC, 164 SCRA 268
Held: On the basis of stipulations printed at the back of the ticket, Pan Am
contends that its liability for the lost baggage of Pangan is limited to $
600.00 ($20 x 30 kilos) as the latter did not declare a higher value for his
baggage and pay the corresponding charges.
The SC applied the ruling in Mendoza vs PAL: Before defendant could
be held to special damages, such as alleged loss of profits on account of
delay or failure of delivery, it must have appeared that he had notice at the
time of delivery to him of the particular circumstances attending the
shipment, and which probably would lead to such special loss if he defaulted.
In order to impose on the defaulting party further liability than for damages
naturally and directly, i.e. in the ordinary course of things, arising from a
breach of contract, such unusual or extraordinary damages must have been
brought within the contemplation of the parties as the probable result of the
breach at the time of or prior to contracting. In the absence of proof that
Pan Am's attention was called to the special circumstances requiring prompt
delivery of Pangan's luggages, petitioner cannot be held liable for the
PAGE 53
cancellation of Pangan's contracts as it could not have reasonably foreseen

such eventuality when it accepted the luggage for transit. Pan Am was not
privy to the contracts of Pangan nor was its attention called to the condition
therein requiring delivery of the promotional and advertising materials on or
before a certain date.
No attorney's fees could be awarded since there was no unjustified
refusal by Pan Am to satisfy the passenger's just and valid claim.
Villa Rey Transit vs CA, 31 SCRA 511
Held: The determination of damages due is dependent on 2 factors : (1) on

the no. of years on the basis of which damages shall be computed (life
expectancy); and (2) rate at which the losses sustained should be fixed.
CA determined life expectancy accdg. to the American Expectancy
Table of Mortality; and since Quintos was around 30 years old at the time of
his death : 2/3 x [80 - 30] = 33 1/3 years. The bus co. wanted to use the 4
year basis adopted in Alcantara vs Surro but the court held that the case is
not controlling as it did not lay down any rule on the length of time to be
used in the computation of damages. In fact, it declared that there is no
fixed basis for determination of indemnity and much is left to the discretion
of the court considering the material damages involved and that there can be
no exact or uniform rule for measuring the value of human life and the
measure of damages cannot be arrived at by precise mathematical
calculations.
Villa Rey impugns the decision on the ground that damages will have
to be paid NOW where most of those sought to be indemnified will be
suffered years later. This argument if offset by the fact that payment of the
award will take place upon the finality of the decision, fixed at the rate of P
2,184 per year and did not anymore compute the potentiality and capacity of
Quintos to increase his future income, upon conclusion of his training, when
he would be promoted and receive a higher salary.
In determining the losses sustained by the dependents and heirs of
Quintos. they consist NOT of the full amount of his earnings but of the
support they would have received from him had he not died. In fixing said
amount, the necessary living expenses should therefore be deducted from
his earnings. The amount recoverable would therefore be the NET earnings,
which is the portion which the beneficiaries would have received. To this
sum must be added P12,000 pursuant to Art. 104 and 107 of the RPC, in
relation to Art. 2206, NCC and P 1,727.95 for the amount actually spent by
the sisters for his medical and burial expenses and
P 2, 500 attorney's fees.
PAL vs CA, 185 SCRA 110
Held: Under Arts. 1764 and Article 2206 (1), the award of damages for death
is computed on the basis of the life expectancy of the deceased and not of
the beneficiary. In this case, the lower courts determined the deceased
PAGE 54
gross annual income to be P 23,100 less P 9,200 as living expenses,

resulting in a net income of P 13,900. The lower court allowed the
deceased a life expectancy of 30 years. Multiplying his annual net income by
his life expectancy of 30 years, the product is P 417,000, which is the death
indemnity due to his mother and only forced heir.
Because of the long delay in this case, the mother already died without
being able to receive the indemnity she deserved. PAL is ordered to pay her
heirs the death indemnity with legal rate of interest of 6% per annum.
3. Moral
Art. 2217. Moral damages include physical suffering, mental

anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant's
wrongful act or omission.
Art. 2216. No proof of pecuniary loss is necessary in order

that moral, nominal, temperate, liquidated or exemplary damages
may be adjudicated. The assessment of such damages, except
liquidated ones, is left to the discretion of the court, according to
the circumstances of each case.
Art. 2219. Moral damages may be recovered in the following

analogous cases :
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
xxx
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
30, 32, 34 and 35.
xxx
Art. 2220. Willful injury to property may be a legal ground for

awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies
to breaches of contract where the defendant acted fraudulently or
in bad faith.
Art. 2206. xxx

(3) The spouses, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.
Fores vs Miranda 105 Phil 266
PAGE 55
Held: Art. 1764 makes it all the more evident that where the injured
passenger does not die, moral damages are not recoverable unless it is
proved that the CC was guilty of malice or bad faith. In the case at bar, there
is no other evidence of such malice to support an award of moral damages.
To award moral damages for breach of contract, without proof of bad faith or
malice on the part of the CC, as required by Art. 2220, would be to violate
the clear provisions of the law, and constitute unwarranted legislation. A
CC's bad faith is not to be lightly inferred from a mere finding that the
contract was breached through negligence of the CC's EEs. The exception is a
mishap resulting to the death of a passenger in which case Art. 1764 makes
the CC subject to Art. 2206 (award of moral damages).
Air France vs Carrascoso, 18 SCRA 155
Held: Air France contended that the issuance of the first class ticket was no
guarantee that he would have a first class ride, but such would depend upon
the availability of first class seats. The SC ruled that it could not understand
how a reputable firm like Air France could have the indiscretion to give out
tickets it never meant to honor at all. It received the corresponding amount
in payment of first-class tickets and yet it allowed the passenger to be at the
mercy of its EEs. Plaintiff was indeed confirmed for first class all the way to
Rome.
There was contract to furnish plaintiff a first class passage. Said
contract was breached when the CC failed to furnish the first class
transportation at Bangkok. Third, there was bad faith when petitioner's EE
compelled Carrascoso to leave his first class accommodation after he was
already seated and to take a seat in the tourist class by reason of which he
suffered inconvenience, embarrassments and humiliation, thereby causing
him mental anguish, serious anxiety, wounded feelings, and social
humiliation, resulting in moral damages. It is true that the complaint did not
use the term Bad Faith. But the interference of BF is there. The manager
not only prevented Carrascoso from enjoying his right to a first class seat;
worse, he imposed his arbitrary will; he forcibly ejected him from his seat,
made him suffer the humiliation of having to go to the tourist class
compartment -- just to give way to another passenger whose right thereto
has not been established. This is certainly BF. For the willful malevolent act
of CC's manager, the CC-ER must answer. Moral damages are recoverable.
CC's contract with Carrascoso is attended with public duty. The
expulsion of Carrascoso is a violation of a public duty by the CC -- a case of
quasi-delict. Damages are proper. The manner of ejectment of Carrascoso
fits into the legal precept for awarding exemplary damages in addition to
moral damages.
Lopez vs Pan Am, 16 SCRA 431
Held: In so misleading the plaintiffs into purchasing first class tickets in

conviction that they had confirmed reservations when in fact they had none,
PAGE 56
defendant willfully and knowingly placed itself into position of having

breached its contract with plaintiffs.
Such actions of the defendant may indeed have been prompted by
nothing more than the promotion of its self-interest in holding on to plaintiffs
as passengers and foreclosing on their chances to seek the service of other
airlines that may have been able to afford to them first class
accommodations. All the same, in legal contemplation, such conduct already
amounts to action in BF. For bad faith means a breach of a known duty
through some motive of interest of ill will. It may not be humiliating to travel
as tourist passengers, but it is humiliating to be compelled to travel as such,
contrary to what is rightfully to be expected from the contractual
undertaking.
Plaintiffs are entitled to moral damages. Considering their official,
political, social and financial standing, they are awarded P 200,000 as moral
damages, P 75,000 as exemplary damages all with interest, and P 50,000
as attorney's fees considering the standing of plaintiff's counsel.
Ortigas vs Lufthansa, 64 SCRA 610
Held: It is the opinion of the SC that moral damages should be raised from P
100,000 to P 150,000 and exemplary damages be increased from P 30,000 to
P 100,000. It is our considered view that when it comes to contracts of
common carriage, inattention and lack of care on the part of the CC resulting
in the failure of the passenger to be accommodated in the class contracted
for amounts to bad faith or fraud which entitles the passenger to an award of
moral damages in accordance with Art. 2220. In this case, the breach
appears to be of graver nature, since the preference given to the Belgian
passenger over plaintiff was done willfully and in wanton disregard of
plaintiff's rights and his dignity as a human being and as a Filipino, who may
not be discriminated against with impunity. Since both Alitalia and Lufthansa
are members of IATA and are agents of each other, they are bound by the
mistakes committed by a member such as the mistake of the Alitalia EE to
inform Ortigas that he could travel first class instead of only being waitlisted.
The award of higher damages is justified by the aggravation of the situation
when the Lufthansa EE at Rome falsely noted on Ortigas' ticket that he was
traveling economy from Rome to HK and which was repeated four times.
Also taken into consideration was the heart condition of Ortigas which gave
him added apprehension about traveling economy against the advice of the
doctor.
4. Exemplary
Art. 2229. Exemplary or corrective damages are imposed, by

way of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages.
Art. 2232. In contracts and quasi contracts, the court may

award exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
PAGE 57
Art. 2233. Exemplary damages cannot be recovered as a

matter of right; the court will decide whether or not they should be
adjudicated.
Mecenas vs CA, 180 SCRA 83
Held: Before going into the issue, the SC ruled that the action which was
based on quasi-delict should be appropriately regarded as grounded on
contract, and indulged in the presumption of negligence on the part of the
CC although its EEs may have acted beyond the scope of their authority or
even in violation of its instructions. Its liability would include moral damages
(Art. 1764) and exemplary damages if the defendants acted recklessly or
with gross negligence (Art. 2332).
There is no question that the defendants are negligent. As found by
the CFI, DJ steered to the right while TC continued its course to the left.
There can be no excuse for them not to realize that with such maneuvers,
they will collide. They executed maneuvers inadequately and too late, to
avoid collision. The question is WON the defendants were recklessly or
grossly negligent. The SC ruled in the affirmative.
As for the captain, he was playing mahjong before and up to the time
of the collision. WON he was then off-duty is immaterial; there is, both
realistically speaking and in contemplation of law, no such thing as off-duty
hours for the master of a vessel at sea that is a CC upon whom the law
imposes the duty of extraordinary diligence. When the collision occurred, the
captain failed to supervise his crew in the process of abandoning the ship
and he failed to avail of measures to prevent the too rapid sinking of his
vessel, thus aggravating the casualties.
As for Negros Aviation, in permitting, or in failing to discover and
correct the regularity of the captain's mahjong sessions while DJ was at sea,
it must be deemed grossly negligent. It also sailed with an overload (1,004
passengers and crewmembers).
As for the failure of TC to follow R18 by turning right instead of left, the
SC ruled that it is not applicable and will not relieve DJ from responsibility if
the collision could have been avoided by proper care and skill on her part or
even by a departure from the rules. DJ is still at fault when, upon seeing TC
turn to its left, it still turned to its right resulting in the collision.
The SC awarded moral damages of P 307,000 and exemplary damages
of P 307,000 and attorney's fees of P 15,000 together with actual and
compensatory damages for wrongful death of P 126,000 and P 60,000 for a
total of P 815,000. Although the petitioners only asked for P 400,000 award
of damages granted by the CFI, the SC increased it to P 800,000 following the
doctrine that the SC must consider and resolve all issues which must be
decided in order to render substantial justice to the parties, including issues
not explicitly raised by the parties affected.
In discussing the rule of exemplary damages in law, the SC looks to it
as an instrument to serve the ends of law and public policy by reshaping
socially deleterious behaviors, specifically, in the case, to compel CC to
PAGE 58
control their EEs, to tame their reckless instincts, and to force them to take
adequate care of human beings and their property.
5. Nominal, Temperate and Liquidated
Art. 2221. Nominal damages are adjudicated in order that a

right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.
Art. 2224. Temperate or moderate damages, which are more

than nominal but less than compensatory damages, may be
recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be
proved with certainty.
Art. 2226. Liquidated damages are those agreed upon by the

parties to a contract, to be paid in case of breach thereof.
Art. 1757. The responsibility of a common carrier for the

safety of passengers as required in Arts. 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise.
Alitalia vs IAC, 192 SCRA 10
Held: Under the Warsaw Convention, an air carrier is made liable for
damages for: (1) The death, wounding or other bodily injury of a passenger if
the accident causing it took place on board the aircraft or in the course of its
operations of embarking or disembarking; (2)
The destruction, or loss of damage to, any registered luggage or goods, if the
occurrence causing it took place during the carriage by air; and (3) Delay in
the transportation by air of passengers, luggage or goods. The Convention
also limits the liability of the carriers for each passenger to 250,000 francs
and for registered baggage and cargo to 250 francs per kg unless the
passenger has declared a higher rate and has paid additional charges. The
Warsaw Convention, however, denies to the carrier availment of the
provisions which exclude or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as is considered to be
equivalent to wilful misconduct or if the damage is similarly caused by any
agent of the carrier acting within the scope of his employment. The
Convention does not thus operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit of the extent of that
liability. Such proposition is not borne out by the language of the
Convention. The Convention should be deemed a liability only in those cases
where the cause of the death or injury to person, or destruction, loss or
damage to property or delay in its transport is not attributable to or attended
by any wilful misconduct, bad faith, recklessness, or otherwise improper
PAGE 59
conduct. The Convention does not regulate or exclude liability for other
breaches of contract by the carrier. Otherwise, an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in
bad faith, to comply with a contract of carriage. The Warsaw Convention has
invariably been held inapplicable, or as not restrictive of the carrier's liability,
where there was satisfactory evidence of malice or bad faith attributable to
its officers and employees.
In the case at bar, no bad faith or otherwise improper conduct may be
ascribed to the EEs of Alitalia. Dr. Pablo's luggage was eventually returned
belatedly, but without appreciable damage. The fact is, nevertheless, that
some special species of injury was caused to her because Alitalia misplaced
her baggage and failed to deliver it to her at the time appointed -- a breach
of its contract of carriage -- with the result that she was unable to read her
paper that she had painstakingly labored over. The opportunity to claim
honor or distinction for herself, for UP and for the country, was irretrievably
lost to her. She also underwent profound distress and anxiety, which
gradually turned into panic and despair, when she learned that her suitcases
were missing.
The compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for
delay in the transport of baggage. She is not entitled to be compensated for
loss or damage to her luggage since they were ultimately delivered to her.
She is however entitled to nominal damages, which is adjudicated in order
that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated and recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered.
As to the argument that she failed to include a specific claim for
nominal damages in her complaint, it suffices that her general prayer
includes "such other and further just and equitable relief in the premises."
Also absent any claim for actual or compensatory damages (she asked for
moral and exemplary damages and attorney's fees), and with proof of Dr.
Pablo's right being violated, the issue of nominal damages is raised.
The award of P 5,000 for attorney's fees is reasonable. The law
authorizes recovery of attorney's fees where the defendant's act or omission
has compelled the plaintiff to litigate with third person or to incur expenses
to protect his interest, or where the court deems it just and equitable.
Saludo vs CA 207 SCRA 498
Held: (1) Petitioners allege that private respondents received the casketed
remains of petitioner's mother on Oct. 26, 1976 as evidenced by the issuance
of the PAL Airway Bill. 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 Oct. 27, 1976, or one day after
private respondents received the cargo, the latter must necessarily be liable.
Petitioners relied on the doctrine that the issuance of the bill of lading carries
the presumption that the goods were delivered to the carrier issuing the bill,
for immediate shipment, and it is nowhere questioned that a bill of lading is
prima facie evidence of the receipt of the goods by the carrier. A bill of
lading is a written acknowledgment of the receipt of the goods and an
PAGE 60
agreement to transport and deliver them at a specified place to a person

named or on his order. A bill of lading is a receipt as to the quantity and
description of the goods shipped and a contract to transport the goods to the
consignee or other person therein designated, on the terms specified in such
instrument.
SC: An airway bill estops the carrier from denying receipt of goods.
However, as between the shipper and the carrier, when no goods have been
delivered for shipment no recitals in the bill can estop the carrier from
showing the true facts. We must therefore allow the airline companies to
explain, why, despite the issuance of the airway bill and the date thereof,
they deny having received the remains of Saludo on Oct. 26, 1976.
As found by the CA, the airway bill was issued, not as evidence of
receipt of delivery but merely as confirmation for the booking made for the
SF-Manila flight scheduled on October 27, 1976. It was not until Oct. 28 that
PAL received physical delivery of the body at SF. The extraordinary
responsibility of CC begins from the time the goods are delivered to the
carrier. This responsibility remains in force even when they are temporarily
unloaded or stored in transit, unless the shipper exercises the right of
stoppage in transitu, and terminates ony after the lapse of a reasonable time
for the acceptance of the goods by the consignee or other person entitled to
receive them. For such duty to commence, there must in fact have been
delivery of the cargo subject of the contract of carriage. Only when such fact
of delivery has been unequivocally esablished can the reqt. of extraordinary
responsibility arise.
As found by the CA, the body was really received by PAL on Oct. 28,
1976 and it was from such date that it became responsible for the agreed
cargo under the airway bill. Consequently, for the switching of caskets prior
thereto which was not caused by them and subsequent events caused
thereby, PAL cannot be held liable.
(2) Petitioners allege that even assuming CMAS was at fault, PAL would still
be liable because whoever brought the cargo to the airport or loaded it on
the plane did so as agent of PAL.
SC: This contention is without merit. When the cargo was received
from CMAS, Air Care Intl, PAL's agent and TWA had no way of determining its
actual contents, since the casket was hermetically sealed by the Philippine
Vice-Consul. They had to rely on the information given by CMAS. No amount
of inspection by the airlines could have guarded against the switching that
had taken place. They had no authority to unseal and open the casket. It is
the right of the carrier to require good faith on the part of those persons who
deliver goods to be carried by it. In the absence of more definite information,
the carrier has the right to accept shipper's marks as to the contents of the
package offered for transportation and is not bound to inquire particularly
about them. It can safely be said that a CC is entitled to fair representation
of the nature and value of the goods to be carried, with the concomitant right
to rely thereon, and that a carrier has no obligation to inquire into the
correctness or sufficiency of such information. The consequent duty to
conduct an inspection arises in the event that there should be reason to
doubt the veracity of such representations.
PAGE 61
In this case, private respondents had no reason to doubt the truth of

the shipper's representations. The airway bill was issued on the basis of such
representations.
Neither can they be held accountable on the basis of petitioner's
theory that whoever brought the cargo to the airport or loaded it on the
plane did so as an agent of private respondents, so that even if CMAS was
indeed at fault, the liability would be attributed to the airlines. CMAS was not
an agent of private respondents. It was hired to handle all the necessary
shipping arrangements for the transportation of the remains. CMAS may be
classified as a forwarder, which is regarded as the agent of the shipper
(Pomierski) and not of the crrier. It merely contracts for the transportation of
goods by carriers and has no interest in the freight but receives
compensation from the shipper as his agent.
The facts of the case would point to CMAS as the culprit. In fact, even
the petitioners wrote CMAS entertaining serious doubts as to whether they
were responsible for the mix-up. But the court cannot rule on the possible
liability of CMAS as such is not at issue in this case and there has not been
convincing evidence on the matter.
(3) Petitioners contended that TWA by agreeing to transport the remains, it

made itself a party to the contract of carriage nad was therefore bound by
the airway bill. When TWA shipped the remains ten hours earlier than
scheduled, it allegedly violated the terms of the airway bill which
compounded, if not directly caused, the switching of the caskets. The EEs of
TWA presumably caused the mix-up by loading the wrong casket on the
plane. TWA must be presumed negligent unless such is rebutted. TWA
contends that it faithfully complied with the obligations under the airway bill.
Said faithful compliance was not affected by the fact that the remains were
shipped on an earlier flight as there was no fixed time for completion of
carriage stipulated on. TWA did not undertake to carry the cargo aboard any
specified aircraft, in view of the condition on the back of the airway bill,
which provides that " xxx no time is fixed for the completion of the carriage,
xxx and that Carrier may without notice substitute alternate carriers or
aircrafts xxx."
SC : TWA's contention is tenable. TWA can use substitute aircraft, even

without notice and without the assumption of any obligation whatsoever to
carry the goods on any specified aircraft. This is clearly sanctioned by the
contract of carriage. When a CC undertakes to convey goods, the law implies
a contract that they shall be delivered at destination within a reasonable
time, in the absence of any agreement as to the time of delivery. In case at
bar, no special contract for prompt delivery was entered into by the parties.
Condition No. 5 is binding on the plaintiff even if it is printed at the
back of the airway bill. This is in the nature of a contract of adhesion.
However, such condition only serves to insulate the carrier from liability in
those instances when the changes in routes, flights and schedules are clearly
justified by the peculiar circumstances of a particular cae, or by general
transportation practices, customs and usages, or by contingencies,
emergencies in aviation, such as weather turbulence, mechanical failure,
reqts. of national security and the like. In this case, the delay in the
PAGE 62
delivery of the remains cannot be attributed to the fault, negligence or

malice of private respondents. When TWA shipped the remains on an earlier
flight, it did so in the exercise of sound discretion and with reasonable
prudence -- they wanted to assure that the shipment would be received in SF
in sufficient time for transfer to PAL. TWA knew of the urgency of the
shipment due to the notation on the airway bill : "xxx Please return bag first
available flight to SFO."
(4) Petitioners alleged that private respondents are liable for tort on account
of humiliating, arrogant and indifferent acts of their officers and personnel.
They contended that there was no reason for the personnel to disclaim
knowledge of the arrival or whereabouts of the body other than their sheer
arrogance, indifference and extreme insensitivity to their feelings.
SC: It affirmed the CA's findings that TWA EEs did not deal with
petitioners in a grossly humiliating, arrogant or indifferent manner as to
amount to BF or malice. It must be pointed out that the lamentable
actuations of TWA's EEs leave much to be desired, particularly so given the
grief of petitioners, their tension and anxiety wrought by the confusion and
the fear about where their mother's remains were. Airline companies are
sternly admonished to strictly require their personnel to be more
accommodating to passengers and the general public.
Petitioners agonized for 5 hours unattended to and without any
assurance from the EEs of TWA. Common sense should have dictated that
they exert a little extra effort in making more extensive inquiry, by
themselves or through their superiors, rather than just shrug off the
promblem with a callous and uncaring remark that they had no knowledge
about it.
The foregoing observations do not appear to be applicable to PAl and
its EEs.
(5) In the absence of strong and positive evidence of fraud, malice or bad
faith, moral damages cannot be awarded. Neither can exemplary damages
nor attorney's fees, in the absence of proof that defendants acted with
malice, fraud or BF. The censurable conduct of TWA's EEs cannot be said to
have approximated the dimensions of fraud, malice or BF. Nonetheless, the
facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by
every common carrier was violated by TWA and this entitles them, at least,
to nominal damages from TWA alone. Arts. 2221 and 2222 of the Civil Code
makes it clear that nominal damages are not intended for indemnification of
loss suffered but for the vindication or recognition of a right violated or
invaded. They are recoverable where some injury has been done but the
amount of which the evidence fails to show, the assessment of damages
being left to the discretion of the court accdg. to the circumstances of the
case. Nominal damages of P 40,000 to be paid by TWA was awarded in favor
of petitioners as a reasonable amount in the circumstances.
6. Attorney's Fees and Interest
PAGE 63
Art. 2208. In the absence of stipulation, attorney's fees and

expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect
his interest;
(3) In criminal cases of malicious prosecution against the
plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident BF in
refusing to satisfy the plaintiff's plainly valid, just and demandable
claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages or household helpers,
laboreres and skilled workers;
(8) In actions for indemnity under workmen's compensation
and employer's liability laws;
(9) In a separate civil action to recover civil liability arising
from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other cases where the court deems it just and
equitable that attorney's fees and expenses of litigation should be
recovered.
In all cases, the attorney's fees and expenses of litigation
must be reasonable.
Art. 2210. Interest may, in the discretion of the court, be

allowed upon damages awarded for breach of contract.
4 Agbayani:
Damages arising from death; factors to be considered

1. number of years on the basis of which the damages shall be
computed
2. the rate at which the losses sustained should be fixed. In the
determination of the losses or damages sustained by dependents and heirs
of the deceased, said damages consist not of the full amount of his earnings,
but of the support they received or would have received from him had he not
died in consequence of the negligence of defendant.
In fixing the amount of support, only net earnings are to be
considered-- total earnings less expenses necessary in the creation of such
earnings less living and incidental expenses
Damages recoverable when death occurs due to commission of

crime.-- (1) indemnity for the death of victim (P 50T); (2) indemnity for loss
of earning capacity of the deceased; (3) moral damages; (4) exemplary
PAGE 64
damages; (5) attorney's fees and expenses of litigation; and (6) interest.
Indemnity arising from the fact of death is fixed whereas the others are still
subject to the determination of the court based on evidence presented;
indemnity for death is distinct and separate from the other forms of
indemnity
Common carrier not liable for moral damages to passenger injured

due to negligence of driver.-- A CC's bad faith is not to be lightly inferred
from a mere finding that the contract was breached through negligence of
the CC's employees (Fores vs Miranda)
Extent of liability of air carrier for death of passenger:

(1) where there was no satisfactory explanation on the part of PAL as to how
and why the accident occurred, the presumption is that it was at fault, under
Art. 1756
(2) liability for lost earnings are the deceased passenger's net
earnings during his expected length of life based on accepted mortality
tables (compensatory damages)
(3) PAL is not liable for exemplary damages where it was not proven
that it acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner
[Davila vs PAL]
Nature of liability of air carrier to its passengers:
[Zulueta vs Pan Am]
Held: A passenger is entitled to courteous treatment from the carrier and its
EEs and failure of the CC to comply with this obligation will entitle the
passenger to damages.
The relation between CC and passenger involves special and peculiar
obligations and duties, differing in kind and degree, from those of almost
every legal or contractual relation. On account of the peculiar situation of
the parties, the law implies a promise and imposes upon the CC the
corresponding duty of protection and courteous treatment. Therefore, the CC
is under the absolute duty of protecting his passengers from assault or insult
by himself or his servants.
A contract to transport passengers is quite different in kind and degree
from any other contractual relation. And this, because of the relation which
an air carrier sustains with the public. Its business is mainly with the
traveling public. It invites people to avail of the comforts and advantages it
offers. The contract of air carriage, therefore, generates a relation attended
with a public duty. Neglect or malfeasance of the CC's employees naturally
could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a
right to be treated by the CC's EEs with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees.
PAGE 65
So it is, that any rude or discourteous conduct on the part of EEs towards a
passenger gives the latter an action for damages against the CC.
Damages caused by CC on third persons.-- Negligence refers to the

failure to observe for the protection of the interests of another person that
degree of care, precaution, and vigilance which the circumstances justify
demand, whereby such other person suffers injury
Common carrier is liable only for damages that are natural and
probable consequence of breach of contract.-- Where the CC is guilty
of a breach of contract, but acted in GF, it is liable only for the natural and
probable consequences of the breach and which the parties had foreseen or
could have reasonably foreseen at the time the obligation was constituted
(includes medical, hospital expenses)
Actual damages.-- (1) lost income.-- includes income to be earned by the

injured passenger or deceased passenger had he finished his course (could
have been foreseen)
(2) sum being carried by the deceased passenger which was lost
(3) funeral expenses
(4) attorney's fees
(5) loss of merchandise carried by the deceased
(6) loss of baggage and personal belongings
Exception to rule that CC is not liable for moral damages in breach

of contract:
(1) where the mishap results in death of the passenger
(2) where it is proved that the CC was guilty of fraud or BF, even if
death does not result Ex. where because of the BF of the CC, the
passenger suffered social humiliation, wounded feelings, serious anxiety and
mental anguish
Under 2206, the heirs of the deceased passenger may demand moral
damages in an amount commensurate with the mental anguish suffered by
them
xxx
In a case where the passenger suffers physical injuries because of the
CC's injuries, he cannot recover moral damages for such breach of contract
since it does not fall under any of the cases where moral damages are
recoverable under Art. 2219
xxx
In determining the amount of moral damages, the TC may consider the
nature and extent of the injuries and the suffering occasioned by them and
the duration thereof. The appellate court should not interfere unless such is
palpably and scandalously excessive so as to indicate that it was the result of
passion, prejudice or corruption on the part of the TC
BF justifying moral damages must be in the securing, execution and

enforcement of contract of carriage. BF cannot be imputed but must be
alleged and proved; mere carelessness of the CC's driver does not per se
constitute or justify an inference of malice or BF on the part of the CC
PAGE 66
xxx
CC is subsidiarily liable for moral damages in actions ex delicto or
where the action is based upon its liability arising from a crime
xxx
CC is not ordinarily liable for exemplary or corrective damages based
upon the wrongful act of its EE or driver where it did not have anything to do
with the wrongful act or had not previously authorized or subsequently
ratified such act (Art. 2332) This cannot be presumed but must be proven by
evidence; exemplary damages cannot be recovered as a matter of right
Nominal and exemplary damages awarded for willful breach of

contract committed through agent or EE
xxx
Where the CC has incurred in delay in the delivery of the luggage of
the offended party, but it had not acted in BF nor been guilty of gross
negligence, the offended party is not entitled to moral nor exemplary
damages but only to the limited amount printed in the plane ticket where the
offended party had not declared a higher value nor paid addtl. transpo
charges
Liability of air carriers for moral and exemplary damages.-- [Ortigas

vs Lufthansa] (1) Under the pool arrangement among different airlines of the
IATA agreement of which Alitalia and Lufthansa are signatories, both airlines
are constituted as agents of each other in the issuing of tickets and other
matters pertaining to their relations with those who would need their
services.
(2) When it comes to contracts of common carriage, inattention and
lack of care on the part of the CC resulting in the failure of the passenger to
be accommodated in the class contracted for amounts to BF or fraud which
entitles the passenger to the award of moral damages. Where the
passenger's seat was given to a white passenger, there is willful breach
giving rise to an action for moral damages.
(3) Exemplary damages were awarded. Defendant as an airline should
be made to pay an amount that can really serve as a deterrent against a
seeming pattern of indifference and unconcern, and discrimination for racial
reasons, discernible in the treatment of air passengers.
[PAL vs CA, 106 SCRA 391] The duty to exercise the utmost diligence on the
part of the CC is for the safety of passengers as well as for the members of
the crew or the complement operating the carrier. Any omission, lapse or
neglect thereof will certainly result to the damage, prejudice, injuries and
even death to all aboard the plane, passengers, and crew members alike.
xxx
[KLM vs CA] A provision in passage ticket that carriage by successive air
carriers is to be regarded as a single operation makes the ticket-issuing
carrier liable for tortious conduct of other carriers
xxx
Exemplary damages may be awarded where the vehicle involved in
the accident operated under the kabit system, which is a pernicious system
PAGE 67
in violation of law and which is in fraud of the traveling public which has a
right to expect that the holder of the certificate of convenience be the one to
actually operate his transport line.
xxx
CC is liable for nominal damages for its failure to bring passengers to
their destination which is in violatin of their right as passengers.
xxx
The CC is liable for the negligence of his driver in case of breach of
contract and cannot avail of the defense that he exercised due diligence in
the employment of his driver. The action for breach of contract imposes on
the CC a presumption of liability upon mere proof of injury to the passenger.
xxx
An action for damages against CC for breach of contract is primary and
independent and does not depend upon the previous conviction of the driver
or EE. Indemnification in a criminal prosecution is distinct from that
awarded as damages in a civil action.
Other Principles :
The offended party has the option between an action for enforcement
of civil liability based on culpa criminal and an action for recovery of
damages based on culpa aquiliana. Responsibility for negligence under the
Civil Code is entirely separate from negligence under the Penal Code.
An independent civil action based on quasi-delict against the ER-

operator of a negligent driver cannot be suspended by the filing of a criminal
action against the driver.
Death of driver is not a hindrance to a separate quasi-delict action

against the CC-employer
There is no error in awarding civil damages against a driver in a

criminal case even when a separate civil action was filed against the ER.
Culpa contractual and an act or omission punishable by law are two distinct
sources of obligation.
III. CODE OF COMMERCE PROVISIONS ON OVERLAND

TRANSPORTATION
COMMERCIAL CONTRACTS FOR TRANSPORTATION OVERLAND
A. Scope of Overland Transportation
PAGE 68
B. Nature of Contract
Art. 349. A contract of transportation by land or waterways of

any kind shall be considered commercial:
1. When it involves merchandise or any object of commerce.

2. When, no matter what its object may be, the carrier is a
merchant or is customarily [habitually] engaged in transportation
for the public.
Requisites for a contract of transportation by land or water to be

commercial :
(1) transportation of merchandise is always commercial
(2) transportation of person or news is commercial only when the CC is
a merchant or is habitually engaged in transportation for the public
* principal requirement : the CC is a merchant or is habitually engaged
in transportation for the public; the object carried is of little importance
A contract of air transportation may be regarded as commercial since

it is analogous to land and water transportation. The reason for its non-
inclusion in the Code of Commerce was that at the time of its promulgation,
air transportation on a commercial basis was not yet known.
C. Effect of Civil Code
Art. 1766. In all matters not regulated by this Code, the rights
and obligations of common carriers shall be governed by the Code
of Commerce and by special laws. (New Civil Code.)
Art. 2270. The following laws and regulations are hereby

repealed:
(2) The provisions of the Code of Commerce governing sales,
partnership, agency, loan, deposit and guaranty;
(4) All laws, Acts, parts of Acts, rules of court, executive
orders, and administrative regulations which are inconsistent with
this Code. (Ibid.)
There is now no distinction between a transportation contract of a CC

under the Civil Code and a transportation contract under the Code of
Commerce
The New Civil Code does not expressly repeal the provisions of the
Code of Commerce on overland transportation; it makes such provisions
suppletory to the provisions of the Civil Code on CCs.
D. Contract of Carriage
1. Bill of Lading
PAGE 69
(a) Definition, Subject Matter
Art. 352. The bills of lading or tickets in cases of trans-

portation of passengers may be diverse, one for persons and
another for baggage; but all of them shall bear the name of the
carrier, the date of shipment, the point of departure and arrival, the
cost, and with regard to the baggage, the number and weight of the
packages, with such other statements which may be necessary for
their easy identification.
A bill of lading may defined as a written acknowledgment of the

receipt of goods and an agreement to transport and to deliver them at a
specified place to a person named or on his order. It comprehends all
methods of transportation.
Nature : (1) each bill is a contract in itself and the parties are bound by its
terms
(2) a bill of lading is also a receipt
(3) it is also a symbol of the goods covered by it
A bill of lading is also a document of title. A document of title is any

document used in the ordinary course of business in the sale or transfer of
goods, as proof of the possession or control of goods, or authorizing or
purporting to authorize the possessor of the document to transfer or receive,
either by indorsement or by delivery, goods represented by such document.
(b) Form, Contents
Art. 350. The shipper as well as the carrier of merchandise

and goods may mutually demand of each other the issuance of a bill
of lading in which there shall be stated:
1. The name, surname, and domicile of the shipper.
2. The name, surname, and domicile of the carrier.
3. The name, surname, and domicile of the person to whom
or to whose order the goods are addressed, or whether they are to
be delivered to the bearer of the said bill.
4. A description of the goods, stating their generic character,
their weight, and the external marks or signs of the packages
containing the same.
5. The cost of the transportation.
6. The date of which the shipment is made.
7. The place of the delivery to the carrier.
8. The place and time at which the delivery is to be made
to the consignee.
9. The damages to be paid by the carrier in case of delay, if
any agreement is made on this point.
PAGE 70
Art. 351. In transportation made by railroads or other enterprises

which are subject to schedules or the time fixed by regulations, it
shall be sufficient that the bills of lading or the declarations of
shipment furnished by the shipper refer, with respect to the rate,
terms, and special conditions of the transportation, to the schedules
and regulations, the application of which he requests; and should no
schedule be determined, the carrier must apply the rate of the
merchandise paying the lowest, with the conditions inherent
therein, always including such statement or reference to them in the
bill of lading which he delivers to the shipper.
Many of the items required in a bill of lading may be omitted with much
advantage to commerce, which aims to have the greatest number of
transactions in the last possible time especially in cases where there are
tariffs or regulations issued by the carrier company. In this case, the
circumstances relative to price, term and conditions of carriage may be
omitted and simple reference be made to the tariff and regulations under
which the transportation is to be made. (Art. 351)
The form of the bill of lading is not material : if it contains an

acknowledgment by the carrier of the receipt of goods for transportation, it is
in legal effect, a bill of lading
A ticket issued by a carrier to a passenger is not only a receipt for the
fare paid but is the contract between the passenger and the carrier, of the
passenger's right to ride in the CC's vehicle
Classes of bills of lading :

1. negotiable B/L - where it is stated that the goods will be delivered to
the bearer, or to the order of any person named in such document
2. non-negotiable B/L - where the goods are to be delivered to a
specified person
3. clean B/L - does not indicate any defect in the goods
4. foul B/L - indicates that the goods covered by it are in bad condition
5. spent B/L - covers goods that have already been delivered by the CC
without a surrender of a signed copy of the B/L; the subsequent delivery of
the spent B/L cannot give to the buyer of it any actual control of the goods,
or anything which can fairly be called delivery
6. through B/L - issued by the CC who is obliged to use the facilities of
other carriers as well as his own facilities for the purpose of transporting the
goods from the city of the seller to the city of the buyer, which B/L is honored
by the subsequent interested carriers who do not issue their own ladings
7. on board B/L - states that the goods have been received on board
the vessels which is to carry the goods
8. received for shipment B/L - states that the goods have been
received for shipment with or w/o specifying the vessel by which the goods
are to be shipped; issued when conditions are not normal and there is an
insufficiency of shipping space
9. custody B/L - issued by the CC to whom the goods have been
delivered for shipment but the steamer indicated in the B/L which is to carry
PAGE 71
the goods has not yet reached the port where the goods are held for
shipment
10. port B/L - issued by the CC to whom the goods have been delivered
and the steamer indicated in the B/L by which the goods are to be shipped is
already in the port where the goods are held for shipment
Negotiation of Bills by delivery/ by indorsement
Effect of fraud, accident on validity of negotiation : not impaired where

the person to whom the bill was negotiated paid value thereof in GF without
notice of the breach of duty or loss, theft, fraud, accident, mistake, duress or
conversion
Who may negotiate? owner; any person to whom possession or

custody of the bill has been entrusted by the owner
Rights acquired:
1. such title to the goods as the person negotiating the bill had or had
ability to convey to a buyer in good faith for value
2. direct obligation of the CC issuing the bill to hold possession of the
goods for him according to the terms of the B/L as fully as if such CC
contracted directly with him
Transfer of non-negotiable B/L
Rights acquired:
1. as against the transferor, title to the goods subject to the terms of
any agreement with the transferor
2. right to notify the CC who issued the bill and thereby acquire the
direct obligations of such CC to hold possession of the goods for him accdg to
the terms of the document; prior to notification of the CC, the title of the
transferee may be defeated by levy upon the goods or a subsequent
purchaser from the transferor of a subsequent sale of the goods by a
transferor
(c) Function
Art. 353. The legal basis of the contract between the shipper
and the carrier shall be the bills of lading, by the contents of which
all disputes which may arise with regard to their execution and
fulfillment shall be decided, no exceptions being admissible other
than forgery or material errors in the drafting thereof.
After the contract has been complied with, the bill of lading
shall be returned to the carrier who may have issued it, and by
virtue of the exchange of this title for the article transported, the
respective obligations and actions shall be considered canceled,
unless the same act the claims which the contracting parties desire
PAGE 72
to reserve are reduced to writing, exception being made of the

provisions of Article 366.
In case the consignee, upon receiving the goods, cannot

return the bill of lading subscribed by the carrier, due to its loss or
for any other cause, he shall give said carrier a receipt for the goods
delivered, this receipt producing the same effect as the return of
the bill of lading.
B/L constitutes the legal evidence of the contract of transportation --> all
disputes between the parties regarding the execution and performance of the
contract shall be decided by the contents of the B/L issued by the CC --> the
law admits no exceptions other than falsity and material error in the drafting
of the B/L
As a contract expressing the terms and conditions upon which the

property is to be transported, it is to be regarded as merging all prior and
contemporaneous agreements of the parties, and in the absence of fraud,
concealment or mistake, its terms or legal import, when free from ambiguity
cannot be explained nor added to by parol (Parol Evidence Rule)
2. Refusal to Transport
Art. 356. Carriers may refuse to accept packages which

appear unfit for transportation; and if said transportation is to be
made by railway, and the shipment is insisted on, the company shall
carry them, being exempt from all liability if its objections are so
stated in the bill of lading.
CC cannot ordinarily refuse to carry a particular class of goods to the

prejudice of the traffic in those goods
exception : when the goods or packages are unfit for transportation
--> if transpo is insisted upon, railroads cannot refuse to carry them, but they
shall be exempt from all responsibility if their objections are made to appear
in the B/L
3. Doubtful declaration of contents
Art. 357. If by reason of well-founded suspicions of falsity in

the declaration of the contents of a package, the carrier should
decide to examine it, he shall do so before witnesses, in the
presence of the shipper or of the consignee.
Should the shipper or consignee cited not appear, the exami-
nations shall be made before a notary, who shall draft a certificate
of the result of the examination, for such purposes as may be
proper.
PAGE 73
If the declaration of the shipper should be correct, the

expenses caused by the examination and those of carefully repack-
ing the packages shall be defrayed by the carrier, and in a contrary
case by the shipper.
If the CC has a well-founded suspicion of falsity in the declaration as to the

contents of a package, he may examine it --> he must follow the procedure
under 357
4. No bill of lading
Art. 354. In the absence of a bill of lading the respective

claims of the parties shall be decided by the legal proofs that each
one may submit in support of his claims, in accordance with the
general provisions established in this Code for commercial
contracts.
Art. 351. In transportation made by railroads or other

enterprises which are subject to schedules or the time fixed by
regulations, it shall be sufficient that the bills of lading or the
declarations of shipment furnished by the shipper refer, with
respect to the rate, terms, and special conditions of the trans-
portation, to the schedules and regulations, the application of which
he requests; and should no schedule be determined, the carrier
must apply the rate of the merchandise paying the lowest, with the
conditions inherent therein, always including such statement or
reference to them in the bill of lading which he delivers to the
shipper.
Bill not essential to contract : While under 350, the shipper and the CC may
mutually demand that a B/L is made, it is not obligatory. The fact that a B/L
is not issued does not preclude the existence of a contract of transpo.
Provided there is a meeting of the minds and from such meeting arise rights
and obligations, there should be no limitations as to form.
The B/L is not essential to the contract, although it may become
obligatory by reason of the regulations of companies or as a condition
imposed in the contract by agreement of the parties themselves
Where no B/L is issued, the disputes between the parties shall be
decided accdg. to the rules laid down in Art. 354
E. Responsibility of the Carrier
1. When it commences
Art. 355. The liability of the carrier shall begin from the
moment he receives the merchandise, in person or through a person
entrusted therewith in the place indicated for their reception.
PAGE 74
The responsibility of the CC commences from the moment he receives the

merchandise --> the delivery must be made to him personally or through his
duly authorized agent, and at the place indicated for receiving the
merchandise
2. Route
Art. 359. If there should be an agreement between the

shipper and the carrier with regard to the road over which the
transportation is to be made, the carrier may not change the route,
unless obliged to do so by force majeure; and should he do so
without such cause, he shall be liable for any damage which may be
suffered by the goods transported for any other cause whatsoever,
besides paying the amount which may have been stipulated for such
a case.
When on account of said force majeure the carrier is obliged
to take another route, causing an increase in the transportation
charges, he shall be reimbursed for said increase after formal proof
thereof.
Where there is an agreed route, the CC shall be liable for losses due not only
to the change of route but also to other causes, together with the indemnity
agreed upon --> the CC may not avail of the contract limiting his liability in
case of unjustified change of route
Where there is no agreed route, the carrier must select one which may
be the shortest, least expensive and practically passable
3. Care of Goods
Article 361. The merchandise shall be transported at the risk

and venture of the shipper, if the contrary was not expressly
stipulated.
Therefore, all damages and impairment suffered by the goods
during the transportation, by reason of accident, force majeure, or
by virtue of the nature or defect of the articles, shall be for the
account and risk of the shipper.
The proof of these accidents is incumbent on the carrier.
When goods are delivered on board a ship in good order and condition, and
the shipper-owner delivers them to the shipper in bad order and condition, it
then devolves upon the shipowner to both allege and prove that the goods
were damaged by reason of some fact which legally exempts him from
liability
The shipper will suffer losses and deteriorations arising from fortuitous
event, force majeure, or inherent nature and defects of the goods (at the risk
and venture of the shipper)
PAGE 75
It does not mean that the CC is free from liability for losses and
deterioration arising from his negligence or fault, which is presumed
Relate this with Art. 1734 and 1735 of the Civil Code
Art. 362. The carrier, however, shall be liable for the losses
and damages arising from the causes mentioned in the foregoing
article if it is proved that they occurred on account of his
negligence or because he did not take the precautions usually
adopted by careful persons, unless the shipper committed fraud in
the bill of lading, making him believe that the goods were of a class
or quality different from what they really were.
If, notwithstanding the precaution referred to in this article,

the goods transported run the risk of being lost on account of the
nature or by reason of an unavoidable accident, there being no time
for the owners to dispose of the same, the carrier shall proceed to
their sale, placing them for this purpose at the disposal of the
judicial authority or of the officials determined by special
provisions.
Burden of proof : the CC has the burden of proving that the injury was
occasioned by one of the excepted causes
The shipper then has the burden to prove that although the injury may
have been occasioned by one of the excepted causes, yet still the CC is
responsible if the injury might have been avoided by the exercise of
reasonable skill and attention on his part
Art. 362 is in consonance with Art. 1735, NCC --> except that under
1732, proof of extra-o diligence is required and not just ordinary diligence as
implied under 362
Where goods run risk of loss due to their nature, Art. 362 provides for
the remedy of sale by the CC of the goods, placing them for the purpose at
the disposal of the judicial authority or of the officials designated by special
provisions
Art. 1734. Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless the same is due to
any of the ff. causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
PAGE 76
(5) Order or act of competent public authority. (New Civil

Code.)
Art. 1735. In all cases other than those mentioned in Nos.

1,2,3,4, and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, CCs are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Art. 1733. (Ibid.)
4. Delivery
(a) Condition of Goods
Art. 363. With the exception of the cases prescribed in the

second paragraph of Article 361, the carrier shall be obliged to
deliver the goods transported in the same condition in which,
according to the bill of lading, they were at the time of their receipt,
without any damage or impairment, and should he not do so, he
shall be obliged to pay the value of the goods not delivered at the
point where they should have been and at the time the delivery
should have taken place.
If part of the goods transported should be delivered the
consignee may refuse to receive them, when he proves that he
cannot make use thereof without the others.
Duty to deliver goods : duty to deliver the goods in the same condition in
which accdg. to the B/L they were found at the time they were received,
without damage or impairment --> otherwise, the CC is liable for damages
Partial delivery: The consignee may refuse to receive the goods

delivered, if he can prove that he cannot make use of them independently of
those not delivered --> true solution depends upon the economic use which
the goods transported have (consignee cannot be arbitrary and must justify
his determination)
Estoppel of shipper by laches : neglect or delay of shipper to demand
immediately, or within a reasonable time, the return of the merchandise
shipped or its value in case of non-delivery constitutes estoppel by laches
Places the CC at a disadvantageous position to show that it had
fulfilled what it had undertaken; makes it difficult for the CC to prove delivery
Art. 364. If the effect of the damage referred to in Article 361

should be only a reduction in the value of the goods, the obligation
of the carrier shall be reduced to the payment of the amount of said
reduction in value, after appraisal by experts.
PAGE 77
Where all the goods are delivered but damage is to such an extent
that their value is diminished, the obligation of the CC shall be reduced to the
payment of the amount which, in the judgment of experts, constitute such
difference in value --> subject of course to other damages under the NCC
Art. 365. If, on account of the damage, the goods are

rendered useless for sale or consumption for the use for which they
are properly destined the consignee shall not be bound to receive
them, and may leave them in the hands of the carrier, demanding
payment of their value at the current market price that day.
If among the goods damages there should be some in good
condition and without any defect whatsoever, the foregoing provi-
sion shall be applicable with regard to the damaged ones, and the
consignee shall receive those which are sound, this separation being
made by distinct and separate articles, no object being divided for
the purpose, unless the consignee proves the impossibility of
conveniently making use thereof in this form.
The same provision shall be applied to merchandise in bales or
packages, with distinction of the packages which appear sound.
Where damage renders the goods useless for sale and consumption for the
purposes for which they are properly destined:
1. if the damage affects all goods, the consignee may abandon all the
goods to the CC who shall pay the corresponding damages
2. if the damage affects only some of the goods, the consignee may
abandon only the damaged goods --> but if the consignee can prove that it is
impossible to conveniently use the undamaged goods in that form, without
the damaged goods, the law authorizes the consignee to abandon all the
goods
Art. 366. Within the twenty-four hours following the receipt of

the merchandise a claim may be made against the carrier on
account of damage or average found upon opening the packages,
provided that the indications of the damage or average giving rise
to the claim cannot be ascertained from the exterior of said
packages, in which case said claim shall only be admitted at the
time of the receipt of the packages.
After the periods mentioned have elapsed, or after the

transportation charges have been paid, no claim whatsoever shall
be admitted against the carrier with regard to the condition in
which the goods transported were delivered.
In case of damaged goods, the damage may either be (1) ascertainable only
by opening of the packages, or (2) ascertainable from the outside part of the
package
PAGE 78
In Case 1, the claim against the CC for damages must be made within
24 hours following the receipt of the merchandise
In Case 2, the claim must be made at the time of receipt
The claim must be made before the payment of transportation charges
** otherwise, no action for damages may be maintained against the CC
When period begins to run : period begins to run when the consignee
received possession of the goods such that he may exercise over it the
ordinary control pertinent to ownership
There must be delivery of the merchandise by the CC to the consignee
at the place of destination --> Art. 366 applies only to cases of claims for
damage to goods actually turned over by the CC and received by the
consignee
The conditions under Art. 366 are not limitation of action but are
conditions precedent to a cause of action --> if the shipper or consignee fails
to allege and prove the conditions under 366, he shall have no right of action
against the CC
The CC may require in the B/L that the goods be examined at the time
of delivery thereof --> the CC may likewise waive such right
Art. 366 is modified by a B/L prescribing a longer period for filing of

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

reasonable opportunity and facilities to check the validity of the claims while
the acts are still fresh in the minds of the person who took part in the
transaction and the documents are still available.
The consignee may file a provisional claim : it is not necessary that

such claim should state a detailed list of the loss or damage; they only have
to contain descriptions of the shipments in question sufficient to have
allowed the CC to make reasonable verifications of such claim --> the
determination of the specific amount of damages claimed should be done
carefully and without haste and these can be done only in a formal claim
which will be filed after the provisional claim
This stipulation is in the nature of a limitation upon the owner's right to

recovery --> the burden of proof is on the CC to show that the limitation was
reasonable and in proper form or within the time stated (see Southern Lines
vs CA)
PAGE 79
A a stipulation in the B/L providing for a shorter period than the

statutory period within which to bring action for breach is valid --> does
not in any way defeat the right to recover but merely requires that said right
be asserted by action at an earlier period (filing of claims is different from
filing of suits)
Art. 367. If there should occur doubts and disputes between

the consignee and the carrier with regard to the condition of goods
transported at the time of their delivery to the former, the said
goods shall be examined by experts appointed by the parties, and in
case of disagreement, a third one appointed by the judicial
authority, the result of the examination being reduced to writing;
and if the persons interested should not agree to the report of the
experts and could not settle their disputes, said judicial authority
shall order the deposit of the merchandise in a safe warehouse, and
the parties interested shall make use of their rights in the proper
manner.
If doubts and disputes should arise between the consignee and the CC with
respect to the condition of the goods transported at the time of the delivery,
Art. 367 shall govern --> expert opinion on the matter is not conclusive on
the parties
(b) To Whom Delivery Made
Art. 368. The carrier must deliver to the consignee without

any delay or obstruction the merchandise received by him, by the
mere fact of being designated in the bill of lading to receive it; and
should he not do so he shall be liable for the damages which may
arise therefrom.
The delivery must be made to the consignee
Where the B/L is issued to the order of the shipper, the CC is under a duty
not to deliver the merchandise except upon presentation of the B/L duly
indorsed by the shipper, and where the CC delivered the goods to another
person who did not present the B/L, such CC is liable for misdelivery --> duty
to transport the goods safely and to deliver them to the person indicated in
the B/L
Misdelivery: Delivery to a person different from that indicated in the B/L -->
different from non-delivery
In case of conflicting orders of the shipper and the consignee (where
one orders the return and the other orders the delivery of the goods), there is
no other recourse than to determine at what moment the right of the shipper
to countermand the shipment terminates --> this moment can be no other
than the time when the consignee or legitimate holder of the B/L appears
PAGE 80
with such B/L before the CC and makes himself a party to the contract (prior
to that time, he is a stranger to the contract)
(c) Judicial Deposit
Art. 369. Should the consignee be not found at the domicile

indicated in the bill of lading, or should refuse to pay the
transportation charges and expenses, or to receive the goods, the
deposit of said goods shall be ordered by the municipal judge,
where there is no judge of first instance, to be placed at the
disposal of the shipper or sender, without prejudice to a person
having a better right, this deposit having all the effects of a
delivery.
Judicial deposit as a remedy:

1. where the consignee cannot be found at the residence indicated
2. where the consignee refused to pay the transportation charges
3. where the consignee refuses to receive the goods
Judicial deposit shall produce all the effects of delivery subject to third
persons with better rights
Duty to look for consignee : if consignee is not present, he is entitled
to reasonable notice from the CC of their arrival and a fair opportunity to
take care of and remove them
: if the consignee is unknown to the CC, the latter must use proper and
reasonable diligence to find him, and if the consignee still cannot be found,
the goods may be stored in a proper place and the CC will have performed
his whole duty and shall be discharged from liability as a CC
Failure to look for consignee and to give him reasonable notice shall
make the CC liable for damages resulting from the delay in the receipt of the
goods by the consignee --> apply 1738 on the liability of the CC even when
the goods are deposited in its warehouse until after the consignee has been
given reasonable notice and opportunity to remove the goods
Art. 1752. Even when there is an agreement limiting the

liability of the CC in the vigilance over the goods, the CC is
disputably presumed to have been negligent in case of their loss,
destruction or deterioration. (New Civil Code.)
(d) When to be made
Article 370. If a period has been fixed for the delivery of the
goods, it must be made within the same, otherwise the carrier shall
pay the indemnity agreed upon in the bill of lading, neither the
shipper nor consignee being entitled to anything else.
PAGE 81
Should no indemnity have been agreed upon and the delay

exceeds the time fixed in the bill of lading, the carrier shall be liable
for the damages which may have been caused by the
delay.
Art. 358. Should no period within which goods are to be

delivered be previously fixed, the carrier shall be under the
obligation to forward them in the first shipment of the same or
similar merchandise which he may make to the point of delivery;
and should he not do so, the damages occasioned by the delay shall
be suffered by him.
Where period fixed for delivery : the CC must deliver the goods within the
time fixed --> for failure to do so, the CC shall pay indemnity stipulated in
the B/L, neither the shipper nor the consignee being entitled to anything else
--> however, under the CC, damages shall be paid if the carrier refuses to
pay the stipulated indemnity or is guilty of fraud in the fulfillment of his
obligation (Art. 1126,NCC)
If no indemnity has been stipulated and the delay exceeds the time
fixed in the B/L, the CC shall be liable for the damages that the delay may
have caused, e.g. the difference between the MV of the goods at the time
when they should have been delivered, and the price at the time when they
were delivered to which may be added reasonable expenses caused by delay
A CC in GF may be held liable only for damages that were foreseen or

might have been foreseen at the time the contract of transpo was entered
into --> before a CC could be held liable for special damages, such as loss of
profits on account of the delay or failure of deliver, he must have notice at
the time of the delivery of the particular circumstances attending the
shipment and which would probably lead to such special loss if he defaulted
(Mendoza vs PAL)
If the CC incurs in delay in transporting the goods, a natural disaster
shall not free such carrier from responsibility; where the CC without cause
delays the transportation of the goods, the contract limiting the CC's liability
cannot be availed of in case of the loss, destruction or deterioration of the
goods
Where property in the hands of a CC is not delivered within a
reasonable time after it has reached its destination, the CC in the absence of
any legal exemption and after demand has been made and delivery refused,
is liable for a conversion of the property --> the consignee may waive title to
the property and sue for conversion and is entitled to the value of the goods
at the time they should have been delivered to him --> subsequent tender of
the goods by the CC is not available as a defense
If there has been demand and the CC tenders the goods, the
consignee cannot refuse to receive the goods and sue for conversion; his sole
remedy is an action for damages on account of the delay --> there can only
be conversion if there has been demand and the CC refuses delivery
PAGE 82
The time for delivery when no period fixed : the CC shall be bound to
forward them in the first shipment of the same or similar goods which he
makes to the point where he must deliver them --> should he not do so, the
damages caused by the delay shall be for his account
Art. 358 is not violated when though the goods were not shipped on
the train agreed upon, they were shipped on another train which arrived
earlier than the one agreed upon
(e) Two or more carriers
Art. 373. A carrier who delivers merchandise to a consignee

by virtue of agreements or combined services with other carriers
shall assume the obligations of the carriers who preceded him,
reserving his right to proceed against the latter if he should not be
directly responsible for the fault which gives rise to the claim of the
shipper or of the consignee.
The carrier making the delivery shall also assume all the
actions and rights of those who may have preceded him in the
transportation.
The shipper and the consignee shall have an immediate right

of action against the carrier who executed the transportation
contract, or against the other carriers who received the goods
transported without reservation.
The reservations made by the latter shall not however exempt

them from the liabilities they may have incurred by reason of their
own act.
Successive carriers shall assume the obligations of previous carriers but have
a right of action against previous carriers is the latter are directly responsible
for the fault giving rise to the claim of the shipper
(f) Obligation to keep registry
Art. 378. Transportation agents shall be obliged to keep a

special registry, with the formalities required by Article 36, in which
there shall be entered, in progressive order of number and dates, all
the goods the transportation of which is undertaken, stating the
circumstances required by Articles 350 et seq. for the respective
bills of lading.
(g) Compliance with administrative regulations
Art. 377. The carrier shall be liable for all the consequences
arising from noncompliance on his part with the formalities
PAGE 83
prescribed by the laws and regulations of the public administration

during the entire course of the trip and upon arrival at the point of
destination, except when his omission arises from his having been
induced into error by false statements of the shipper in the
declaration of the merchandise.
If the carrier has acted in accordance with a formal order
received from the shipper or consignee of the merchandise both
shall incur liability.
The CC is exempted from responsibility where his failure to comply arises

from having been led into error by the falsehood on the part of the shipper in
the declaration of the merchandise
The shipper or consignee may become liable for noncompliance with
govt. rules and regulations, when the CC has acted by virtue of a formal
order of the shipper or consignee --> but the CC continues to be liable
F. Rights and Obligations of Shipper and/or Consignee
1. Right to Damages
(a) Condition imposed on right
Art. 366. Within the twenty-four hours following the receipt of

the merchandise a claim may be made against the carrier on
account of damage or average found upon opening the packages,
provided that the indications of the damage or average giving rise
to the claim cannot be ascertained from the exterior of said
packages, in which case said claim shall only be admitted at the
time of the receipt of the packages.
After the periods mentioned have elapsed, or after the
transportation charges have been paid, no claim whatsoever shall
be admitted against the carrier with regard to the condition in
which the goods transported were delivered.
Art. 357. If by reason of well-founded suspicions of falsity in

the declaration of the contents of a package, the carrier should
decide to examine it, he shall do so before witnesses, in the
presence of the shipper or of the consignee.
Should the shipper or consignee cited not appear, the exami-
nations shall be made before a notary, who shall draft a certificate
of the result of the examination, for such purposes as may be
proper.
If the declaration of the shipper should be correct, the
expenses caused by the examination and those of carefully repack-
ing the packages shall be defrayed by the carrier, and in a contrary
case by the shipper.
PAGE 84
the bill of lading.
Effect of return of the B/L or giving of the receipt: The respective

obligations and actions of the parties against each other shall be considered
canceled, except where in the same act of return or giving of a receipt the
claims of the parties be reduced to writing subject to the provisions of Art.
366
(b) Amount of damages for loss
Art. 372. The value of the goods which the carrier must pay in
case of their being lost or mislaid shall be fixed in accordance with
what is stated in the bill of lading, no proofs being allowed on the
part of the shipper that there were among the goods declared
therein articles of greater value, and money.
Horses, vehicles, vessels, equipments, and all the other

principal and accessory means of transportation, shall be especially
obligated in favor of the shipper, although with respect to railroads
said obligation shall be subordinated to the provisions of the laws of
concession with regard to property and to those of this Code with
regard to the manner and form of making attachments and seizures
against the said companies.
The value of the goods stated in the B/L is conclusive between the parties
and the shipper is not allowed to prove a higher value
It is only when the CC's fault is so gross as to amount to actual fraud,
that the actual amount of the losses and damages suffered may be proved
by the shipper against the carrier
PAGE 85
Par. 2 especially binds the horses, vehicles, vessels and eqpt. and all other
principal and accessory means of the CC in favor of the shipper --> this lien
is a security for the payment of the value of the goods which the CC must
pay in case of loss or misplacement
Art. 1744, NCC. A stipulation between the CC and the shipper
or owner limiting the liability of the former for the loss, destruction
or deterioration of the goods to a degree less than extra-o diligence
shall be valid, provided it be:
(1) in writing, signed by the shipper or owner;
(2) supported by a valuable consideration other than the
service rendered by the CC; and
(3) reasonable, just, and not contrary to public policy. (New
Civil Code.)
(c) Amount of damages for delay
Art. 371. In cases of delay on account of the fault of the

carrier, referred to in the foregoing articles, the consignee may
leave the goods transported in the hands of the carrier, informing
him thereof in writing before the arrival of the same at the point of
destination.
When this abandonment occurs, the carrier shall satisfy the
total value of the goods, as if they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss and
damages on account of the delays cannot exceed the current price
of the goods transported on the day and at the place where the
delivery was to have been made. The same provision shall be
observed in all cases where this indemnity is due.
Damages for delay (par. 3) : Provided there is no express agreement as to

indemnity in the B/L and there is no fraud on the part of the CC, and the
goods have a known current price at the place and on the day they should
have been delivered, the damages shall not exceed such value --> subject to
Civil Code provisions on damages in case of delay
2. Right to abandon
Art. 371. In cases of delay on account of the fault of the

carrier, referred to in the foregoing articles, the consignee may
leave the goods transported in the hands of the carrier, informing
him thereof in writing before the arrival of the same at the point of
destination.
When this abandonment occurs, the carrier shall satisfy the
total value of the goods, as if they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss and
damages on account of the delays cannot exceed the current price
of the goods transported on the day and at the place where the
PAGE 86
delivery was to have been made. The same provision shall be

observed in all cases where this indemnity is due.
Right of abandonment: Exceptional but limited right

The right must be exercised during the intervening period between the
moment when the fault of the CC produces a delay, which is the generative
cause of the action, until the moment just before the arrival of the goods at
the place of delivery, by communicating such abandonment to the CC in
writing
Where these conditions do not concur, the refusal to accept cannot be
effective
Damages for abandonment : Art. 371 (2) --> subject to Civil Code
Art. 360. The shipper may, without changing the place where
the delivery is to be made, change the consignment of the goods
delivered to the carrier, and the latter shall comply with his orders,
provided that at the time of making the change of the consignee the
bill of lading subscribed by the carrier, if one were issued, be
returned to him, exchanging it for another containing the novation
of the contract.
The expenses arising from the change of consignment shall be
defrayed by the shipper.
Art. 365. If, on account of the damage, the goods are

rendered useless for sale or consumption for the use for which they
are properly destined the consignee shall not be bound to receive
them, and may leave them in the hands of the carrier, demanding
payment of their value at the current market price that day.
If among the goods damages there should be some in good
condition and without any defect whatsoever, the foregoing provi-
sion shall be applicable with regard to the damaged ones, and the
consignee shall receive those which are sound, this separation being
made by distinct and separate articles, no object being divided for
the purpose, unless the consignee proves the impossibility of
conveniently making use thereof in this form.
The same provision shall be applied to merchandise in bales or
packages, with distinction of the packages which appear sound.
Art. 363. With the exception of the cases prescribed in the

second paragraph of Article 361, the carrier shall be obliged to
deliver the goods transported in the same condition in which,
according to the bill of lading, they were at the time of their receipt,
without any damage or impairment, and should he not do so, he
shall be obliged to pay the value of the goods not delivered at the
point where they should have been and at the time the delivery
should have taken place.
PAGE 87
If part of the goods transported should be delivered the

consignee may refuse to receive them, when he proves that he
cannot make use thereof without the others.
Cases where consignee may abandon goods :

1. Art. 363, in case of partial non-delivery where the consignee proves
that he cannot make use of the goods capable of delivery independently of
those not delivered
2. Art. 365, where the goods are rendered useless for sale and
consumption for the purposes for which they are properly destined
3. Art. 371, where there is delay through the fault of the carrier
2. Right to change consignment
Art. 360. The shipper may, without changing the place where
the delivery is to be made, change the consignment of the goods
delivered to the carrier, and the latter shall comply with his orders,
provided that at the time of making the change of the consignee the
bill of lading subscribed by the carrier, if one were issued, be
returned to him, exchanging it for another containing the novation
of the contract.
The expenses arising from the change of consignment shall be
defrayed by the shipper.
3. Obligation to pay transportation charges
Art. 374. The consignees to whom the remittance may have

been made may not defer the payment of the expenses and
transportation charges on the goods that they received after
twenty-four hours have elapsed from the time of the delivery; and in
case of delay in making this payment, the carrier may demand the
judicial sale of the goods he transported to a sufficient amount to
cover the transportation charges and the expenses incurred.
Railroad corporations have the power to detain freight, goods or

luggage, to answer for the freight, storage and other transportation charges
In case of failure of the shipper, owner or consignee to pay for such
charges, the CC has the power to sell such freight, goods, or luggage at
public auction following the procedure under the law
Art. 375. The goods transported shall be specifically bound to

answer for the transportation charges and for the expenses and
fees caused by the same during their transportation, and until the
time of their delivery.
This special right shall be limited to eight days after the

delivery has been made, and after said prescription the carrier shall
PAGE 88
have no further right of action than that corresponding to an

ordinary creditor.
Art. 376. The preference of the carrier to the payment of what

is due him for the transportation and expenses of the goods
delivered to the consignee shall not be affected by the bankruptcy
of the latter, provided the action is brought within the eight days
mentioned in the foregoing article.
Art. 2241. With reference to specific movable property of the

debtor, the ff. claims or liens shall be preferred :
xxx
(9) Credits for transportation, upon the goods carried, for the
price of the contract and incidental expenses, until their delivery
and for thirty days thereafter. (New Civil Code.)
Two sanctions for the enforcement by the CC of the payment of expenses

and transpo charges :
1. Art. 374 - judicial sale of the goods transported
2. Art. 375 - creating a lien in favor of the CC on the goods transported
--> 8 day period has been increased to 30 days by the NCC
The purpose of the lien and time limit: Reciprocal to that established
in favor of the shipper under
Art. 372(par. 2); time limit rests on the necessity which the consignee must
have for alienation of the goods, by which the CC is given a period relatively
urgent pertaining to the said goods transported --> after the time has
prescribed, his preference prescribes and his only remedy is by ordinary
action
The mere fact that the goods remain in the possession of the CC
because they have not been removed by the consignee, and the right of the
CC to demand the sale of the goods to satisfy the cost of transportation and
other expenses, do not deprive the CC of its right to demand in a proper
action the amounts owing to it by reason of the contract of transpo
The bankruptcy of the consignee shall not cut off the preference of the
CC, provided that the claim is made w/in 30 days from date of delivery (NCC)
5. Obligation to return bill of lading
PAGE 89
the bill of lading.
Under par. 2, Art. 353, after the contract of transpo has been complied with,
the B/L shall be returned to the issuing CC in exchange for the goods
transported which are delivered to the shipper or consignee
Where the consignee upon receiving the goods cannot return the B/L
to the CC by reason of its loss or any other cause, par. 3, Art. 353 provides
that he must give the CC a receipt of the goods delivered
Effect of return of the B/L or giving of the receipt: The respective

obligations and actions of the parties against each other shall be considered
canceled, except where in the same act of return or giving of a receipt the
claims of the parties be reduced to writing subject to the provisions of Art.
366
G. Applicability of Provisions
Art. 379. The provisions contained in Article 349 et seq. shall

also be understood as relating to persons who, although they do not
personally effect the transportation of commercial goods, contract
to do so through others, either as contracts for a special and fixed
transaction or as freight and transportation agents.
In either case they shall be subrogated to the place of the
carriers with regard to the obligations and liability of the latter, as
well as with regard to their right.
IV. ADMIRALTY AND MARITIME COMMERCE
A. Concept of Admiralty; Jurisdiction over Admiralty Cases
BP 129, Sec. 19. Regional Trial Courts shall exercise exclusive

original jurisdiction:
xxx
PAGE 90
(3) In all actions in admiralty and maritime jurisdiction where

the demand or claim exceeds one hundred thousand pesos
(P100,000) xxx.
BP 129, Sec. 33. Metropolitan Trial Courts, Municipal Trial

Courts and Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and
probate proceedings, testate and intestate, including the grant of
provisional remedies in proper cases, where the value of the
personal property, estate or amount of the demand does not exceed
one hundred thousand pesos (P100,000), or in Metro Manila where
such personal property, estate, or amount of the demand does not
exceed Two hundred thousand pesos (P200,000), exclusive of
interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs, the amount of which must be specifically
alleged: Provided, That interest, damages of whatever kind,
attorney's fees, litigation expenses, and costs shall be included in
the determination of the filing fees: Provided, further, That where
there are several claims or causes of action between the same or
different parties, embodied in the same complaint, the amount of
the demand shall be the totality of the claims in all the causes of
action, irrespective of whether the causes of action arose out of the
same or different actions.
International Harvester vs Aragon 84 Phil 363
Held : It is clear from the complaint that IH is being held liable only on the
assumption that the goods had been lost in transit or before being
discharged at the pier. The liability of IH is predicated on the contract of
carriage by sea between IH and Yaras & Co. as evidenced by the B/L,
independently of the liability of the Manila Terminal Co. as operator of an
arrastre service.
Admiralty has jurisdiction over all maritime contracts, in whatever
form, wherever they were executed or are to be performed, but not over non-
maritime contracts. Whether or not a contract is maritime depends not on
the place where the contract is made and is to be executed, making the
locality the test, but on the subject matter of the contract, making the true
criterion a maritime service or a maritime transaction. Specifically, admiralty
has jurisdiction of a proceeding in rem or in personam for the breach of a
contract of affreightment, whether evidenced by a B/L or a charter party.
And typical of a controversy over contracts of affreightment is a suit of one
party against the other for loss or damage to the cargo. This is the very case
before us, because the respondent Yaras & Co. seeks to recover from the
petitioner IH the value of certain lost cargo.
The contention of Yaras that the admiralty jurisdiction is not involved
because the contract in question was made upon land and to be terminated
upon land, merely reflects the English rule which had long been rejected in
the US. It is now well-settled in the latter country that the jurisdiction of
PAGE 91
admiralty in matters of contract depends upon the subject matter, i.e., the
nature and character of the contract and that the English rule which
conceded jurisdiction only to contracts made upon and to be performed upon
navigable waters, is inadmissible, the true criterion being that the contract
has reference to maritime service or maritime transaction. Under the law,
the CFI has jurisdiction over admiralty cases.
B. Vessels
1. Meaning
Lopez vs Duruelo 52 Phil 229
Held : Assuming that article 835 of the Code of Commerce states a condition
precedent to the maintenance of an action in a case requiring protest, such
as protest is nevertheless not necessary in the case at bar. The article is
found in the section dealing with collisions and the context shows the
collisions intended are collisions of sea-going vessels. Said article cannot be
applied to small boats engaged in river and bay traffic. The vessels intended
in the Third Book of the Code of Commerce which deals with maritime
commerce and in which Art. 865 is found was evidently intended to define
the law relative to merchant vessels and marine shipping, and the vessels
intended in that Book are such as are run by masters having special training
with the elaborate apparatus of crew and equipment indicated in the Code.
The word "vessel" used in the section was not intended to include all ships,
craft, or floating structures of every kind without limitation, and the provision
of that section should not be held to include minor craft engaged only in river
or bay traffic. Vessels of minor nature, such as river boats and those carrying
passengers from ship to shore are governed as to their liability in
passengers, by the Civil Code.
The word ship and vessel, in their grammatical sense are applied to
designate every kind of craft, large or small, merchant or war, a signification
which does not differ essentially from its juridical meaning according to
which vessels for the purpose of the Code of Commerce, are considered not
only those engaged in navigation whether coastwise or high seas, but also
floating docks, pontoons,dredges, scows, and other floating apparatus for the
service of the industry or maritime commerce.
Yet notwithstanding these principles from which it would seem that
any floating apparatus which serves directly for the transportation of things
or persons or which indirectly is related to this industry, ought to be
subjected to the principles of the Code with reference to ownership, transfer,
rights, registrations, etc. they are not applicable to small craft which are only
subject to administrative regulations in the matter of port service and in the
fishing industry.
But even if The Code Of Commerce was applicable, a protest still need
not be made since under Art. 836, want of protest cannot prejudice a person
not in a condition to make known his wishes. A person who has suffered
PAGE 92
injuries like that of the plaintiff cannot be supposed to be in a condition to

make a protest.
2. Nature and acquisition of vessels
Art. 573. Merchant vessels constitute property which may be

acquired and transferred by any of the means recognized by law.
The acquisition of a vessel must be included in a written instrument,
which shall not produce any effect with regard to third persons if
not recorded in the registry of vessels. The ownership of a vessel
shall also be acquired by the possession thereof in good faith for
three years, with a good title duly recorded.
In the absence of any of these requisites, uninterrupted
possession for ten years shall be necessary in order to acquire
ownership.
A captain cannot acquire by prescription the ship of which he
is in command.
Vessels: Those engaged in navigation , whether coastwise or on the high

seas, including floating docks, pontoons, dredges, scows and any other
floating apparatus destined for the services of the industry or maritime
commerce
Vessels engaged in the business of carrying or transporting

passengers or goods for compensation, offering their services to the public
are common carriers --> governed primarily by the Civil Code provisions on
common carriers and subsidiarily by the Code of Commerce and special laws
The Code of Commerce regulates merchant ships or those engaged in
the transportation of passengers and freight from one port to another or from
place to another
The Code of Commerce does not refer to pleasure ships, yachts,
pontoons, health service and harbor police vessels, floating storehouses,
warships or patrol vessels, coast guard vessels, fishing vessels, towboats and
other craft destined to other uses, such as coast and geodetic survey,
scientific research and exploration, crafts engaged in the loading and the
discharge of vessels, or transhipments from one vessel to another
Vessels of a minor nature not engaged in maritime commerce, such
as, river boats and those carrying passengers from ship to shore, must be
governed as to their liability to passengers, by the provisions of the Civil
Code
Modes of acquisition: (1) purchase and sale, (2) prescription, (3)

construction, (4) capture, (5) donation, (6) succession, and (7) other means,
such as barter
Possession in GF will ripen into ownership in 3 years; if the possession
is otherwise, it will ripen into ownership in 10 years
PAGE 93
There can be no prescription in favor of the captain because the nature

of the possession of the captain is such that he is only an agent of the owner,
a depositary of the vessel
The acquisition of a vessel must appear in a written instrument and

such instrument must be registered in order that the transfer may affect
third persons
Art. 574. Builders of vessels may employ the material and

follow with regard to their construction and rigging the systems
most suitable to their interest. Ship owners and seamen shall be
subject to the provisions of the laws and regulations of the public
administration on navigation, customs, health, safety of vessels,
and other similar matters.
The business of constructing and repairing vessels or parts thereof shall not
be considered a public utility and no CPC shall be required thereof
Art. 585. For all purposes of law not modified or restricted by

the provisions of this Code, vessels shall continue to be considered
as personal property.
Vessels are considered personal or movable property; but they partake to a

certain extent, of the nature and conditions of real property, on account of
their value and importance in the world of commerce
Art. 712. Ownership is acquired by occupation and by

intellectual creation.
Ownership and other real rights over property are acquired
and transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by tradition.
They may also be acquired by means of prescription. (New
Civil Code.)
3. Registration; certificates issued; distinctions
Tariff and Customs Code, Sec. 802
(1) vessels - every sort of boat, craft or other artificial

contrivance used, or capable of being used, as a means of
transportation on water
(2) duly registered - person, natural or juridical, registered
with the proper govt. agencies, as Bureau of Commerce, SEC,
NACIDA, BOI, Export Incentives Board or Oil Commission, as now or
may hereafter be required by law.
PD 761 as amended by PD 1064, 1521
PAGE 94
Sec. 806. Upon registration of a vessel of domestic ownership,

and of more than 15 tons gross, a certificate of Philippine registry
shall be issued for it. If the vessel is of domestic ownership and of
15 tons gross or less, the taking of the certificate of Philippine
registry shall be optional with the owner.
Domestic ownership means ownership vested in the citizens of
the Philippines or corporations or association organized under the
laws of the Philippines at least 60% of the C/S or capital of which is
wholly owned by citizens of the Philippines, and in the case of
corporations or associations which will engage in coastwise trade
the president and managing directors thereof shall be such citizens
xxx
xxx an enterprise duly registered with the Board of
Investments WON entirely owned by foreign nationals, may register
its own vessels xxx if such vessels are to be used exclusively to
transport its own raw materials and finished products in Philippine
waters as an incident to its manufacturing, processing or business
activity registered with the BOI and certified to by said Board as an
essential element in the operation of the registered project.
Rule III, Marina Rules and Regulations:
Subjects of Registration:
1) All vessels used in Phil. waters, not being transients of
foreign registry, shall be registered with the MARINA. To this end, it
shall be the duty of the master, owner and agent of every such
vessel to make application to the proper MARINA district office for
registration thereof within 15 days after the vessel becomes subject
to such registration.
2) A vessel of 3 tons gross or less shall not be registered
unless the owner shall so desire, nor shall documents licenses of
any kind be required for such vessel, but the proper fee shall be
charged for measurement when measurement is necessary, except
when the same is engaged in towing or carrying of articles and
passengers for hire.
3) All undocumented vessels shall be numbered in such form
as may be prescribed by the Administrator.
Vessels exempt from Registration :

AFP vessels, vessels owned and/or operated by the AFP or by
foreign govt. for military purposes, and bancas, sail boats and other
water craft which are not motorized of less than 3 gross tons shall
not be subject to the requirements of these rules and regulations
PAGE 95
relative to registration and navigation, except in so far as may be

prescribed by regulations of MARINA.
The Phil. Coast Guard is vested with exclusive authority over the registration
and documentation of Phil. vessels, as well as the issuance of all certificates,
licenses, or other documents necessary or incident to such registration
The registration shall be effected at its home port or at the nearest
Coast Guard district or station when the home port does not have such
Certificates of Philippine register: upon registration of a vessel of

domestic ownership and of more than 15 tons gross, a certificate of Phil.
register shall be issued for it
The purpose of certificates of register of vessels : to declare the
nationality of a vessel engaged in trade with foreign nations and to enable
her to assert that nationality wherever found
Privileges of certificate: It confers upon the vessel the right to

engage, consistently with law, in the Philippines coastwise trade and entitles
it to the protection of the authorities and the flag of the Philippines in all
ports and on the high seas, and at the same time secures to it the same
privileges and subjects it to the same disabilities as, under the laws of the
Philippines, pertain to foreign built vessels transferred abroad to citizens of
the Philippines
Certificates of ownership : upon registration of a vessel of more than 5 tons
gross, a certificate of ownership shall be issued for it
4. Significance of registration of transactions affecting vessels
Presumption of ownership from registration : the presumption is that the

person in whose name a vessel is registered has legal title thereto --> but
such is not conclusive proof against the real owners
It is essential that a record of documents affecting the title of a vessel
be entered in the Philippine Coast Guard
Arroyo vs Yu 54 Phil 511
HELD : Sec. 1171 of AC has modified the provisions of the Chattel Mortgage
Law, particularly Sec. 4 thereof. It is now not necessary for a chattel
mortgage of a vessel to be noted in the register of deeds. But it is essential
that a record of documents affecting the title of a vessel be entered in the
office of the collector of customs at a port of entry. This is designed to
protect persons who deal with a vessel on the strength of the record title.
Mortgages on vessels., although not recorded, are good as between the
parties. But as against creditors of the mortgagor, an unrecorded mortgage
is valid.
PAGE 96
However, we find an explanation of the delay of registration with the

collector of customs-because of doubts entertained by the latter relative to
the applicability of Act No. 3324 to a mortgage executed in 1918 in favor of a
Chinese subject. This uncontradicted fact must be taken as curing the bank's
defective title. That the collector did not perform his duty was no fault of
PNB.
Judgment affirmed in part in the sense that as between Yu and PNB,
the latter has a superior right to its claim for P20,000, and set aside in part in
the sense that the record is remanded for further proceedings.
Rubiso vs Rivera 37 Phil 72
HELD : The requisite of registration in the registry of the purchase of a

vessel is necessary and indispensable in order that the purchaser's rights
may be maintained against a claim filed by a third person. Such registration
is required both Art. 573 of the Code of Commerce in connection with Sec 2
of Act No. 1900 which Act amended said article. The amendments solely
consisted in charging the Insular Collector of Customs, as at present, with the
fulfillment of the duties of the commercial register concerning the registering
of vessels, so that the registration of a bill of sale of a vessel shall be made in
the Insular Collector of Customs, who, since May 18, 1909, has been
performing the duties of the commercial registry in place of this latter
official. In view of said legal provisions, it is undeniable that defendant's
rights cannot prevail over those acquired by plaintiff in the ownership of said
boat, in as much as defendant's registration came after plaintiff's
registration.
C. Persons Participating in Maritime Commerce
1. Shipowners and shipagents
Art. 586. The owner of a vessel and ship agent shall be civilly
liable for the acts of the captain and for the obligations contracted
by the latter to repair, equip, and provision the vessel, provided the
creditors proves that the amount claimed was invested therein.
By agent is understood the person entrusted with the
provisioning of a vessel, or who represents her in the port in which
she happens to be.
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct
of the captain in the care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel with all
her equipments and the freightage he may have earned during the
voyage.
PAGE 97
Art. 588. Neither the owner of the vessel nor the agent shall
be liable for the obligations contracted by the captain if the latter
exceeds his powers and privileges inherent in his position or those
which may have been conferred upon him by the former.
However, if the amounts claimed were made use of for the
benefit of the vessel, the owner or agent shall be liable.
Liability of shipowner and shipagent :

(1) under Art. 857, for the acts of the captain
(2) for contracts entered into by the captain to repair, equip and
provision the vessel, provided that the amount claimed was invested for the
benefit of the vessel
(3) for the indemnities in favor of third persons which may arise from
the conduct of the captain in the care of the goods transported, as well as for
the safety of passengers transported
(4) for damages to third persons for tort or quasi-delict committed by
the captain, except collision with another vessel
(5) under Art. 826, for damages in case of collision due to the fault,
negligence, or want of skill of the captain, sailing mate, or any other member
of the complement
The agent is liable to the shippers and owners of the cargo transported
by it, for losses and damages occasioned to such cargo without prejudice to
his rights against the owner of the ship, to the extent of the value of the
vessel, its equipment and the freight
Under 588, the shipowner and the shipagent are not liable for the obligations
contracted by the captain if he exceeds his authority, unless the amounts
claimed were invested for the benefit of the vessel --> however under Art.
1759, NCC, the ship owner is liable for the death of or injuries to the
passengers which are caused by the negligence or wilful acts of his EEs
although such EEs may have acted beyond the scope of their authority or in
violation of the orders of the shipowner
Art. 589. If two or more persons should be part owners of a

merchant vessel, an association shall be presumed as established by
the part owners.
This association shall be governed by the resolutions of a
majority of the members.
A majority shall be the relative majority of the voting
members.
If there should be only two part owners, in case of
disagreement the vote of the member having the largest interest
shall be decisive. If the interests are equal, it shall be decided by
lot.
The representation of the smallest part in the ownership shall
have one vote; and proportionately the other part owners as many
votes as they have parts equal to the smallest one.
PAGE 98
A vessel cannot be detained, attached or levied upon execu-

tion in her entirety for the private debts of a part owner, but the
proceedings shall be limited to the interest the debtor may have in
the vessel, without interfering with her navigation.
Art. 590. The co-owners of a vessel shall be civilly liable, in

the proportion of their contribution to the common fund, for the
results of the acts of the captain, referred to in Article 587.
Each part owner may exempt himself from this liability by the
abandonment before a notary of the part of the vessel belonging to
him.
Art. 591. All the part owners shall be liable, in proportion to

their respective ownership, for the expenses which are incurred by
virtue of a resolution of the majority.
They shall likewise be liable in the same proportion for the
expenses of maintenance, equipment, and provisioning of the
vessel, necessary for navigation.
Art. 592. The resolutions of the majority with regard to the

repair, equipment, and provisioning of the vessel in the port of
departure shall bind the minority, unless they renounce their
participation therein, which must be acquired by the other part
owners after a judicial appraisement of the value of the portion or
portions assigned.
The resolutions of the majority relating to the dissolution of
the association and sale of the vessel shall also be binding on the
minority.
The sale of the vessel shall be made at a public auction,
subject to the provisions of the law of civil procedure unless the
part owners unanimously agree otherwise, subject always to the
right of pre-emption and redemption mentioned in Article 575.
Art. 593. The owners of a vessel shall have preference in her

charter over other persons, offering equal conditions and price. If
two or more of the former should claim said right the one having
greater interest shall be preferred, and should they have an equal
interest it shall be decided by lot.
Art. 594. The part owners shall elect the manager who is to
represent them in the capacity of agent.
The appointment of director or agent shall be revocable at the
will of the partners.
PAGE 99
Art. 595. The agent, be he at the same time an owner of a

vessel or a manager for an owner or for an association of co-
owners, must be qualified to trade and must be recorded in the
merchant's registry of the province.
The agent shall represent the ownership of the vessel, and
may in his own name and in such capacity take judicial and extra-
judicial steps in all that relates to commerce.
Art. 596. The agent may discharge the duties of captain of the
vessel, subject, in every case, to the provisions contained in Article
609.
If two or more co-owners request the position of captain, the
disagreement shall be decided by a vote of the members; and if the
vote should result in a tie, the position shall be given to the part
owner having the larger interest in the vessel.
If the interest of the petitioners should be the same, and there
should be a tie, the matter shall be decided by lot.
Art. 597. The agent shall select and enter into an agreement
with the captain, and shall contract in the name of the owners, who
shall be bound in all that refers to repairs, details of equipment,
armament, provisions, fuel, and freight of the vessel, and, in
general, in all that relates to the requirements of navigation.
Art. 598. The agent cannot order a new voyage, nor make
contracts for a new charter, nor insure the vessel, without the
authority of her owner or by virtue of a resolution of the majority of
the co-owners, unless these powers were granted him in the
certificate of his appointment.
If he should insure the vessel without authority therefor he
shall be subsidiarily liable for the solvency of the underwriter.
Art. 599. The managing agent of an association, shall give his

co-owners an account of the results of each voyage of the vessel,
without prejudice to always having the books and correspondence
relating to the vessel and to its voyages at their disposal.
Art. 600. After the account of the managing agent has been
approved by a relative majority, the co-owners shall satisfy the
expenses in proportion to their interest, without prejudice to the
civil or criminal actions which the minority may deem fit to institute
afterwards.
In order to enforce the payment, the managing agents shall be
entitled to an executory action, which shall be instituted by virtue of
PAGE 100
a resolution of the majority, and without further proceedings than

the acknowledgment of the signatures of the persons who voted for
the resolution.
* Note : an executory action is no longer recognized in this jurisdiction
Art. 601. Should there be any profits, the co-owners may

demand of the managing agent the amount due them, by means of
an executory action without further requisite than the
acknowledgment of the signatures in the instrument approving the
account.
Art. 602. The agent shall indemnify the captain for all the
expenses he may have made from his own funds or from those of
other persons, for the benefit of the vessel.
Art. 603. Before a vessel goes out to sea the agent may at his
discretion, discharge the captain and members of the crew whose
contract did not state a definite period nor a definite voyage, paying
them the salaries earned according to their contracts, and without
any indemnity whatsoever, unless there is an expressed and specific
agreement in respect thereto.
Art. 604. If the captain or any other member of the crew should be
discharged during the voyage, they shall receive their salary until their return
to the place where the contract was made, unless there are good reasons for
the discharge, all in accordance with Art. 636 et seq. of this Code.
Art. 605. If the contracts of the captain and members of the

crew with the agent should be for a definite period or voyage, they
cannot be discharged until the fulfillment of their contracts, except
for reasons of insubordination in serious matters, robbery, theft,
habitual drunkenness, and damage caused to the vessel or to its
cargo by malice or manifest or proven negligence.
Art. 606. If the captain should be a part owner in the vessel,

he may not be discharged unless the agent returns to him the
amount of his interest therein, which, in the absence of an
agreement between the parties, shall be appraised by experts
appointed in the manner established in the law of civil procedure.
Art. 607. If the captain who is a part owners should have

obtained the command of the vessel by virtue of a special agree-
ment contained in the articles of copartnership, he cannot be
deprived thereof except for the reasons mentioned in Article 605.
PAGE 101
Art. 608. In case of the voluntary sale of the vessel, all

contracts between the agent and captain shall terminate, reserving
to the latter his right to the indemnity which may be proper,
according to the agreements made with the agent.
The vessel sold shall remain subject to the security of the
payment of said indemnity if, after the action against the vendor
has been instituted, the latter should be insolvent.
Art. 618. The captain shall be civilly liable to the ship agent
and the latter to the third persons who may have made contracts
with the former -
1. For all the damages suffered by the vessel and its cargo by
reason of want of skill or negligence on his part. If a misdemeanor
or crime has been committed he shall be liable in accordance with
the Penal Code.
2. For all the thefts and robberies committed by the crew,
reserving his right of action against the guilty parties.
3. For the losses, fines, and confiscations imposed on account
of violation of the laws and regulations of customs, police, health,
and navigation.
4. For the losses and damages caused by mutinies on board
the vessel, or by reason of faults committed by the crew in the
service and defense of the same, if he does not prove that he made
full use of his authority to prevent or avoid them.
5. For those arising by reason of a misuse of powers and
nonfulfillment of the duties which pertain to him in accordance with
Articles 610 and 612.
6. For those arising by reason of his going out of his course or
taking a course which, in the opinion of the officers of the vessel, at
a meeting attended by the shippers or supercargoes who may be on
board, he should not have taken without sufficient cause.
No exception whatsoever shall exempt him from his obliga-
tion.
7. For those arising by reason of his voluntarily entering a
port other than his destination, with the exception of the cases or
without the formalities referred to in Article 612. 8. For those
arising by reason of the nonobservance of the provisions contained
in the regulations for lights and maneuvers for the purpose of
preventing collisions.
Art. 618 provides for the direct responsibility of the shipowner and shipagent
to third persons; the captain shall be civilly liable to the ship agent and the
latter is the one liable to third persons This article applies to breaches
of contract and tortious negligence of the captain
PAGE 102
But where the vessel is totally chartered for use of a single party, the
shipowner and that party may validly stipulate that the latter shall be exempt
from liability for the negligence of the captain and crew
Reason for imposition of liability on owner for damages suffered by

third persons occasioned by the acts of the captain: To place the
primary liability upon the person who has actual control over the conduct of
the voyage and who has the most capital embarked in the venture, namely,
the owner of the ship, leaving him to obtain recourse, from other individuals
who have been drawn into the venture as shippers
The shippers and passengers in making contracts with the captain do
so through the confidence they have in the shipowner who appointed him -->
they presume that the owner made a most careful investigation before
appointing him
Distinction between liability for lawful and unlawful acts :

The lawful acts and obligations of the captain beneficial to the vessel
may be enforced as against the agent/owner for the reason that such
obligations arise from the contract of agency ( provided that the captain does
not exceed his authority)
As to any liability incurred by the captain through his unlawful acts,
the ship agent is simply subsidiarily liable
Liabilities of captain: the responsibility of the captain extends to every

fraudulent or negligent act of any person in the complement, in the execution
of his employment --> he does not respond for personal injuries of the crew
arising from personal quarrels but he is liable for damages to persons or
property occasioned by a maneuvering of the vessel, for failure to follow
international rules and regulations, for failure to take the precautions to
prevent every damage possible to the vessel which has suffered an average
Standard Oil vs Castelo 42 Phil 256
Held : Ordinarily, the loss of cargo carried on deck shall not be considered as
general average loss, as expressed in the York- Antwerp Rules. This rule,
first made during the days of sailing vessels has changed and it is now
generally held that jettisoned goods carried on deck, according to the
customs of trade, by steam vessels navigating coastwise and inland waters,
are entitled to contribution as general average loss. The reason for this, in
coastwise trade, is that boats are small and voyages are short, with the
result that the coasting vessel can use more circumspection about the
condition of the weather at departure time. It is evident therefore, that the
loss of the petroleum is a general average with the result that plaintiff is
entitled to recover an amount bearing such proportion to its total loss as the
value of both ship and cargo bears to the value of ship and entire cargo
before jettison was effected.
It is universally recognized that the captain is the representative of the
owner and both under Art. 586 of the Code of Commerce, are civilly liable for
the acts of the master. When jettison of cargo occurs, it is the duty of the
PAGE 103
captain to effect the adjustment, liquidating and distribution of the general

average; his failure gave rise to liability for which the owner of the ship must
answer.
The owner of the ship ordinarily has vastly more capital embarked
upon a voyage than has any shipper of cargo. Moreover, the shipowner, in
captain's person, has complete and exclusive control of the crew and ship
navigation. It is therefore proper that any person whose property may have
been cast should have a right of action directly against the shipowner for
breach of duty which the law imposed on the captain with respect to such
cargo. The evident intention of the Com. Code is to place primary liability
upon the person who has actual control over the conduct of the voyage and
who has most capital in the venture, namely, the shipowner, leaving him to
obtain recourse, as it is very easy to do, from other individuals who have
been drawn into the venture as shippers. Defendant is therefore liable.
(a) Responsibilities and liabilities
Yu Con vs Ipil 41 Phil 770
Held : Ipil and Solamo, as carriers and depositories of the money were liable
under the Civil Code, the theft not being a fortuitous event or of force
majeure and they being manifestly negligent and at fault.
As to the liability of Lauron, the SC proceeded by first defining the
banca "Maria" as within the meaning of the term "vessel." Thus, according to
the foregoing definitions (by the Mercantile Code, by Reus in Commentaries
on the Code of Commerce, and by Blanco) we hold that the banca "Maria"
chartered by Yu Con from Lauron, was a "vessel" under Mercantile Law and
the Code of Commerce. Ipil, the master of the banca, was also held to be the
captain (masters are to small vessels as captains are to big ones). Under
Arts. 587 and 618, the shipowner shall be civilly liable to third persons when
the captain of the vessel causes the damage or loss to goods entrusted to
him by said third persons under a contract to carry said goods. Thus, it is
well and god that the shipowner be not held criminally liable for such crimes
or quasi crimes but he cannot be excused from liability for the damage and
harm which in consequence of those acts may be suffered by the third
parties who contracted with the captain in his double capacity of agent and
subordinate of the shipowner himself. In maritime commerce, the shippers
and passengers in making contracts with the captain do so through the
confidence they have in the shipowner who appointed him.
The owner of a minor craft who has equipped and victualed it for the
purpose of using it in the transportation of merchandise from one port to
another is under the law a shipowner and the master of the craft is to be
considered as its captain in the legal acceptation of this word, and the former
must be held civilly liable for indemnities in favor of third parties to which the
conduct of the master/captain may give rise in the custody of the effects
laden on the craft, and for all losses which, through his fault or negligence,
may occur to the merchandise or effects delivered to him for their
transportation as well as for the damages suffered by those who contracted
PAGE 104
with him, in consequence of misdemeanors and crimes committed by him or

by the members of the crew of the craft.
Manila Steamship vs Abdulhaman 100 Phil 32
Held : (1) While it is true that plaintiff's action against petitioner is based on a
tort or quasi-delict, the tort in question is not a civil tort under the Civil Code
but is a maritime tort resulting in a collision at sea, governed by Arts. 826-
939 of the Code of Commerce, while the owners of both colliding vessels are
solidarily liable for damages caused. This direct responsibility is recognized
in Art. 618 of the Code of Commerce, under which the captain shall be civilly
liable to the ship agent, and the latter is the one liable to third persons.
In fact it is a general principle well established in the maritime law and
custom, that shipowners and shipagents are civilly liable for the acts of the
captain (Art. 586) and for the indemnities due to the third persons (Art. 587).
This direct liability moderated and limited by the owner's right of
abandonment of the vessel and earned freight (Art. 587) has been declared
to exist not only in the case of breached contracts but also in cases of
tortious negligence.
It is easy to see that to admit the defense of the diligence of a bonus
pater familias in the selection and vigilance of the officers and crew as
exempting the shipowner from any liability for their faults, would render
nugatory the solidary liability in Art. 827 for the greater protection of injured
parties.
(2) It is to be noted that Macrohon was not duly licensed as a
shipmaster and Lim knew of this fact when it hired the former, thus
deliberately increasing the risk to which the unknowing passengers would be
subjected. The liability of Lim, cannot, therefore be identical to that of a
shipowner who bears in mind the safety of the passengers by employing duly
licensed officers. To hold, as the CA had done, that Lim may limit his liability
to the value of his vessels, is to erase all differences between compliance
with law and the deliberate disregard thereof.
The international rule is to the effect that the right of abandonment of
vessels, as a legal limitation of a shipowner's liability, does not apply to
cases where the injury of the average is due to shipowner's own fault.
(b) The doctrine of limited liability
* Doctrine of limited liability is provided for in Arts. 587, 590 and 837
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct
of the captain in the care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel with all
her equipments and the freightage he may have earned during the
voyage.
PAGE 105
A shipagent is liable notwithstanding the insolvency of the principal/owner
BUT the ship agent may exempt himself from liability by abandoning the
vessel with all her equipment and the freight it may have earned during the
voyage --> the effect of abandonment is to extinguish the liability of the
shipagent
The ship agent's liability is confined to that which he is entitled as a
matter of right to abandon : the vessel with all her eqpt. and the freight it
may have earned during the voyage and to the insurance thereof
Limited liability is not applicable when no abandonment of vessel is
made
Effect of abandonment: An abandonment amounts to an offer of the value

of the vessel, of her equipment, and freight money earned --> results in the
cessation of the responsibility of the owner/agent
Abandonment cannot be refused by creditors
This applies to all cases where the owner/agent may be held liable for
the negligent or illicit acts of the captain
Effect of loss or destruction of vessel: The shipagent's liability is merely

co-extensive with his interest in the vessel such that the total loss thereof
results in its extinction --> the total destruction of the vessel extinguishes a
maritime lien as there is no longer any res to which it can attach.
Thre (3) cases where the loss of the vessel extinguishes the
liability of the shipowner:
(1) under 587, liability arising from the conduct of the captain in the
vigilance of the goods and for the safety of the passengers and for any
liability arising from the negligent or illicit acts of the captain for which the
shipowner or ship agent may be held liable
(2) under 643, liability for the wages of the captain and the crew and
for advances made by the shipagent if the vessel is lost by shipwreck or
capture
(3) under 837, liability for collision
Exceptions:
(1) Doctrine does not apply where shipowner is at fault : the doctrine is
premised on the condition that the death or injury to the passenger occurred
by reason of the fault or negligence of the captain only
(2) Doctrine does not apply in cases of Workmen's Compensation --> such
compensation has nothing to do with maritime commerce; it is an item in the
cost of production which must be included in the budget of any well-
managed industry
(3) Total destruction of the vessel does not affect the liability of the owner for
repairs on the vessel completed before its loss --> owners of a vessel are
liable for necessary repairs; its liability for repairs remains unaffected by the
loss of the thing
Reason for limited liability: This doctrine had its origin when maritime
trade and sea voyage was attended by innumerable hazards and perils --> to
PAGE 106
offset against these adverse conditions and to encourage shipbuilding and

maritime commerce, it was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to the vessel, eqpt. and
freight or insurance, if any
Limited liability is evidence of the real and hypothecary nature of

maritime law:
(1) limitation of liability to the actual value of the vessel and freight; (2) right
to retain the cargo and the embargo and detention of the vessel in cases
where the ordinary civil law would not allow more than a personal action
against the debtor or personal liable --> the maritime creditor may attach
the vessel itself to secure his claim without waiting for a settlement of his
rights by a final judgment, even to the prejudice of a third person
Manila Steamship vs Abdulhaman 100 Phil 32
Issue : How is the doctrine of limited liability applied in this case with M/V
Consuelo?
Held : The direct liability may be moderated or limited by the shipowner's

right to abandon the vessel and earned freight. However, this right of
abandonment of vessels, as a legal limitation of a shipowner's liability does
not apply to cases where the injury or the average is due to shipowner's
fault. Thus, the owner of Consuelo is solidarily liable with Manila Steamship,
the former having caused the vessel to sail without licensed officers, for
injuries caused by the collision over and beyond the value of the said vessel.
In the application for permission to operate, despite lack of trained
crew, Lim Hong To even declared expressly, "that in case of any accident,
damage, or loss, I shall assume full risks and responsibility for all
consequences, thereof." Hence, Lim cannot escape liability because of the
sinking of the vessel. Operating with an unlicensed shipmaster constitutes
such negligence as would prevent the shipowner from claiming the benefit of
limited liability under Art. 587.
Yangco vs Laserna 73 Phil 330
Held : Art. 587 accords a shipowner or agent the right of abandonment; and
by necessary implication, his liability is confined to that which he is entitled
as of right to abandon -- the vessel with all her equipments and the freight it
may have earned during the voyage. In other words, such liability is limited
to the value of the vessel and other things appertaining thereto such that a
total loss thereof results in its extinction. Although the article appears to
deal only with the limited liability of shipowners or agents for damages
arising from the misconduct of the captain in the care of the goods which the
vessel carries, this is a mere deficiency of language and in no way indicates
the true extent of such liability, to wit, the benefit of limited liability applies
in all cases (as regards both goods and passengers of the vessel) wherein the
PAGE 107
shipowner or agent may properly be held for the negligent or illicit acts of the
captain.
The reason for the limited liability is the real and hypothecary nature
of maritime law as distinguished from civil law and mercantile law in general.
As evidence of this real nature, we have (1) the limitation of the liability of
the agents to the actual value of the vessel and the freight money and (2)
the right of the maritime creditor to retain the cargo, and the embargo and
detention of the vessel in cases where the ordinary civil law would not allow
more than a personal action against the debtor or person liable. Thus, even
assuming that Yangco is liable for breach of contract because his relationship
to the passengers rests on a contract of carriage, the exclusively real and
hypothecary nature of maritime law still operates to limit his liability to the
value of the vessel or to the insurance thereon, if any. In this case, the
vessel was not insured. Whether the abandonment of the vessel sought by
the petitioner in instant case was in accordance with law or not, is
immaterial. The vessel having totally perished, any act of abandonment
would be an idle ceremony. Petitioner is absolved from all complaints.
Abueg vs San Diego 77 Phil 730
Held : The real and hypothecary nature of the liability of the shipowner or
agent embodied in the provisions of the Maritime Law, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the
medieval ages, attended by innumerable hazards and perils. To offset
against these adverse conditions and to encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner or
agent arising from the operation of a ship to the vessel, equipment, and
freight, or insurance, if any, so that if the shipowner or agent abandoned the
ship, equipment, and freight, his liability was extinguished.
The provisions of the Code of Commerce regarding maritime
commerce have no room in the application of the Workmen's Compensation
Act which seeks to improve, and aims at the amelioration of, the condition of
laborers and EEs. Said Act creates a liability to compensate EEs and laborers
in cases of injury received by or inflicted upon them, while engaged in the
performance of their work or employment, or the heirs and dependents of
such laborers and EEs in the event of death caused by their employment.
The officers of motor ships engaged in fishing are industrial EEs and
are entitled to the benefits of the Workmen's Compensation Act. If an
accident is compensable under the WCA, it must be compensated even when
the workman's right is not recognized by or is in conflict with other provisions
of the Civil Code or Code of Commerce. The reason is that the WCA was
enacted in abrogation of existing laws.
Heirs of Amparo de los Santos vs CA 186 SCRA 649
Held : There is no dispute as to the finding of the captain's negligence. The

present controversy centers on the questions of Maritima's negligence and of
the application of Art. 587 of the Code of Commerce. Under this provision, a
PAGE 108
shipowner or agent has the right of abandonment; and by necessary

implication, his liability is confined to that which he is entitled as of right to
abandon -- the vessel with all her equipments and the freight it may have
earned during the voyage. This rule is found necessary to offset against the
innumerable hazards and perils of a sea voyage and to encourage
shipbuilding and marine commerce. The limited liability doctrine applies not
only to the goods but also in all cases like death or injury to passengers
wherein the shipowner of agent may properly be held liable for the negligent
or illicit acts of the captain. Art. 587 speaks only of situations where the
fault or negligence is committed solely by the captain. In cases where the
shipowner is likewise to be blamed, Art. 587 does not apply. Such a situation
will be covered by the Civil Code provisions on CCs. Owing to the nature of
their business and for reasons of public policy, they are required to observe
EO diligence.
Maritima's claim that it had no information of typhoon Welming until
after the boat was at sea is untenable in light of modern technology which
enables it to detect any incoming atmospheric disturbances. In fact, the
Weather Bureau issued a total of 17 warnings or advisories of typhoon
Welming. In allowing the ship to depart late from Manila despite the typhoon
advisories, Maritima displayed lack of foresight and minimum concern for the
safety of its passengers taking into account the surrounding circumstances of
the case.
While the captain was negligent for overloading the ship, Maritima
shares equally in his negligence. M/V Mindoro was cleared for departure at 2
PM by the Bureau of Customs and the Coast Guard but its departure was
delayed for 4 hours. Maritima could not account for the delay because it
neither checked from the captain the reasons behind the delay. It was due to
this interim that there is great probability that unmanifested cargo and
passengers were loaded.
Maritima presented evidence of the seaworthy condition of the ship
prior to its departure, including the installation of life saving equipment and
other navigational instruments. But it could not present evidence that it
specifically installed a radar which could have allowed the vessel to navigate
safely for shelter during the storm. An important device such as the radar
could have enabled the ship to pass through the river and to safety.
Maritima's lack of EO diligence coupled with the negligence of the
captain were the proximate causes of the sinking of M/V Mindoro. Maritima is
liable for the deaths and injury of the victims. It was ordered to pay death
indemnities to the heirs of the victims, moral damages, actual damages and
attorney's fees.
(c) Specific rights and prerogatives
Art. 575. Part owners of vessels shall enjoy the right of pre-
emption and redemption in the sales made to strangers; but they
PAGE 109
can only exercise it within the nine days following the record of the
sale in the registry and by delivering the price at once.
Art. 593. The owners of a vessel shall have preference in her

charter over other persons, offering equal conditions and price. If
two or more of the former should claim said right the one having
greater interest shall be preferred, and should they have an equal interest it
shall be decided by lot.
Art. 594. The part owners shall elect the manager who is to
represent them in the capacity of agent.
The appointment of director or agent shall be revocable at the

will of the partners.
Art. 596. The agent may discharge the duties of captain of the
vessel, subject, in every case, to the provisions contained in Article
609.
If two or more co-owners request the position of captain, the

disagreement shall be decided by a vote of the members; and if the
vote should result in a tie, the position shall be given to the part
owner having the larger interest in the vessel.
If the interest of the petitioners should be the same, and there

should be a tie, the matter shall be decided by lot.
Art. 609. Captains, masters or patrons of vessels must

be Filipinos, have legal capacity to contract in accordance with
this Code, and prove the skill, capacity, and qualifications
necessary to command and direct the vessel, as established
by marine or navigation laws, ordinances, or regulations, and
must not be disqualfied according to the same for the
discharge of the duties of the position.
If the owner of a vessel desires to be the captain
thereof, without having the legal qualifications therefor, he
shall limit himself to the financial administration of the vessel,
and shall intrust the navigation to a person possessing the
qualifications required by said ordinances nd regulations.
Art. 601. Should there be any profits, the co- owners may
demand of the managing agent the amount due them, by means of an
executory action without further requisite than the acknowledgment
of the signatures in the instrument approving the account.
2. Captains and Masters
PAGE 110
(a) Qualifications and licensing
RA 5173
Sec. 3. The Philippine Coast Guard shall perform the following

functions : (e) to issue licenses and certificates to officers, pilots,
major and minor patrons and seamen, as well as suspend and revoke
such licenses and certificates.
Art. 609. Captains and masters of vessels must be Filipinos

having legal capacity to bind themselves in accordance with this
Code, and must prove that they have the skill, capacity, and
qualifications required to command and direct the vessel, as
established by marine laws, ordinances, or regulations, or by those of
navigation, and that they are not disqualified according to the same
for the discharge of the duties of that position.
If the owner of a vessel desires to be the captain thereof and
does not have the legal qualifications therefore, he shall limit himself
to the financial administration of the vessel, and shall entrust her
navigation to the person possessing the qualifications required by
said ordinances and regulations.
notes:
- Captain - one who governs vessels that navigate the high seas or ships of
large dimensions and importance, although they may be engaged in coastwise
trade
- Master - one who commands smaller ships engaged exclusively in coastwise
trade
- captain and master have the same meaning for maritime commerce
- patron - bancas
- Roles of the captain :

(1) general agent of the shipowner
(2) technical director of the vessels
(3) represents the government of the country under whose flag he navigates
(b) Inherent Powers
Art. 610. The following powers are inherent in the position of

captain or master of a vessel:
1. To appoint or make contracts with the crew in the absence
of the ship agent and propose said crew, should said agent be
present; but the agent may not employ any member against the
captain's express refusal.
2. To command the crew and direct the vessel to the port to its
destination, in accordance with the instructions he may have
received from the ship agent.
PAGE 111
3. To impose, in accordance with the contracts and the laws

and regulations of the merchants marine, on board the vessel,
correctional punishment upon those who do not comply with his
orders or who conduct themselves against discipline, holding a
preliminary investigation on the crimes committed on board the
vessel on the high seas, which he shall turn over to the authorities,
who are to take cognizance thereof, at the first port touched.
4. To make contracts for the charter of the vessel in the
absence of the ship agent or of the consignee, acting in accordance
with the instructions received and protecting the interests of the
owner with utmost care.
5. To adopt all the measures which may be necessary to keep
the vessel well supplied and equipped, purchasing all that may be
necessary for the purpose, provided there is no time to request
instructions of the agent.
6. To provide in similar urgent cases and on a voyage, for the
repairs to the hull and engines of the vessel and to her rigging and
equipment which are absolutely necessary in order for her to be able
to continue and conclude her voyage; but if she should arrive at a
point where there is a consignee of the vessel, he shall act in
concurrence with the latter.
notes: The first three powers cannot be renounced as they relate to public
order and are vested in the captain as a delegation of public authority
Art. 611. In order to comply with the obligations mentioned in

the foregoing article, and when he has no funds and does not expect
to receive any from the agent, the captain shall procure the same in
the successive order stated below:
1. By requesting said funds of the consignees of the vessel or
the correspondents of the ship agent.
2. By applying to the consignees of the cargo or to the persons
interested therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a bottomry
loan.
5. By selling a sufficient amount of the cargo to cover the
amount absolutely necessary to repair the vessel and to equip her to
pursue the voyage.
In the two last cases he must apply to the judicial authority of
the port, if in the Philippines and to the Filipino consul, if in a foreign
country; and where there should be none, to the local authority,
proceeding in accordance with the prescriptions of Article 583, and
with the provisions of the law of civil procedure.
Art. 583. If while on a voyage the captain should find it

necessary to contract one or more of the obligations men-
PAGE 112
tioned in subdivisions 8 and 9 of articl 580, he shall apply to

the judge or court if he is in the Philippine territory, and
otherwise to the consul of the Republic of the Philippines,
should there be one, and in his absence, to the judge or court
or proper local authority, presenting the certificate of the
registration sheet treated of in Article 612 and the
instruments proving the obligation contracted.
The judge or court, the consul, or the local authority, as
the case may be, in view of the result of the proceedings
institutied, shall make a temporary memorandum of their
result in the certificate, in order that it may be recorded in the
registry when the vessel returns to the port of its registry, or
so that it can be admitted as a legal and preferred obligation
in case of sale before its return, by reason of the sale of the
vessel on account of a declaration of unseaworthiness.
The omission of this formality shall make the captain
personally liable for the credits prejudiced on his account.
(the ff. is not required by the outline)

Art. 612. The following duties are inherent in the office of
captain:
1. To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, tackle, stores, and other
equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts
entered into with the crew; the list of passengers; the health
certificate; the certificate of the registry proving the ownership of
the vessel; and all the obligations which encumber the same up to
that date; the charters or authenticated copies thereof; the invoices
or manifest of the cargo, and the instrument of the expert visit or
inspection, should it have been made at the port of departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains,
signed by the marine official, and in his absence by the competent
authority.
In the first book, which shall be called "log book," he shall enter
every day the condition of the atmosphere, the prevailing winds, the
course sailed, the rigging carried, the horsepower of the engines, the
distance covered, the maneuvers executed, and other incidents of
navigation. He shall also enter the damage suffered by the vessel in
her hull engines, rigging, and tackle, no matter what is its cause, as
well as the imperfections and averages of the cargo, and the effects
and consequence of the jettison, should there be any; and in cases of
grave resolutions which require the advice or a meeting of the
officers of the vessel, or even of the passengers and crew, he shall
record the decision adopted. For the informations indicated he shall
make use of the binnacle book, and of the steam or engine book kept
by the engineer.
PAGE 113
In the second book, called the "accounting book", he shall enter

all the amounts collected and paid for the account of the vessel,
entering specifically article by article, the sources of the collection,
and the amounts invested in provisions, repairs, acquisition of
rigging or goods, fuel, outfits, wages, and all other expenses. He
shall furthermore enter therein a list of all the members of the crew,
stating their domiciles, their wages and salaries, and the amounts
they may have received on accounts, either directly or by delivery to
their families.
In the third book, called "freight book," he shall record the
entry and exit of all the goods, stating their marks and packages,
names of the shippers and of the consignees, ports of loading and
unloading, and the freight earned. In the same book he shall record
the names and places of sailing of the passengers and the number of
packages of which their baggage consists, and the price of the
passage.
4. To make, before receiving the freight, with the officers of
the crew, and the two experts, if required by the shippers and
passengers, an examination of the vessel, in order to ascertain
whether she is watertight, and whether the rigging and engines are
in good condition; and if she has the equipment required for good
navigation, preserving a certificate of the memorandum of this
inspection, signed by all the persons who may have taken part
therein, under their liability.
The experts shall be appointed one by the captain of the vessel
and the other one by the persons who request the examination, and
in case of disagreement a third shall be appointed by the marine
authority of the port.
5. To remain constantly on board the vessel with the crew
during the time the freight is taken on board and carefully watch the
stowage thereof; not to consent to any merchandise or goods of a
dangerous character to be taken on, such as inflammable or
explosive substances, without the precautions which are recom-
mended for their packing, management and isolation; not to permit
that any freight be carried on deck which by reason of its disposition,
volume, or weight makes the work of the sailors difficult, and which
might endanger the safety of the vessel; and if, on account of the
nature of the merchandise, the special character of the shipment,
and principally the favorable season it takes place, he allows
merchandise to be carried on deck, he must hear the opinion of the
officers of the vessel, and have the consent of the shippers and of
the agent.
6. To demand a pilot at the expense of the vessel whenever
required by navigation, and principally when a port, canal, or river,
or a roadstead or anchoring place is to be entered with which neither
he, the officers nor the crew are acquainted.
7. To be on deck at the time of sighting land and to take
command on entering and leaving ports, canals, roadsteads, and
rivers, unless there is a pilot on board discharging his duties. He
PAGE 114
shall not spend the night away from the vessel except for serious
causes or by reason of official business.
8. To present himself, when making a port in distress, to the

maritime authority if in the Philippines and to the Filipino consul if in
a foreign country, before twenty-four hours have elapsed, and make
a statement of the name, registry, and port of departure of the
vessel, of its cargo, and reason of arrival, which declaration shall be
vised by the authority of by the consul if after examining the same it
is found to be acceptable, giving the captain the proper certificate in
order to show his arrival under stress and the reasons therefore. In
the absence of marine officials or of the consul, the declaration must
be made before the local authority.
9. To take the steps necessary before the competent authority
in order to enter in the certificate of the vessel in the registry of the
vessels, the obligations which he may contract in accordance with
Article 583.
10. To put in a safe place and keep all the papers and
belongings of any members of the crew who might die on the vessel,
drawing up a detailed inventory, in the presence of passengers as
witnesses, and, in their absence, of members of the crew.
11. To conduct himself according to the rules and precepts
contained in the instructions of the agent, being liable for all that he
may do in violation thereof.
12. To give an account to the agent from the port where the
vessel arrives, of the reason therefore, taking advantage of the
semaphore, telegraph, mail, etc., according to the cases; notify him
the freight he may have received, stating the name and domicile of
the shippers, freight earned, and amounts borrowed on bottomry
bond, advise him of his departure, and give him any information and
date which may be of interest.
13. To observe the rules on the situation of lights and
evolutions to prevent collisions.
14. To remain on board in case of danger to the vessel, until all
hope to save her is lost, and before abandoning her to hear the
officers of the crew, abiding by the decision of the majority; and if he
should have to take a boat he shall take with him, before anything
else, the books and papers, and then the articles of most value, being
obliged to prove in case of the loss of the books and papers that he
did all he could to save them.
15. In case of wreck he shall make the proper protest in due
form at the first port reached, before the competent authority or
Filipino consul, within twenty-four hours, stating therein all the
incidents of the wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and
rules of navigation, customs, health, and others.
Notes: Although the duties in Art. 612 are inherent in the captain, the civil
liability arising from the non-fulfillment thereof is not limited to the captain,
PAGE 115
since while the captain is liable to the shipagent, the shipagent is liable to
third persons (Art. 618).
(not included in the outline)

Art. 622. If when on a voyage the captain should receive news
of the appearance of privateers or men of war against his flag, he
shall be obliged to make the nearest neutral port, inform his agents
or shippers, and await an occasion to sail under convoy or until the
danger is over or to receive final orders from the ship agent or
shippers.

Art. 624. A captain whose vessel has gone through a hurricane
or who believes that the cargo has suffered damages or averages,
shall make a protest thereon before the competent authority at the
first port he touches within the twenty-four hours following his
arrival, and shall ratify it within the same period when he arrives at
the place of his destination, immediately proceeding with the proof
of the facts, it not being permitted to open the hatches until after
this has been done.
The captain shall proceed in the same manner if, the vessel
having been wrecked, he is saved alone or with part of his crew, in
which case he shall appear before the nearest authority, and make a
sworn statement of the facts.
The authority or the consul abroad shall verify the said facts,
receiving sworn statements of the members of the crew and
passengers who may have been saved, and taking such other steps
as may help in arriving at the facts, he shall make a statement of the
result of the proceedings in the log book and in that of the sailing
mate, and shall deliver the original records of the proceedings to the
captain, stamped and folioed, with a memorandum of the folios,
which he must rubricate, for their presentation to the judge or court
of the port of destination.
The statement of the captain shall be believed if it is in

accordance with those of the crew and passengers; if they disagreed,
the latter shall be accepted, unless there is proof to the contrary.

Art. 625. Upon arrival at the port of destination, the captain
shall, under his personal liability, turn over the cargo, without any
defalcation, to the consignees, and, in a proper case, the vessel,
rigging, and freights to the agent, after having obtained the
necessary permission from the health and customs officers and
PAGE 116
fulfilled the other formalities required by the regulations of the

administration.
[If, by reason of the absence of the consignee or on account of
the nonappearance of a legal holder of the invoices, the captain does
not know to whom he is to make the legal delivery of the cargo, he
shall place it at the disposal of the proper judge or court or authority,
in order that he may decide with regard to its deposit, preservation,
and custody.]
Notes: Under 619, the delivery of the cargo at the port of discharge
terminates the captain's responsibility as to the cargo
INTER-ORIENT MARINE ENTERPRISES V. NLRC [235 S 634 (1994)]
ISSUE: W/N CAPTAIN TAYONG WAS ILLEGALLY DISMISSED?
HELD: Yes.
1. It is well settled that confidential and managerial employees cannot be

arbitrarily dismissed at any time, and without case as reasonably established
in an appropriate investigation.
2. The captain of a vessel is a confidential and managerial employee within

the meaning of the above doctrine. A master or captain, for purposes of
maritime commerce, is one who has command of a vessel. A captain
commonly performs three (3) distinct roles: (1) he is a general agent of the
shipowner; (2) he is also commander and technical director of the vessel; and
(3) he is a representative of the country under whose flag he navigates. Of
these roles, by far the most important is the role performed by the captain as
commander of the vessel, for such role (which to our mind, is analogous to
that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise)
has to do with the operation and protection of the vessel during its voyag and
the protection of the passengers (if any) and crew and cargo. In his role as
general agent of the shipowner, the captain has authority to sign bills of
lading, carry goods aboard and and deal with the freight earned, agree upon
rates and decide whether to take cargo. The ship captain, as agent of the
shipowner, has legal authority to enter into contracts with respect to the
vessel and the trading of the vessel, subkect to applicable limitations
established by statute, contract or instructions and regulations of the
shipowner. To the captain is committed the governance, care and
management of the vessel. Clearly, the captain is veste with both
management and fiduciary functions.
3. More importantly, a ship's captain must be accorded a reasonable measure

of discretionary authority to decide what the safety of the ship and its crew
and cargo specifically requires on a stipulated ocean voyage. The captain is
held responsible, and properly so, for such safety.
PAGE 117
4. Compagnie de Commerce v. Hamburg is instructive in this connection. In

that case, the captain of a German vessel at the port of Saigon decided to
head for the port of Manila instead of the ports of Dunkirk and Hamburg
because of WWI has been declared and in his judgment, the vessel could not
reach its destination. The charterer sued for damages arising from the breach
of the charter party, and unauthorized sale of the Cargo. The SC held that the
master of the vessel had reasonable grounds to apprehend that the vessel was
in danger of seizure of captur by the French authorities in Saigon and was
justified by necessity to elect the court which he took - to flee Saigon for the
port of Manila - with the result that the shipowner was relieved from liability
for the deviation from the stipulated route and from liability for the damage to
the cargo.
(c) Prohibited acts and transactions
Art. 613. A captain who navigates for freight in common or on

shares may not make any separate transaction for his own account,
and should he do so the profits shall belong to the other persons
interested, and the losses shall be borne by him alone.
Art. 615. Without the consent of the ship agent, the captain
may not have himself substituted by another person; and should he
do so, besides being liable for all the acts of the substitute and
bound to pay the indemnities mentioned in the foregoing article, the
substitute as well as the captain may be discharged by the ship
agent.
Notes: The duties of a captain are essentially personal due to the confidence
given to him arising from the fact that he possesses the required technical
ability and that he is a man worthy of trust of the shipowner
Art. 617. The captain may not contract loans on respondentia

secured by the cargo, and should he do so the contract shall be void.
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns, provided
no money has been previously borrowed on the whole vessel, and
provided there does not exist any other kind of lien or obligation
chargeable against the vessel. When he is permitted to do so, he
must necessarily state what interest he has in the vessel.
In case of violation of this article the principal, interest, and
costs shall be charged to the private account of the captain, and the
ship agent may furthermore discharge him.
Art. 621. A captain who borrows money on the hull, engine,

rigging, or tackle of the vessel, or who pledges or sells merchandise
PAGE 118
or provisions outside of the cases and without the formalities

prescribed in this Code, shall be liable for the principal, interest, and
costs, and shall indemnify for the damages he may cause.
He who commits fraud in his accounts shall reimburse the
amount defrauded, and shall be subject to the provisions of the Penal
Code.
Art. 583. If the ship being on a voyage the captain should find
it necessary to contract one or more of the obligations mentioned in
Nos. 8 and 9 of Article 580, he shall apply to the judge or court if he
is in Philippine territory, and otherwise to the Filipino consul, should
there be one, and in his absence to the judge or court or to the
proper local authority, presenting the certificate of the registry of
the vessel treated of in Article 612, and the instruments proving the
obligation contracted.
The judge or court, the consul or the local authority as the case
may be in view of the result of the proceedings instituted, shall make
a temporary memorandum in the certificate of their result, in order
that it may be recorded in the registry when the vessel returns to the
port of her registry, or so that it can be admitted as a legal and
preferred obligation in case of sale before the return, by reason of
the sale of the vessel by virtue of a declaration of unseaworthiness.
The lack of this formality shall make the captain personally
liable to the creditors who may be prejudiced through his fault.
Notes: Obligations covered by this article : (1) price which has not been paid
to the last vendor; (2) for materials and labor in the construction of the vessel;
(3) for the repair, equipment and provisioning with the victuals and fuel; (4)
loan on bottomry before departure of the vessel; (5) insurance premiums
under Art. 580 pars. 8 and 9.
3. Other Officers and Crew
notes:
Art. 626 - 631 : sailing mate or second in command
Art. 632 - 633 : second mate or third in command
Complement of a vessel or crew - all the persons on board, from the captain to
the cabin boy, necessary for the management, maneuvers, and service;
includes the sailing mates, engineers, stokers, and other employees.
(a) Contracts and formalities
Art. 634. The captain may make up his crew with the number
he may consider advisable, and in the absence of Filipino sailors he
may ship foreigners residing in the country, the number thereof not
to exceed one-fifth of the total crew. If in foreign ports the captain
PAGE 119
should not find a sufficient number of Filipino sailors, he may make

up the crew with foreigners, with the consent of the consul or marine
authorities.
The agreements which the captain may make with the members
of the crew and others who go to make up the complement of the
vessels, to which reference is made in Article 612 (obligations
inherent in the office of captain) must be reduced to writing in the
account book without the intervention of a notary public or clerk of
court, signed by the parties thereto, and vised by the marine
authority if they are executed in Filipino territory, or by the consuls
or consular agents of the Philippines if executed abroad, stating
therein all the obligations which each one contracts and all the rights
they acquire, said authorities taking care that these obligations and
rights are recorded in a concise and clear manner, which will not give
rise to doubts or claims.
The captain shall take care to read to them the articles of this
Code which concern them, stating in the said document that they
were read.
If the book includes the requisites prescribed in Article 612, and
there should not appear any signs of alterations in its entries, it shall
be admitted as evidence in questions which may arise between the
captain and the crew with regard to the agreements contained
therein and the amounts paid on account of the same.
Every member of the crew may demand of the captain a copy,
signed by the latter, of the agreement and of the liquidation of his
wages, as they appear in the book.
Notes: The contract with a seaman has the nature of a lease of service, in
virtue of which one person binds himself to perform or to do the services or
works for which he has signed himself in the vessel in consideration of the
compensation stipulated
(b) Duties and liabilities
Art. 635. A sailor who has been contracted to serve on a vessel

cannot rescind his contract nor fail to comply therewith except by
reason of a legitimate impediment which may have occurred.
Neither can he pass from the service of one vessel to another
without obtaining the written consent of the vessel on which he may
be.
If, without obtaining said permission, the sailor who has signed
for one vessel should sign for another one, the second contract shall
be void, and the captain may choose between forcing him to fulfill
the service to which he first bound himself or look for a person to
substitute him at his expense.
Said sailor shall furthermore lose the wages earned on his first
contract to the benefit of the vessel for which he may have signed.
PAGE 120
A captain who, knowing that a sailor is in the service of another

vessel, should have made a new agreement with him, without having
requested the permission referred to in the foregoing paragraphs,
shall be personally liable to the captain of the vessel to which the
sailor first belonged for that part of the indemnity, referred to in the
third paragraph of this article, which the sailor may not be able to
pay.
(c) Rights
Art. 636. Should there be no fixed period for which a sailor has
been contracted, he cannot be discharged until the end of the return
voyage to the port where he enlisted.
Art. 637. Neither may the captain discharge a sailor during the
time of his contract except for just cause, the following being
considered as such:
1. The perpetration of a crime which disturbs order on the
vessel.
2. Repeated insubordination, want of discipline, or non-
fulfillment of the service.
3. Incapacity and repeated negligence in the fulfillment of the
service which he should render.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the sailor to perform the
work entrusted to him, with the exception of that provided in Article
644.
Art. 644. A seaman who falls sick shall not lose his right
to wages during the voyage, unless the sickness is the result
of his own fault. At any rate, the costs of the attendance and
cure shall be defrayed from the common funds, in the form of
a loan.
If the sickness should comee from an injury received in

the service or defense of the vessel, the seaman shall be
attended and cured at the expense of the common funds de-
ducting, before anything else, from the proceeds of the
freightage the cost of the attendance and cure.
6. Desertion.
The captain may, however, before setting out on a voyage and without
giving any reason whatsoever, refuse to permit a sailor whom he may have
engaged to go on board, and may leave him on land, in which case his wages
have to be paid as if he had rendered services.
PAGE 121
The indemnity shall be paid from the funds of the vessel if the captain
should have acted for reasons of prudence and in the interest of the safety
and good service of the vessel. Should this not be the case, it shall be paid by
the captain personally.
After the voyage has begun, and during the same and until the
conclusion thereof, the captain may not abandon any member of his crew on
land or on the sea, unless, as the accused of a crime, his imprisonment and
delivery to the competent authority in the first port touched should be proper,
which shall be obligatory to the captain.
Art. 638. If, after the crew has been engaged, the voyage is
revoked by the will of the ship agent or of the charterers, before or
after the vessel has put to sea, or if the vessel is for the same reason
given a different destination from that fixed in the agreement with
the crew, the latter shall be indemnified on account of the rescission
of the contract, according to the following cases:
1. If the revocation of the voyage should be decided before
departure of the vessel from the port, each sailor engaged shall be
given one month's salary, besides what may be due him, in
accordance with his contract, for the services rendered to the vessel
up to the date of the revocation.
2. If the agreement should have been for a fixed amount for
the whole voyage, what may be due for said month and days shall be
determined in proportion to the approximate duration of the voyage,
in the judgment of the experts, in the manner established by the law
of civil procedure; and if the proposed voyage should be of such
short duration that it is calculated at approximately one month, the
indemnity shall be fixed at fifteen days, discounting in all cases the
sums advanced.
3. If the revocation should take place after the vessel has put
to sea, the sailors engaged for a fixed amount for the voyage shall
receive the entire salary which may have been offered them if the
voyage had terminated; and those engaged by the month shall
receive the amount corresponding to the time they might have been
on board and to the time they may require to arrive at the port of
destination, the captain being obliged, furthermore, to pay said
sailors in both cases the passage to the said port or to the port of
sailing of the vessel, as may be convenient for them.
4. If the ship agent or the charterers of the vessel should give
it a destination different from that fixed in the agreement, and the
members of the crew should not agree thereto, they shall be given by
way of indemnity half the amount fixed in the first case, in addition
to what may be due them for the part of the monthly wages
corresponding to the days which may have elapsed from the date of
their agreements.
If they accept the change, and the voyage, on account of
greater distance or of other reasons, should give rise to an increase
of wages, the latter shall be adjusted privately, or through friendly
PAGE 122
adjusters in case of disagreement. Even if the voyage should be

shortened to a nearer point, this shall not give rise to a reduction in
the wages agreed upon.
Should the revocation or change of the voyage originate from
the shippers or charterers, the ship agent shall have a right to
demand of them the indemnity which may be justly due.
Art. 639. Should the revocation of the voyage arise from a just
cause independent of the will of the ship agent and the charterers,
and the vessel should not have left the port, the members of the
crew shall no other right than to collect the wages earned up to the
day the revocation was made.
Art. 640. The following shall be just causes for the revocation
of the voyage:
1. A declaration of war or interdiction of commerce with the
power to whose territory the vessel was bound.
2. The blockade of the port of its destination or the breaking
out of an epidemic after the agreement.
3. The prohibition to receive in said port the goods which make
up the cargo of the vessel.
4. The detention or embargo of the same by order of the
government, or for any other reason independent of the will of the
agent.
5. The inability of the vessel to navigate.
Art. 641. If, after a voyage has been begun, and any of the first
three causes mentioned in the foregoing article should occur, the
sailors shall be paid at the port which the captain may deem
advisable to make for the benefit of the vessel and cargo, according
to the time they may have served thereon; but if the vessel is to
continue its voyage, the captain and the crew may mutually demand
the enforcement of the contract.
In case of the occurrence of the fourth cause, the crew shall
continue to be paid half wages, if the agreement is by month; but if
the detention should exceed three months, the contract shall be
rescinded and the crew shall be paid what they should have earned
according to the contact, as if the voyage had been made. And if the
agreement should be for a fixed sum for the voyage, the contract
must be complied with in the terms agreed upon.
In the fifth case, the crew shall have no other right than to
collect the wages earned; but if the disability of the vessel should
have been caused by the negligence or lack of skill of the captain,
engineer, or sailing mate, they shall indemnify the crew for the
damages suffered, always without prejudice to the criminal liability
which may be proper.
PAGE 123
Art. 642. If the crew has been engaged on shares it shall not be
entitled, by reason of the revocation, delay, or greater extension of
the voyage, to anything but the proportionate part of the indemnity
which may be paid to the common funds by the persons responsible
for said occurrences.
Art. 643. If the vessel and her cargo should be totally lost by
reason of capture or shipwreck, all rights shall be extinguished, both
as regards the right of the crew to demand any wages and as regards
the right of the ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be
saved, the crew engaged on wages, including the captain, shall retain
their rights on the salvage, as far as possible, on the remainder of
the vessel as well as on the value of the freightage or the cargo
saved; but sailors who are engaged on shares shall have no right on
the salvage of the hull, but only on the portion of the freightage
saved. (If they should have worked to recover the remainder of the
shipwrecked vessel, they shall be given from the amount of the
salvage an award in proportion to the efforts made and to the risks
encountered in order to accomplish the salvage.)
Art. 644. A sailor who falls sick shall not lose his right to wages
during the voyage, unless his sickness is the result of his own fault.
At any rate, the costs of medical attendance and treatment shall be
defrayed from the common funds, in the form of a loan.
If the sickness should be caused by an injury received in the
service or defense of the vessel, the sailor shall be attended and
treated at the expense of the common funds, deducting, before
anything else, from the proceeds of the freightage, the cost of the
attendance and treatment.
Art. 645. If a sailor should die during the voyage, his heirs shall
be given the wages earned and not received, according to his
contract and the cause of his death, namely ---
If he died a natural death and was engaged on wages, that
which may have been earned up to the date of his death shall be
paid.
If the contract was for a fixed sum for the whole voyage, half
the amount earned shall be paid if the sailor died on the voyage out,
and the whole amount if he died on the return voyage.
And if the contract was on shares and the death occurred after
the voyage was begun, the heirs shall be paid the entire portion due
the sailor; but if the latter died before the departure of the vessel
from the port, the heirs shall not be entitled to claim anything.
If death occurred in the defense of the vessel, the sailor shall
be considered as living, and his heirs shall be paid, at the end of the
PAGE 124
voyage, the full amount of wages or the entire part of the profits
which may be due him as others of his class.
The sailor shall likewise be considered as present if he was
captured while defending the vessel, in order to enjoy the benefits
as the rest; but should he have been captured on account of
carelessness or other accident not related to the service, he shall
only receive the wages due up to the day of his capture.
Art. 646. The vessel with her engines, rigging, equipment, and
freightage shall be liable for the wages earned by the crew engaged
per month or for the trip, the liquidation and payment to take place
between one voyage and the other. // After a new voyage has been
undertaken, credits of such kind pertaining to the preceding voyage
shall lose the preference.
Art. 647. The officers and the crew of the vessel shall be
exempted from all obligations contracted, if they deem if proper, in
the following cases;
1. If, before the beginning of the voyage, the captain attempts
to change it, or there occurs a naval war with the power to which the
vessel was destined.
2. If a disease should break out and be officially declared
epidemic in the port of destination.
3. If the vessel should change owner or captain.
4. Supercargoes
Art. 649. Supercargoes shall discharge on board the vessel the

administrative duties which the agent or shippers may have assigned
them; they shall keep an account and record of their transactions in a
book which shall have the same conditions and requisites as required
for the accounting book of the captain, and shall respect the latter in
his duties as chief of the vessel.
The powers and liabilities of the captain shall cease, when there
is a supercargo, with regard to that part of the administration
legitimately conferred upon the latter, but shall continue in force for
all acts which are inseparable from his authority and office.
Supercargo: An agent of the owner of the goods shipped as cargo on a

vessel, who has charge of the cargo on board, sells the same to the best
advantage in the foreign markets, buys cargo to be brought back on the return
voyage of the ship, and comes home with it
Art. 650. All the provisions contained in the second section of

Title III, Book II, with regard to qualifications, manner of making
PAGE 125
contracts, and liabilities of factors shall be applicable to

supercargoes.
Now governed by the provisions on agency
Art. 651. Supercargoes cannot, without special authorization or

agreement, make any transaction for their own account during the
voyage, with the exception of the ventures which, in accordance with
the custom of the port of destination, they are permitted to do.
Neither shall they be permitted to invest in the return trip more
than the profits from the ventures, unless there is a special
authorization therefor from the principals.
D. Accidents and Damages in Maritime Commerce
RISKS, DAMAGES, AND ACCIDENTS OF MARITIME COMMERCE
1. Averages
(a) Nature and Kinds
Art. 806. For the purposes of this Code the following shall be
considered averages:
1. All extraordinary or accidental expenses which may be
incurred during the voyage for the preservation of the vessel or
cargo, or both.
2. All damages or deterioration which the vessel may suffer
from the time it puts to sea at the port of departure until it casts
anchor at the port of destination, and those suffered by the
merchandise from the time they are loaded in the port of shipment
until they are unloaded in the port of their consignment.
Art. 807. The petty and ordinary expenses incident to

navigation, such as those of pilotage of coasts and ports, lighterage
and towage, anchorage, inspection, health, quarantine lazaretto,
and other so-called port expenses, costs of barges, and unloading,
until the merchandise is placed on the wharf, and other usual
expenses of navigation shall be considered ordinary expenses to be
defrayed by the shipowner, unless there is an express agreement to
the contrary.
Art. 808. Averages shall be:

1. Simple or particular.
2. General or gross.
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Averages consist of 2 items :

1. Expenses : to constitute an average, an expense must be:
a. extraordinary or accidental
b. incurred during the voyage
c. incurred in order to preserve the vessel, cargo or both
2. Damages or deterioration : to constitute an average, it must be:
a. have been suffered from the time the vessel puts to sea
from
the port of departure until it casts anchor in the port of
destination
b. have been suffered by the merchandise from the time they
are
loaded in the port of shipment until they are unloaded in the
port
of consignment
(1) Simple or Particular
(a) Defined
Art. 809. As a general rule, simple or particular averages

include all the expenses and damages caused to the vessel or to her
cargo which have not inured to the common benefit and profit of all
the persons interested in the vessel and her cargo, especially the
following:
1. The losses suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of the inherent
defect of the goods or by reason of a marine accident or force
majeure, and the expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its hull,
rigging, arms, and equipments, for the same causes and reasons,
from the time it puts to sea from the port of departure until it
anchors in the port of destination.
3. The losses suffered by the merchandise loaded on deck,
except in coastwise navigation, if the marine ordinances allow it.
4. The wages and victuals of the crew when the vessel is
detained or embargoed by a legitimate order or force majeure, if the
charter has been contracted for a fixed sum for the voyage.
5. The necessary expenses on arrival at port, in order to make
repairs or secure provisions.
6. The lowest value of the goods sold by the captain in
arrivals under stress for the payment of provisions and to save the
crew, to meet any other need of the vessel against which the proper
amount shall be charged.
7. The victuals and wages of the crew while the vessel is in
quarantine.
8. The loss inflicted upon the vessel or cargo by reason of an
impact or collision with another, if it is accidental and unavoidable.
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If the accident should occur through the fault or negligence of the

captain, the latter shall be liable for all the damage caused.
9. Any loss suffered by the cargo through the faults,
negligence, or barratry of the captain or of the crew, without
prejudice to the right of the owner to recover the corresponding
indemnity from the captain, the vessel, and the freight.
Distinguishing feature : an expense incurred or damage suffered which has

not inured to the common benefit and profit of all persons interested in the
vessel and its cargo
(b) Effects
Art. 810. The owner of the goods which gave rise to the
expense or suffered the damage shall bear the simple or particular
averages.
(2) Gross or General
(a) Defined
Art. 811. As a general rule, general or gross averages shall

include all the damages and expenses which are deliberately caused
in order to save the vessel, its cargo, or both at the same time, from
a real and known risk, and particularly the following:
1. The goods or cash invested in the redemption of the vessel
or of the cargo captured by enemies, privateers, or pirates, and the
provisions, wages, and expenses of the vessel detained during the
time the settlement or redemption is being made.
2. The goods jettisoned to lighten the vessel, whether they
belong to the cargo, to the vessel, or to the crew, and the damage
suffered through said act by the goods which are kept on board.
3. The cables and masts which are cut or rendered useless,
the anchors and the chains which are abandoned, in order to save
the cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of the
cargo in order to lighten the vessel and place it in condition to enter
a port or roadstead, and the damage resulting therefrom to the
goods removed or transferred.
5. The damage suffered by the goods of the cargo by the
opening made in the vessel in order to drain it and prevent its
sinking.
6. The expenses caused in order to float a vessel intentionally
stranded for the purpose of saving it.
7. The damage caused to the vessel which had to be opened,
scuttled or broken in order to save the cargo.
8. The expenses for the treatment and subsistence of the
members of the crew who may have been wounded or crippled in
defending or saving the vessel.
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9. The wages of any member of the crew held as hostage by

enemies, privateers, or pirates, and the necessary expenses which
he may incur in his imprisonment, until he is returned to the vessel
or to his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel chartered
by the month, during the time that it is embargoed or detained by
force majeure or by order of the Government, or in order to repair
the damage caused for the common benefit.
11. The depreciation resulting in the value of the goods sold
at arrivals under stress in order to repair the vessel by reason of
gross average.
12. The expenses of the liquidation of the average.
Art. 817. If in the lightening a vessel on account of a storm, in

order to facilitate its entry into a port or roadstead, part of her
cargo should be transferred to lighters or barges and be lost, the
owner of said part shall be entitled to indemnity, as if the loss had
originated from a gross average, the amount thereof being
distributed between the vessel and cargo from which it came.
If, on the contrary, the merchandise transferred should be
saved and the vessel should be lost, no liability may be demanded
of the salvage.
Art. 818. If, as a necessary measure to extinguish a fire in

port, roadstead, creek, or bay, it should be decided to sink any
vessel, this loss shall be considered gross average, to which the
vessels saved shall contribute.
Distinguishing feature: Expense or damage suffered deliberately in order to

save the vessel, its cargo or both from a real and known risk --> it is the
deliverance from an immediate peril, by a common sacrifice, that constitutes
the essence of general average
Requisites for general average:
1. there must be a common danger --> the ship and cargo are subject
to the same danger and that the danger arises from accidents of the sea,
dispositions of the authorities or faults of men, provided that the
circumstances producing the peril should be ascertained and imminent
2. for the common safety, part of the vessel or the cargo or both is
sacrificed deliberately
3. from the expenses or damages caused follows the successful saving
of the vessel and cargo
4. the expenses or damages should have been incurred or inflicted
after taking legal steps and authority
(b) Essential Requisites
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Art. 813. In order to incur the expenses and cause the

damages corresponding to gross average, there must be a resolu-
tion of the captain, adopted after deliberation with the sailing mate
and other officers of the vessel, and after hearing the persons
interested in the cargo who may be present.
If the latter should object, and the captain and officers or a
majority of them, or the captain, if opposed to the majority, should
consider certain measures necessary, they may be executed under
his responsibility, without prejudice to the right of the shippers to
proceed against the captain before the competent judge or court, if
they can prove that he acted with malice, lack of skill, or
negligence.
If the persons interested in the cargo, being on board the
vessel, have not been heard, they shall not contribute to the gross
average, their share being chargeable against the captain, unless
the urgency of the case should be such that the time necessary for
previous deliberation was wanting.
Art. 814. The resolution adopted to cause the damages which

constitute general average must necessarily be entered in the log
book, stating the motives and reasons on which it is based, the
votes against it and the reason for the dissent, should there be any,
and the irresistible and urgent causes which impelled the captain if
he acted of his own accord.
In the first case the minutes shall be signed by all the persons
present who could do so before taking action, if possible; and if not,
at the first opportunity. In the second case, it shall be signed by the
captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in
detail all the goods jettisoned, and mention shall be made of the
injuries caused to those kept on board. The captain shall be obliged
to deliver one copy of these minutes to the maritime judicial
authority of the first port he may make, within twenty- four hours
after his arrival, and to ratify it immediately under oath.
Formalities for incurring gross average :

1. there must be an assembly of the sailing mate and other officers with the
captain including those with interests in the cargo
2. there must be a resolution of the captain
3. the resolution shall be entered in the log book, with the reasons and
motives and the votes for and against the resolution
4. the minutes shall be signed by the parties
5. within 24 hours upon arrival at the first port the captain makes, he shall
deliver one copy of these minutes to the maritime judicial authority thereat
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Art. 860. If, notwithstanding the jettison of the merchandise,

breakage of masts, ropes, and equipment, the vessel should be lost
running same risk, no contribution whatsoever by reason of gross
average shall be proper.
The owners of the goods saved shall not be liable for the
indemnification of those jettisoned, lost or damaged.
The goods that were not sacrificed shall not be liable for the indemnification
of those sacrificed - One of the requisites of general average is lacking,
that is, success in saving the vessel and remaining cargo
Magsaysay Inc. vs Agan 96 Phil. 504
Held: In classifying averages into simple or particular and general or gross

and defining each class, the Code of Commerce at the same time enumerate
certain specific cases as coming specially under one or the other class. While
the expenses incurred in putting the vessel afloat may well come under No. 2
of Art. 809 - referring to expenses suffered by the vessel due to an accident
of the sea or force majeure- said expenses do not fit into any of the specific
cases of general average enumerated in ART. 811. No. 6 of Art. 811
mentions expenses caused to afloat a vessel, but it specifically refers to a
vessel intentionally stranded for the purpose of saving it, and would have no
application where the stranding was unintentional.
The following are the requisites for a general average: 1) there must
be common danger, 2) for the common safety part of the vessel or cargo or
both is sacrificed deliberately, 3) from the expenses or damages caused
follows the successful saving of the vessel and cargo, and 4) the expenses or
damages should have been incurred or inflicted after taking the proper legal
steps and authority.
It is the deliverance from an immediate peril, by reason of a common
sacrifice, that constitutes the essence of a general average. Where there is
no proof that the stranded vessel had to be put afloat to save it from
imminent danger, and what does appear is that the vessel had to be
salvaged in order to enable it to proceed to its port of destination, the
expenses incurred in floating the vessel do not constitute general average. It
is the safety of the property, and not of the voyage which constitutes the true
foundation of general average.
The expenses incurred for the common safety of the vessel and cargo
in this case did not arise from the imminent peril of both. The cargo could
have been unloaded by the owners had they been required to do so. The
refloating was a success, but as the sacrifice was for the vessel's benefit -- to
enable it to proceed to its destination -- and not for the purpose of saving the
cargo, the cargo owners are not in law bound to contribute to expenses. The
final requisite has not been proved for it does not appear that the expenses
in question were incurred after following the procedure laid down in Art. 913.
Decision reversed.
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International Harvester vs Hamburg American Line 42 Phil 845
Held: It is clear that the cargo in question is not liable to a general average.
It is not claimed that said cargo was contraband of war and being neutral
goods, they were not liable to forfeiture in the event of capture by the
enemies of the ship's flag. It follows that when the master of the vessel
decided to take refuge in Manila, he acted exclusively with a view to the
vessel's protection. There was no common danger to the ship and cargo;
and, therefore, it was not a case for a general average.
The outbreak of the war between Germany and Russia absolved the
defendant from conveying the cargo to Russia, and no damage could be
recovered by the plaintiff from the defendant for the latter's failure to convey
the cargo to the port of destination on that ship. But by the terms of the
contract of affreightment, the defendant was bound to forward the cargo to
Vladivostok at its expense, not necessarily by a streamer of defendant. It
does not by any means follow that it is not liable for the expenses incurred
by the plaintiff in completing the unfinished portion of the voyage in another
ship. Defendant is, therefore, liable for the cost of forwarding the cargo by
another line, the full freight having been received by the ship at the
commencement of the voyage.
Judgment affirmed.
Compagnie de Commerce vs Hamburg 36 Phil 590
Held: The danger from which the master of the vessel fled was a real and
not merely an imaginary one. Seizure at the hands of the enemy, though not
inevitable, was a possible outcome of a failure to leave the port of Saigon;
and it cannot be said that under the conditions existing at the time when the
master elected to flee from that port, there were no grounds for a reasonable
apprehension of danger from seizure by French authorities, and therefore no
necessity for flight. The deviation of the vessel therefore, from the route
prescribed in her charter party, and the subsequent abandonment by the
master of the voyage contemplated in the contract of affreightment, must be
held to have been justified by the necessity under which the master was
placed to elect that course which would remove and preserve the vessel from
danger of seizure by the public enemy of the flag which the vessel sailed;
and that neither the vessel nor her owners are liable for the resultant
damages suffered by the owner of the cargo.
The claim for general average by the shipowner, however, cannot be
sustained under the provisions of the York-Antwerp Rules. An examination of
the entire body of these rules discloses that general average is never allowed
thereunder unless the loss or damage sought to be made good as general
average has been incurred for the `common safety'. It is very clear that in
fleeing from the port of Saigon and taking refuge in Manila, the master of the
vessel was not acting for the common safety of the vessel and her cargo.
The French cargo was absolutely secure from danger of seizure or
confiscation so long as it remained in the port of Saigon, and there can be no
question that the flight of the vessel was a measure of precaution adopted
solely and exclusively for the preservation of the vessel from danger of
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seizure or capture. Delivery of the net proceeds of the sale to plaintiff should
be affirmed, but recovery of damages by plaintiff should be reversed.
Defendant cannot claim for general average.
Judgment modified.
(c) Effects
Art. 812. In order to satisfy the amount of the gross or

general averages, all the persons having an interest in the vessel
and cargo therein at the time of the occurrence of the average shall
contribute.
(d) Jettison
Art. 815. The captain shall direct the jettison, and shall order
the goods cast overboard in the following order:
1. Those which are on deck, beginning with those which
embarrass the maneuver or damage the vessel, preferring, if
possible, the heaviest ones with the least utility and value.
2. Those which are below the upper deck, always beginning
with those of the greatest weight and smallest value, to the amount
and number absolutely indispensable.
Art. 816. In order that the goods jettisoned may be included

in the gross average and the owners thereof be entitled to
indemnity, it shall be necessary in so far as the cargo is concerned
that their existence on board be proven by means of the bill of
lading; and with regard to those belonging to the vessel, by means
of the inventory prepared before the departure, in accordance with
the first paragraph of Article 612.
(e) Jason Clause
Jason Clause, Rule D, York-Antwerp Rules
Rights to contribution in general average shall not be affected, though

the event which gave rise to the sacrifice or expenditure may have been due
to the fault of one of the parties to the adventure; but this shall not prejudice
any remedies which may be open against that party for such fault.
(b) Proof and Liquidation of Averages
(1) Modes
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Art. 846. Those interested in the proof and liquidation of

averages may mutually agree and bind themselves at any time with
regard to the liability, liquidation and payment thereof.
In the absence of agreements, the following rules shall be
observed:
1. The proof of the average shall take place in the port where
the repairs are made, should any be necessary, or in the port of
unloading.
2. The liquidation shall be made in the port of unloading, if it
is a Philippine port.
3. If the average occurred outside of the jurisdictional waters
of the Philippines, or the cargo has been sold in a foreign port by
reason of an arrival under stress, the liquidation shall be made in
the port of arrival.
4. If the average has occurred near the port of destination, so
that said port can be made, the proceedings mentioned in rules 1
and 2 shall be held there.
Art. 847. In the case where the liquidation of the averages is

made privately by virtue of agreement, as well as when a judicial
authority intervenes at the request of any of the parties interested
who do not agree thereto, all of them shall be cited and heard,
should they not have renounced this right.
Should they not be present or should they have no legal
representative, the liquidation shall be made by the consul in a
foreign port, and where there is none, by the competent judge or
court, according to the laws of the country and for the account of
the proper party.
When the representative is a person well known in the place
where the liquidation is made, his intervention shall be admitted
and shall produce legal effects, even though he be authorized only
by a letter of the ship agent, the shipper, or the insurer.
Art. 848. Claims for averages shall not be admitted if they do

not exceed 5 per cent of the interest which the claimant may have in
the vessel or in the cargo if it be gross average, and 1 per cent of
the goods damaged if particular average, deducting in both cases
the expenses of appraisal, unless there is an agreement to the
contrary.
(2) Appraisal of general average
Art. 850. If by reason of one or more accidents of the sea,

particular and gross averages of the vessel, of the cargo, or of both,
should take place on the same voyage, the expenses and damages
corresponding to each average shall be determined separately in
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the port where the repairs are made, or where the merchandise is
discharged, sold, or utilized.
For this purpose the captains shall be obliged to demand of
the expert appraisers and of the contractors making the repairs, as
well as of those appraising and taking part in the unloading, repair,
sale, or utilization of the merchandise, that in their appraisements
or estimates and accounts they set down separately and accurately
the expenses and damages pertaining to each average, and in those
of each average those corresponding to the vessel and to the cargo,
also stating separately whether or not there are damages
proceeding from inherent defect of the thing and not from accident
of the sea; and in case there should be expenses common to the
different averages and to the vessel and its cargo, the amount
corresponding to each must be estimated and stated distinctly.
Art. 851. At the instance of the captain, the adjustment,

liquidation, and distribution of gross averages shall be held
privately, with the consent of all the parties in interest.
For this purpose, within forty-eight hours, following the arrival
of the vessel at the port, the captain shall convene all the persons
interested in order that they may decide as to whether the
adjustment or liquidation of the gross average is to be made by
experts and liquidators appointed by themselves, in which case did
shall be so done if the interested parties agree.
If an agreement is not possible, the captain shall apply to the
competent judge or court, who shall be the one in the port where
these proceedings are to be held in accordance with the provisions
of this Code, or to the consul of the Philippines should there be one,
and should there be none, to the local authority when they are to be
held in a foreign port.
Art. 852. If the captain does not comply with the provisions of
the preceding article, the ship agent or the shippers shall demand
the liquidation, without prejudice to the action they may bring to
demand indemnity from him.
Under Art. 851, the captain is required to initiate the proceedings for the
adjustment, liquidation and distribution of any gross average; it is his duty to
take the proper steps to protect any shipper whose goods may have been
jettisoned for the general safety ==> if the captain does not comply with his
duty under 851, the shipowner or shipper has the right to maintain an action
against the captain for indemnification for the loss --> this does not involve
the suppression of the right of action of the shipper against the shipowner
Art. 853. After the experts have been appointed by the

persons interested, or by the court, and after the acceptance, they
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shall proceed to the examination of the vessel and of the repairs

required and to the appraisal of their cost, separating these losses
and damages from those arising from the inherent defect of the
things.
The experts shall also declare whether the repairs may be
made immediately, or whether it is necessary to unload the vessel in
order to examine and repair it.
With regard to the merchandise, if the average should be
visible at a mere glance, the examination thereof must be made
before they are delivered. Should it not be visible at the time of
unloading, said examination may be made after the delivery,
provided that it is done within forty-eight hours from the unloading,
and without prejudice to the other proofs which the experts may
deem proper.
Art. 854. The valuation of the objects which are to contribute

to the gross average, and that of those which constitute the
average, shall be subject to the following rules:
1. The merchandise saved which is to contribute to the
payment of the gross average shall be valued at the current price at
the port of unloading, deducting the freightage, customs duties, and
expenses of unloading, as may appear from a material inspection of
the same, without taking the bills of lading into consideration,
unless there is an agreement to the contrary.
2. If the liquidation is to be made in the port of departure, the
value of the merchandise loaded shall be determined by the
purchase price, including the expenses until they are placed on
board, the insurance premium excluded.
3. If the merchandise should be damaged, it shall be
appraised at its true value.
4. If the voyage having been interrupted, the merchandise
should have been sold in a foreign port, and the average cannot be
estimated, the value of the merchandise in the port of arrival, or the
net proceeds obtained at the sale thereof, shall be taken as the
contributing capital.
5. Merchandise lost, which constitutes the gross average,
shall be appraised at the value which merchandise of its kind may
have in the port of unloading, provided that its kind and quality
appear in the bill of lading; and should they not appear, the value
shall be that stated in the invoices of the purchase issued in the
port of shipment, adding thereto the expenses and freightage
subsequently arising.
6. The masts cut down, the sails, cables, and other equipment
of the vessel rendered useless for the purpose of saving it, shall be
appraised at the current value, deducting one-third by reason of the
difference between new and old.
This deduction shall not be made with respect to anchors and
chains.
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7. The vessel shall be appraised at its true value in the

condition in which it is found.
8. The freightage shall represent 50 per cent by way of
contributing capital.
Art. 855. The merchandise loaded on the upper deck of the

vessel shall contribute to the gross average should it be saved; but
there shall be no right to indemnify if it should be lost by reason of
having been jettisoned for common safety, except when the marine
ordinances allow its shipment in this manner in coastwise
navigation.
The same shall take place with that which is on board and is
not included in the bills of lading or inventories, according to the
cases.
In any case the shipowner and the captain shall be liable to
the shippers for the damages from the jettison, if the storage on the
upper deck was made without the consent of the latter.
The goods may be stowed on deck (1) with the consent of the shipper or (2)
without his consent --> if stowed on deck with his consent, he takes the risk
upon himself of the perils arising from the dangers of the sea and any
damage will be borne by the owner [particular average]
--> if stowed on deck without his consent, the captain does so at his
own risk; the captain cannot protect himself by showing that they are
damaged or lost by dangers of the sea
The carriage of gasoline on deck by coastwise or interisland vessels is

allowed by marine regulations --> the loss of petroleum for common safety
and benefit will constitute a general average.
Art. 857. After the appraisement of the goods saved and of

those lost which constitute the gross average, has been concluded
by the experts, the repairs, if any, made on the vessel, and, in this
case, the accounts of the same approved by the persons interested
or by the judge or court, the entire record shall be turned over to
the liquidator appointed, in order that he may proceed with the
distribution of the average.
(3) Liquidation of general average
Art. 858. In order to effect the liquidation, the liquidator shall

examine the protest of the captain, comparing it, if necessary, with
the log book, and all the contracts which may have been made
among the persons interested in the average, the appraisements,
expert examinations, and accounts of repairs made. If, as a result
of this examination, he should find any defect in the procedure
which might injure the rights of the persons interested or affect the
liability of the captain, he shall call attention thereto in order that it
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may be corrected, if possible, and otherwise he shall include it in

the exordial of the liquidation.
Immediately thereafter he shall proceed with the distribution
of the amount of the average, for which purpose he shall fix:
1. The contributing capital, which he shall determine by the
value of the cargo, in accordance with the rules established in
Article 854.
2. That of the vessel in its actual condition, according to a
statement of experts.
3. The 50 per cent of the amount of the freightage, deducting
the remaining 50 per cent for wages and maintenance of the crew.
After the amount of the gross average has been determined in
accordance with the provisions of this Code, it shall be distributed
pro rata among the goods which are to cover the same.
Art. 865. The distribution of the gross average shall not be

final until it has been agreed to, or in the absence thereof, until it
has been approved by the judge or court, after an examination of
the liquidation and a hearing of the persons interested who may be
present or of their representatives.
Art. 866. After the liquidation has been approved, it shall be

the duty of the captain to collect the amount of the contribution,
and he shall be liable to the owners of the goods averaged for the
damages they may suffer through his delay or negligence.
Art. 867. If the persons contributing should not pay the

amount of the contribution at the end of the third day after having
been required to do so, the goods saved shall be proceeded against,
at the request of the captain, until payment has been made from
their proceeds.
Art. 868. If the person interested in receiving the goods saved

should not give security sufficient to answer for the amount
corresponding to the gross average, the captain may defer the
delivery thereof until payment has been made.
Art. 869. The experts whom the court or the persons

interested may appoint, as the case may be, shall proceed with the
examination and appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7, in so far as they are
applicable.
(4) Liquidation of particular average
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Art. 869. The experts whom the court or the persons

interested may appoint, as the case may be, shall proceed with the
examination and appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7, in so far as they are
applicable.
2. Arrivals Under Stress
(a) Causes
Art. 819. If during the voyage the captain should believe that
the vessel cannot continue the trip to the port of destination on
account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea
disabling it to navigate, he shall assemble the officers and shall
summon the persons interested in the cargo who may be present,
and who may attend the meeting without the right to vote; and if,
after examining the circumstances of the case, the reason should be
considered well-founded, the arrival at the nearest and most
convenient port shall be agreed upon, drafting and entering the
proper minutes, which shall be signed by all, in the log book.
The captain shall have the deciding vote, and the persons
interested in the cargo may make the objections and protests they
may deem proper, which shall be entered in the minutes in order
that they may make use thereof in the manner they may consider
advisable.
Art. 820. An arrival shall not be considered lawful in the

following cases:
1. If the lack of provisions should arise from the failure to
take the necessary provisions for the voyage according to usage and
custom, or if they should have been rendered useless or lost
through bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not
have been well known, manifest, and based on positive and
provable facts.
3. If the defector the vessel should have arisen from the fact
that it was not repaired, rigged, equipped, and prepared in a
manner suitable for the voyage, or from some erroneous order of
the captain.
4. Whenever malice, negligence, want of foresight, or lack of
skill on the part of the captain exists in the act causing the damage.
Arrival under stress: Arrival of a vessel at the nearest and most

convenient port, if during the voyage the vessel cannot continue the trip to
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the port of destination due to : (1) lack of provisions, (2) well-founded fear of
seizure, privateers, or pirates, (3) by reason of any accident of the sea
disabling it to navigate
(b) Formalities
Art. 819. If during the voyage the captain should believe that
the vessel cannot continue the trip to the port of destination on
account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea
disabling it to navigate, he shall assemble the officers and shall
summon the persons interested in the cargo who may be present,
and who may attend the meeting without the right to vote; and if,
after examining the circumstances of the case, the reason should be
considered well-founded, the arrival at the nearest and most
convenient port shall be agreed upon, drafting and entering the
proper minutes, which shall be signed by all, in the log book.
The captain shall have the deciding vote, and the persons
interested in the cargo may make the objections and protests they
may deem proper, which shall be entered in the minutes in order
that they may make use thereof in the manner they may consider
advisable.
Formalities : 1. assembly of the officers including all interested parties

2. drafting and entering in the log book the proper minutes, which shall be
signed by all
3. entry in the log book of the objections and protests of the persons
interested in the cargo
Art. 822. If in order to make repairs to the vessel or because

there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from
the competent judge or court for the removal, and carry it out with
the knowledge of the person interested in the cargo, or his
representative, should there be any.
In a foreign port, it shall be the duty of the Filipino consul,
where there is one, to give the authorization.
In the first case, the expenses shall be for the account of the
ship agent or owner, and in the second, they shall be chargeable
against the owners of the merchandise for whose benefit the act
was performed.
If the unloading should take place for both reasons, the
expenses shall be divided proportionately between the value of the
vessel and that of the cargo.
(c) Expenses
PAGE 140
Art. 821. The expenses of an arrival under stress shall always

be for the account of the shipowner or agent, but they shall not be
liable for the damages which may be caused the shippers by reason
of the arrival, provided the latter is legitimate.
Otherwise, the ship agent and the captain shall be jointly
liable.
Art. 822. If in order to make repairs to the vessel or because

there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from
the competent judge or court for the removal, and carry it out with
the knowledge of the person interested in the cargo, or his
representative, should there be any.
In a foreign port, it shall be the duty of the Filipino consul,
where there is one, to give the authorization.
In the first case, the expenses shall be for the account of the
ship agent or owner, and in the second, they shall be chargeable
against the owners of the merchandise for whose benefit the act
was performed.
If the unloading should take place for both reasons, the
expenses shall be divided proportionately between the value of the
vessel and that of the cargo.
Requisites for the captain to unload the cargo arriving under stress:
1. the unloading must be necessary to make repairs or there must be danger
that the cargo may suffer damage
2. the captain must be authorized by either a competent court or the Phil.
consul, depending on the port of arrival
(d) Responsibility of Captain
Art. 823. The custody and preservation of the cargo which has
been unloaded shall be entrusted to the captain, who shall be
responsible for the same, except in cases of force majeure.
Art. 824. If the entire cargo or part thereof should appear to

be damaged, or there should be imminent danger of its being
damaged, the captain may request of the competent judge or court,
or of the consul in a proper case, the sale of all or of part of the
former, and the person taking cognizance of the matter shall
authorize it, after an examination and declaration of experts,
advertisements, and other formalities required by the case, and an
entry in the book, in accordance with the provisions of Article 624.
The captain shall, in a proper case, justify the legality of his
conduct, under the penalty of answering to the shipper for the price
PAGE 141
the merchandise would have brought if it had arrived in good

condition at the port of destination.
Art. 825. The captain shall be responsible for the damages

caused by his delay, if after the cause of the arrival under stress has
ceased, he should not continue the voyage.
If the cause of the arrival should have been the fear of
enemies, privateers, or pirates, a deliberation and resolution in a
meeting of the officers of the vessel and persons interested in the
cargo who may be present, in accordance with the provisions
contained in Article 819, shall precede the departure.
The captain has the duty to continue the voyage without delay after the
cause of the arrival under stress has ceased--> otherwise, he shall be liable
for damages caused by the delay
3. Collisions
Collision: impact of two vessels both of which are moving

Allision: striking of a moving vessel against one that is stationary
Cases of collision :
1. due to the fault, negligence or lack of skill of the captain, sailing mate or
the complement of the vessel --> under 826, the shipowner shall be liable for
the losses and damages
2. due to the fault of both vessels --> under 827, each vessel shall suffer its
own losses, but as regards the owners of the cargoes, both vessels shall be
jointly and severally liable
3. where it cannot be determined which of the 2 vessels is at fault --> under
828, each vessel shall suffer its own losses, and both shall also be solidarily
responsible for the losses and damages caused to their cargoes
4. collision due to fortuitous event or force majeure --> under 830, each
vessel shall bear its own damages
5. where two vessels collide with each other without their fault but by reason
of the fault of a third vessel --> under 831, the owner of the third vessel
causing the collision shall be liable for the losses and damages 6. a vessel
which is properly anchored and moored may collide with those nearby by
reason of a storm or other cause of force majeure --> under 832, the vessel
run into shall suffer its own damages and expenses
Nautical Rules to determine negligence :
1. When 2 vessels are about to enter a port, the farther one must allow
the nearer to enter first; if they collide, the fault is presumed to be imputable
to the one who arrived later, unless it can be proved that there was no fault
on its part.
PAGE 142
2. When 2 vessels meet, the smaller should give the right of way to
the larger one.
3. A vessel leaving port should leave the way clear for another which
may be entering the same port.
4. The vessel which leaves later is presumed to have collided against

one who has left earlier.
5. There is also a presumption against the vessel which sets sail at

night.
6. The presumption also works against the vessel with spread sails
which collides with another which is at anchor, and cannot move, even when
the crew of the latter has received word to lift anchor, when there was not
sufficient time to do so or there was fear of a greater damage or other
legitimate reason.
7. The vessel which is not properly moored or does not observe the
proper distances, has the presumption against itself.
8. The vessel which is moored at a place not used for the purpose, or
which is improperly moored or does not have sufficient cables, or which has
been left without watch, has also against itself the presumption.
9. The same rule applies to those vessels which do not have buoys to
indicate the location of its anchors to prevent damage to these vessels which
may approach it.
Zones in time of collisions (3 time zones):
1. all the time up to the moment when the risk of collision may have
said to have begun
--> within this zone, no rule is applicable because none is necessary.
Each vessel is free to direct its course as it deems best with reference to the
movements of the other vessel.
2. the time between the moment when the risk of collission begins and
the moment when it has become a practical necessity.
3. the time between the moment when collission has become a

practical certainty and the moment of actual contact
Effect of fault of privileged vessel during third zone :
If a vessel having a right of way suddenly changes its course during

the third zone, in an effort to avoid an imminent collision due to the fault of
another vessel, such act may be said to be done in extremis, and even if
PAGE 143
wrong, cannot create responsibility on the part of said vessel with the right of
way. Thus, it has been held that fault on the part of the sailing vessel at the
moment preceding a collission, that is, during the third division of time, does
not absolve the steamship which has suffered herself and a sailing vessel to
get into such dangerous proximity as to cause inevitable harm and confusion,
and a collision results as a consequence. The steamer having a far greater
fault in allowing such proximity to be brought about is chargeable with all the
damages resulting from the collission; and the act of the sailing vessel
having been done in extremis and even wrong, is not responsible for the
result.
(a) Classes and Effects
(1) Fortuitous
Art. 830. If a vessel should collide with another through

fortuitous event or force majeure, each vessel and its cargo shall
bear its own damages.
Art. 832. If, by reasons of a storm or other cause of force

majeure, a vessel which is properly anchored and moored should
collide with those nearby, causing them damages, the injury
occasioned shall be considered as particular average of the vessel
run into.
Each to his own damage --> particular damage
(2) Culpable
Art. 826. If a vessel should collide with another, through the

fault, negligence, or lack of skill of the captain, sailing mate, or any
other member of the complement, the owner of the vessel at fault
shall indemnify the losses and damages suffered, after an expert
appraisal.
Where the obligation arises from tortious act and not from contract, both the
owner and the shipagent should be declared liable
Art. 827. 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 occasioned to their cargoes.
Defense of due diligence of a good father of a family in the selection and

vigilance of the officers and crew cannot be used to render nugatory the
solidary liability under 827
PAGE 144
Under the express provisions of 827, the shipowners cannot successfully

maintain an action against the other for the loss or injury to his vessel
Art.831. If a vessel should be forced by a third vessel to

collide with another, the owner of the third vessel shall indemnify
the losses and damages caused, the captain thereof being civilly
liable to said owner.
(3) Inscrutable Fault
Art. 828. The provisions of the preceding article are

applicable to the case in which it cannot be determined which of the
two vessels has caused the collision.
Relation of Art. 827 to Art. 828

Art. 828 must be considered an extension of Art. 827
The rule of liability under Art. 827 is applicable not only to the case
where both vessels may be shown to be actually blameworthy but also to the
case where it is obvious that only one was at fault but the proof does not
show which
Under Arts. 827 and 828, in case of collision between two vessels at
sea, both are solidarily liable for the loss of cargo carried by either to the full
extent of the value thereof, not only in the cse where both vessels may be
shown to be actually blameworthy but also in the case where it is shown that
only one ws at fault but the proof does not show it --> it makes no difference
that the negligence imputable to the two vessels may have differed
somewhat in character and degree and that the negligence of the sunken
ship was somewhat more marked than that of the ther
The doctrine of last clear chance cannot be raised --> under the
express provisions of Art. 827, under which the evidence disclosing that both
vessels are blameworthy, the owners of neither can successfully maintain an
action against the other for the loss or injury to his vessel
(b) Presumption of loss by collision
Art.833. A vessel which, upon being run into, sinks

immediately, as well as that which, having been obliged to make a
port to repair the damages caused by the collision, is lost during the
voyage or is obliged to be stranded in order to be saved, shall be
presumed as lost by reason of collision.
(c) Liabilities
PAGE 145
(1) Shipowner or agent
Art. 837. The civil liability incurred by the shipowners in the

cases prescribed in this section, shall be understood as limited to
the value of the vessel with all its appurtenances and freightage
earned during the voyage.
Art. 838. When the value of the vessel and her appurtenances
should not be sufficient to cover all the liabilities, the indemnity due
by reason of the death or injury of persons shall have preference.
Limited liability : limited to the value of the vessel and the freight earned
during the voyage [provided for in Arts. 587, 590 and 837]
Damages may be recovered to the extent of what may be salvaged or
of the freightage received or of the value of the insurance recoverable
(2) Captain, pilot, others
Art. 829. In the cases above mentioned the civil action of the
owner against the person causing the injury as well as the criminal
liabilities, which may be proper, are reserved.
Art. 834. If the vessels colliding with each other should have
pilots on board discharging their duties at the time of the collision,
their presence shall not exempt the captains from the liabilities they
incur, but the latter shall have the right to be indemnified by the
pilots, without prejudice to the criminal liability which the latter
may incur.
(3) conditions; protests
Art. 835. The action for the recovery of losses and damages
arising from collisions cannot be admitted if a protest or declaration
is not presented within twenty-four hours before the competent
authority of the point where the collision took place, or that of the
first port of arrival of the vessel, if in Philippine territory and to the
consul of the Philippines, if it occurred in a foreign country.
Art. 836. With respect to damages caused to persons or to the

cargo, the absence of a protest may not prejudice the persons
interested who were not on board or were not in a condition to
make known their wishes.
PAGE 146
Art. 835 establishes a condition precedent before any action for the recovery
of damages arising from collisions may be admitted --> presentation of a
protest or declaration within 24 hours before the proper authorities
[competent authority at the point where the collision took place or of the first
port of arrival of the vessel or to the consul of the Philippines if it occurred in
a foreign country]
The requirement of protest is not necessary with respect to small boats

engaged in river and bay traffic and boats manned by a group of fishermen
Reason for requiring protest: Neccesity of preventing fictitious collisions

and improper indemnities
Summary of cases where protest is required:

1. under 612, when the vessel makes an arrival under stress
2. under 612, 624 and 843, where the vessel is shipwrecked
3. under 624, where the vessel has gone through a hurricane or when the
captain believes that the cargo has suffered damages or averages
4. under 835, in case of maritime collisions
Art. 839. If the collision should take place between Philippine

vessels in foreign waters, of if having taken place in the open seas,
and the vessels should make a foreign port, the Filipino consul in
said port shall hold a summary investigation of the accident,
forwarding the proceedings to the Secretary of the Department of
Foreign Affairs for continuation and conclusion.
4. Shipwrecks
Art. 840. The losses and deteriorations suffered by a vessel

and her cargo by reason of shipwreck or stranding shall be
individually for the account of the owners, the part which may be
saved belonging to them in the same proportion.
Art. 841. If the wreck or standing should be caused by the

malice,e negligence, or lack of skill of the captain, or because the
vessel put to sea insufficiently repaired and equipped, the ship
agent or the shippers may demand indemnity of the captain for the
damages caused to the vessel or to the cargo by the accident, in
accordance with the provisions contained in Articles 610, 612, 614,
and 621.
Shipwreck: Loss of a vessel at sea, either by being swallowed up by the

waves, by running against another vessel or thing at sea, or on coast -->
renders the ship incapable of navigation
PAGE 147
Under 841, in case the wreck or stranding is due to the (1) malice,
negligence, or lack of skill of the captain, or (2) because the vessel put to sea
was insufficiently repaired and equipped, the captain shall be liable
Art. 842. The goods saved from the wreck shall be specially
bound for the payment of the expenses of the respective salvage,
and the amount thereof must be paid by the owners of the former
before they are delivered to them, and with preference over any
other obligation if the merchandise should be sold.
Where a ship and its cargo are saved together, the salvage allowance should
be charged against the ship and cargo in proportion of their respective
values, the same as in general averages and neither is liable for the salvage
due from the other
Where a personal action is brought by the salvor against the owner of
the ship, the liability of the latter is limited to such part of the salvage
compensation due for the entire service as is proportionate to the value of
the ship
Art. 843. If several vessels sail under convoy, and any of them
should be wrecked, the cargos saved shall be distributed among the
rest in proportion to the amount which each one is able to take.
If any captain should refuse, without sufficient cause, to
receive what may correspond to him, the captain of the wrecked
vessels shall enter a protest against him, before two sea officials, of
the losses and damages resulting therefrom, ratifying the protest
within twenty-four hours after arrival at the first port, and including
it in the proceedings he must institute in accordance with the
provisions contained in Article 612.
If it is not possible to transfer to the other vessels the entire
cargo of the vessel wrecked, the goods of the highest value and
smallest volume shall be saved first, the designation thereof to be
made by the captain with the concurrence of the officers of his
vessel.
Salvage Law (Act No. 2616)
Section 1. When in case of shipwreck, the vessel or its cargo

shall be beyond the control of the crew, or shall have been
abandoned by them, and picked up and conveyed to a safe place by
other persons, the latter shall be entitled to a reward for the
salvage.
Those who, not being included in the above paragraph, assist
in saving a vessel or its cargo from shipwreck, shall be entitled to a
like reward.
PAGE 148
Salvage.-- The compensation allowed to persons by whose voluntary

assistance a ship at sea or her cargo or both have been saved in whole or in
part from impending sea peril, or such property recovered from actual peril
or loss, as in cases of shipwrecks, derelict or recapture -- a service which
one person, renders to the owner of a ship or goods by his own labor,
preserving the goods or ship which the owner or those entrusted with the
care of them either abandoned in distress at sea or are unable to protect and
secure ---> a permit is required to engage in salvage business
Shipwreck-- means a ship which has received injuries rendering her

incapable by navigation; loss of a vessel at sea, either by being swallowed up
by the waves, running against a thing at sea, or on the coast
Derelict.-- A ship or her cargo which is abandoned and deserted at sea by

those who are in charge of it, without any hope of recovering it, or without
any intention of returning it --> if those in charge of the property left it with
the intention of finally leaving it, it is a derelict and the change of their
intention and an attempt to return to it will not change its nature
ex. a schooner which has capsized in the high seas, deserted by her
captain with no intention to return, is a derelict
a vessel, though not abandoned, may be the subject of salvage, if at
the time the services were rendered, there was a probable, threatening
danger to the vessel or its cargo --> if the vessel towed is aided in escaping
present or prospective danger, the service is one of salvage an the towage is
merely incidental
Rights of finder of derelict: The finder who takes possession with

the intention of saving her, gains a right of possession which he can maintain
against the true owners. The owner does not renounce his right of property.
This is not presumed to be intentional, nor does the finder acquire any such
right. But the owner thus abandons temporarily, his right of possession,
which is transferred to the finder who becomes bound to preserve the
property with GF and bring it to a place of safety for the owner's use; in
return, he acquires a right to be paid for his service a reasonable and proper
compensation out of the property itself. He is not bound to part with the
possession until he is paid or the property is taken into the possession of the
law preparatory to the amount of salvage being legally asserted
Elements of a valid salvage:
1. a marine peril
2. service voluntarily rendered when not required as an existing duty
or from special contract
3. success, in whole or in part, or that the services rendered
contributed to such success
Distinction between salvage and towage is of importance to the crew

of the salvaging ship : if the contract for towage is in fact towage, then the
crew does not have any interest or rights with the renumeration pursuant to
the contract; BUT if the owners of the respective vessels are of a salvage
PAGE 149
nature, the crew of the salvaging ship is entitled to salvage, and can look to
the salvaged vessel for its share
Captain towing vessel cannot invoke equity in quasi-contract of towage
--> there is an express provision of law (Art. 2142, NCC) applicable to the
relationship of quasi-contract of towage, where the crew is not entitled to
compensation separate from that of the vessel
Section 2. If the captain of the vessel, or the person acting in

his stead, is present, no one shall take from the sea, or from the
shores, or coast merchandise or effects proceeding from a
shipwreck or proceed to the salvage of the vessel, without the
consent of such captain or person acting in his stead.
Section 3. He who shall save or pick up a vessel or

merchandise at sea, in the absence of the captain of the vessel,
owner or a representative of either of them, they being unknown,
shall convey and deliver such vessel or merchandise, as soon as
possible, to the Collector of Customs, if the port has a collector, and
otherwise to the provincial treasurer or municipal mayor.
Section 4. After the salvage is accomplished, the owner or his

representative shall have the right to the delivery of the vessel or
the things saved, provided that he pays or gives a bond to secure
the expenses and the proper reward.
Salvor has an interest in the property; this is called a lien, but it is not a debt
due by the owner to the salvor for services rendered but upon the principle
that the service creates a property in the thing saved --> he is, to all intents
and purposes, a joint owner and if, the property is lost he must bear his
share like other joint owners.
Payment of compensation where vessel and cargo salvage : where a ship and
its cargo are saved together, the salvage allowance should be charged
against the ship and cargo in the proportion of their respective values, as in
the case of general average
Section 5. The Collector of Customs, provincial treasurer, or

municipal mayor, to whom a salvage is reported, shall order:
a. That the things saved be safeguarded and inventoried.
b. The sale at public auction of the things saved which may be
in danger of immediate loss or those whose conservation is
evidently prejudicial to the interests of the owner, when no
objection is made to such sale.
c. The advertisement within the 30 days subsequent to the
salvage, in one of the local newspapers or in the nearest newspaper
published, of all the details of the disaster, with a statement of the
mark and number of the effects requesting all interested persons to
make their claims.
PAGE 150
Section 6. If, while the vessel or thing saved are at the

disposition of the authorities, the owner or his representative shall
claim them, such authorities shall order their delivery to such owner
or his representative, provided that there is no controversy over
their value, and a bond is given by the owner or his representative
to secure the payment of the expenses and the proper reward.
Otherwise, the delivery shall not be made until the matter is
decided by the CFI (RTC) of the province.
Section 7. No claim being presented in the three months

subsequent to the publication of the advertisements prescribed in
subsection (c) of Section 5, the things saved shall be sold at public
auction, and their proceeds, after deducting the expenses and the
proper reward shall be deposited in the insular treasury. If three
years shall pass without anyone claiming it, one-half of the deposit
shall be adjudged to him who saved the things, and the other half to
the insular government.
Section 8. The following shall have no right to a reward for

salvage or assistance:
a. The crew of the vessel shipwrecked or which was in danger
of shipwreck;
b. He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
c. He who shall have failed to comply with the provisions of
Section 3.
Section 9. If, during the danger, an agreement is entered into

concerning the amount of the reward for salvage or assistance, its
validity may be impugned because it is excessive, and it may be
required to be reduced to an amount proportionate to the
circumstances.
Kinds of salvage service:

(1) voluntary - wherein the compensation is dependent upon success
(2) rendered under a contract for a pier diem or per horam wage,
payable at all events
Where the compensation is dependent upon success, it may be very much
larger than mere quantum meruit --> as a reward for perilous services
Such contracts for salvage will not be set aside unless corruptly
entered into, or made under fraudulent representations, a clear mistake or
suppression of important facts, under compulsion or contrary to equity and
good conscience
Section 10. In a case coming under the last preceding section,

as well as in the absence of an agreement, the reward for salvage
or assistance shall be fixed by the RTC of the province where the
things salvaged are found, taking into account principally the
expenditures made to recover, or save the vessel or the cargo or
PAGE 151
both, the zeal demonstrated, the time employed, the services

rendered, the excessive expenses occasioned, the number of
persons who aided, the danger to which they and their vessels were
exposed as well as that which menaced the things recovered or
salvaged, and the value of such things after deducting the
expenses.
Reasons for allowing salvage compensation to salving vessel:

(1) to reward promptness, energy, efficiency, and heroic endeavor in saving
life and property in peril;
(2) to compensate the use and service of the vessel as an indispensable
instrument for the salvage;
(3) recognizes the danger and risk to which the crew and the vessel were
exposed to in saving the ship and property and life.
The amount should be liberal enough to cover the expenses and to give an
extra sum as a reward for the services rendered; should be liberal enough to
offer an inducement to others to render like services in similar emergencies
in the future; BUT should not be so high as to cause vessels in need of
assistance to hesitate because of ruinous cost
"Public policy encourages the hardy and adventurous mariner to

engage in these laborious and sometimes dangerous enterprises, and
with a view to withdraw from him every temptation to embezzlement
and dishonesty, the law allows him, in case he is successful, a liberal
compensation."
Section 11. From the proceeds of the sale of the things saved
shall be deducted, first, the expenses of their custody, conversation,
advertisement, and auction, as well as whatever taxes or duties they
should pay for their entrance; then there shall be deducted the
expenses of salvage; and from the net amount remaining shall be
taken the reward for the salvage or assistance which shall not exceed
50% of such amount remaining.
Section 12. If in the salvage or in the rendering of assistance

different persons shall have intervened the reward shall be divided
between them in proportion to the services which each one may have
rendered, and in case of doubt, in equal parts.
Those who, in order to save persons, shall have been exposed
to the same dangers shall also have a right to participation in the
reward.
No other person has the right to interfere with the salvage of a vessel or cargo
if the salvor is able to effect the salvage with fidelity and vigor --> if their
means are inadequate, they are bound to accept additional assistance if
offered
PAGE 152
Taking passengers from a sinking ship, without rendering any service in

rescuing the vessel, is not a salvage service, being a duty of humanity and not
for reward --> the Salvage Act, giving salvors of human life a fair share or
remuneration offered to salvors of the vessel, refers to a situation where both
lives and property were simultaneously imperiled and both are rescued at the
same time
Section 13. If a vessel or its cargo shall have been assisted or

saved, entirely or partially, by another vessel, the reward for salvage
or for assistance shall be divided between the owner, the captain,
and the remainder of the crew of the latter vessel, so as to give the
owner a half, the captain a fourth, and all the remainder of the crew
the other fourth of the reward, in proportion to their respective
salaries, in the absence of an agreement to the contrary. The
expenses of salvage, as well as the reward for salvage or assistance,
shall be a charge on the thing salvaged or their value.
The owner of the salving vessel has always been considered as entitled to
salvage reward for the use of his vessel in rendering salvage services, though
he was not present when the salvage service was rendered --> remuneration
is awarded on account of the danger to which the service exposes their
property and the risk which they run of loss in suffering their vessels engaged
in such perilous undertaking.
Section 14. This Act shall take effect on its passage. Enacted
2/4/16.
MRR vs Macondray 37 Phil 850
Issues : Is the plaintiff entitled to recover renumeration for saving the cargo as
well as for saving the ship? What is the reasonable compensation which should
be allowed?
Held : There is no question as to the liability of defendant for the service
rendered by plaintiff. Nor is there any dispute over the fact that the service
rendered was a salvage service and renumerable as such. Where a ship and
its cargo are saved together, as a result of services carried on with a view to
saving both, the salvage allowance should be apportioned between the ship
and cargo in the proportion of their respective values, the same as in a case of
general average; and neither is liable for the salvage due from the other. If
one who have salved both ship and cargo brings before the court in his
salvage action only the ship, or only the cargo, he will get judgment only for
such amount of reward as the court finds to be due in respect of the value of
that property which is before the court. Not only is the salvage charge a
separate and divisible burden as between ship and cargo, but also as between
portions of the cargo belonging to different owners. There is no common
liability for the amounts due from the ship or other portions of the cargo when
the ship and cargo, or either, are brought into the custody of the court as a
result of a proceeding in rem. The rule of liability must be the same where a
personal action is instituted against the owners of the one or the other. The
PAGE 153
personal liability of each must be limited to the portion of the salvage charge
which should be borne by his own property.
If it had been alleged and proved that the ship was unseaworthy when
she put to sea or that the necessity for the salvage service was due to the
negligence of the master, or of the ship's owner, the latter might have been
liable, at least between himself and the shipper, for the entire cost of the
service. But when the claim is put upon the basis of salvage, the fixing of the
compensation goes beyond the limits of a quantum meruit for the work and
labor done and involves the assessment of a bounty. The amount to be
allowed is in part determined upon considerations of equity and public policy;
and it is not proper to make the ship or the ship's owner liable for the whole
amount. But where the owner of the cargo has not been made a party to the
action, no recovery can be had in this action in regard to the service rendered
to the cargo.
In fixing the compensation, the ff. circumstances are taken into
consideration: (1) the labor expended by the salvors in rendering the salvage
service; (2) the promptitude, skill and energy displayed in rendering the
service and saving the property; (3) the value of the property employed by the
salvors, and the danger to which such property was exposed; (4) the risk
incurred by the salvors in rescuing the property from the impending peril; (5)
the value of the property salved; and (6) the degree of danger from which the
property was rescued.
In applying these criteria to this case, the ff. circumstances are
pertinent : the Hondagua was delayed in her voyage about nine hours. This
delay caused her to enter Iloilo, the port of destination, in the early hours of
the morning instead of the late afternoon of the previous day; but the
unloading of her cargo was not thereby retarded. Under the charter party
contract under which she was operating, the Hondagua was earning about P
300/day, which was considered reasonable compensation for her use,
including the services of officers and crew. The service rendered did not
involve any further expenditure of labor on the part of the salvors, no unusual
display of skill and energy and the condition of the sea was not such as to
involve any special risk either to Hondagua or her crew. Finally, the danger
from which the Seward was rescued was real since the ship was confronted
by a serious peril. In determining the amount of the award, the aim should be
to hold out to seafaring men a fair inducement to the performance of salvage
service without fixing a scale of compensation so high as to cause vessels in
need of such services to hesitate and decline to receive them because of the
ruinous cost. That the salvor is entitled, as of bounty, to something more than
mere renumeration for his own work and the risk incurred by him is conceded;
but the interests of commerce should also be considered. Towage is not
considered a salvage service of high order of merit and where the risk is
inconsiderable and other conditions favorable, the compensation to be allowed
should be modest in its amount.
In this case, the sum of P 1,000 is adequate for the service rendered.
Barrios vs Go Thong 7 SCRA 535
PAGE 154
Issue: WON the service rendered by plaintiff constituted salvage or towage,

and if so, WON plaintiff may recover from defendant compensation for such
service.
Held :(1) According to Sec. 1 of the Salvage Law, those who assist in saving a
vessel or its cargo from shipwreck, shall be entitled to a reward (salvage).
"Salvage" has been defined as the compensation allowed to persons by whose
assistance a ship or her cargo has been saved, in whole or in part, form
impending peril on the sea, or in recovering such property from actual loss, as
in case of shipwreck, derelict or recapture. There was no marine peril in this
case. Although defendant's vessel was in a helpless condition due to engine
failure, it did not drift too far from the place where it was. As found by the LC,
the weather was fair, clear and good. The waves were small and too slight, so
much so, that there were only ripples on the sea, which was quite smooth.
During the towing of the vessel on the same night, there was moonlight.
Although said vessel was drifting towards the open sea, there was no danger
of its foundering or being stranded, as it was far from any island or rocks. In
case of danger of stranding, its anchor could be released, to prevent such
occurrence. There was no danger that defendant's vessel would sink, in view
of the smoothness of the sea and the fairness of the weather. That there was
absence of danger is shown by the fact that said vessel or its crew did not
even find it necessary to lower its launch and two motor boats, in order to
evacuate its passengers no were the cargo in danger of perishing. All that the
vessel's crew members could no do was to move the vessel on its own power.
That did not make the vessel a quasi-derelict, considering that even before the
plaintiff-appellant extended the help to the distressed ship, a sister vessel was
known to be on its way to succor it.
(2) But plaintiff's service can be considered as a quasi- contract of
towage. In consenting to plaintiff's offer to tow the vessel, the defendant
through its captain, thereby impliedly entered into a juridical relation of
towage with the owner of the MV Henry. If the contract thus created is one
for towage, then only the owner of the towing vessel , to the exclusion of the
crew of the said vessel, may be entitled to renumeration. And as the vessel-
owner, William Lines, had expressly waived its claim for compensation for the
towage service rendered to defendant, it is clear that plaintiff, whose right if at
all depends upon and not separate from the interest, is not entitled to
payment for such towage services. Neither may the plaintiff captain invoke
equity in support of his claim for compensation against defendant. There
being an express provision of law (Art. 2142, NCC) applicable to the
relationship created in this case, that is, that of a quasi-contract of towage
where the crew is not entitled to compensation separate from that of the
vessel, there is no occasion to resort to equitable considerations.
E. SPECIAL CONTRACTS OF MARITIME COMMERCE
1. Charter Parties
a. Definition; as common carrier
PAGE 155
A charter party is a contract by virtue of which the owner or agent of a

vessel binds himself to transport merchandise or persons for a fixed price. It
is a contract by which the owner or agent of the vessel leases for a certain
price the whole or a portion of the vessel for the transportation of goods or
persons from one port to another.
Towage is not a charter party; instead it is a contract for the hire of
services by virtue of which a vessel is engaged to tow another vessel from
one port to another for a consideration
Planters Products vs CA G.R. 101503 (Sept. 15, 1993)
F: Planters purchased urea fertilizer from Mitsubishi,New York. The fertilizer

was shipped on MV Sun Plum, which is owned by KKKK, from Alaska to San
Fernando, La Union. A time charter party was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner. Upon arrival in the port, PPI unloaded the
cargo. It took PPI 11 days to unload the cargo. PPI hired a marine and cargo
surveyor to determine if there was any shortage. A shortage and contamination of
the fertilizer was discovered. PPI sent a claim letter to SSA, the resident agent of
KKKK for the amount of the loss. An action for damages was filed. SSA contended
that the provisions on CC do not apply to them because they have become private
carriers by reason of the charter-party. The TC awarded damages. The CA reversed.
Issue : Does a charter party between a shipowner and a charterer transform

a CC into a private one as to negate the civil law presumption of negligence
in case of loss or damage to its cargo? NO.
Held : A charter-party is a contract by which an entire ship, or some principal

part thereof, is let by the owner to another person for a specified time or use.
There are 2 kinds : (1) contract of affreightment which involves the use of
shipping space or vessels leased by the owner in part or as a whole, to carry
goods for others; and (2) charter by demise or bareboat charter where the
whole vessel is let to the charterer with a transfer to him of its entire
command and possession and consequent control over its navigation,
including the master and the crew, who are his servants.
It is not disputed that the carrier operates as a CC in the ordinary
course of business. When PPI chartered the vessel, the ship captain, its
officers and crew were under the employ of the shipowner and therefore
continued to be under its direct supervision and control. Thus it continued to
be a public carrier.
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel, provided the
charter is limited to the ship only, as in the case of a time-charter or a
voyage-charter. It is only when the charter includes both the vessel and the
crew, as in a bareboat or demise that a CC becomes private, insofar as such
particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
PAGE 156
Held : The presumption of negligence on the part of respondent carrier has

been overcome by the showing of extraordinary zeal and assiduity exercised
by the carrier in the care of the cargo. On the other hand, no proof was
adduced by the petitioner showing that the carrier was remiss in the exercise
of due diligence in order to minimize the loss or damage to the goods it
carried.
b. Kinds
Classes of charter party:
(1) as to extent of vessel hired

(a) total
(b) partial - the charterer does not as a rule acquire the right to
fix the date when the vessel should depart, unless such right is expressly
granted in the contract
(2) as to time
(a) until a fixed day or for a determined number of days or
month
(b) for a voyage
(3) as to freightage
(a) for a fixed amount for the whole cargo
(b) for a fixed rate per ton
(c) for so much per month
Maritime Agencies vs CA 187 SCRA 346
Held : There are 3 general categories of charters:

1. Demise or bareboat charter - involves the transfer of full possession
and control of the vessel for the period covered by the contract, the charterer
obtaining the right to use the vessel and carry whatever cargo it chooses,
while manning and supplying the ship as well
2. Time Charter - contract to use a vessel for a particular period of
time, the charterer obtaining the right to direct the movements of the vessel
during the chartering period, although the owner retains possession and
control
3. Voyage Charter - contract for the hire of a vessel for one or a series
of voyages usually for the purpose of transporting goods for the charterer;
the voyage charter is a contract of affreightment and is considered a private
carriage
- being a private carriage, the parties may freely contract respecting
liability for damages to the goods and other matters; responsibility for the
cargo loss falls on the one who agreed to perform the duty involved in
accordance with the terms of the voyage charter
This case involves a voyage charter.In the present case, the charterer
was responsible for loading, stowage and discharging at the ports visited,
while the owner was responsible for the care of the cargo. Par. 2 of the
Uniform General Charter provided that the owner shall be responsible for loss
PAGE 157
or damage or delay in the delivery of goods caused by improper or negligent

stowage of the goods or by personal want of due diligence in making the
vessel seaworthy and properly manned. However, the owner shall not be
liable for any other cause, even from the neglect of the captain or the crew
or any other person employed by the owner on board, or for any
unseaworthiness of the vessel on loading or commencement of the voyage.
In cases at bar, the TC found that there were shortlanded bags, which
could only mean that they were damaged or lost on board the vessel before
unloading of the shipment. The entire cargo was covered by a clean B/L. As
the bags were in good order when received by the vessel, the presumption is
that they were damaged or lost during the voyage as a result of their
negligent improper storage. The shipowner should be held liable.
The filing of the claim must be within one year, in accordance with the
COGSA. Otherwise, the carrier and the ship shall be discharged from liability.
The one year period should commence from Oct. 20, 1979, the date when
the last item was delivered to the consignee. Union filed the complaint
against Hongkong within the one year period but tardily against Macondray.
The action has prescribed with respect Macondray but not against the
principal, Hongkong Island.
As regards the goods damaged or lost during unloading, the charterer
is liable thereof, having assumed this activity under the charter party free of
expense to the vessel. The difficulty is that Transcontinental has not been
impleaded and so is beyond the court's jurisdiction. The liability imposed on
it cannot be borne by Maritime which is a mere agent and is not answerable
for the injury caused by its principal (unless the principal is undisclosed).
In this case, the charterer did not represent itself as a carrier and
indeed assumed responsibility only for the unloading of the cargo. Maritime
acted in representation of the charterer and not of the vessel. As a mere
charterer's agent, it cannot be held solidarily liable with Transcontinental for
the losses/damages to the cargo outside the custody of the vessel.
Transcontinental was disclosed as the charterer's principal and Maritime only
acted within the scope of its authority.
The TC's findings were upheld except for some modifications. The
liability of Macondray can no longer be enforced because of prescription.
Maritima cannot be held liable for the principal's acts.
c. Forms and Effects
Art. 652. A charter party must be drawn in duplicate and

signed by the contracting parties, and when either does not know
how or is not able to do so, by two witnesses at his request.
The charter party shall include, besides the condition
stipulated, the following circumstances:
1. The kind, name, and tonnage of the vessel.
2. Her flag and port or registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the agent, if the latter
should make the charter party.
PAGE 158
5. The name, surname, and domicile of the charterer, and if

he states that he is acting by commission, that of the person for
whose account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or weight, or measure
which they respectively bind themselves to load and transport, or
whether it is the total cargo.
8. The freightage to be paid, stating whether it is to be a
fixed amount for the voyage or so much per month, or for the space
to be occupied, or for the weight or measure of the goods of which
the cargo consists, or in any other manner whatsoever agreed upon.
9. The amount of primage to be paid the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the
rate of demurrage.
Art. 653. If the freight should be received without the charter

party having been signed, the contract shall be understood as
executed in accordance with what appears in the bill of lading,
which shall be the only instrument with regard to the freight to
determine the rights and obligations of the ship agent, of the
captain, and of the charterer.
If the cargo is received without a charter party, the B/L shall be considered
the contract of the parties
Q: If there is no charter party and B/L, would there be a valid contract?

A: Taking Art. 653 literally, the answer is no. However, if we take into
account the fact that delivery of the cargo does not constitute the making of
a contract but rather the partial performance thereof, the mere fact of
delivery and receipt of such cargo, the GF and mutual consent with which
they have been made, should be a better substitute for the charter party
than is the B/L which is nothing more than the proof of such delivery.
Primage.-- Formerly, a small allowance or compensation payable to the

master and marines of a ship; to the former for the use of his cables and
ropes to discharge the goods of the merchant; to the latter for lading and
unlading in any port of haven
Primage, at present, it is no longer a gratuity to the master, unless
especially stipulated; but it belongs to owners or freighters and is nothing but
an increase of the freight rate.
Demurrage.-- Sum which is fixed by the contract of carriage, or which is

allowed, as remuneration to the owner of a ship for the detention of his
vessel beyond the number of days allowed by the charter party for loading
and unloading or for sailing; it is an extended freight or reward to the vessel
in compensation for the earnings she is improperly caused to lose
PAGE 159
Lay days.-- Days allowed to charter parties for loading and unloading the
cargo
Art. 654. The charter parties executed with the intervention

of a broker, who certifies to the authenticity of the signatures of the
contracting parties made in his presence, shall be full evidence in
court; and, if they should be conflicting, that which agrees with the
one which the broker must keep in his registry, if kept in accordance
with law, shall govern.
The contracts shall also be admitted as evidence, even though
a broker has not taken part therein, if the contracting parties
acknowledge the signatures of the same as their own.
Should no broker have taken part in the charter party and the
signatures be not acknowledged, doubts shall be decided by what is
provided for in the bill of lading, and, in the absence thereof, by the
proofs submitted by the parties.
Art. 655. Charter parties executed by the captain in the

absence of the ship agent shall be valid and effective, even though
in executing them he should have acted in violation of the orders
and instructions of the agent or shipowner; but the latter shall have
a right of action against the captain to recover damages.
Art. 656. If in the charter party the time in which the loading
and unloading are to take place is not stated, the usages of the port
where these acts take place shall be observed. After the stipulated
or customary period has passed, and should there not be in the
freight contract an express provision fixing the indemnification for
the delay, the captain shall be entitled to demand demurrage for
the lay days and extra lay days which may have elapsed in loading
and unloading.
Art. 657. If during the voyage the vessel should be rendered

unseaworthy the captain shall be obliged to charter at his expense
another one in good condition, to carry the cargo to its destination,
for which purpose he shall be obliged to look for a vessel not only at
the port of arrival but also in the neighboring ports within a
distance of 150 kilometers.
If the captain, through indolence or malice, should not furnish
a vessel to take the cargo to its destination, the shippers, after
requesting the captain to charter a vessel within an unextendible
period, may charter one and apply to the judicial authority for the
summary approval of the charter party which they may have made.
The same authority shall judicially compel the captain to carry
out for his account and under his responsibility the charter made by
the shippers.
PAGE 160
If the captain, notwithstanding his diligence, should not find a

vessel to charter, he shall deposit the cargo at the disposal of the
shippers, to whom he shall communicate the facts on the first
opportunity, the freight being adjusted in such cases by the
distance covered by the vessel, with no right to any indemnification
whatsoever.
Articles 659 to 664 : Some of the goods being transported may : (1) be sold
by the captain to pay for necessary repairs; (2) be jettisoned for the common
safety; (3) be lost by reason of shipwreck or stranding; (4) be seized by
pirates or enemies; (5) suffer deteriorations or dimunitions; or (6) increase by
natural cause in weight or size
** Goods that shall not pay freightage:

(1) Art. 660 - goods jettisoned for the common safety but the amount of
freightage that should have been paid shall be considered as a general
average and shall be computed in proportion to the distance covered when
they were jettisoned
(2) Art. 661 - merchandise lost by reason of shipwreck or stranding; if freight
had been paid in advance, it shall be returned
(3) Art. 661 - goods seized by pirates or enemies; freight paid in advance
shall be returned
** Goods required to pay freightage:
(1) Art. 659 - goods sold by the captain to pay for the necessary repairs to
the hull, machinery or equipment or for unavoidable and urgent needs -->
but the freight may not be required to be paid in full
(2) Art. 663 - goods which suffer deterioration or dimunition on account of (a)
inherent defects or bad quality of packing, or of (b) fortuitous event
(3) Art. 644 - goods that increase in size or weight by natural cause
d. Rights and Obligations of Shipowners
Art. 669. The shipowner of the captain shall observe in

charter parties the capacity of the vessel or that expressly
designated in its registry, a difference greater than 2 per cent
between that registered and her true capacity not being permissi-
ble.
If the shipowner or the captain should contract to carry a
greater amount of cargo than the vessel can carry, in view of her
tonnage, they shall indemnify the shippers whose contracts they do
not fulfill for the losses they may have caused them by reason of
their default, according to the cases, viz:
If the vessel has been chartered by one shipper only, and
there should appear to be an error or fraud in her capacity, and the
charterer should not wish to rescind the contract, when he has a
right to do so, the freightage shall be reduced in proportion to the
cargo the vessel cannot receive, the person from whom the vessel is
PAGE 161
chartered being furthermore obliged to indemnify the charterer for

the losses he may have caused him.
If, on the contrary, there should be several charter parties,
and by reason of the want of space all the cargo contracted for
cannot be received, and none of the charterers desires to rescind
the contract, preference shall be given to the person who has
already loaded and arranged the cargo in the vessel, and the rest
shall take the place corresponding to them in the order of the dates
of their contracts.
Should there be no priority, the charterers may load, if they
wish, in proportion to the weight or space they may have engaged,
and the person from whom the vessel was chartered shall be
obliged to indemnify them for losses and damages.
Art. 670. If the person from whom the vessel is chartered,

after receiving a part of the cargo, should not find sufficient to
make up at least three fifths of the amount the vessel can hold, at
the price he may have fixed, he may substitute for that
transportation another vessel inspected and declared suitable for
the same voyage, the expenses of transfer, and the increase in the
price of the charter, should there be any, being for his account.
Should he not be able to make this change, the voyage shall be
undertaken at the time agreed upon; and should no time have been
fixed, within fifteen days from the time the loading began, should
nothing to the contrary have been stipulated.
If the owner of the part of the cargo already loaded should
procure some more at the same price and under similar or propor-
tionate conditions to those accepted for the freight received, the
person from whom the vessel is chartered or the captain may not
refuse to accept the rest of the cargo; and should he do so, the
charterer shall have a right to demand that the vessel put to sea
with the cargo she may have on board.
Art. 671. After three-fifths of the vessel is loaded, the person

from whom she is chartered may not, without the consent of the
charterers or shippers, substitute the vessel designated in the
charter party with another one, under the penalty of making himself
thereby liable for all the losses and damages occurring during the
voyage to the cargo of those who did not consent to the change.
Art. 672. If the vessel has been chartered in whole, the

captain may not, without the consent of the person chartering her,
accept cargo from any other person; and should he do so, said
charterer may oblige him to unload it and to indemnify him for the
losses suffered thereby.
PAGE 162
Art. 673. The person from whom the vessel is chartered shall
be liable for all the losses caused the charterer by reason of the
voluntary delay of the captain in putting to sea, according to the
rules prescribed, provided he has been requested to put to sea at
the proper time through a notary or judicially.
Art. 674. If the charterer should carry to the vessel more

cargo than that contracted for, the excess may be admitted in
accordance with the price stipulated in the contract if it can be well
stowed without incurring the other shippers, but if in order to stow
said cargo it should be necessary to stow it in such manner as to
throw the vessel out of trim the captain must refuse it or unload it
at the expense of its owner.
The captain may likewise, before leaving the port, unload the
merchandise clandestinely placed on board, or transport it, it he can
do so and keep the vessel in trim, demanding by way of freightage
the highest price which may have been stipulated for said voyage.
Art. 675. If the vessel has been chartered to receive the cargo
in another port, the captain shall appear before the consignee
designated in the charter party, and should the latter not deliver
the cargo to him, he shall inform the charterer and await his
instructions, the lay days agreed upon, or those allowed by custom
in the port, beginning to run in the meantime, unless there is an
express agreement to the contrary.
Should the captain not receive an answer within the time
necessary therefore, he shall make efforts to find cargo; and should
he not find any after the lay days and extra lay days have elapsed,
he shall make a protest and return to the port where the charter
was made.
The charterer shall pay the freightage in full, discounting that
which may have been earned on the merchandise which may have
been carried on the voyage out or on the return trip, if carried for
the account of third persons.
The same shall be done if a vessel, having been chartered for
the round trip, should not be given any cargo for her return.
Art. 676. The captain shall lose the freightage and shall
indemnify the charterers if the latter should prove, even against the
certificate of inspection, if one has been made at the port of
departure, that the vessel was not in a condition to navigate at the
time of receiving the cargo.
Art. 677. The charter party shall subsist if the captain should
not have any instructions from the charterer, and a declaration of
war or a blockade should take place during the voyage.
PAGE 163
In such case the captain must proceed to the nearest safe and
neutral port, requesting and awaiting orders from the shipper; and
the expenses and salaries accruing during the detention shall be
paid as general average.
If, by orders of the shipper, the cargo should be discharged at
the port of arrival, the freightage for the voyage out shall be paid in
full.
Art. 678. If the time necessary, in the opinion of the judge or

court, to receive orders from the shippers should have elapsed
without the captain having received any instructions, the cargo shall
be deposited, and it shall be liable for the payment of the freightage
and expenses incurred by reason of the delay, which shall be paid
from the proceeds of the part first sold.
Obligations of shipowner:
1. Art. 669 - to observe in the charter parties, the capacity of the vessel, and
to indemnify the shippers whose contracts are not fulfilled for the losses they
may have suffered by the failure of the shipowner to observe the capacity of
the vessel
2. Art. 670 - to undertake a voyage at the time agreed upon or within 15
days from loading if no time is stipulated, even if the shipowner should not
find cargo sufficient to make up at least 3/5 of the amount which the vessel
may hold, where he fails to exercise his right to change vessel
3. Art. 670 - where the shipowner should not find cargo sufficient to make up
at least 3/5 of the amount which the vessel may hold, to accept other cargo
procured by the owner of the freight already loaded under the same price
and conditions
4. Art. 671- not to change the vessel after 3/5 of the vessel has been loaded,
without the consent of the charterers or shippers
5. Art. 672 - if the vessel has been chartered in whole, not to accept cargo
from any other person without the consent of the charterer
6. Art. 673 - to answer for losses arising from delay in putting to sea
7. Art. 676 - to have the vessel in a condition to navigate at the time of
receiving the cargo
8. Art. 677 - in case of declaration of war or blockade during the voyage,
where the captain has not received any instructions from the charterer, for
the captain to proceed to the nearest safe and neutral port, requesting and
awaiting orders from the shippers
Rights of Shipowner:
1. Art. 670 - where the cargo is not sufficient to make up at least 3/5 of the
amount which the vessel may hold, he may substitute anohter vessel
inspected and declared suitable for the voyage --> expenses of transfer and
increase in price of the charter shall be paid by him
2. Art. 674 - to collect the freight in accordance with the price stipulated for
cargo in excess of that agreed upon is such excess can be properly stowed 3.
PAGE 164
Art. 674 - to refuse and unload at the expense of the owner excess cargo that
cannot be properly stowed
4. Art. 674 - to unload merchandise clandestinely placed on board, or to
transport them if he can do so, demanding the highest freightage
5. Art. 675- to find freight to take place of freight not received, if the vessel
has been chartered to receive cargo in another port, after he receives no
cargo from the consignee and after he receives no answer from the charterer
6. Art. 675 - to receive freight in full, discounting that which may have been
earned on the merchandise carried as substitute
7. Art. 677 - to have the charter party subsist notwithstanding the declaration
of war or a blockade during the voyage, and to receive in such cases, the
freightage in full where the shipper orders that the cargo should be
discharged at the port of arrival
e. Obligations of charterers
Art. 679. The charterer of an entire vessel may subcharter the

whole or part thereof for the amounts he may consider most
convenient, the captain not being allowed to refuse to receive on
board the cargo delivered by the second charterers, provided the
conditions of the first charter are not changed, and that the price
agreed upon is paid in full, even though the full cargo is not loaded,
with the limitation established in the next article.
Art. 680. A charterer who does not complete the full cargo he
bound himself to ship shall pay the freightage of the amount he fails
to load, if the captain does not take other freight to complete the
load of the vessel, in which case he shall pay the first charterer the
difference should there be any.
Art. 681. If the charterer should ship goods different from

those indicated at the time of executing the charter party, without
the knowledge of the person from whom the vessel was chartered or
of the captain, and should thereby give rise to losses, by reason of
confiscation, embargo, detention, or other causes, to the person
from whom the vessel was chartered or to the shippers, the person
giving rise thereto shall be liable with the value of his shipment and
furthermore with his property, for the full indemnity to all those
injured through his fault.
Art. 682. If the merchandise should have been shipped for the
purpose of illicit commerce, and was taken on board with the
knowledge of the person from whom the vessel was chartered or of
the captain, the latter, jointly with the owner of the merchandise,
shall be liable for all the losses which may be caused to other
shippers, and even though it may have been agreed, they cannot
PAGE 165
demand any indemnity whatsoever from the charterer for the

damage caused the vessel.
Art. 683. In case of making a port to repair the hull,

machinery, or equipment of the vessel, the shippers must wait until
the vessel is repaired, being permitted to unload her at their own
expense should they deem it advisable. If, for the benefit of cargo
which runs the risk of deterioration, the shippers or the court, or
the consul, or the competent authority in a foreign land should
order the merchandise to be unloaded, the expenses of unloading
and reloading shall be for the account of the former.
Art. 684. If the charterer, without the occurrence of any

of the cases of force majeure mentioned in the foregoing article,
should wish to unload his merchandise before arriving at the port of
destination, he shall pay the full freightage, the expenses of the
arrival made at his request, and the losses and damages caused the
other shippers, should there be any.
Art. 685. In charters for transportation of general freight any

of the shippers may unload the merchandise before the beginning of
the voyage, paying one half the freightage, the expense of stowing
and restoring the cargo, and any other damage which may be
caused the other shippers.
Art. 686. After the vessel has been unloaded and the cargo
placed at the disposal of the consignee, the latter must immediately
pay the captain the freightage due and the other expenses for which
the cargo may be liable.
The primage must be paid in the same proportion and at the
same time as the freightage, all the changes and modifications to
which the latter should be subject also governing the former.
Art. 687. The charterers and shippers may not abandon

merchandise damaged on account of its own inherent defect or of
fortuitous event for the payment of the freightage and other
expenses.
The abandonment shall be proper, however, if the cargo
should consist of liquids which may have leaked out, there re-
maining in the containers not more than one-fourth of their
contents.
Obligations of the charterer:
PAGE 166
1. Art. 680 - to pay the freight in full even if the charterer does not complete
the full cargo he bound himself to ship
2. Art. 681- to answer with the value of his shipment and other property for
the losses suffered by the shipowner, captain or other shippers arising from
confiscation, embargo, detention, or other causes, where the charterer loads
goods different from those stated at the time of the execution of the charter
party
3. Art. 682 - to be jointly liable with the captain for losses which may be
caused to the other shippers where the charterer ships goods for illicit
commerce with the knowledge of the shipowner or captain
4. Art. 682 - in case of making a port to repair the hull, machinery or
equipment of the vessel, to wait until the vessel is repaired or to pay for the
expenses of unloading should the charterer choose to unload
5. Art. 684 - where the charterer unloads goods before arriving at port of
destination without any force majeure occurring, to pay (1) expenses of
arrival, (2) full freight and (3) for the damages and losses caused to other
shippers, if any
6. Art. 685 - where the charterer unloads before the beginning of the voyage,
(1) to pay 1/2 of the freight, (2) to pay for the expenses of stowing and
restowing the cargo, (3) to pay any other damage which he may have caused
other shippers
7. Art. 686 - to pay for freight, other expenses and the primage after the
vessel has been unloaded and the cargo placed at the disposal of the
consignee
8. Art. 687 - not to abandon merchandise damaged on account of
inherent defect or fortuitous event, for the payment of the freight and other
expenses
f. Rescission
Art. 688. A charter party may be annulled at the request of

the charterer:
1. If before loading the vessel he should abandon the charter,
paying half the freightage agreed upon.
2. If the capacity of the vessel should not agree with that
stated in the certificate of tonnage, or if there be an error in the
statement of the flag under which she sails.
3. If the vessel should not be placed at the disposal of the
charterer within the period and in the manner agreed upon.
4. If, after the vessel has put to sea, she should return to the
port of departure, on account of risk from pirates, enemies, or bad
weather, and the shippers should agree to unload her.
In the second and third cases the person from whom the
vessel was chartered shall indemnify the charterer for the losses he
may suffer.
In the fourth case the person from whom the vessel was
chartered shall have a right to the freightage in full for the voyage
out.
PAGE 167
If the charter should have been made by the month, the

charterers shall pay the full freightage for one month, if the voyage
is for a port in the same waters; and two months, if for a port in
different waters.
(From one port to another of the Peninsula (Philippines) and
adjacent islands, the freightage for one month only shall be paid.)
5. If a vessel should make a port during the voyage in order to
make urgent repairs and the charterers should prefer to dispose of
the merchandise.
When the delay does not exceed thirty days, the shippers shall
pay the full freightage for the voyage out.
Should the delay exceed thirty days, they shall pay the freight
in proportion to the distance covered by the vessel.
Art. 689. At the request of the person from whom the vessel
is chartered the charter party may be rescinded:
1. If the charterer at the termination of the extra lay days
does not place the cargo alongside the vessel.
In such case the charterer must pay half of the freightage
stipulated besides the demurrage due for the lay days and extra lay
days.
2. If the person from whom the vessel was chartered should
sell it before the charterer has begun to load it and the purchaser
should load it for his own account.
In such case the vendor shall indemnify the charterer for the
losses he may suffer.
If the new owner of the vessel should not load it for his own
account the charter party shall be respected, and the vendor shall
indemnify the purchaser if the former did not inform him of the
charter pending at the time of making the sale.
Art. 690. The charter party shall be rescinded and all action
arising therefrom shall be extinguished if, before the vessel puts to
sea from the port of departure, any of the following cases should
occur:
1. A declaration of war or interdiction of commerce with the
power to whose ports the vessel was to make its voyage.
2. A condition of blockage of the port of destination of said
vessel, or the breaking out of an epidemic after the contract was
executed.
3. The prohibition to receive at the said port the merchandise
constituting the cargo of the vessel.
4. An indefinite detention, by reason of an embargo of the
vessel by order of the government, or for any other reason inde-
pendent of the will of the ship agent.
5. The inability of the vessel to navigate, without fault of the
captain or ship agent.
The unloading shall be made for the account of the charterer.
PAGE 168
Art. 691. If the vessel cannot put to sea on account of the

closing of the port of departure, or any other temporary cause, the
charter shall remain in force without right of either of the
contracting parties to claim damages.
The subsistence and wages of the crew shall be considered as
general average.
During the interruption the charterer may, at the proper timer
and for his own account, unload and load the merchandise, paying
demurrage if the reloading should continue after the cause for the
detention has ceased.
Art. 692. A charter party shall be partially rescinded, unless

there is an agreement to the contrary, and the captain shall only be
entitled to the freightage for the voyage out, if, by reason of a
declaration of war, closing of ports, or interdiction of commercial
relations during the voyage, the vessel should make the port
designated for such a case in the instructions of the charterer.
2. Loans on Bottomry and Respondentia
a. Loan on Bottomry, defined
A contract in the nature of a mortgage, by which the owner of the ship

borrows money for the use, equipment and repair of the vessel and for a
definite term, and pledges the ship (or the keel or bottom of the ship) as a
security for its repayment, with maritime or extraordinary interest on account
of the maritime risks to be borne by the lender, it being stipulated that if the
ship be lost in the course of the specific voyage or during the limited time, by
any of the perils enumerated in the contract, the lender shall also lose his
money.
b. Loan on Respondentia, defined
One made on the goods laden on board the ship, and which are to be
sold or exchanged in the course of the voyage, the borrower's personal
responsibility being deemed the principal security for the performance of the
contract, which is therefore called respondentia. The lender must be paid
his principal and interest, thought the ship perishes, provided that the goods
are saved.
c. Character of Loan
Art. 719. A loan in which, under any condition whatever, the

repayment of the sum loaned and of the premium stipulated
depends upon the safe arrival in port of the goods on which it is
PAGE 169
made, or of the price they may receive in case of accident, shall be

considered a loan on bottomry or respondentia.
Real, unilateral, aleatory contract:

1. delivery of the amount loaned is necessary for the perfection of the
contract
2. although there are reciprocal benefits, the contract produces
obligations only for one party, the borrower who must return the amount
borrowed plus premium
3. lender really runs known risks
Distinguished from ordinary loans:
Ordinary loan loan on bottomry and

respondentia
1. first lender has preference last lender has preference over
over subsequent lenders previous ones
2. must be paid absolutely loan is required to be paid only

upon
at all events, WON thing safe arrival of the thing given as
given as security is lost or security at port of destination
destroyed
3. subject to Usury Law no limit as to rate of interest in

view of diff. classes and various
risks in a maritime voyage
Marine insurance vs Bottomry and Respondentia Loans:
The borrower is in effect indemnified for his loss, at least, to the extent of the
loan --> in case of loss of the thing given as security, the borrower is under
no obligation to pay the loan
Marine insurance bottomry/respondentia

loans
1. indemnity is paid after the indemnity is paid in advance by
way of loan
loss has occurred
2. when marine peril occurs, when marine peril causes the

loss of the
the obligation of the insurer vessel or cargo, the obligation
of the
becomes absolute borrower to pay is extinguished
3. consensual contract real contract --perfected from

the
PAGE 170
* governed by Insurance Act moment of delivery of the thing

loaned
When loss does not extinguish loan: (Art. 731)

1. where the loss is caused by inherent defect of the thing
2. where the loss is caused by fault or malice of borrower
3. where loss is caused by barratry on the part of the captain
4. where loss is caused by damage to the vessel as a consequence of its
engaging in contraband
5. where loss arose from having loaded the merchandise on a vessel
different from that designated in the contract, except if change is due to
force majeure
d. Forms and Requisites
Art. 720. Loans on bottomry or respondentia may be execut-

ed:
1. By means of a public instrument.
2. By means of a policy signed by the contracting parties and
the broker taking part therein.
3. By means of a private instrument.
Under whichever of these forms the contract is executed, it
shall be entered in the certificate of the registry of the vessel and
shall be recorded in the registry of vessels, without which requisites
the credits of this kind shall not have, with regard to other credits,
the preference which, according to their nature, they should have,
although the obligation shall be valid between the contracting
parties.
The contracts made during a voyage shall be governed by the
provisions of Articles 583 and 611, and shall be effective with
regard to third persons from the date of their execution, if they
should be recorded in the registry of vessels of the port of registry
of the vessel before the lapse of eight days following its arrival. If
said eight days should elapse without the record having been made
in the registry of vessels, the contracts made during the voyage of a
vessel shall produce no effect with regard to third persons, except
from the day and date of their inscription.
In order that the policy of the contracts executed in accor-
dance with No.2 may have binding force, they must conform to the
registry of the broker who took part therein. With respect to those
executed in accordance with No. 3 the acknowledgment of the
signature shall be required.
Contracts which are not reduced in writing shall not give rise
to judicial action.
Effect of registration:
PAGE 171
1. the loan shall have, with regard to other credits, the preference which,
according to its nature, it should have (Art. 580 - 8th in the order of
preference)
2. effective against third persons from the time of execution/registration
Art. 721. In a contract on bottomry or respondentia the

following must be stated:
1. The kind, name, and registry of the vessel.
2. The name, surname, and domicile of the captain.
3. The names, surnames, and domiciles of the person giving
and the person receiving the loan.
4. The amount of the loan and the premium stipulated.
5. The time for repayment.
6. The goods pledged to secure repayment.
7. The voyage during which the risk is run.
Art. 722. The contracts may be made to order, in which case

they shall be transferable by indorsement, and the indorsee shall
acquire all the rights and shall incur all the risks corresponding to
the indorser.
e. On What Constituted
Art. 724. The loans may be constituted jointly or separately:

1. On the hull of the vessel.
2. On the rigging.
3. On the equipment, provisions, and fuel.
4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
If the loan is constituted on the hull of the vessel, the rigging,
equipment and other goods, provisions, fuel, steam engines, and
the freightage earned during the voyage on which the loan is made,
shall also be considered as included in the liability for the loan.
If the loan is made on the cargo, all that which constitutes the
same shall be subject to the repayment; and if on a particular object
of the vessel or of the cargo, only the object concretely and
specifically mentioned shall be liable.
Art. 725. No loans on bottomry may be made on the salaries

of the crew or on the profits expected.
f. Amount
Art. 723. Loans may be made in goods and in merchandise,

fixing their value in order to determine the principal of the loan.
PAGE 172
Art. 726. If the lender should prove that he loaned an amount

larger than the value of the object liable for the bottomry loan, on
account of fraudulent measures employed by the borrower, the loan
shall be valid only for the amount at which said object is appraised
by experts.
The surplus principal shall be returned with legal interest for
the entire time required for repayment.
Art. 727. If the full amount of the loan contracted in order to

load the vessel should not be used for the cargo, the balance shall
be returned before clearing.
The same procedure shall be observed with regard to the
goods taken as loan, if they were not loaded.
The excess shall be valid only as an ordinary loan
g. By whom
Art. 728. The loan which the captain takes at the point of
residence of the owners of the vessel shall only affect that part
thereof which belongs to the captain, if the other owners or their
agents should not have given their express authorization therefor or
should not have taken part in the transaction.
If one or more of the owners should be requested to furnish
the amount necessary to repair or provision the vessel, and they
should not do so within twenty-four hours, the interest which the
parties in default may have in the vessel shall be liable for the loan
in the proper proportion.
Outside of the residence of the owners, the captain may
contract loans in accordance with the provisions of Articles 583 and
611.
Art. 617. The captain may not contract loans on respondentia

secured by the cargo, and should he do so the contract shall be
void.
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns, provided
no money has been previously borrowed on the whole vessel, and
provided there does not exist any other kind of lien or obligation
chargeable against the vessel. When he is permitted to do so, he
must necessarily state what interest he has in the vessel.
In case of violation of this article the principal, interest, and
costs shall be charged to the private account of the captain, and the
ship agent may furthermore discharge him.
PAGE 173
Art. 611. In order to comply with the obligations mentioned in

the foregoing article, and when he has no funds and does not expect
to receive any from the agent, the captain shall procure the same in
the successive order stated below:
1. By requesting said funds of the consignees of the vessel or
the correspondents of the ship agent.
2. By applying to the consignees of the cargo or to the
persons interested therein. 3. By drawing on the ship agent.
4. By borrowing the amount required by means of a bottomry
loan.
5. By selling a sufficient amount of the cargo to cover the
amount absolutely necessary to repair the vessel and to equip her
to pursue the voyage.
In the two last cases he must apply to the judicial authority of
the port, if in the Philippines and to the Filipino consul, if in a
foreign country; and where there should be none, to the local
authority, proceeding in accordance with the prescriptions of Article
583, and with the provisions of the law of civil procedure.
Art. 583. If the ship being on a voyage the captain should find
it necessary to contract one or more of the obligations mentioned in
Nos. 8 and 9 of Article 580, he shall apply to the judge or court if he
is in Philippine territory, and otherwise to the Filipino consul, should
there be one, and in his absence to the judge or court or to the
proper local authority, presenting the certificate of the registry of
the vessel treated of in Article 612, and the instruments proving the
obligation contracted.
The judge or court, the consul or the local authority as the
case may be in view of the result of the proceedings instituted, shall
make a temporary memorandum in the certificate of their result, in
order that it may be recorded in the registry when the vessel
returns to the port of her registry, or so that it can be admitted as a
legal and preferred obligation in case of sale before the return, by
reason of the sale of the vessel by virtue of a declaration of
unseaworthiness.
The lack of this formality shall make the captain personally
liable to the creditors who may be prejudiced through his fault.
h. Effects of Contract
Art. 719. A loan in which, under any condition whatever, the

repayment of the sum loaned and of the premium stipulated
depends upon the safe arrival in port of the goods on which it is
made, or of the price they may receive in case of accident, shall be
considered a loan on bottomry or respondentia.
Art. 729. Should the goods on which money is taken not be

subjected to risk, the contract shall be considered a simple loan,
PAGE 174
with the obligation on the part of the borrower to return the

principal and interest at the legal rate, if that agreed upon should
not be lower.
Art. 726. If the lender should prove that he loaned an amount

larger than the value of the object liable for the bottomry loan, on
account of fraudulent measures employed by the borrower, the loan
shall be valid only for the amount at which said object is appraised
by experts.
The surplus principal shall be returned with legal interest for
the entire time required for repayment.
Art. 727. If the full amount of the loan contracted in order to

load the vessel should not be used for the cargo, the balance shall
be returned before clearing.
The same procedure shall be observed with regard to the
goods taken as loan, if they were not loaded.
Art. 730. Loans made during the voyage shall have preference
over those made before the clearing of the vessel, and they shall be
graduated in the inverse order of their dates.
The loans for the last voyage shall have preference over prior
ones.
Should several loans have been made at the same port of
arrival under stress and for the same purpose, all of them shall be
paid pro rata.
F. BILL OF LADING
B/L operates both as a receipt and as a contract; it is a receipt for the goods
shipped and a contract to transport and deliver the same as stipulated
A stipulation that a CC's liability is limited to the value of the goods

appearing in the B/L, unless the owner declares a greater value, is valid and
binding
Bill of Lading vs Charter party

1. Charter party - entire or complete contract
B/L - private receipt which the captain gives to accredit that such goods
belong to such persons
2. Charter party - consensual party, which can be dissolved by means of
indemnity for losses and damages
B/L - real contract; exists only after delivery of the goods to be transported
is made
PAGE 175
1. Contents
Art. 706. The captain and the shipper shall have the
obligation of drawing up the bill of lading, in which shall be stated:
1. The name, registry, and tonnage of the vessel.
2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued in
the name of a specified person.
6. The quantity, quality, number of packages, and marks of
the merchandise.
7. The freightage and the primage stipulated.
The bill of lading may be issued to bearer, to order, or in the
name of a specified person, and must be signed within twenty- four
hours after the cargo has been received on board, the shipper being
entitled to demand the unloading at the expense of the captain
should the latter not sign it, and, in any case, the losses and
damages suffered thereby.
Art.707. Four true copies of the original bill of lading shall be

made, and all of them shall be signed by the captain and by the
shipper. Of these copies the shipper shall keep one and send
another to the consignee; the captain shall take two, one for himself
and the other for the ship agent.
There may also be drawn as many copies of the bill of lading
as may be considered necessary by the parties; but, when they are
issued to order or to bearer, there shall be stated in all the copies,
be they the first four or the subsequent ones, the destination of
each one, stating whether it is for the ship agent, for the captain,
for the shipper, or for the consignee. If the copy sent to the latter
should have a duplicate, this circumstance and the fact that it is not
valid except in default of the first one must be stated therein.
Art. 713. If before the delivery of the cargo a new bill of

lading should be demanded of the captain, on the allegation that
the failure to present the previous ones is on account of their loss or
for any other just cause, he shall be obliged to issue it, provided
that security for the value of the cargo is given to his satisfaction;
but without changing the consignment and stating therein the
circumstances prescribed in the last paragraph of Article 707, when
dealing with the bills of lading referred to therein, under penalty,
should he not do so, of being liable for said cargo if improperly
delivered through his fault.
Art. 714. If before the vessel puts to sea the captain should
die or should cease to hold his position through any cause, the
PAGE 176
shipper shall have the right to demand of the new captain the
ratification of the first bills of lading, and the latter must do so,
provided that all the copies previously issued be presented or
returned to him, and it should appear from an examination of the
cargo that they are correct.
The expenses arising from the examination of the cargo shall
be for the account of the ship agent, without prejudice to his right
of action against the first captain, if he ceased to be such through
his own fault. Should said examination not be made, it shall be
understood that the new captain accepts the cargo as it appears
from the bills of lading.
2. Probative Value
Art. 709. A bill of lading drawn up in accordance with the

provisions of this title shall be proof as between those interested in
the cargo and between the latter and the insurers, evidence to the
contrary being reserved by the latter.
Art. 710. If the bills of lading do not agree, and no change or

erasure appears in any of them, those in the possession of the
shipper or consignee signed by the captain shall be proof against
the latter or ship agent in favor of the consignee or the shipper; and
those possessed by the captain or ship agent signed by the shipper
shall be proof against the shipper or consignee in favor of the
captain or ship agent.
B/L - proof of the agreement between the parties

Issuance of B/L is merely prima facie evidence of the receipt of the
merchandise by the carrier or his agent; not conclusive evidence
Defective and irregular B/L may be cured by other complementary
documents
G. PASSENGERS ON SEA VOYAGE
1. Nature of Contract
Art. 695. The right to passage, if issued to a specified person,

may not be transferred without the consent of the captain or of the
consignee.
2. Obligations of Passengers
Art. 693. If the passage price has not been agreed upon, the
judge or court shall summarily fix it, after a statement of experts.
PAGE 177
Art. 699. If the contract is rescinded, before or after the

commencement of the voyage, the captain shall have a right to
claim payment for what he may have furnished the passengers.
Art. 704. In order to collect the fare and expenses of

sustenance, the captain may retain the goods belonging to the
passenger, and in case of their sale, he shall be given preference
over other creditors, acting in the same way as in the collection of
freightage.
Art. 694. Should the passenger not arrive on board at the

time fixed, or should he leave the vessel without permission from
the captain, when the latter is ready to leave the port, the captain
may continue the voyage and demand the full passage price.
Art. 700. In all that pertains to the preservation of order and

discipline on board the vessel, the passengers shall be subject to
the orders of the captain, without any distinction whatsoever.
3. Rights of Passengers
Art. 697. If before beginning the voyage it should be

suspended through the sole fault of the captain or ship agent, the
passengers shall be entitled to have their passage refunded and to
recover for losses and damages; but if the suspension was due to an
accidental cause, or to force majeure, or to any other cause beyond
the control of the captain or ship agent, the passengers shall only
be entitled to the return of the passage money.
Art. 698. In case a voyage already begun should be

interrupted, the passengers shall be obliged to pay only the fare in
proportion to the distance covered, and without right to recover for
losses and damages if the interruption is due to a fortuitous event
or to force majeure, but with a right to indemnify if the interruption
should have been caused by the captain exclusively. If the
interruption should be by reason of the disability of the vessel, and
the passenger should agree to await the repairs, he may not be
required to pay any increased price of passage, but his living
expenses during the delay shall be for his own account.
In case of delay in the departure of the vessel, the passengers
have a right to remain on board and to be furnished food for the
account of the vessel, unless the delay is due to an accidental cause
or to force majeure. If the delay should exceed 99ten days, the
passengers requesting the same shall be entitled to the return of
PAGE 178
the fare; and if it is due exclusively to the captain or ship agent they
may furthermore demand indemnity for losses and damages.
A vessel exclusively destined to the transportation of pas-
sengers must take them directly to the port or ports of destination,
no matter what the number of passengers may be, making all the
stops indicated in its itinerary.
In the Philippines, there is no law which requires shipowners to publish a

schedule of the arrivals and departures of their vessels in the different ports
of call, and which holds them liable in damages to passengers for any
deviation from said schedule
Issue: WON defendant is liable.

Held: The governing provisions are found in the Code of Commerce. Art. 614
provides that a captain who agreed to make a voyage and who fails to fulfill
his undertaking, without being prevented by fortuitous event or force
majeure, shall indemnify all the losses which his failure may cause, without
prejudice to criminal penalties which may prosper. Art. 698 also provides for
the captain's liability.
The crucial factor then is the existence of a fortuitous event or force
majeure. Without it, the right to damages and indemnity exists against a
captain who fails to fulfill his undertaking or where the interruption has been
caused by the captain exclusively.
As found by both courts below, there was no fortuitous event or force
majeure which prevented the vessel from fulfilling its undertaking of taking
private respondents to Catbalogan. Mechanical defects in the CC are not
considered caso fortuito that exempts the CC from responsibility. Even
granting that the engine failure was a fortuitous event, it accounted only for
the delay in the departure. When the vessel left Cebu, there was no longer
any force majeure that justified the by-passing a port of call. The vessel was
completely repaired when it left Cebu for Samar and Leyte. In fact, after
docking at Tacloban City, the vessel left for Manila to complete its voyage.
Petitioner cannot rely on the conditions in small bold print at the back
of the ticket reading: "The passenger's acceptance of this ticket shall be
considered as an acceptance of the ff. conditions:
3. In case the vessel cannot continue or complete the trip for any
cause whatsoever, the carrier reserves the right to bring the passenger to
his/her destination at the expense of the carrier or to cancel the tickets and
refund the passenger the value of his/her ticket.
11. The sailing schedule of the vessel xxx is subject to change without
previous notice."
Even assuming that those conditions are applicable to case at bar,

petitioner did not comply with the same. It did not cancel the ticket nor did it
refund the value of the tickets to private respondents. Besides, it was not the
vessels' sailing schedule that was involved. The complaint is directed not at
the delayed departure the next day but at the by-passing of Catbalogan, their
destination. Had petitioner notified them previously and offered to bring
PAGE 179
them to their destination at its expense or refunded the value of the tickets
purchased, perhaps this controversy would not have arisen.
Furthermore, the conditions relied upon by petitioner cannot prevail
over Arts. 614 and 698 of the Code of Commerce.
The voyage to Catbalogan was interrupted by the captain upon
instruction of management. The interruption was not due to fortuitous event
or force majeure nor to disability of the vessel. Having been caused by the
captain upon instructions of management, the passengers' right to indemnity
is evident. The owner of a vessel and the ship agent shall be civilly liable for
the acts of the captain under Art. 586 of the Code of Commerce.
The passengers are also entitled to moral damages on account of the

BF on the part of the carrier. They did not give notice of the change of
schedule. Knowing fully well that it would take 15 hours to repair the vessel,
they informed the passengers that it would take only a few hours. They did
not offer to refund the tickets of the passengers nor provide them
transportation from Bacolod City to Catbalogan.
4. Responsibilities of Captain
Art. 701. The convenience or the interest of the passengers

shall not obligate nor empower the captain to stand in-shore or
enter places which may take the vessel out of her course, nor to
remain in the ports he must or is under the necessity of touching for
a period longer than that required by the needs of navigation.
Art. 702. In the absence of an agreement to the contrary, the

subsistence of the passengers during the voyage shall be deemed
included in the price of the passage; but should it be for their
account, the captain shall be under the obligation, in case of
necessity, to supply the food necessary for their sustenance at a
reasonable price.
Art. 705. In case of the death of a passenger during the

voyage the captain shall be authorized, with respect to the body, to
take the steps required by the circumstances, and shall carefully
take care of the papers and goods of said passenger which may be
on board, complying with the provisions of case No. 10 of Article
612 with regard to members of the crew.
Art. 612. The following duties are inherent in the office of

captain:
1. To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, tackle, stores, and other
equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts
PAGE 180
entered into with the crew; the list of passengers; the health
certificate; the certificate of the registry proving the ownership of
the vessel; and all the obligations which encumber the same up to
that date; the charters or authenticated copies thereof; the invoices
or manifest of the cargo, and the instrument of the expert visit or
inspection, should it have been made at the port of departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains,
signed by the marine official, and in his absence by the competent
authority.
In the first book, which shall be called "log book," he shall
enter every day the condition of the atmosphere, the prevailing
winds, the course sailed, the rigging carried, the horsepower of the
engines, the distance covered, the maneuvers executed, and other
incidents of navigation. He shall also enter the damage suffered by
the vessel in her hull engines, rigging, and tackle, no matter what is
its cause, as well as the imperfections and averages of the cargo,
and the effects and consequence of the jettison, should there be
any; and in cases of grave resolutions which require the advice or a
meeting of the officers of the vessel, or even of the passengers and
crew, he shall record the decision adopted. For the informations
indicated he shall make use of the binnacle book, and of the steam
or engine book kept by the engineer.
In the second book, called the "accounting book", he shall
enter all the amounts collected and paid for the account of the
vessel, entering specifically article by article, the sources of the
collection, and the amounts invested in provisions, repairs,
acquisition of rigging or goods, fuel, outfits, wages, and all other
expenses. He shall furthermore enter therein a list of all the
members of the crew, stating their domiciles, their wages and
salaries, and the amounts they may have received on accounts,
either directly or by delivery to their families.
In the third book, called "freight book," he shall record the
entry and exit of all the goods, stating their marks and packages,
names of the shippers and of the consignees, ports of loading and
unloading, and the freight earned. In the same book he shall record
the names and places of sailing of the passengers and the number
of packages of which their baggage consists, and the price of the
passage.
4. To make, before receiving the freight, with the officers of
the crew, and the two experts, if required by the shippers and
passengers, an examination of the vessel, in order to ascertain
whether she is watertight, and whether the rigging and engines are
in good condition; and if she has the equipment required for good
navigation, preserving a certificate of the memorandum of this
inspection, signed by all the persons who may have taken part
therein, under their liability.
The experts shall be appointed one by the captain of the
vessel and the other one by the persons who request the examina-
PAGE 181
tion, and in case of disagreement a third shall be appointed by the

marine authority of the port.
5. To remain constantly on board the vessel with the crew
during the time the freight is taken on board and carefully watch
the stowage thereof; not to consent to any merchandise or goods of
a dangerous character to be taken on, such as inflammable or
explosive substances, without the precautions which are recom-
mended for their packing, management and isolation; not to permit
that any freight be carried on deck which by reason of its dispo-
sition, volume, or weight makes the work of the sailors difficult, and
which might endanger the safety of the vessel; and if, on account of
the nature of the merchandise, the special character of the
shipment, and principally the favorable season it takes place, he
allows merchandise to be carried on deck, he must hear the opinion
of the officers of the vessel, and have the consent of the shippers
and of the agent.
6. To demand a pilot at the expense of the vessel whenever
required by navigation, and principally when a port, canal, or river,
or a roadstead or anchoring place is to be entered with which
neither he, the officers nor the crew are acquainted.
7. To be on deck at the time of sighting land and to take
command on entering and leaving ports, canals, roadsteads, and
rivers, unless there is a pilot on board discharging his duties. He
shall not spend the night away from the vessel except for serious
causes or by reason of official business. 8. To present himself,
when making a port in distress, to the maritime authority if in the
Philippines and to the Filipino consul if in a foreign country, before
twenty-four hours have elapsed, and make a statement of the name,
registry, and port of departure of the vessel, of its cargo, and
reason of arrival, which declaration shall be vised by the authority
of by the consul if after examining the same it is found to be
acceptable, giving the captain the proper certificate in order to
show his arrival under stress and the reasons therefor. In the
absence of marine officials or of the consul, the declaration must be
made before the local authority.
9. To take the steps necessary before the competent
authority in order to enter in the certificate of the vessel in the
registry of the vessels, the obligations which he may contract in
accordance with Article 583.
10. To put in a safe place and keep all the papers and
belongings of any members of the crew who might die on the vessel,
drawing up a detailed inventory, in the presence of passengers as
witnesses, and, in their absence, of members of the crew.
11. To conduct himself according to the rules and precepts
contained in the instructions of the agent, being liable for all that
he may do in violation thereof.
12. To give an account to the agent from the port where the
vessel arrives, of the reason therefor, taking advantage of the
semaphore, telegraph, mail, etc., according to the cases; notify him
the freight he may have received, stating the name and domicile of
PAGE 182
the shippers, freight earned, and amounts borrowed on bottomry

bond, advise him of his departure, and give him any information and
date which may be of interest.
13. To observe the rules on the situation of lights and
evolutions to prevent collisions.
14. To remain on board in case of danger to the vessel, until
all hope to save her is lost, and before abandoning her to hear the
officers of the crew, abiding by the decision of the majority; and if
he should have to take a boat he shall take with him, before
anything else, the books and papers, and then the articles of most
value, being obliged to prove in case of the loss of the books and
papers that he did all he could to save them.
15. In case of wreck he shall make the proper protest in due
form at the first port reached, before the competent authority or
Filipino consul, within twenty-four hours, stating therein all the
incidents of the wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and
rules of navigation, customs, health, and others.
Art. 703. A passenger shall be considered a shipper of the
goods he carries on board, and the captain shall not be responsible
for what the former may keep under his immediate and special
custody, unless the damage arises from an act of the captain or of
the crew.
Art. 1754. The provisions of Arts. 1733 to 1753 shall apply to

the passenger's baggage which is not in his personal custody or in
that of his employee. As to the other baggage, the rules in Articles
1998 and 2000 to 2003 concerning the responsibility of hotel-
keepers shall be applicable. (New Civil Code.)
J. Carriage of Goods by Sea Act (Commonwealth Act. No. 65, Public Act No.
521, 74the US Congress)
Sec. 1. That the provisions of Public Act No. 521 of the 74th
Congress of the United States, approved on April 16, 1936, be
accepted, as it is hereby accepted to be made applicable to all
contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade: Provided, that nothing in this Act shall be
construed as repealing any existing provision of the Code of
Commerce which is not in force, or as limiting its application.
Notes: In relation to Civil Code :

Art. 1753 - governed by law of place of destination, if shipped to a foreign
country, governed by law of foreign country
Art. 1766 - goods from foreign country shipped to the Philippines, governed
by the Civil Code
PAGE 183
COGSA - applicable to all transportation of goods by sea in foreign trade to

and from Philippine ports
- does not apply to purely domestic transport
- Laws applicable to a contract for the carriage of goods by sea:
1. Distinguish - common carrier (Civil Code)

- private carrier
2. Where is the vessel going?
a. Common carrier coming to the Phils. = what law applies?
1st: Civil Code
2nd: COGSA (it's more specific than Code of Commerce)
- in foreign trade
3rd: Code of Commerce
b. Private carrier coming to the Phils. in foreign trade

1st: COGSA (because it's more specific)
2nd: Code of Commerce
3rd: Civil Code (provisions not on common carriers e.g. torts, contracts)
c. From the Phils. to a foreign country: apply laws of such foreign country
(Art. 1753)
- with respect to vessels destined for foreign ports, the COGSA doesn't apply
unless parties make it applicable.
Q: In what situations does COGSA primarily apply?

A: Where the parties expressly stipulate that COGSA shall govern their
respective rights and obligations.
Q: Can the COGSA apply in domestic shipping?

A: Generally, NO.
EXCEPTION: when parties agree to make it apply.
Q: What application does COGSA have in carriage of passengers?

A: None. Applies only to carriage of goods.
Sec. 2. This Act shall take effect upon its approval. (Approved
October 22, 1936).
TITLE I
Sec. 1. When used in this Act-

(a) The term "carrier" includes the owner or the charterer
who enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to
contracts of carriage covered by a bill of lading or any similar
document of title, insofar as such document relates to the carriage
PAGE 184
of goods by sea, including any bill of lading or any similar document

as aforesaid issued under or pursuant to a charter party from the
moment at which such bill of lading or similar document of title
regulates the relations between a carrier and a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and
articles of ever kind whatsoever, except live animals and cargo
which by the contract of carriage is stated as being carried on deck
and is so carried.
(d) The term "ship" means any vessel used for the carriage
of goods by sea.
(e) The term "carriage of goods" covers the period from the
time when the goods are loaded to the time when they are dis-
charged from the ship
RISKS
Sec. 2. Subject to the provisions of Section 6, under every

contract of carriage of goods by sea, the carrier in relation to the
loading, handling, stowage, carriage, custody, care, and discharge
of such goods shall be subject to the responsibilities and liabilities
and entitled to the rights and immunities hereinafter set forth.
RESPONSIBILITIES AND LIABILITIES
Sec. 3. (1) The carrier shall be bound before and at the

beginning of the voyage to exercise due diligence to-
(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling
chambers, and all other parts of the ship in which goods
are carried, fit and safe for their reception, carriage, and
preservation
(2) The carrier shall properly and carefully load, handle, stow,
carry, keep, care for, and discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or
the master or agent of the carrier, shall, on demand of the shipper,
issue to the shipper a bill of lading showing among other things-
(a) The loading marks necessary for identification of the

goods as the same are furnished in writing by the
shipper before the loading of such goods starts,
provided such marks are stamped or otherwise shown
clearly upon the goods if uncovered, in such a manner as
PAGE 185
should ordinarily remain legible until the end of the

voyage.
(b) Either the number of packages or pieces, or the
quantity or weight, as the case may be, as furnished in
writing by the shipper.
(c) The apparent order and conditions of the goods: Provided,
that no carrier, master, or agent of the carrier, shall be bound
to state or show in the bill of lading any marks, number,
quantity, or weight which he has reasonable ground for
suspecting not accurately to represent the goods actually
received or which he has had no reasonable means of checking.
(4) Such a bill of lading shall be prima facie evidence of the

receipt by the carrier of the goods as therein described in accordance
with paragraphs (3) (a), and (c), of this section: (The rest of the
provision is not applicable to the Philippines).
(5) The shipper shall be deemed to have guaranteed to the

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

such loss or damage be given in writing to the carrier or his agent at
the port of discharge or at the time of the removal of the goods into
the custody of the person entitled to delivery thereof under the
contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of
lading. If the loss or damage is not apparent, the notice must be
given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the

receipt for the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods
has at the time of their receipt been the subject of joint survey or
inspection.
In any event the carrier and the ship shall be discharged from
all liability in respect of loss or damage unless suit is brought within
one year after delivery of the goods or the date when the goods
should have been delivered: Provided, that, if a notice of loss or
damage, either apparent or concealed, is not given as provided for in
this section, that fact shall not affect or prejudice the right of the
shipper to bring suit within one year after the deliver of the goods or
the date when the goods should have been delivered.
PAGE 186
In the case of any actual or apprehended loss or damage, the

carrier and the receiver shall give all reasonable facilities to each
other for inspecting and tallying the goods
(7) After the goods are loaded the bill of lading to be issued by
the carrier, master, or agent of the carrier to the shipper shall if the
shipper so demands, be a "shipped" bill of lading: Provided, that if
the shipper shall have previously taken up any document of title to
such goods, he shall surrender the same as against the issue of the
"shipped" bill of lading, but at the option of the carrier such
document of title may be noted at the port of shipment by the
carrier, master, or agent with the name or names of the ship or ships
upon which the goods have been shipped and the date or dates of
shipment, and when so noted the same shall for the purpose of this
section be deemed to constitute a "shipped" bill of lading.
(8) Any clause, covenant, or agreement in a contract of

carriage relieving the carrier of the ship from liability for loss or
damage to or in connection with the goods, arising from negligence,
fault, or failure in the duties and obligations provided in this section,
or lessening such liability otherwise than as provided in this Act,
shall be null and void and of no effect. A benefit of insurance in favor
of the carrier, or similar clause, shall be deemed to be a clause
relieving the carrier from liability.
Notes: Prescriptive period under Section 3(6). - the carrier and the agent
shall be discharged form liability in respect of loss or damage unless suit is
brought within 1 year from:
(1) in case of damaged goods: from the time delivery of the goods was
made
(2) in case of non-delivery (i.e., lost goods): from the date the goods
should have been delivered
Cases of misdelivery or conversion not covered.

1 year-prescriptive period in Sec. 3 (6) applies only where there is loss or
damage.
Loss contemplates only where no delivery at all was made by the carrier of the
goods because the same had perished, gone out of commerce, or disappeared
in such a way that their existence is unknown or they cannot be recovered
Hence, in case of misdelivery (delivery to wrong person) or conversion of the

goods, the rules on prescription found in the Civil Code shall apply (10 years
for contracts; 4 years for tortious obligations)
Shipper, consignee or legal holder of B/L may invoke the prescriptive period
and have the right to file suit within one year after delivery of the goods or
failure to deliver.
PAGE 187
Mere proposal for arbitration or fact that there have been initial negotiations
does not suspend the running of the period for prescription
NOTE: Prof. Quimbo does not agree with this SC ruling. If there is a
misdelivery or conversion, there is a case of loss from the point of view of the
consignee or shipper.
Q: Is the prescriptive period under the COGSA interrupted from the time of
the making of extra-judicial demand or filing of judicial action as provided in
Art. 1155, NCC?
A: No. 1 year period is a special prescriptive period, uniform worldwide
Rationale behind the 3-day notice and relatively short prescriptive period:
- to provide carrier an opportunity to look for the lost goods
- to discover who was at fault
- in case of transshipment, to determine, when and where damage
occurred
Shipper, consignee or legal holder of bill may invoke prescriptive period

although the proviso in Sec. 3 (6) gives the impression that it is the shipper
alone who can invoke the same.
But prescriptive period does not apply to the action by an insurer as subrogee
of the consignee.
Stipulation in bill limiting carrier's liability contrary to sec. 3(8) is void; e.g.
provision in the bill excepting th owner form liability for loss or damage of
cargo unless written notice is thereof was given to the carrier within 30 days;
such a provision is contrary to a provision of the COGSA since Sec. 3 provides
that even if a notice of loss or damage is not given as required, that fact shall
not prejudice the right of the shipper to bring suit within 1 year after delivery
of the goods.
Notice requirements:
COGSA: Sec. 3(6)
If loss or damage is apparent - protest as soon as receipt of goods
If not apparent -> within 3 days of delivery
Code of Commerce: Art. 366

apparent - protest at time of receipt
non-apparent - within 24 hours after receipt
WARSAW: Art. 26
in case of damage:
of baggage - within 3 days from receipt
of goods - within 7 days
in case of delay: within 14 days from receipt
PAGE 188
failure to comply with the 3-days notice requirement under COGSA does not
affect the right of the shipper to bring action provided he brings the same
within 1 year
To be distinguished from the notice requirement in the WARSAW

convention and Code of Commerce, where the notice requirement is a
condition precedent for the right of action against the shipowner to accrue.
RIGHTS AND IMMUNITIES
Sec. 4. (1) Neither the carrier not the ship shall be liable for
loss or damage arising or resulting from unseaworthiness unless
caused by want of due diligence on the part of the carrier to make
the ship seaworthy and to secure that the ship is properly manned,
equipped, and supplied, and to make the holds, refrigerating and
cooling chambers, and all other parts of the ship in which goods are
carried fit and safe for their reception, carriage, and preservation, in
accordance with the provisions of paragraph (1) of Section (3).
Whenever loss or damage has resulted from unseaworthiness, the
burden of proving the exercise of due diligence shall be on the carrier
or other person claiming exemption under this section.
(2) Neither the carrier not the ship shall be responsible for loss
or damage arising or resulting from-
(a) Act, neglect, or default of the master, mariner, pilot,

or the servants of the carrier in the navigation or in the
management of the ship;
(b) Fire, unless caused by the actual fault or privity of
the carrier;
(c) Perils, dangers, and accidents of the sea or other
navigable water;
(d) Act of God;
(e) Act of war;
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or
seizure under legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the
goods, his agent or representative;;
(j) Strikes or lockouts or stoppage or restraint of labor
from whatever cause, whether partial or general:
Provided, that nothing herein contained shall be
construed to relive a carrier from responsibility for the
carrier's own acts:
(k) Riots and civil commotions;
(l) Saving or attempting to save life or property at sea;
PAGE 189
(m) Wastage in bulk or weight or any other loss or

damage arising from inherent defect, quality, or vice of
the goods;
(n) Insufficiency of packing;
(o) Insufficiency or inadequacy of marks;
(p) Latent defects not discoverable by due diligence;
and
(q) Any other cause arising without the actual fault
and privity of the carrier and without the fault or neglect
of the agents or servants of the carrier, but the burden
of proof shall be on the person claiming the benefit of
this exception to show that neither the actual fault or
privity of the carrier not the fault or neglect of the
agents or servants of the carrier contributed to the loss
or damage.
(3) The shipper shall not be responsible for loss or damage

sustained by the carrier or the ship arising or resulting from any
cause without the act, or neglect of the shipper, his agents, or his
(4) An deviation in saving or attempting to save life or

property at sea, or any reasonable deviation shall not be deemed to
be an infringement or breach of this Act or of the contract of
carriage, and carrier shall not be liable for any loss or damage
resulting therefrom: Provided, however, that if the deviation is for
the purpose of loading or unloading cargo or passengers it shall,
prima facie, be regarded as unreasonable.
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum
in other currency, unless the nature and value of such goods have
been declared by the shipper before shipment and inserted in the bill
of lading. This declaration, if embodied in the bill of lading, shall be
prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master or agent of the

carrier, and the shipper another maximum amount than that men-
tioned in this paragraph may be fixed: Provided, that such maximum
shall not be less than the figure above named. In no event shall the
carrier be liable for more than the amount of damage actually
sustained.
Neither the carrier nor the ship shall be responsible in any

event for loss or damage to or in connection with the transportation
of the goods if the nature or value thereof has been knowingly and
fraudulently mis-stated by the shipper in the bill of lading.
PAGE 190
(6) Goods of an inflammable, explosive, or dangerous nature to

the shipment whereof, the carrier, master or agent of the carrier, has
not consented with knowledge of their nature and character, may at
any time before discharge be landed at any place or destroyed or
rendered innocuous by the carrier without compensation, and the
shipper of such goods shall be liable for all damages and expenses
directly or indirectly arising out of or resulting from such shipment.
If any such goods shipped with such knowledge and consent shall
become a danger to the ship or cargo, they may in like manner be
landed at any place, or destroyed or rendered innocuous by the
carrier without liability on the part of the carrier except to general
average if any.
Notes: Amount recoverable in case of loss: $500/package, even if not

stipulated
The plaintiff cannot dispute said limitation on the ground that it was not freely
and fairly agreed upon or that it is against public policy, since the LAW ITSELF
PROVIDES FOR SAID LIMITATION; THE SAME IS DEEMED READ INTO THEIR
CONTRACT
Package - means individual packaging of the goods

- does not cover 1 container van
Parties may agree to amount of liability less than $500 under Sec. 4(5). By
providing that $500 is the maximum liability, the law does not disallow an
agreement for liability at a lesser amount. Moreover, Art. 1749 of the NCC
expressly allows th limitation of the carrier's liability. (Eastern v. Great Ameri-
can)
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF

RESPONSIBILITIES AND LIABILITIES
Sec. 5. A carrier shall be at liberty to surrender in whole or in

part all or any of his rights and immunities or to increase any of his
responsibilities and liabilities under this Act, provided such surrender
or increase shall be embodied in the bill of lading issued to the
shipper.
The provisions of this Act shall not be applicable to charter

parties; but if bills of lading are issued in the case of a ship under a
charter party, they shall comply with the terms of this Act. Nothing
in this Act shall be held to prevent the insertion in a bill of lading of
any lawful provisions regarding general average.
SPECIAL CONDITIONS
PAGE 191
Sec. 6. Notwithstanding the provisions of the preceding

section, a carrier, master or agent of the carrier, and a shipper shall,
in regard to any particular goods be at liberty to enter into any
agreement in any terms as to the responsibility and liability of the
carrier for such goods, and as to the rights and immunities of the
carrier in respect to such goods, or his obligation as to
seaworthiness, (so far as the stipulation regarding seaworthiness is
not contrary to public policy), or the care or diligence of his servants
or agents in regard to the loading, handling, stowage, carriage,
custody, care and discharge of the goods carried by sea; provided,
that in this case no bill of lading has been or shall be issued and that
the terms agreed shall be embodied in a receipt which shall be a non-
negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal effect:
Provided, that this section shall not apply to ordinary commercial
shipments made in the ordinary course of trade but only to other
shipments where the character or condition of the property to be
carried or the circumstances, terms and conditions under which the
carriage is to be performed are such as reasonable to justify a special
agreement.
Sec. 7. Nothing contained in this Act shall prevent a carrier or

a shipper from entering into any agreement, stipulation, condition,
reservation, or exemption as to the responsibility and liability of the
carrier or the ship for the loss or damage to or in connection with the
custody and care and handling of goods prior to the loading on and
subsequent to the discharge from the ship on which the goods are
carried by sea.
Sec. 8. The provisions of this Act shall not affect the rights and
obligations of the carrier under the provisions of the Shipping Act,
1916, or under the provisions of Section 4281 to 4292, inclusive, of
the Revised Statutes of the United States, or of any amendments
thereto, or under the provisions of any other enactment for the time
being in force relating to the limitation of the liability of the owners
of seagoing vessels.
TITLE II
Sec. 9. Nothing contained in this Act shall be construed as

permitting a common carrier by water to discriminate between
competing shippers similarly placed in time and circumstances, either
(a) with respect to their right to demand and receive bills of
lading subject to the provisions of this Act; or
(b) when issuing such bills of lading either in the surrender of
any of the carrier's rights and immunities or in the increase of any of
PAGE 192
the carrier's responsibilities and liabilities pursuant to Section 5, Title

I, of this Act;
(c) in any other way prohibited by the Shipping Act, 1916, as
amended.
Sec. 10. (Not applicable to the Philippines.)
Sec. 11. When under the custom of any trade the weight of any
bulk cargo inserted in the bill of lading is a weight ascertained or
accepted by a third party other than the carrier or the shipper and
the fact that the weight as ascertained or accepted is stated in the
bill of lading, then notwithstanding anything in this Act, the bill of
lading shall not be deemed to be prima facie evidence against the
carrier of the receipt of goods of the weight so inserted in the bill of
lading, and the accuracy thereof at the time of shipment shall not be
deemed to have been guaranteed by the shipper.
Sec. 12. (Not applicable to the Philippines.)
Sec. 13. This act shall apply to all contracts for carriage of
goods by sea to or from ports of the United States in foreign trade.
As used in this Act the term "United States" includes its districts,
territories, and possessions: Provided, however, that the Philippine
Legislature may by law exclude its application to transportation to or
from ports of the Philippine Islands. The term "foreign trade" means
the transportation of goods between the ports of the United States
and ports of foreign countries. Nothing in this Act shall be held to
apply to contracts for carriage of goods by sea between any port of
the United States or its possession: Provided, however, that any bill
of lading or similar document of the title which is evidence of a
contract for the carriage of goods by sea between such ports,
containing an express statement that it shall be subject to the
provisions of this Act, shall be subjected hereto as fully as if subject
hereto by the express provisions of this Act: Provided, further, that
every bill of lading or similar document of title which is evidence of a
contract for the carriage of goods by sea from ports of the United
States in foreign trade, shall contain a statement that it shall have
effect subject to the provisions of this Act.
Notes: American Insurance vs Cia Maritima : contract of carriage from NY with

final destination in Cebu. COGSA is applicable despite the fact that from
Manila to Cebu, the goods were transshipped on an interisland vessel.
Transshipment was not a separate transaction from that originally entered into
by the parties but was part of the carrier's contractual obligation.
PAGE 193
Sec. 14. Upon the certification of the Secretary of Commerce

that the foreign commerce of the United States in its competition
with that of foreign nations is prejudiced by the provisions, or any of
them, of the Title I of this Act, or by the laws of any foreign country
or countries relating to the carriage of goods by sea, the President of
the United States may, from time to time by proclamation, suspend
any or all provisions of Title I of this Act for such periods of time or
indefinitely as may be designated in the proclamation., The
President may at any time rescind such suspension of Title I hereof,
and any time rescind such suspension of Title I hereof, and any
provisions thereof which may have been thereafter made for carriage
of goods by sea. Any proclamation of suspension or rescission of any
such suspension shall take effect on the date named therein, which
date shall be not less than ten days from the issue of the proc-
lamation.
Any contract for the carriage of goods by sea, subject to the
provisions of this Act, effective during any period when Title I hereof,
or any part thereof, is suspended, shall be subject to all provisions of
law now or hereafter applicable to that part of Title I which may have
thus been suspended.
Sec. 15, COGSA. This Act shall take effect ninety days after the date
of its approval; but nothing in this Act shall apply during a period not
to exceed one year following its approval to any contract for the
carriage of goods by sea, made before the date on which this Act is
approved nor to any bill of lading or similar document of title issued,
whether before or after such date of approval in pursuance of any
such contract as aforesaid.
Sec. 16, COGSA. This Act may be cited as the "Carriage of Goods by
Sea Act."
Approved, April 16, 1936.
V. International Air Transport
A. The Warsaw Convention, 51 O.G. 5084 (October 1955);
PAGE 194
Presidential Proclamation No. 201, 51 O.G. 4933 (October 1955)
MAKING PUBLIC THE ADHERENCE OF THE R.P. TO THE CONVENTION

FOR THE UNIFICATION OF CERTAIN RULES RELATING TO INTL.
TRANSPORTATION BY AIR AND THE ADDITIONAL PROTOCOL THERETO,
1929
WHEREAS, a Convention for the Unification of Certain Rules

Relating to International Transportation by Air & an Additional
Protocol thereto relating to Article 2 of the Convention were signed
at Warsaw by the plenipotentiaries of 32 countries;
WHEREAS, Article 38 of the aforesaid Convention provides that

a Government on behalf of which this Convention has not been
signed, shall be allowed to adhere thereto at any time after the
Convention has come into force, by means of a notification addressed
to the Government of the Republic of Poland;
WHEREAS, the Senate of the Congress of the Philippines, by its

Resolution No. 19 adopted on May 16, 1950, concurred in the
adherence by the Republic of the Philippines Government to the said
Convention & the said Protocol in accordance with the Philippine
Constitution, subject to the reservation, as provided in the Additional
Protocol, that the 1st paragraph of Art. 2 of the Convention shall not
apply to international transportation that may be performed by the
Republic of the Philippines;
WHEREAS, the Republic of the Philippines Government has

formally adhered to the said Convention its Additional Protocol, & the
Government of the Republic of Poland was notified of said adherence
on November 9, 1950, when the instrument of adherence was
registered in accordance with Article 38 (2) of said Convention; and,
WHEREAS, the adherence of the Republic of the Philippines

Government, pursuant to Art. 38(3) of said Convention, took effect as
from the 90th day after November 9, 1950.
NOW, THEREFORE, be it known that I, Ramon Magsaysay,

Republic of the Philippines President, in pursuance of the aforesaid
concurrence of the Senate of the Congress of the Philippines, and
subject to the reservation as provided in the Additional Protocol that
the First paragraph of Art.2 of the Convention shall not apply to
international transportation that may be performed by the Republic
of the Philippines, do hereby proclaim and make public the said
Convention and said Protocol, a copy of which is hereto attached, to
the end that the same and every article and clause thereof may be
observed & fulfilled with good faith by the Republic of the Philippines
and the citizens thereof.
PAGE 195
Notes: If common carrier, Civil Code first applies, then Warsaw Convention.
Situations where Warsaw is applicable is in private carriers.
The only criterion for the Warsaw Convention to be applicable is: it is

applicable to ALL international transportation of persons, baggage, or goods
performed by aircraft for hire.
International transport: where there's transport by AIR & there is a point of

contact in 2 high contracting parties (countries which have acceded to the
Convention).
E.g. transportation by PAL from Manila to San Francisco

Federal Express - transporation of goods
B. Constitutionality
SANTOS V. NORTHWEST AIRLINES [210 S 256 (1992)]
F: 1. A Filipino minor was informed by Northwest that he had no reservations for

his flights, and had to be waitlisted, despite a previous confirmation. He sued for
damages. Northwest moved to dismiss on the ground of lack of jurisdiction based on
Art.28 (1) of the Warsaw Convention, where the complaint could be instituted in the
territory of one of the contracting parties before the court of the
(1) domicile of the carrier;
(2) principal place of business;
(3) where it has a place of business through which the contract had been made; and
(4) place of destination.
FIRST ISSUE: W/NOT THE WARSAW CONVENTION IS UNCONSTITUTIONAL?
HELD: No. Art. 28 (1) of Warsaw Con. is constitutional. Although the case can
be decided on other grounds without resolving the constitutional question, the
Warsaw Convention is a treaty commitment voluntarily assumed by the
Philippine Government and as such, has the force and effect of law. The
presumption is that this joint legislative-executive act was first carefully
studied and determined to be constitutional before it was adopted. Petitioner's
allegation have not overcome this presumption. Moreover, the treaty since
1950 has not been rejected by the Philippine Government.
SECOND ISSUE: W/NOT THE WC SHOULD BE RENDERED IRRELEVANT BY THE

DOCTRINE OF REBUS SIC STANTIBUS?
HELD: No. The circumstance that the airline industry was still in infancy when
the Convention was made, alone, is not sufficient justification for the rejection
of the treaty at this time. The changes recited by petitioner were not entirely
unforeseen although they were expected in a general sense only. (Check
Art.41).
PAGE 196
THIRD ISSUE: W/NOT THE REQUISITS OF THE WC IS MERELY A MATTER OF

VENUE OR JURISDICTION?
HELD: Jurisdiction
(1) The wording of Art. 32, which indicates the places where the action for
damages "must" be brought, underscores the mandatory nature of Art. 28 (1).
(2) This characterization is consistent with one of the objectives of the
convention, which is to regulate in a uniform manner the conditions of
international transportation by air.
FOURT ISSUE: W/NOT PHILIPPIN COURTS HAVE JURISDICTION OVER THIS

CASE?
HELD: No. Art. 28 (1) provides that an action for damage must be brought at
the option of the plaintiff: (a) before the court of the domicile of the carrier;
(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c the contract had been
made;
(d) the court of the place of destination.
In this case, the ff. were not followed, and hence the Philippines, not
being one of the courts mentioned in Art.28 (1), does not have jurisdiction
over the case.
(1) court of domicile is Minnesota, U.S.A;
(2) principal place of business of carrier is also U.S.A;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a
round trip-ticket from SFO-TYO-MNL, then back to TYO- SFO. The "ultimate
destination" being San Francisco.
The court called upon to determine the applicability of the limitation

provision must first be vested with the appropriate jurisdiction. If the carrier is
indeed is indeed not guilty of WILLFUL MISCONDUCT, it can avail itself of the
limitations set forth in this article. But it can be done only if the action has first
been commenced properly under the rules set forth in Art.28 (1).
Notes: The enumeration of the causes of action in the WC is not an exclusive

list. You can have a cause of action even if it is not:
(a) death or wounding of passenger;
(b) damage or loss or destruction of checked baggage;
(c) delay in transportation of passengers, luggage and goods.
The case of Northwest is actually overbooking. Delay still a cause of action

under WC.
Note however, that the limitations of liability in the Convention favors the
carrier.
C. When Applicable
PAGE 197
Art. 1. (1) This convention shall apply to all international

transportation of persons, baggage, or goods performed by aircraft
for hire. It shall apply equally to gratuitous transportation by aircraft
performed by an air transportation enterprise.
(2) For the purpose of this convention the expression
"international transportation" shall mean any transportation in
which, according to the contract made by the parties, the place of
departure and the place of destination, whether or not there be a
break in the transportation or a transshipment, are situated either
within the territories of two High Contracting Parties, or within the
territory of a single High Contracting Party, if there is an agreed
stopping place within a territory subject to the sovereignty,
suzerainty, mandate, or authority of another power, even though
that power is not a party to this convention. Transportation without
such an agreed stopping place between territories subject to the
sovereignty, suzerainty, mandate, or authority of the same High
Contracting Party shall not be deemed to be international for the
purposes of this Convention.
(3) Transportation to be performed by several successive air
carriers shall be deemed, for the purposes of this Convention, to be
one undivided transportation, if it has been rendered by the parties
as a single operation, whether it has been agreed upon under the
form of a single contract or of a series of contracts is to be performed
entirely w/in a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting Party.
Art. 2. (1) This convention shall apply to transportation

performed by the state or by legal entities constituted under public
law provided it falls within the conditions laid down in Art .1.
(2) This convention shall not apply to transportation performed
under the terms of any international postal convention.
D. Liabilities Under the Convention
Art. 17. The carrier shall be liable for damage sustained in the
event of the death or wounding of a passenger or any other bodily
injury suffered by a passenger, if the accident which caused the
damage so sustained took place on board the aircraft or in the course
of any of the operations of embarking or disembarking.
Art. 18. (1) The carrier shall be liable for damage sustained in
the event of the destruction or loss of, or of damage to, any checked
baggage, or any goods, if the occurrence which caused the damage
so sustained took place during the transportation by air.
PAGE 198
(2) The transportation by air within the meaning of the

proceeding paragraph shall comprise the period during which the
baggage or the goods are in charge of the carrier, whether in an
airport or on board an aircraft, or in the case of a landing outside an
airport, in any place whatsoever.
(3) The period of the transportation by air shall not extend to
any transportation by land, by sea, or by river performed outside of
an airport. If however, such transportation takes place in the
performance of a contract for transportation by air, for the purpose
of loading, delivery, or transshipment,any damage is presumed,
subject to proof to the contrary, to have been the result of an event
which took place during the transportation by air.
Art. 19. The carrier shall be liable for damage occasioned by

delay in the transportation by air of passengers,baggage, or goods.
NORTHRWEST V. CUENCA [14 S 1063 (1965)]
ISSUE: W/NOT CUENCA HAS A CAUSE OF ACTION THOUGH NOT AMONG THOSE
MENTIONED IN THE WC?
HELD: Yes. The said articles merely declare the carrier liable for damages in
the enumerated cases, if the conditions therein specified are present. Neither
the provisions of said articles nor others regulate or exclude liability for other
breaches of contract by the carrier. Under petitioner's theory, an air carrier
would be exempt from any liability for damages in the event of its absolute
refusal, in bad faith, to comply with a contract of carriage, which is absurd.
ALITALIA V. IAC [192 SCRA 10 (1990)]
F: Dr. Felipa Pablo, an Associate UP Professor and research grantee of the

Philippine Atomic Energy Agency was scheduled to speak in a UN meeting in Ispra,
Italy. She arrived in Milan a day before the meeting, but her luggage (where her
speech was) was delayed, and arrived a day after the meeting. She returned to
Manila before the meeting.
ISSUE: W/NOT THE WC SHOULD APPLY TO LIMIT ALITATLIA'S LIABILITY?
HELD: No. The WC does not operate as an absolute limit of the extent of an
airline's liability. It does not regulate or exclude liability for other breaches of
contract by the carrier.
Under the WC, an air carrier is made liable for damages for delay in the
transportation by air of passengers, luggage or goods. The WC also limits
the liability of the carrier to 250 francs per kilo of the total weight of the
package. The WC denies to the carrier availment of the provisions which
PAGE 199
exclude or limit his liability, if the damage is caused by his willful misconduct
or by such default on his part as, in accordance with the law of the court
seized of the case, is considered as willful misconduct, or if the damage is
caused by any agent of the carrier acting w/in the scope of his employment.
2. The WC does not regulate or exclude liability for other breaches of contract
by the carrier or misconduct of its officers and employees or for some
particular or exceptional damage. The WC has been held inapplicable where
there was proof of malice or bad faith attributable to its officers and
employees. Here, however, there was no bad faith on the part of the
employees.
Nominal damages however, was awarded because of the presence of some
special species of injury caused to Dr. Pablo.
E. Limitations on Liability
RE: PASSENGERS
Art.22. (1) In the transportation of passengers the liability of

the carrier for each passenger shall be limited to the sum of 125,000
francs. (Now $100,000) Where, in accordance w/ the law of the court
to w/c the case is submitted, damages may be awarded in the form of
periodical payments, the equivalent capital value of the said
payments shall not be exceed 125,000 francs. Nevertheless, by
special contract, the carrier and the passenger may agree to a higher
limit of liability.
RE: BAGGAGE/GOODS
(2) In the transportation of checked baggage and of goods, the

liability of the carrier shall be limited to a sum of 250 francs per
kilogram (Now $20 per kilo), unless the consignor has made, at the
time when the package was handed over to the carrier, a special
declaration of the value of the delivery and has paid a supplementary
sum if the case so requires. In that case, the carrier will be liable to
pay a sum not exceeding the declared sun, unless he proves that the
sum is grater that the actual value to the consignor at delivery.
(3) As regards objects of w/c the passenger takes charge

himself, the liability of the carrier shall be limited to 5,000 francs per
passenger.
(4) The sums mentioned above shall be deemed to refer to the

French franc consisting of 65 1/2 milligrams of gold at the standard
of fineness of nine hundred thousandths. These sums may be
converted into any national currency in round figures.
PAGE 200
Art. 23. Any provision tending to relieve the carrier of liability

or to fix a lower limit that which is laid down in this convention shall
be null and void, but the nullity of any such provision shall not
involve the nullity of the whole contract, which shall remain subject
to the provisions of this convention.
Art. 24. (1) In the cases covered by Arts.18 & 19 any action for
damages, HOWEVER FOUNDED, can only be brought subject to the
conditions and limit set out in this convention.
(2) In the case covered by Art.17, the provisions of the preced-
ing paragraph shall also apply,w/o prejudice to the question as to
who are the persons who have the right to bring suit and what are
their respective rights.
NOTES: Even if you base your claim on quasi-delict, you can still sue under
Warsaw, invoking Art.24 (1).
PAN AM v. IAC (164 SCRA)
ISSUE: WON Pangan is bound by such Warsaw provisions & hence is entitled
only to $600 ($20 standard X 30 kilos) ---- YES.
Such provisions have been held to be a part of the contract of carriage,
& is valid & binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation.
A contract limiting liability upon an agreed valuation does not offend
against the policy of the law forbidding one from contracting against his own
negligence. Inasmuch as Pangan failed to declare any higher value for his
luggage & to pay add'l charges, PanAm's liability is limited to $600, as
stipulated at the back of the ticket.
FELICIANO v. PAN AM (CA CASE)
Was TC correct? --- YES.

Indeed, SC has granted damages on the ground of fraud or bad faith
due to the personal misconduct of airline employees. This case, however, the
contract of carriage of PET's baggage is based on the conditions in the airline.
Such contract is governed by Art.22(2). Since there is no evidence that PET
had declared a higher value for her lost luggage for w/c the corresponding
value, the Warsaw Con. should apply.
F. When limitations unavailable
Art. 3. (1) For the transpo. of passengers the carrier must

deliver a passenger ticket w/c shall contain the ff. particulars:
(a) The place & date of issue;

(b) The place of departure & of destination;
PAGE 201
(c) The agreed stopping places, provided that the carrier

may reserve the right to alter the stopping places in
case of necessity, and that if he exercises that right, the
alteration shall not have the effect of depriving the
transportation of its intl. character;
(d) The name & address of the carrier/s;
(e) A statement that the transpo. is subject to the rules
relating to liability established by this convention.
(2) The absence, irregularity, or loss of the passenger ticket

shall not affect the existence or the validity of the contract of
transportation, w/c shall none the less be subject to the rules of this
convention. Nevertheless, if the carrier accepts a passenger w/o a
passenger ticket having been delivered he shall not be entitled to
avail himself of those provisions of this Convention w/c exclude or
limit his liability.
Art.25. (1) The carrier shall not be entitled to avail himself of

the provisions of this convention w/c exclude or limit his liability, if
the damage is caused by his wilful misconduct or by such default on
his part as, in accordance w/ the law of the court to w/c the case is
submitted, is considered to be equivalent to wilful misconduct.
(2) Similarly the carrier shall not be entitled to avail himself of
the said provisions, is the damage is caused under the same
circumstances by any agent of the carrier acting w/in the scope of his
employment.
NOTES: Q: In what cases can carrier NOT invoke limitations?

A: 1. wilfull misconduct (Art.25)
2. default amounting to wilful misconduct accdg. to court where action is
brought;
3. accepting passengers w/o passenger ticket (Art.3-2);
4. accepting goods w/o air waybill/baggage w/o baggage check.
Q: Can carrier rely on WC if it was guilty of wilfull misconduct?
A: YES. It just can't avail of the limitation on liability. Thus it can still
invoke the provisions on NOTICE or PRESCRIPTION/LACK OF CAUSE OF ACTION.
e.g. If damage wasn't one of the enumerations in the WC, & case was filed
beyond the 2 year requirement. The carrier can invoke prescription. But if suit
is brought w/in 2 years, carrier may be liable for a higher amount than the
limitation.
The only time when WC isn't applicable is when it's not intl. air
transport. There is nothing in Art.25 w/c says that the WC doesn't apply
entirely.
ALITALIA v.IAC (supra)
PAGE 202
The Convention does not regulate or exclude liability for other

breaches of contract by the carrier or misconduct of its officers and
employees or for some particular or exceptional damage. The Con. has been
held inapplicable where there was proof of malice or bad faith attributable to
its officers & employees. HERE, HOWEVER, no bad faith of EES. Nominal
damages however, was awarded because of the presence of some special
species of injury caused to Dr. Pablo.
TWA v. CA (165 SCRA)
F: Vinluan, ACCRA lawyer, was downgraded from 1st class to economy & was
issued refund
application, in his MNL-Europe-NYK- SFO-MNL flight. (His NYK-SFO flight particularly)
He also noticed that white Caucasian passengers who checked in later than him were
given preference in 1st class seats, w/c became available due to "no show"
passengers. He sued in CFI for breach of contract & bad faith.
ISSUE: WON Warsaw Con. limit on liability can be availed of --- NO.
There was obvious discrimination & humiliation to w/c Vinluan was
subjected. Such inattention & lack of care for interest of its passengers
amount to bad faith w/c entitles passenger to moral damages.
NOTES: His entire trip, even though he availed of the services of other
airlines, is equal to one transport.
E.g. MNL-SFO via PAL } one continuing
SFO-NYK via United } ticket
Hence, if injury appears in SFO-NYK, Warsaw can be applied.
F. Conditions of Liability
Art.26. (1) Receipt by the person entitled to the delivery of

baggage of goods w/o complaint shall be prima facie evidence that
the same have been delivered in good condition & in accordance w/
the document of transpo.
(2)In case of damage, the person entitled to delivery must
complain to the carrier forthwith after the discovery of the damage,
and at the latest, within 3 days from the date of receipt in the case of
BAGGAGE and 7 days from the date of receipt in the case of GOODS.
In case of DELAY the complaint must be made at the latest w/in 14
days from the date on w/c the baggage or goods have been placed at
his disposal.
(3) Every complaint must be made in writing upon the docu-
ment of transportation or by separate notice in writing dispatched
w/in the times aforesaid.
(4) Failing complaint w/in the times aforesaid, no action shall
lie against the carrier, save in the case of fraud on his part.
NOTE: No notice requirement in case or a person's death or injury.
PAGE 203
Art. 27. In the case of death of the person liable, an action for
damages lies in accordance w/ th terms of this convention against
those legally representing his estate.
Art. 28. (1) An action for damage must be brought at the option
of the plaintiff, in the territory of one of the High Contracting Parties,
either before the court of the domicile of the carrier or of his
principal place of business , or where he has a place of business
through w/c the contract has been made, or before the court at the
place of destination.
(2) Questions of procedure shall be governed by the law of the
court to w/c the case is submitted.
SANTOS v. NORTHWEST (supra)
Art. 28(1) provides that an action for damage must be brought

at the option of the plaintiff:
(a) before the court of the domicile of the carrier;

(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c
the contract had been made;
(d) the court of the place of destination.
xxx
In this case, the ff. were not followed, and hence the Phils., not being
one of the courts mentioned in Art.28 (1), does not have jurisdiction over the
case.
(1) court of domicile is U.S., Minnesota;
(2) principal place of business of carrier is also US;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a
round trip-ticket from SFO-TYO-MNL, then back to TYO- SFO. The "ultimate
destination" being San Francisco.
Art. 32. Any clause contained in the contract an all special

agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied or by altering the rules as
to jurisdiction, shall be null and void. Nevertheless, for the
transportation of goods, arbitration clauses shall be allowed, subject
to this convention, if the arbitration is to take place within one of the
jurisdictions referred to in the first paragraph of Article 28.
PAGE 204
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TRANSPORTATION AND MARITIME

• A public utility is a business or service engaged in regularly supplying

transportation, processing, and marketing of agricultural products of

• A contract of transportation is one whereby a certain person or

Certificate of Public Convenience (CPC)

• A CPC is any authorization to operate a public service issued by the

Certificate of Public Convenience and Necessity (CPCN)

• A CPCN is issued by the PSC to a public service to which any political

• It constitutes neither a franchise nor a contract, confers no property

• However, certificates represent property rights to the extent that if the

• Certificates are considered as property as used in Civil Procedure as

Determination of WON an issuance of a certificate is for public

1. financial responsibility of the applicant

2. reliability of the applicant

3. priority of filing the application for a certificate, and

Prior operator rule

• regular operators are preferred over irregular operators

• prior operator is given opportunity to improve service

• prior operator given opportunity to extend lines

• basis of rule : to prevent ruinous and wasteful competition in order

Private nature: rights and obligations of parties inter se arising from

Contract of Transportation, Defined

• One whereby a certain person or association of persons obligate

PARTIES TO THE CONTRACT

• One who gives rise to the contract of transportation by agreeing to

person or those of other or others in the case of transportation of

• One who binds himself to transport persons, things, or news as the

• Persons or corporations who undertake to transport or convey goods,

Regulation of the Transportation Industry

The Department of Transportation and Communications

• The DOTC shall be the primary policy, planning, programming,

Powers and Functions

(b) establish and administer comprehensive and integrated programs for

(f) establish, operate and maintain a nationwide postal system xxx;

(h) accredit foreign aircraft and manufactures xxx;

(i) establish and prescribe rules and regulations for identification of

(k) establish and prescribe rules xxx operation and maintenance of a

(n) establish and prescribe rules xxx issuance of licenses xxx;

(o) establish and prescribe rules xxx enforcement of laws governing

(q) establish and prescribe rules xxx accreditation of driving schools;

(s) perform such other powers and functions as it may be prescribed by

Air Transportation Office

The Civil Aeronautics Board is hereby transferred from the Dept. of

Sec. 25, RA 776. The Civil Aeronautics Administration shall be under

Civil Aeronautics Board

Section 5. The Civil Aeronautics Board shall be composed of the

Section 10 (A) Except as otherwise provided herein, the Board shall

Powers and Duties of the CAB

1. issue, deny, amend, revise, alter, modify, cancel, suspend, or revoke

2. fix and determine reasonable individual, joint or special rates, charges,

3. authorize charters whether domestic or international and special air

4. approve or disapprove increase of capital, sale of equipment of an air

5. inquire into the mgmt. of the business of any air carrier

6. require annual, monthly, periodical and special reports from any

(i) Land Transportation Office

(ii) Land Transportation Franchising and Regulatory Board

Powers and functions

a. prescribe and regulate routes of service, xxx zones or areas of

b. issue, amend, revise, suspend or cancel CPCs or permits authorizing

c. determine, prescribe, approve and periodically review and adjust

d. issue preliminary or permanent injunction xxx;

f. issue subpoena and subpoena duces tecum and to summon witnesses

g. conduct investigations and hearings of complaints for violation of the