Aug 31, 2021

Article 1753 of the Civil Code in rel. to Article 848 of the Code of Commerce

Article 1753 of the Civil Code Article 848 of the Code of Commerce
Article 1757. The responsibility of a common Article 848. Claims for averages shall not be admitted if they do
carrier for the safety of passengers as required in not exceed 5% of the interest which the claimant may have in the
articles 1733 and 1755 cannot be dispensed with vessel or in the cargo if it be gross average and 1% of the goods
or lessened by stipulation, by the posting of damaged if particular average, deducting in both cases the
notices, by statements on tickets, or otherwise. expenses of appraisal, unless there is an agreement to the
contrary.

American Home Assurance Company v. Court of Appeals, G.R. No. 94149, 05 May 1992, (208 SCRA 343)
Facts:
Issue:
Ruling:

A. Art. 1732: Definition of common carrier

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.

AIR TRANSPORTATION
1949 - Civil Code adopted the definition of Common Carriers from the Code of Commerce, but it included air transit

1. Carrying of persons or goods or both may be the principal or ancillary activity

De Guzman v. Court of Appeals, G.R. No. L-47822, 22 December 1988, (168 SCRA 612)
Facts: de Guzman contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a
warehouse. Only 150 boxes of Liberty filled milk were delivered to the petitioner. The other 600 boxes never
reached the petitioner, since the truck which carried these boxes was hijacked. Petitioner commenced action
against private respondent for the claimed value of the lost merchandise, plus damages and attorney's fees,
arguing that private respondent, being a common carrier, failed to exercise the extraordinary diligence required
of him by the law, should be held liable for the value of the undelivered goods. Private respondent denied that he
was a common carrier and argued that he could not be held responsible for such loss having been due to force
majeure. CFI considered him as a common carrier in finding that he had habitually offered trucking services to
the public; and did not exempt him from liability on the ground of force majeure. The Court of Appeals reversed
the judgment and held that respondent had been engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier.

Issue: WON respondent is a common carrier

WON respondent was not liable

Ruling:
➔ The above article (1732) makes no distinction between one whose principal business activity is the carrying
of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as "a
sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733 deliberately avoided making such
distinctions.

It appears to the Court that private respondent is properly characterized as a common carrier even though he
merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was
done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's
principal occupation was not the carriage of goods for others. There is no dispute that the private respondent
charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not
relevant here.

The Court of Appeals referred to the fact that the private respondent held no certificate of public convenience,
and concluded he was not a common carrier. This is a palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has
also complied with the requirements of the applicable regulatory statute and implementing regulations and has
been granted a certificate of public convenience or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would
be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply
with applicable statutory requirements.

➔ Common carriers, "by the nature of their business and for reasons of public policy" are held to a very high
degree of
care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. Article 1734
establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the
goods which they carry, "unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the
common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they
appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, 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 as required in Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant
case — the hijacking of the carrier's truck — does not fall within any of the five (5) categories of exempting
causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt
with under the provisions of Article 1735, in other words, that the private respondent as common carrier is
presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by
proof of extraordinary diligence on the part of the private respondent.

In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's
cargo. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence
or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the
truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later
releasing them in another province (in Zambales). In these circumstances, we hold that the occurrence of the loss
must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all
risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are
inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

Air France v. Zani, GR No. 199767, March 13, 2019

Facts: Zani and Airfrance executed a credit agreement allowing the former to purchase plane tickets on a credit at
a fixed price from petitioner. Under this agreement, Zani purchased several tickets from the airline and despite
the payment terms had an outstanding balance of around P1M. The counsel of airfrance wrote Zani that he will
be refused carriage on Airfrance’s network or flights until he settles his balance. Zani failed to pay and a
collection case was filed against him. The RTC ruled in favor of Airfrance and CA upheld the decision.

Meanwhile, Zani booked flights through ANSCOR travel corporation, a travel agency. The flights involved different
airlines including the petitioner. Ultimately, Zani was refused to embark on a flight with Airfrance which was
booked with ANSCOR. Consequently, Zani filed a complaint for damages against Airfrance, claiming that the latter
breached the contract of carriage between them. On the other hand, Airfrance contended that at the time of the
incident, Zani was indebted to Airfrance (P1M) which is a violation of the agreement. Thus, when Airfrance
refused carriage to Zani, Airfrance was only enforcing its rights.

The RTC ruled in Zani’s favor, declaring that there was a perfected contract between Zani and Airfrance when the
latter confirmed the former’s ticket, and the refusal of Airfrance to let Zani board was a breach of contract despite
Zani’s pending obligations. The CA upheld the ruling.

Issue: W/N there was a breach of contract of carriage

Ruling: A contract of carriage is defined as one whereby a person/association of persons obligates themselves to
 transport things, persons, or news from one place or another for a fixed price. Thus, an airline’s issuance of
confirmed tickets is a guarantee to the passenger that the airline would honor the tickets and transport him for
that segment of his trip corresponding to the confirmed ticket.

Breach of contract is the failure, without legal reason, to comply with the terms of the contract or the failure,
without legal excuse to perform any promise which forms the whole or part of the contract. The court ruled in
PAL v. CA
“When an airline issues a ticket to the passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. xxx If the passenger is not transported or if he dies/is injured in the process of
transportation, the carrier may be held liable for a breach of contract of carriage.”

Undoubtedly, a contract of carriage existed between the parties. Zani carried confirmed tickets covering
several flights with Airfrance. Zani had the right to expect that he would fly (From Mahe Island to Paris).
Since Airfrance refused to transport him, it evidently breached their contract of carriage and Zani had
every right to sue air france for this breach.

Airfrance can only refuse carriage due to non-payment of the fare or credit arrangement when what
remains unpaid, or the credit arrangement remains unsettled, is the fare for that particular ticket or
flight (in this case, the July 16 2020 flight from Mahe Island to Paris). As explained by the Airfrance witness,
Airfrance would dishonor a ticket and disallow a passenger from boarding a flight if the ticket for that particular
flight is not yet paid. In this case, Zani’s unpaid obligation did not include the payment for the July 16 2000 flight.
It refers to previous purchases Zani made pursuant to the credit agreement.

2. The common carrier need not be the owner (of the vessel) used to consummate contract of carriage
Cebu Salvage Corporation v. Philippine Home Assurance Corporation, G.R. No. 150403, 25 January 2007,
(512 SCRA 667)
Facts: Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer)
entered into a voyage charter wherein petitioner was to load 800 to 1,100 metric tons of silica quartz on board
the M/T Espiritu Santo. The shipment never reached its destination, however, because the M/T Espiritu Santo
sank in the afternoon of December 24, 1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of
the cargo. MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance
Corporation, who later was subrogated to the rights of MCCII and filed a case in the RTC against petitioner for
reimbursement of the amount it paid MCCII. RTC rendered judgment in favor of respondent. On appeal, the CA
affirmed the decision of the RTC.

Issue: WON the contract entered into was a contract of carriage

Ruling: Based on the agreement signed by the parties and the testimony of petitioner’s operations manager, it is
clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited MCCII’s
account, offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in lieu of the
M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since these vessels had broken
down. There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was
engaged in the business of carrying and transporting goods by water, for compensation, and offered its services to
the public.

Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel
it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did
not own the vessel it decided to use to consummate the contract of carriage did not negate its character and
duties as a common carrier. The MCCII (respondent’s subrogor) could not be reasonably expected to inquire
about the ownership of the vessels which petitioner carrier offered to utilize. As a practical matter, it is very
difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it
should be required to know who the actual owner of the vessel is. In fact, in this case, the voyage charter itself
denominated the petitioner as the "owner/operator" of the vessel.

The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received for
transportation. It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS. This is
consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may
serve as the contract of carriage between the parties, it cannot prevail over the express provision of the voyage
charter that MCCII and petitioner executed:

In cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under a
charter party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the receipt for
the goods, and as document of title passing the property of the goods, but not as varying the contract between the
charterer and the shipowner." The Bill of Lading becomes, therefore, only a receipt and not the contract of
carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law between the parties
who are bound by its terms and condition provided that these are not contrary to law, morals, good customs,
public order and public policy.

Tatad, et al. v. Garcia, et al, G.R. No. 114222 April 6, 1995

FACTS:
DOTC planned to construct an LRT along EDSA. Eli Levin Enterprises proposed to construct LRT III through a BOT
basis. DOTC and respondent EDSA LRT Corporation entered into the BOT agreement. EDSA LRT Corporation is a
foreign corporation existing under the laws of Hong Kong

Petitioners assert that the EDSA LRT III is a public utility and the ownership and operation thereof is limited by
the constitution to Filipino citizens and domestic corporations, not foreign corporations like the private
respondent.

Issue: WON EDSA LRT Corporation, a foreign corporation, owns the subject light rail transit which is a public
utility.

Ruling: What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals
and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the public,
they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but
their use to serve the public.

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does
not require a franchise before one can own the facilities needed to operate a public utility so long as it does not
operate them to serve the public.

Section 11 of Article XII of the Constitution provides:

No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines
at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive character or for a longer period than fifty years . . . (Emphasis supplied).

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities
and equipment used to serve the public.

The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and
used to serve the public as a public utility unless the operator has a franchise.

While private respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it admits that it is
not enfranchised to operate a public utility (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of
this incapacity, private respondent and DOTC agreed that on completion date, private respondent will
immediately deliver possession of the LRT system by way of lease for 25 years, during which period DOTC shall
operate the same as a common carrier and private respondent shall provide technical maintenance and repair
services to DOTC.

Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier.
For this purpose, DOTC shall indemnify and hold harmless private respondent from any losses, damages, injuries
or death which may be claimed in the operation or implementation of the system, except losses, damages, injury
or death due to defects in the EDSA LRT III on account of the defective condition of equipment or facilities or the
defective maintenance of such equipment facilities.

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have
no dealings with the public and the public will have no right to demand any services from it.

B. Examples of common carrier

B.1. Test for determining whether a party is a common carrier
B.1.1 Pipeline Operator
First Philippine Industrial Corporation v. Court of Appeals, G.R. No. 125948, 29 December 1998, (300
SCRA 661)
Facts: Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install
and operate oil pipelines. Petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City
but was, however, required to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the
LGC. Petitioner paid the same under protest; the same protest was denied by the City Treasurer contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under
Section 133 (j) of the LGC. It argues that said exemption applies only to "transportation contractors and persons
engaged in the transportation by hire and common carriers by air, land and water." Respondents assert that
pipelines are not included in the term "common carrier" which refers solely to ordinary carriers such as trucks,
trains, ships and the like. The trial court rendered a decision dismissing the complaint, ruling that plaintiff is
either a contractor or other independent contractor. Plaintiff claims that it is a grantee of a pipeline concession
under Republic Act 387 whose concession was lately renewed by the Energy Regulatory Board. Yet neither said
law nor the deed of concession grant any tax exemption upon the plaintiff. Even the Local Government Code
imposes a tax on franchise holders under Sec. 137 of the Local Tax Code.

Issue: WON petitioner is a common carrier or a transportation contractor

Ruling: The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying goods for others as a public employment, and must hold
himself out as ready to engage in the transportation of goods for person generally as a business and not as a
casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established roads;
and
4. The transportation must be for hire.

Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public
employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele
does not exclude it from the definition of a common carrier.

In De Guzman vs. Court of Appeals we ruled that: So understood, the concept of "common carrier" under Article
1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set
forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes: every
person that now or hereafter may own, operate. manage, or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service
of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, 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 systems, wire or wireless broadcasting stations
and other similar public services. (Emphasis Supplied)

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no distinction
as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of
the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are
considered common carriers.

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier."
Thus, Article 86 thereof provides that: Art. 86. Pipeline concessionaire as common carrier. Republic Act 387 also
regards petroleum operation as a public utility - everything relating to the exploration for and exploitation of
petroleum . . . and everything relating to the manufacture, refining, storage, or transportation by special methods
of petroleum, is hereby declared to be a public utility. The Bureau of Internal Revenue likewise considers the
petitioner a "common carrier” in BIR Ruling No. 069-83.

B.1.2 Customs broker

A.F. Sanchez Brokerage Inc. v. Court of Appeals, G.R. No. 147079, 21 December 2004, (447 SCRA 427)
Facts:
Wyeth-Pharma GMBH shipped onboard KLM airlines oral contraceptives and other medical tablets for delivery to
Manila in favor of consignee Wyeth-Suaco Laboratories. Wyeth-Suaco insured the shipment against all risks with
respondent FGU Insurance. When the shipment arrived at the NAIA airport, it was discharged without exception
and delivered to Philippine Skylanders (PSI) for safekeeping.
To release the cargoes, Wyeth-Suaco engaged the services of Sanchez Brokerage, a licensed broker.
Representatives of Sanchez Brokerage paid PSI a storage fee. A representative of Sanchez Brokerage
acknowledged that he received the cargos consisting of 3 pieces in good [Link] Suaco did not inspect
the cargos which were loaded to the transport vehicles of Sanchez Brokerage. The Cargoes were then delivered
to Hizon Laboratories.

Ronnie Likas, a Wyeth Suaco representative, acknowledged the delivery of the cargos. Upon inspection, he
discovered that 44 cartons of the tablets were in bad order. Wyeth-Suaco issued a notice of material rejection of
the dmaged cartons on the ground that they were delivered to Hizon Laboratories with water damage. Later on,
Wyeth-Suaco demanded from Sanchez Brokerage the payment of the value of the damaged tablets. Sanchez
Brokerage refused. Wyeth-Suaco filed a claim against FGU Insurance in settlement of the claim.

FGU demanded from Sanchez for payment of the amount. Sanchez disclaimed liability for the damaged goods,
contending that the damage was due to improper packaging. FGU filed a case for damages before the RTC against
Sanchez Brokerage. RTC dismissed the complaint. CA reversed the RTC, holding that Sanchez Brokerage was
presumed negligent in the shipping of the damaged tablets.

Issue: W/N Sanchez Brokerage is a common carrier (YES)

Ruling: The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as
defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to
the public.

Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that the
services the firm offers include the delivery of goods to the warehouse of the consignee or importer.

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver
the goods for pecuniary consideration.

In this light, petitioner as a common carrier is mandated to observe, under Article 17334of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according to all the circumstances of each
case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have
acted negligently, unless it proves that it observed extraordinary diligence.

Loadmasters Customs Services, Inc. v. Glodel Brokerage Corporation, G.R. No. 179446, 10 January 2011,
(639 SCRA 69)
Facts: R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to insure the shipment of
132 bundles of electric copper cathodes against All Risks. Columbia engaged the services of Glodel for the release
and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in
turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia’s
warehouses/plants in Bulacan and Valenzuela City. Of the six (6) trucks en route to Balagtas, Bulacan, however,
only five (5) reached the destination. Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but
without the copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for insurance
indemnity which R&B paid, who in turn filed a complaint for damages/reimbursement against Loadmasters and
Glodel. RTC held Glodel alone as liable for the loss of the subject cargo; and it dismissed Loadmasters’
counterclaim against R&B. The CA partly granted the appeal holding the appellee Loadmasters likewise liable to
appellant Glodel in the amount of ₱1,896,789.62 representing the insurance indemnity appellant Glodel has been
held liable to appellant R&B Insurance Corporation.

Issue: WHO between Loadmasters and Glodel is liable to pay R&B Insurance

Ruling: At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common carriers to
determine their liability for the loss of the subject cargo. Loadmasters is a common carrier because it is engaged
in the business of transporting goods by land, through its trucking service. It is a common carrier as
distinguished from a private carrier wherein the carriage is generally undertaken by special agreement and it
does not hold itself out to carry goods for the general public. The distinction is significant in the sense that "the
rights and obligations of the parties to a contract of private carriage are governed principally by their
stipulations, not by the law on common carriers." In the present case, there is no indication that the undertaking
in the contract between Loadmasters and Glodel was private in character. There is no showing that Loadmasters
solely and exclusively rendered services to Glodel. In fact, Loadmasters admitted that it is a common carrier.

In the same vein, Glodel is also considered a common carrier within the context of Article 1732. In its
Memorandum, it states that it "is a corporation duly organized and existing under the laws of the Republic of the
Philippines and is engaged in the business of customs brokering." It cannot be considered otherwise because as
held by this Court in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,a customs broker is
also regarded as a common carrier, the transportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for
reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that extreme measure of care and caution which persons of unusual
prudence and circumspection observe for securing and preserving their own property or right. This exacting
standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of
the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Thus, in
case of loss of the goods, the common carrier is presumed to have been at fault or to have acted negligently. This
presumption of fault or negligence, however, may be rebutted by proof that the common carrier has observed
extraordinary diligence over the goods. With respect to the time frame of this extraordinary responsibility, the
Civil Code provides that the exercise of extraordinary diligence 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.

Premises considered, the Court is of the view that both Loadmasters and Glodel are jointly and severally liable to
R & B Insurance for the loss of the subject cargo. Under Article 2194 of the New Civil Code, "the responsibility of
two or more persons who are liable for a quasi-delict is solidary."

B.1.3 Freight forwarder that contracts delivery of the goods

Unsworth Transport International (Phils.) v. Court of Appeals, G.R. No. 166250, 26 July 2010, (627 SCRA
357)
Facts: Sylvex Purchasing Corp. delivered to UTI (petitioner) various raw materials for pharmaceutical
manufacturing. The shipment was insured by respondent Pioneer Insurance, in favor of Unilab against all risks.
The shipment was loaded in a container van and and boarded on APL’s vessel.

The shipment arrived in Manila and UTI received them in its warehouse after stamping the Permit to Deliver
Imported Goods procured by Champs Customs Brokerage. Later, stripping survey results stated that there were
damages to the shipment. Unilab filed a claim for damage against UTI and Pioneer Insurance. UTI denied liability
while Pioneer insurance paid the claimed amount. Later, by virtue of subrogation receipt issued by Unilab in
favor of Pioneer Insurance, Pioneer Insurance filed a complaint for damages against APL, UTI with the RTC.

The RTC ruled in favor of Pioneer Insurance and Unsworth (and its other co defendants) was ordered to pay
Pioneer Insurance. The CA upheld the RTC.

Issue: W/N the petitioner UTI is a common carrier

Ruling: Admittedly, petitioner is a freight forwarder. The term "freight forwarder" refers to a firm holding itself
out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of
property for compensation and, in the ordinary course of its business, (1) to assemble and consolidate, or to
provide for assembling and consolidating, shipments, and to perform or provide for break-bulk and distribution
operations of the shipments; (2) to assume responsibility for the transportation of goods from the place of
receipt to the place of destination; and (3) to use for any part of the transportation a carrier subject to the federal
law pertaining to common carriers.

A freight forwarder’s liability is limited to damages arising from its own negligence, including negligence
in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination
instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or
damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the
transport, even though the forwarder does not carry the merchandise itself.

It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto, petitioner undertook to
transport, ship, and deliver the 27 drums of raw materials for pharmaceutical manufacturing to the consignee.

Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have
been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is,
unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that they observed such
diligence. Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order
at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall
be held responsible.

B.1.4 School bus operator despite limited clientele

Spouses Pereña v. Spouses Zarate, G.R. No. 157917, 29 August 2012, (679 SCRA 208)
Facts: The Pereñas were engaged in the business of transporting students using a KIA Ceres Van. The Zarates
contracted the Pereñas to transport Aaron to and from Don Bosco. Because of the heavy vehicular traffic on the
South Superhighway, Alfaro took the van to an alternate route. At about the time the van was to traverse the
railroad crossing, PNR Commuter No. 302 (train) was travelling northbound and as the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view
of the oncoming train was blocked because he overtook the passenger bus on its left side. The passenger bus
successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of the van,
and the impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path
of the train, which dragged his body and severed his head, instantaneously killing him. The said site commonly
used for railroad crossing by motorists was not in fact intended by the railroad operator for railroad crossing at
the time of the vehicular collision. The Zarates’ claim against the Pereñas was upon breach of the contract of
carriage for the safe transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil
Code. The Pereñas adduced evidence to show that they had exercised the diligence of a good father of the family
in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a driver’s license and had
not been involved in any vehicular accident prior to the collision. For its part, PNR tended to show that the
proximate cause of the collision had been the reckless crossing of the van and that the narrow path traversed by
the van had not been intended to be a railroad crossing for motorists.

Issue: WON the school bus is a common carrier (leading to WON the Perenas and PNR jointly and severally liable)

Ruling: We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated as
a common carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a
good father of a family. Although in this jurisdiction the operator of a school bus service has been usually
regarded as a private carrier, primarily because he only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use, the exact nature of the operation of a school
bus service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to
another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier. A private carrier is one who, without making the activity a vocation, or without
holding himself or itself out to the public as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance only, to transport goods or persons from one
place to another either gratuitously or for hire. The provisions on ordinary contracts of the Civil Code
govern the contract of private carriage. The diligence required of a private carrier is only ordinary, that
is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering such services to the public. Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code, the Public Service Act, and other special
laws relating to transportation. A common carrier is required to observe extraordinary diligence, and is
presumed to be at fault or to have acted negligently in case of the loss of the effects of passengers, or the
death or injuries to passengers.

The true test for a common carrier is not the quantity or extent of the business actually transacted, or the
number and character of the conveyances used in the activity, but whether the undertaking is a part of the
activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the
 undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and
held out to the general public, the individual or the entity rendering such service is a private, not a common,
carrier. The question must be determined by the character of the business actually carried on by the carrier, not
by any secret intention or mental reservation it may entertain or assert when charged with the duties and
obligations that the law imposes.

Applying these considerations to the case before us, there is no question that the Pereñas as the operators of a
school bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by the method by which the business
was conducted; and (c) transporting students for a fee. Despite catering to a limited clientèle, the Pereñas
operated as a common carrier because they held themselves out as a ready transportation indiscriminately to the
students of a particular school living within or near where they operated the service and for a fee.

C. Distinctions between common carrier and private carrier

Philippine American General Insurance Company v. PKS Shipping Company, G.R. No. 149038, 09 April
2003, (401 SCRA 222)
Facts: Davao Union Marketing (DUMC) contracted PKS Shipping Company (PKS Shipping) for the shipment of
cement to Tacloban City. The goods were loaded to Limar I, a barge belonging to PKS Shipping. When the barge
was being towed by PKS’ tugboat (MT Iron Eagle), the barge sank along with the entire cargo (the cement).

DUMC filed a claim with Philmagen (petitioner) for the amount of the insurance. Philmagen pan and sought
reimbursement rom PKS Shipping. However PKS Shipping refused to pay. Philmagen then filed a suit against PKS
with the RTC.

RTC dismissed the complaint, saying that the loss could’ve been caused by a fortuitous event (in which case the
shipowner was not liable) or through the negligence o the captain and crew, and that under Art. 587 of the Code
of Commerce adopting the "Limited Liability Rule," the ship owner could free itself of liability by abandoning, as
it apparently so did, the vessel with all her equipment and earned freightage.

CA upheld the RTC ruling and declared that PKS Shipping was not a common carrier and as such, was not
expected to observe extraordinary diligence. The appellate court, moreover, found that the loss of the goods was
sufficiently established as having been due to a fortuitous event, negating any liability on the part of PKS
Shipping to the shipper.

Issue: Whether PKS Shipping is a common carrier or private carrier

Whether it observed the proper diligence required given the circumstances

Ruling: 1. Much of the distinction between a "common or public carrier" and a "private or special carrier" lies in
the character of the business, such that if the undertaking is an isolated transaction, not a part of the business or
occupation, and the carrier does not hold itself out to carry the goods for the general public or to a limited
clientele, although involving the carriage of goods for a fee, the person or corporation providing such service
could very well be just a private carrier.

Contrary to the conclusion made by the appellate court, its factual findings indicate that PKS Shipping has
engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to carry
such goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on its
part.6 Neither can the concept of a common carrier change merely because individual contracts are executed or
entered into with patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier
to escape liability by the simple expedient of entering into those distinct agreements with clients.

2. Article 1733 of the Civil Code requires common carriers to observe extraordinary diligence in the vigilance
over the goods they carry. In case of loss, destruction or deterioration of goods, common carriers are presumed
to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them.7 The
provisions of Article 1733, notwithstanding, common carriers are exempt from liability for loss, destruction, or
deterioration of the goods due to any of the following causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

Xxxx
 The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel
masters of Limar I and MT Iron Eagle, that there was no way by which the barge’s or the tugboat’s crew could
have prevented the sinking of Limar I. The vessel was suddenly tossed by waves of extraordinary height of six
(6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into the barge’s
hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the factual findings of
the appellate court.

Two ways to escape liability:

1. Proof of exercise of extraordinary diligence
2. Goods were destroyed under causes dictated in Art. 1733?

D. Art. 1733: Diligence Required of Common Carriers

D.1. Extra-ordinary diligence required/ Presumption of fault in case of loss or damage to goods or death
or injury to passengers

Article 587 of the Code of Commerce in rel. to Articles 1733 & 1755 of the Civil Code:
Heirs of De Los Santos v. Court of Appeals, G.R. No. 51165, 21 June 1990 (186 SCRA 649)
Facts: The heirs of Delos Santos (Petitioner) filed a complaint against respondent Compania Maritima for
damages due to the death of several passengers in the sinking of MV Mindoro, a vessel of Company Maritima.
According to the decision of the Board of Marine Inquiry, the captain and some officers of the crew were
negligent in operating the vessel. Punishment and suspension/revocation of license certificates were imposed on
the crew. However, the same decision cannot be executed upon the captain since he perished with the vessel. CM
also said that the drowning of the passengers, including the relatives of the plaintiffs, was due to force majeure
(the typhoon).

Later, the Board of Marine Inquiry found that the ship’s complement and crew are complete and the vessel was
seaworthy. If the same sank, it was due to force majeure. Additional findings provide that the vessel was
inspected by Bureau of Customs, and the agency gave a clearance to the vessel after inspection.

RTC ruled in favor of Compania Maritima. The CA affirmed the RTC decision. Thought the RTC found that the
concurring negligence of the captain must be imputed to Campania Maritima, the company cannot be held liable
for damages based on the principle of limited liability of the shipowner or shipment under Article 587 of the
Code of Commerce.

Issue: Whether there is negligence on the part of Compania Maritima

Ruling: Campania Maritima’s lack of extraordinary diligence coupled with the negligence of the captain
were the proximate causes of the sinking of the vessel. Hence, Campania Maritime is liable to the deaths
and injury of the victims.

Compania Martima claims that it did not have information about the typhoon until after the boat was already at
sea. However, The Weather Bureau Director stated that the bureau issued 17 warnings of typhoon welding to
shipping companies. It is highly improbable that the Weather Bureau had not yet issued any typhoon bulletin at
any time during the day to the shipping companies.

Additionally, the appellate court found that the ship's captain through his action showed prior knowledge
of the typhoon. ( The captain said in his radiogram that he was “still observing weather condition” which
implicitly suggested that he had known even before the departure, of the unusual weather condition). If the
captain knew of the typhoon beforehand, it is inconceivable for Maritima to be totally in the dark of '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.

Maritime shares equally in the captain’s negligence in overloading the ship. The ship’s departure was
delayed for four hours and Campania Maritima could not account for the delay (it did not check with the captain
to inquire about the delay or send a representative to do the same). During this 4-hour period, it is possible that
the unmanifested cargo and passengers were loaded. However, if there had been close supervision of the ship,
the overloading could have been avoided.

Compania Maritima presented evidence of the ship’s seaworthiness prior to departure. The ship was dry-docked
for a month, necessary repairs were done, lifesaving equipment were installed. HOWEVER, Compania Maritima
did not present evidence that it installed a radar which could have helped the vessel to navigate for
shelter during the storm. The vessel was left at the mercy of ''Welming' in the open sea because although it was
already in the vicinity of the Aklan river, it was unable to enter the mouth of Aklan River to get into New
Washington, Aklan due to darkness.

Philippines Airlines, Inc. v. Court of Appeals, G.R. No. L-82619, 15 September 1993, (226 SCRA 423)
Facts: Private respondent filed a complaint for damages for breach of contract of carriage2 against Philippine
Airlines, Inc. (PAL), him being among the twenty-one (21) passengers of PAL Flight 477 that took off from Cebu
bound for Ozamiz City. Before landing at Ozamiz City, the pilot was informed that the airport was closed due to
heavy rains and inclement weather and that he should proceed to Cotabato City instead. Upon arrival at Cotabato
City, the PAL Station Agent info, or take the next flight to Cebu the following day, or remain at Cotabato and take
the next available flight to Ozamiz City on 5 August 1975. They were also informed that there were only six (6)
seats available as there were already confirmed passengers for Manila; and that the basis for priority would be
the check-in sequence at Cebu. Private respondent chose to return to Cebu but was not accommodated because
he checked-in as passenger No. 9. Private respondent tried to stop the departure of Flight 560 as his personal
belongings, including a package containing a camera were still on board. His plea fell on deaf ears. PAL then
issued to private respondent a free ticket to Iligan city, which the latter received under protest.5 Private
respondent was left at the airport and could not even hitch a ride in the Ford Fiera loaded with PAL personnel.6
PAL neither provided private respondent with transportation from the airport to the city proper nor food and
accommodation for his stay in Cotabato City. His personal effects including the camera, which were valued at
P2,000.00 were no longer recovered. PAL filed its answer denying that it unjustifiably refused to accommodate
private respondent.9 It alleged that there was simply no more seat for private respondent on Flight 560 since
there were only six (6) seats available; that pieces of checked-in baggage and had carried items of the Ozamiz
City passengers were removed from the aircraft; that the reason for their pilot's inability to land at Ozamis City
airport was because the runway was wet due to rains thus posing a threat to the safety of both passengers and
aircraft; and, that such reason of force majeure was a valid justification for the pilot to bypass Ozamiz City and
proceed directly to Cotabato City. RTC ruled in favor of the private respondent, which the CA affirmed.

Issue: WON PAL is liable

Ruling: 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 v. Carrascoso, we held that — 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
travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage,
therefore, generates a relation attended with a public duty.

The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law.
Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such
occurrence did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole
one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said
in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has
been landed at the port of destination and has left the carrier's premises. Hence, PAL necessarily would still have
to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded
passengers until they have reached their final destination. While we find PAL remiss in its duty of extending
utmost care to private respondent while being stranded in Cotabato City, there is no sufficient basis to conclude
that PAL failed to inform him about his non-accommodation on Flight 560, or that it was inattentive to his
queries relative thereto. Private respondent's insistence on being given priority in accommodation was
unreasonable considering the fortuitous event and that there was a sequence to be observed in the booking, i.e.,
in the order the passengers checked-in at their port of origin. His intransigence in fact was the main cause for his
having to stay at the airport longer than was necessary.

AFFIRMED with modification however that the award of moral damages of Fifty Thousand Pesos (P50,000.00) is
reduced to Ten Thousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand Pesos (P10,000.00)
is also reduced to Five Thousand Pesos (P5,000.00). The award of actual damages in the amount Five Thousand
Pesos (P5,000.00) representing business losses occasioned by private respondent's being stranded in Cotabato
City is deleted.

Article 1736:
Macam v. Court of Appeals, G.R. No. 125524, 25 August 1999, (313 SCRA 77)
Facts: Petitioner Benito Macam (under the name Ben-Mac enterprises), shipped boxes of watermelons and
mangoes onboard vessel Nen Jiang, which was owned by respondent China Ocean Boxing Shipping Co through
local agent Wallem Philippines Shipping (respondent). The cargoes were bound for HongKong, with Pakistan
Bank as consignee and the Great Prospect Company (GPC) as notifying party. As required by the letter of credit,
the copies of the bills of lading and commercial invoices were submitted to Consolidated Banking Corporation,
the depository bank of Benito Macam.

Upon arrival in Hong Kong, the shipment was delivered directly to GPC, not to Pakistan Bank and without the
required bill of lading being surrendered. GPC failed to pay Pakistan Bank. Pakistan Bank, in possession of the
original bills of lading, refused to pay SolidBank. Solidbank demanded payment from Wallem but the latter
refused. Macam was constrained to return the amount to Solidbank then demanded payment from Wallem but to
no avail.

Macam sought before the RTC to collect the value of the shipment from the respondent. The Respondents
contended that the shipment was delivered to GPC without the presentation of the bills of lading. Macam
contended that the shipment was not delivered to the consignee Pakistan Bank as stated in the bill of lading or to
a party designated or named by the consignee, and that such act constituted a misdelivery of the shipment.

Issue: W/N the respondents are liable to Macam for releasing the goods to Great Prospect Company without the
bills of lading (NO)

Ruling:
We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive
delivery of the cargoes to the consignee or to the person who has a right to receive them.

PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notifying party. However,
in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his
demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to
conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736
had, other than the consignee, the right to receive them was proper.

Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without
the bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective
consignees without need of presenting the bill of lading and bank guarantee per the respective shipper's
request since "for prepaid shipt ofrt (ganito talaga yung pagkatype sa case) charges already fully paid."

From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around
two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the
facilities of respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of
petitioner to request the shipping lines to immediately release perishable cargoes such as watermelons
and fresh mangoes through telephone calls by himself or his "people." In transactions covered by a letter of
credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers
using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully
paid. In his several years of business relationship with GPC and respondents, there was not a single
instance when the bill of lading was first presented before the release of the cargoes. He admitted the
existence of the telex of 3 July 1989 containing his request to deliver the shipment to the consignee without
presentation of the bill of lading but not the telex of 5 April 1989 because he could not remember having made
such request.

Articles 1736, 1737, & 1738:

Nedlloyd Lijnen B.V. Rotterdam and the East Asiatic Co., Ltd. v. Glow Laks Enterprises, Ltd., G.R. No.
156330, 19 November 2014, (740 SCRA 592)
Facts: Petitioner is a foreign corporation engaged in the business of carrying goods by sea, whose vessels
regularly call at the port of Manila. It is doing business in the Philippines thru its local ship agent, co-petitioner
East Asiatic Co., Ltd. (East Asiatic). Respondent Glow Laks Enterprises,Ltd., is likewise a foreign corporation
organized and existing under the laws of Hong Kong. It is not licensed to do, and it is not doing business in, the
Philippines. Respondent loaded on board M/S Scandutch at the Port of Manila a total 343 cartoons of garments,
complete and in good order for pre-carriage to the Port of Hong Kong. The goods arrived in good condition in
Hong Kong and were transferred for final carriage to Colon, Free Zone, Panama. Both vessels, M/S Scandutch and
M/S Amethyst, are owned by Nedlloyd represented in the Phlippines by its agent, East Asiatic. Upon arrival of the
vessel at the Port of Colon on 23 October 1987, petitioners purportedly notified the consignee of the arrival of
the shipments, and its custody was turned over to the National Ports Authority in accordance with the laws,
customs regulations and practice of trade in Panama. By an unfortunate turn of events, however, unauthorized
persons managed to forge the covering bills of lading and on the basis of the falsified documents, the ports
authority released the goods. Respondent filed a formal claim and later initiated a civil case with Nedlloyd for the
recovery of the invoice value for the misdelivery of the goods. In disclaiming liability for the misdelivery of the
shipments, petitioners asserted that they were never remiss in their obligation as a common carrier and that
they cannot be faulted for the release of the goods to unauthorized persons, their extraordinary responsibility as
a common carrier having ceased at the time the possession of the goods were turned over to the possession of
the port authorities. RTC rendered a Decision ordering the dismissal of the complaint but granted petitioners’
counterclaims for litigation expenses. The Court of Appeals reversed the findings of the RTC and held that foreign
laws were not proven in the manner provided by Section 24, Rule 132 of the Revised Rules of Court, and
therefore, it cannot be given full faith and credit. For failure to prove the foreign law and custom, it is presumed
that foreign laws are the same as our local or domestic or internal law under the doctrine of processual
presumption. Under the New Civil Code, the discharge of the goods into the custody of the ports authority
therefore does not relieve the common carrier from liability because the extraordinary responsibility of the
common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who
has the right to receive them.

Issue: WON petitioners are liable for the misdelivery of goods under Philippine laws

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

Petitioners concede that, as a common carrier, they are bound to observe extraordinary diligence in the care and
custody of the goods in their possession, they insist that they cannot be held liable for the loss of the shipments,
their extraordinary responsibility having ceased at the time the goods were discharged into the custody of the
customs arrastre operator, who in turn took complete responsibility over the care, storage and delivery of the
cargoes.

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

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

Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common
carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and
effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the
right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the
goods by the consignee or such other person entitled to receive them.

It was further provided in the same statute that the carrier may be relieved from the responsibility for loss or
damage to the goods upon actual or constructive delivery of the same by the carrier to the consignee or to the
person who has the right to receive them. In sales, actual delivery has been defined as the ceding of the corporeal
possession by the seller, and the actual apprehension of the corporeal possession by the buyer or by some person
authorized by him to receive the goods as his representative for the purpose of custody or disposal. By the same
token, there is actual delivery in contracts for the transport of goods when possession has been turned over to
the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. In this
case, there is no dispute that the custody of the goods was never turned over to the consignee or his agents but
was lost into the hands of unauthorized persons who secured possession thereof on the strength of falsified
documents. The loss or the misdelivery of the goods in the instant case gave rise to the presumption that the
common carrier is at fault or negligent.

A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported. When the goods shipped are either lost or arrived in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable. To overcome the presumption of negligence, the common carrier must
establish by adequate proof that it exercised extraordinary diligence over the goods. It must do more than merely
show that some other party could be responsible for the damage. In the present case, petitioners failed to prove
that they did exercise the degree of diligence required by law over the goods they transported. Indeed, aside from
their persistent disavowal of liability by conveniently posing an excuse that their extraordinary responsibility
isterminated upon release of the goods to the Panamanian Ports Authority, petitioners failed to adduce sufficient
evidence they exercised extraordinary care to prevent unauthorized withdrawal of the shipments. Nothing in the
New Civil Code, however, suggests, even remotely, that the common carriers’ responsibility over the goods ceased
upon delivery thereof to the custom authorities. To the mind of this Court, the contract of carriage remains in full
force and effect even after the delivery of the goods to the port authorities; the only delivery that releases it from
their obligation to observe extraordinary care is the delivery to the consignee or his agents.

Article 1734:
Calvo v. UCPB General Insurance Co., Inc., G.R. No. 148496, 19 March 2002, (379 SCRA 510)
Facts: Petitioner Virgines Calvo owns the Transorient Container Terminal Services Inc (TCTSI), a customs broker.
He entered into a contract with San Miguel Corporation for the transfer of semi-chemical fluting paper and Kraft
liner board from the Manila Port Area to SMC’s warehouse in Ermita, Manila. Respondent UCPB General
Insurance insured the cargo. Later, the shipment was unloaded to the custody of Manila Port Services, the
arrester operator. The cargo was then delivered to the SMC’s warehouse.

Upon inspection of the cargo by Marine Cargo Surveyors, it was found that 15 reels of the semi-chemical fluting
paper and 3 reels of Kraft paper were damaged. As a result of the damage, SMC collected payment from UCPB
under the insuracnce contract. UCPB, as subrogee of SMC, filed a suit against Calvo. The RTC found Calvo to be
liable to SMC for the damage to the cargo. The CA upheld the RTC ruling.

Issue: W/N Calvo is a common carrier and is thus liable for the damaged shipment

Ruling: The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public."

The above article makes no distinction between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732 also carefully
avoids making any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general community
or population, and one who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such distinctions.
-
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be
its classification, freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard,
marine repair shop, 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 systems, wire or wireless broadcasting stations and other similar public services. x x x"

There is greater reason for holding petitioner to be a common carrier because the transportation of
goods is an integral part of her business. To uphold petitioner's contention would be to deprive those
with whom she contracts the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's business.

It was clear that the shipment was discharged from the vessel to the arrester in good order and condition
as shown in the Equipment Interchange Reports. Had there been any damage, there would have been a report
to that effect by the arrastre operator. And if the container vans were damaged etc, Calvo would have reported it
immediately to the consignee. However, none of this took place. The defendant received the order in good
order and condition and delivered the shipment damaged. We can only conclude that the damage to the
cargo occurred while it was in possession of Calvo. Whenever the thing is lost (or damaged) in the
possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault,
 unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier in case of loss or damage to the goods.

Petitioner accepted the cargo without exception despite the apparent defects in some of the container
vans. Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of
goods in this case or that she is exempt from liability, the presumption of negligence as provided under
Art. 1735 holds.

Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corporation, G.R. No. 182864, 12 January 2015, (745
SCRA 98)
Facts: BPI/MS Insurance Corporation (BPI/MS) and Mitsui Sumitomo Insurance Company Limited (Mitsui) filed
a Complaint before the RTC of Makati City against ESLI and Asian Terminals, Inc. (ATI) to recover actual damages
alleging that various Steel Sheets in good order and condition for transportation to and delivery at the port of
Manila, insured with BPI/MS and Mitsui against all risks, arrived at the port of Manila in an unknown condition,
was turned over to ATI for safekeeping where some of the goods are damaged and was thereby rejected for being
unfit for the intended purpose. Another shipment arrived at the port of Manila partly damaged and in bad order.
The coils sustained further damage during the discharge from vessel to shore until its turnover to ATI’s custody
for safekeeping. The damages on both shipments are being attributed to ESLI as the carrier and ATI as the
arrastre operator in charge of the handling and discharge of the coils and filed a claim against them. RTC Makati
City found both ESLI and ATI jointly and severally liable for the damages sustained by the two shipments.

Issue: WON ESLI is liable

Ruling: Common carriers, from the nature of their business and on public policy considerations, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain
exceptions enumerated under Article 1734[51] of the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the
time the goods are unconditionally placed in the possession of, and received by the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a
right to receive them.

In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and symbol of the
goods covered by it. If it has no notation of any defect or damage in the goods, it is considered as a “clean bill of
lading.” A clean bill of lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein
described.

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments of coils from shipper
Sumitomo Corporation in good condition at the ports of Yokohama and Kashima, Japan. However, upon arrival at
the port of Manila, some coils from the two shipments were partly dented and crumpled as evidenced by the
Turn Over Survey of Bad Order Cargoes[56] signed by ESLI’s representatives, together with ATI’s representative
Garcia.

After re-examination, based on the Requests for Bad Order Survey Nos. 58267 and 58254 covering the first
shipment, four coils were damaged prior to turnover. The second Request for Bad Order Survey No. 58658 also
affirmed the earlier findings that eleven coils on the second shipment were damaged prior to turnover.

Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is
given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be held
responsible. From the foregoing, the fault is attributable to ESLI.

Article 1755

VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO, petitioners, vs. ADELFO B. MACASA, EMELIA
B. MACASA, TIMOTEO B. MACASA, et al, respondents.
G.R. No. 160219. July 21, 2008

FACTS:

Spouses Cornelio and Anacleta Macasa together with their 8-year old grandson, Ritchie Macasa, boarded the MV
Doña Paz at Tacloban bound for Manila. The vessel was owned and operated by respondent Sulpicio Lines, Inc.

Evening of December 20, MV Doña Paz collided with the MT Vector, an oil tanker owned and operated by
petitioners Vector Shipping Corporation and Francisco Soriano. MT Vector at the time was loaded which with
860,000 gallons of gasoline and other petroleum products, as it was chartered by Caltex Philippines Inc.

Only 26 persons survived: 24 passengers of MV Doña Paz and 2 crew members of MT Vector. Cornelio, Anacleta
and Ritchie were among the victims whose bodies have yet to be recovered up to this day.

In October 1991, respondent children of Cornelio and Anacleta and parents of Ritchie (the Macasas) filed a
Complaint for Damages arising out of breach of contract of carriage against Sulpicio Lines before the RTC.

The complaint imputed negligence to Sulpicio Lines because it was remiss in its obligations as a common
carrier. The Macasas prayed for civil indemnity in the amount of P800K (for the death of the 3 relatives, as well as
unearned income of Cornelio and Anacleto who were both working as vocational instructors before their
demise). The Macasas also claimed P100K as actual and compensatory damages for the lost personal belongings
(cash, checks, jewelries and others) P600K in moral damages, P100K by way of exemplary damages, and P100K
as costs and attorney’s fees.

Sulpicio Lines traversed the complaint, alleging, among others that MV Doña Paz was seaworthy in all aspects; it
exercised extraordinary diligence in transporting their passengers and goods; the sinking of MV Doña Paz was
without contributory negligence on its part; and the collision was MT Vector’s fault since it was allowed to sail
with an expired coastwise license, expired certificate of inspection and it was manned by unqualified and
incompetent crew members per findings of the Board of Marine Inquiry (BMI) in a BMI Case which had
exonerated Sulpicio Lines from liability. Thus, Sulpicio Lines filed a Third-Party Complaint against Vector
Shipping, Soriano and Caltex (MT Vector’s charterer).

The RTC decided in favor of the Macasas and ordered Sulpicio Lines to pay the Macasas P200K as civil indemnity
for the death of Cornelio, Anacleta and Ritchie; P100K as actual damages; P500K as moral damages; P100,000.00
as exemplary damages; and P50K as attorney’s fees.

Also, the RTC held third-party defendants Caltex and MT Vector Shipping Corporation and/or Soriano, liable
against Sulpicio Lines, for reimbursement, subrogation and indemnity on all amounts, defendant Sulpicio Lines
was ordered liable against the Macasas.

Aggrieved, Sulpicio Lines, Caltex, Vector Shipping and Soriano appealed to the CA. The CA modified the RTC
decision in that it exonerated Caltex from liability. The P100Kactual damages is deleted while the civil indemnity
was reduced to P150K. The CA ruled that MT Vector was unseaworthy at the time of the mishap (it was the
negligence of MT Vector’s officers and crew which caused the collision, moreover, carrying expired coastwise
license and permits and was not properly manned). Hence this petition by Vector Shipping and Francisco.

ISSUE:
Whether Sulpicio Lines has a right to reimbursement and indemnification from the third-party defendants
Soriano and Vector Shipping?

RULING: YES.

In 1999, the case Caltex (Philippines), Inc. v. Sulpicio Lines, Inc., was decided where the SC held that MT Vector
fits the definition of a common carrier under Article 1732 of the New Civil Code. The ruling in that case was
instructive:

“ Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code.”

The provisions owed their conception to the nature of the business of common carriers. This business is
impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers
in the vigilance over the goods and safety of the passengers, especially because with the modern development of
science and invention, transportation has become more rapid, more complicated and somehow more hazardous.
For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship
and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.

The SC agreed with CA’s ruling that MT Vector was unseaworthy at the time of the mishap.

Petition denied.
NOTES:
The SC agreed with the findings of the CA when it aptly held:

“We are not swayed by the lengthy disquisition of MT Vector and Francisco Soriano urging this Court to absolve
them from liability. All evidence points to the fact that it was MT Vector’s negligent officers and crew which
caused it to ram into MV Doña Paz. More so, MT Vector was found to be carrying expired coastwise license and
permits and was not properly manned. As the records would also disclose, there is a defect in the ignition system
of the vessel, and it was not convincingly shown whether the necessitated repairs were in fact undertaken before
the said ship had set to sea. In short, MT Vector was unseaworthy at the time of the mishap. That the said vessel
was allowed to set sail when it was, to everyone in the group’s knowledge, not fit to do so translates into rashness
and imprudence.

Articles 1756 and 1759

R Transport Corporation v Pante G.R. No. 162104 , 15 September 2009
FACTS:
Petitioner R Transport Corporation, represented by its owner and president, Rizalina Lamzon, is a common
carrier engaged in operating a bus line transporting passengers to Gapan, Nueva Ecija from Cubao, Quezon City
and back. Respondent Eduardo Pante rode petitioner's R.L. Bus Liner bound for Gapan, Nueva Ecija.

While traveling along the Doña Remedios Trinidad Highway in Baliuag, Bulacan, the bus hit a tree and a house
due to the fast and reckless driving of the bus driver, Johnny Merdiquia. Respondent sustained physical injuries
(fracture) as a result of the vehicular accident. Respondent's operation and confinement cost P22,870.00 and
P8,072.60 for his medication. He was informed that he had to undergo a second operation after two years of rest.
He was unemployed for almost a year after his first operation because Goldilocks, where he worked as a
production crew, refused to accept him with his disability as he could not perform his usual job. By way of initial
assistance, petitioner gave respondent's wife, P7,000.00, for the stainless steel instrument used in his fractured
arm. After the first operation, respondent demanded the full payment or reimbursement of his medical and
hospitalization expenses, but petitioner refused payment. Respondent underwent a second operation. Where he
spent P15,170.00 for medical and hospitalization expenses.

Respondent filed a Complaint for damages against petitioner for the injuries he sustained as a result of the
vehicular accident. Petitioner put up the defense that it had always exercised the diligence of a good father of a
family in the selection and supervision of its employees, and that the accident was a force majeure for which it
should not be held liable.

ISSUE: WHETHER OR NOT PETITIONER IS LIABLE TO RESPONDENT FOR DAMAGES.

HELD: YES. Petitioner is liable for damages.

Common carriers, like petitioner bus company, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence for the safety of the passengers transported by them, according to
all the circumstances of each case. They are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.

Article 1756 of the Civil Code states that "in case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed by Articles 1733 and 1755".

Article 1759 of the Civil Code provides that"common carriers are liable for the death or injury to passengers
through the negligence or willful acts of the former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the
common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the
selection and supervision of their employees".

In this case, the testimonial evidence of respondent showed that petitioner, through its bus driver, failed to
observe extraordinary diligence, and was, therefore, negligent in transporting the passengers of the bus. Hence,
even if petitioner was able to prove that it exercised the diligence of a good father of the family in the selection
and supervision of its bus driver, it is still liable to respondent for the physical injuries he sustained due to the
vehicular accident.

Asian Terminals v. Simon Enterprises, Inc. G.R. No. 177116, 27 February 2013, (692 SCRA 87)
Facts:
Contiquincybunge Export Company loaded Soybean Meal in bulk on board MN Seadream at Louisiana, USA for
delivery to the port of Manila. The shipment was discharged to the receiving barges of Asian Terminals
(petitioner and arrester operator). Simon Enterprises received the shipment but claimed that there was a
deficiency with the same. Later, Contiquincybunge Export Company made another shipment of Soybean meal to
Simon Enterprises but the latter again claimed having received a deficiency. Simon Enterprises filed a claim
against Asian Terminals and the courier but the same was denied. Thus, Simon Enterprises instituted an action
for damages against the owner of MN Seadream. The claim was settled with MN Seadream and tonly the claims
against MV Tern, InterAsia Marine Transport INc, and ATI remained.

ATI contended that it exercised diligence in handling the shipment and that the cargo was completely discharged
from MC Tern to the receiving barges owned by ATI. Ultimately, the RTC held MV Tern, Inter-asia marine
transport, and ATI jointly and severally liable for P2M to Simon Enterprises.

The Trial Court ruled that Simon Enterprises established the losses were incurred prior to its receipt of the
goods. Thus, the burden shifted on the carrier to prove that it exercised extraordinary diligence as required by
law to prevent loss/destruction/deterioration. The defendants, however, failed to prove that they exercised the
required diligence.

The CA upheld the RTC ruling. Additionally, the CA declared that petitioner ATI, as the arrastre operator, should
be held jointly and severally liable with the carrier considering that ATI’s stevedores were under the direct
supervision of the unknown owner of MV Tern and the spillages occurred when the cargoes were being unloaded
by ATI’s [Link] moved for reconsideration but was denied. Hence, this petition.

Issue: W/N petitioner Asian Terminals Inc should be solidarily liable with its co-defendants (MV Tern and
Inter-Asia Marine Transport) for the shortage that incurred in the shipment of goods to Simon Enterprises

Ruling: PETITION GRANTED. The CA erred in affirming the decision of the trial court holding petitioner ATI
solidarily liable with its co-defendants for the shortage incurred in the shipment of the goods to respondent

1. SIMON ENTERPRISES FAILED TO PROVE THAT THE SUBJECT SHIPMENT SUFFERED ACTUAL
SHORTAGE, AS THERE WAS NO COMPETENT EVIDENCE TO PROVE THAT IT ACTUALLY WEIGHED
3,300 METRIC TONS AT THE PORT OF ORIGIN.
● Though it is true that common carriers are presumed to have been at fault or to have acted
negligently if the goods transported by them are lost, destroyed, or deteriorated, and that the
common carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption, the plaintiff must still, before the burden is shifted to the defendant, prove that the
subject shipment suffered actual shortage. This can only be done if the weight of the shipment at
the port of origin and its subsequent weight at the port of arrival have been proven by a
preponderance of evidence, and it can be seen that the former weight is considerably greater than
the latter weight, taking into consideration the exceptions provided in Article 1734 of the Civil
Code.
● The weight of the shipment as indicated in the bill of lading is not conclusive as to the actual
weight of the goods. Consequently, the respondent must still prove the actual weight of the
subject shipment at the time it was loaded at the port of origin so that a conclusion may be made
as to whether there was indeed a shortage for which petitioner must be liable. This, the
respondent failed to do.
● The Proforma Invoice militates against respondent’s claim that the subject shipment weighed
3,300 metric tons. Jose Sarmiento, Simon Enterprises’ claims manager, said in his testimony that
“here is a contract between the supplier and our company that embodied [sic] in the letter credit
[sic] that they have the option to ship the cargo plus or minus ten percent of the quantity.” Hence,
the shipper can ship less than 10% of the quantity stated in the invoice and it will sill be a valid
shipment.
● The genuineness of the packing list, berth term grain bill of lading, and pro forma invoice were
not established. Sarmiento only identified them but had no knowledge of the weight of the subject
shipments when they were loaded onto MV Tern at the point of origin. Thus, his testimony
regarding the weight of the shipment must be considered as hearsay because it is knowledge of a
person not presented during trial in the RTC.
● The respondent having failed to present evidence to prove the actual weight of the subject
shipment when it was loaded onto the M/V "Tern," its cause of action must then fail because it
cannot prove the shortage that it was alleging. Indeed, if the claimant cannot definitively establish
the weight of the subject shipment at the point of origin, the fact of shortage or loss cannot be
ascertained. The claimant then has no basis for claiming damages resulting from an alleged
shortage.
● As correctly asserted by petitioner ATI, the shortage, if any, may have been due to the inherent
nature of the subject shipment or its packaging since the subject cargo was shipped in bulk and
 had a moisture content of 12.5%. It should be noted that the shortage being claimed by the
respondent is minimal, and is an indication that it could be due to consolidation or settlement of
the subject shipment, as accurately observed by the petitioner. According to a study, soybean meal
is difficultt to handle because of poor flow ability. It tends to settle or consolidate overtime.
● As indicated in the Proforma Invoice mentioned above, the moisture content of the subject
shipment was 12.5%. Taking into consideration the phenomena of desorption, the change in
temperature surrounding the Soybean Meal from the time it left wintertime Darrow, Louisiana,
U.S.A. and the time it arrived in Manila, and the fact that the voyage of the subject cargo from the
point of loading to the point of unloading was 36 days, the shipment could have definitely lost
weight, corresponding to the amount of moisture it lost during transit.
● The conclusion that the subject shipment lost weight in transit is bolstered by the testimony of
Mr. Fernando Perez. According to him, it was possible for the subject shipment to have lost weight
during the 36-day voyage, as it was wintertime when M/V "Tern" left the United States and the
climate was warmer when it reached the Philippines; hence the moisture level of the Soybean
Meal could have changed.

2. SIMON ENTERPRISES HAS NOT PROVEN ANY NEGLIGENCE ON THE PART OF ATI
● A reading of the survey report of Del Pan Surveyors would not show any untoward incident or
negligence on the part of ATI during the discharging operations. Also, the methods used in
determining whether there was a shortage was not accurate. Moreover, the measurements are
done by the surveyors in prevailing slight to slightly rough sea condition supports the
concluncion that the measurement may bot be accurate.

(TLDR): Considering that respondent was not able to establish conclusively that the subject shipment weighed
3,300 metric tons at the port of loading, and that it cannot therefore be concluded that there was a shortage for
which petitioner should be responsible; bearing in mind that the subject shipment most likely lost weight in
transit due to the inherent nature of Soya Bean Meal; assuming that the shipment lost weight in transit due to
desorption, the shortage of 199.863 metric tons that respondent alleges is a minimal 6.05% of the weight of the
entire shipment, which is within the allowable 10% allowance for loss; and noting that the respondent was not
able to show negligence on the part of the petitioner and that the weighing methods which respondent relied
upon to establish the shortage it alleges is inaccurate, respondent cannot fairly claim damages against petitioner
for the subject shipment's alleged shortage.

Manay, Jr. v. Cebu Air, Inc, G.R. No. 210621, 04 April 2016, (788 SCRA 155)
Facts: Carlos S. Jose (Jose) purchased 20 Cebu Pacific round-trip tickets from Manila to Palawan for himself and
on behalf of his relatives and friends. Jose allegedly specified his preferred date and time to the ticketing agent,
who in turn, after his payment, recapped the first page of the printed ticket which contains the details he
specified. He no longer read the other pages of the flight information. During the processing of their ticket back to
Manila, they were informed by Cebu Pacific personnel that nine of them could not be admitted because their
tickets were for the 10:05 a.m. flight earlier that day. Jose informed the ground personnel that he personally
purchased the tickets and specifically instructed the ticketing agent that all 20 of them should be on the 4:15 p.m.
flight to Manila. Upon checking the tickets, they learned that only the first two pages had the schedule Jose
specified. They were left with no other option but to rebook their tickets which are more expensive than the
promo tickets and since the ground officer do not accept credit card, they had only rebooked 5 of their
companions, leaving the other 4 in Palawan. Jose went to Cebu Pacific's ticketing office in to complain about the
allegedly erroneous booking and the rude treatment that his group encountered from the ground personnel in
Palawan. Jose and his companions were frustrated and annoyed by Cebu Pacific's handling of the incident so they
sent the airline demand letters. Cebu Pacific sent petitioners' counsel an email explaining that "ticketing agents,
like Alou, recap the flight details to the purchaser to avoid erroneous bookings." The recap is given one other time
by the cashier. Cebu Pacific stated that according to its records, Jose was given a full recap and was made aware of
the flight restriction of promo tickets, "which included [the] promo fare being non-refundable. Jose and his
companions were unsatisfied with Cebu Pacific's response so they filed a Complaint for Damages against Cebu
Pacific. The trial court rendered its Decision ordering Cebu Pacific to pay Jose and his companions which held
that as a common carrier, Cebu Pacific should have exercised extraordinary diligence in performing its
contractual obligations. Cebu Pacific's ticketing agent "should have placed markings or underlined the time of the
departure of the nine passengers" who were not in the afternoon flight since it was only logical for Jose to expect
that all of them would be on the same flight. The RTC affirmed the findings of the MTC. The CA reversed both
decisions holding that the extraordinary diligence expected of common carriers only applies to the carriage of
passengers and not to the act of encoding the requested flight schedule. It was incumbent upon the passenger to
exercise ordinary care in reviewing flight details and checking schedules.

Issue: WON respondent Cebu Air, Inc. is liable to petitioners or damages for the issuance of a plane ticket with an
allegedly erroneous flight schedule

Ruling: NO. Common carriers are required to exercise extraordinary diligence in the performance of its
obligations under the contract of carriage. This extraordinary diligence must be observed not only in the
transportation of goods and services but also in the issuance of the contract of carriage, including its ticketing
operations. Extraordinary diligence requires that the common carrier must transport goods and passengers
"safely as far as human care and foresight can provide," and it must exercise the utmost diligence of very cautious
persons with due regard for all the circumstances."

When a common carrier, through its ticketing agent, has not yet issued a ticket to the prospective passenger, the
transaction between them is still that of a seller and a buyer. The obligation of the airline to exercise
extraordinary diligence commences upon the issuance of the contract of carriage. Ticketing, as the act of issuing
the contract of carriage, is necessarily included in the exercise of extraordinary diligence.

The common carrier's obligation to exercise extraordinary diligence in the issuance of the contract of carriage is
fulfilled by requiring a full review of the flight schedules to be given to a prospective passenger before payment.
Based on the information stated on the contract of carriage, all three pages were recapped to petitioner Jose.
Even assuming that the ticketing agent encoded the incorrect flight information, it is incumbent upon the
purchaser of the tickets to at least check if all the information is correct before making the purchase. Once the
ticket is paid for and printed, the purchaser is presumed to have agreed to all its terms and conditions.

Considering that respondent was entitled to deny check-in to passengers whose names do not match their photo
identification, it would have been prudent for petitioner Jose to check if all the names of his companions were
encoded correctly. Since the tickets were for 20 passengers, he was expected to have checked each name on each
page of the tickets in order to see if all the passengers' names were encoded and correctly spelled. Had he done
this, he would have noticed that there was a different flight schedule encoded on the third page of the tickets
since the flight schedule was stated directly above the passengers' names.

Petitioners' flight information was not written in fine print. It was clearly stated on the left portion of the ticket
above the passengers' names. If petitioners had exercised even the slightest bit of prudence, they would have
been able to remedy any erroneous booking. Most of the petitioners were balikbayans. It is reasonable to
presume that they were adequately versed with the procedures of air travel, including familiarizing themselves
with the itinerary before departure. Moreover, the tickets were issued 37 days before their departure from
Manila and 39 days from their departure from Palawan. There was more than enough time to correct any alleged
mistake in the flight schedule.

Petitioners, in failing to exercise the necessary care in the conduct of their affairs, were without a doubt
negligent. Thus, they are not entitled to damages. Before damages may be awarded, "the claimant should
satisfactorily show the existence of the factual basis of damages and its causal connection to defendant's acts."
The cause of petitioners' injury was their own negligence; hence, there is no reason to award moral damages.

On promotional tickets:
This development (increased flights), however, came with its own set of problems. Numerous complaints were
filed before the DTI and the DoTC, alleging "unsatisfactory airline service" as a result of flight overbooking,
delays, and cancellations.

This prompted concerned government agencies to issue DoTC-DTI Joint Administrative Order No. 1, Series of
2012, otherwise known as the Air Passenger Bill of Rights. Section 4. Right to Full, Fair, and Clear Disclosure of the
Service Offered and All the Terms and Conditions of the Contract of Carriage. The Air Passenger Bill of Rights
recognizes that a contract of carriage is a contract of adhesion, and thus, all conditions and restrictions must be
fully explained to the passenger before the purchase of the ticket. Section 4.4 of the Air Passenger Bill of Rights
requires that "all rebooking, refunding, baggage allowance and check-in policies" must be stated in the tickets

The Air Passenger Bill of Rights acknowledges that "while a passenger has the option to buy or not to buy the
service, the decision of the passenger to buy the ticket binds such passenger[.]" Thus, the airline is mandated to
place in writing all the conditions it will impose on the passenger.

The duty of an airline to disclose all the necessary information in the contract of carriage does not remove the
correlative obligation of the passenger to exercise ordinary diligence in the conduct of his or her affairs. The
passenger is still expected to read through the flight information in the contract of carriage before making his or
her purchase. If he or she fails to exercise the ordinary diligence expected of passengers, any resulting damage
should be borne by the passenger.

Articles 1733, 1755 and 1756

Greenstar Express, Inc. v. Universal Robina Corporation, G.R. No. 205090, 17 October 2016 (806 SCRA
125)
FACTS: Petitioner Greenstar Express, Inc. is a domestic corporation engaged in the business of public
transportation, while petitioner Sayson is one of its bus drivers.

Respondents Universal Robina Corporation (URC) and Nissin Universal Robina Corporation (NURC) are domestic
corporations engaged in the food business. Wherein the latter is a subsidiary of URC.

At about 6:50 a.m, on February 25, 2003, which was then a declared national holiday, the petitioner's bus, which
was being driven toward the direction of Manila by Sayson, collided head-on with the URC van, which was then
being driven by NURC's Operations Manager, Bicomong. Bicomong died on the spot while the colliding vehicles
sustained considerable damage.

ISSUE: Whether or not URC, being the employer and owner of the van driven by Bicomong which collided with
Greenstar bus should be held liable for damages premised on negligence.

RULING: No.

AS TO LIABILITY OF EMPLOYER/OWNER OF THE VAN:

In Caravan Travel and Tours International, Inc. v. Abejar, the Court made the following relevant pronouncement:
The resolution of this case must consider two (2) rules:

First, Article 2180's specification that employers shall be liable for the damages caused by their
employees (...) acting within the scope of their assigned tasks.

Second, the operation of the registered-owner rule that registered owners are liable for death or
injuries caused by the operation of their vehicles.

Therefore, in cases where both the registered-owner rule and Article 2180 apply, the plaintiff must first establish
that the employer is the registered owner of the vehicle in question. Once the plaintiff successfully proves
ownership, there arises a disputable presumption that the requirements of Article 2180 have been proven. As a
consequence, the burden of proof shifts to the defendant to show that no liability under Article 2180 has arisen.

In the present case, it has been established that on the day of the collision URC was the registered owner of
the URC van, although it appears that it was designated for use by NURC, as it was officially assigned to the
latter's Logistics Manager, Florante Soro-Soro. It was also shown that Bicomong was the Operations
Manager of NURC and assigned to the First Cavite Industrial Estate; that there was no work as the day
was declared a national holiday. Furthermore, it was shown that Bicomong was on his way home to his
family in Quezon province; that the URC van was not assigned to Bicomong as well, but solely for
SoroSoro' s official use.

Applying the pronouncement in the Caravan Travel and Tours case, it must be said that when by evidence,
the ownership of the van and Bicomong's employment were proved, the presumption of negligence on
respondents' part attached, as the registered owner of the van and as Bicomong's employer.
Hence, the burden of proof then shifted to respondents to show that no liability under Article 2180 arose.
This may be done by proof of any of the following:
1. That they had no employment relationship with Bicomong;
or 2. That Bicomong acted outside the scope of his assigned tasks;
or 3. That they exercised the diligence of a good father of a family in the selection and supervision of
Bicomong.

Respondents succeeded in overcoming the presumption of negligence; having shown that when
the collision took place, Bicomong was not in the performance of his work; and that he was in
possession of a service vehicle that did not belong to his employer NURC, but to URC, and which
was not officially assigned to him, employee, and lastly, that his use of the URC van was
unauthorized - even if he had used the same vehicle in furtherance of a personal undertaking in the past;
that the accident occurred on a holiday and while Bicomong was on his way home to his family in Quezon
 province; and that Bicomong had no official business whatsoever in his hometown in Quezon, or in
Laguna where the collision occurred, his area of operations being limited to the Cavite area.

AS TO LIABILITY OF THE DRIVER (Sayson):

On the other hand, the evidence suggests that the collision could have been avoided if Sayson exercised care
and prudence, given the circumstances and information that he had immediately prior to the accident.

From the trial court's findings and evidence on record, it would appear that immediately prior to the
collision, which took place very early in the morning Sayson saw that the URC van was traveling fast
Quezon-bound on the shoulder of the opposite lane about 250 meters away from him; that at this point,
Sayson was driving the Greenstar bus Manila-bound at 60 kilometers per hour; and despite seeing all of
this, Sayson, instead of slowing down, maintained his speed and tried to swerve the Greenstar bus, and he
also absconded from the scene immediately after the collision.

It was futher found that the collision took place with Bicomong barely encroaching on Sayson's lane. This means
that prior to and at the time of collision, Sayson did not take any defensive maneuver to prevent the accident and
minimize the impending damage to life and property.

The collision was certainly foreseen and avoidable but Sayson took no measures to avoid it. Rather than
exhibit concern for the welfare of his passengers and the driver of the oncoming vehicle, who might have fallen
asleep or suddenly fallen ill at the wheel, Sayson coldly and uncaringly stood his ground, closed his eyes, and left
everything to fate, without due regard for the consequences. Such a suicidal mindset cannot be tolerated, for the
grave danger it poses to the public and passengers availing of petitioners' services. To add insult to injury, Sayson
hastily fled the scene of the collision instead of rendering assistance to the victims - thus exhibiting a selfish,
cold-blooded attitude and utter lack of concern motivated by the self-centered desire to escape liability,
inconvenience, and possible detention by the authorities, rather than secure the well-being of the victims of his
own negligent act.

AS TO THE DOCTRINE OF LAST CLEAR CHANCE:

The doctrine of last clear chance provides that where both parties are negligent but the negligent act of one is
appreciably later in point of time than that of the other, or where it is impossible to determine whose fault or
negligence brought about the occurrence of the incident, the one who had the last clear opportunity to avoid the
impending harm but failed to do so, is chargeable with the consequences arising therefrom. Stated differently, the
rule is that the antecedent negligence of a person does not preclude recovery of damages caused by the
supervening negligence of the latter, who had the last fair chance to prevent the impending harm by the exercise
of due diligence.

E. Liabilities of Common Carriers

Article 1759

LOADSTAR SHIPPING COMPANY, INCORPORATED AND LOADSTAR INTERNATIONAL SHIPPING COMPANY,

INCORPORATED, Petitioners, v. MALAYAN INSURANCE COMPANY, INCORPORATED,Respondent.

G.R. No. 185565, November 26, 2014

FACTS:
Loadstar International Shipping, Inc. (Loadstar Shipping) and Philippine Associated Smelting and Refining
Corporation (PASAR) entered into a Contract of Affreightment for domestic bulk transport of the latter’s copper
concentrates which were loaded in Cargo Hold Nos. 1 and 2 of MV “Bobcat”, a marine vessel owned by Loadstar
International Shipping Co., Inc. (Loadstar International) and operated by Loadstar Shipping under a charter
party agreement. The cargo was insured with Malayan Insurance Company, Inc. (Malayan).
The vessel’s chief officer on routine inspection found a crack on starboard side of the main deck which caused
seawater to enter and wet the cargo. Upon inspection, the Elite Adjusters and Surveyor, Inc. (Elite Surveyor)
confirmed that samples of copper concentrates from Cargo Hold No. 2 were contaminated by seawater.
PASAR sent a formal notice of claim in the amount of [P]37,477,361.31 to Loadstar Shipping. On the basis of the
Elite Surveyor’s recommendation, Malayan paid PASAR the amount of [P]32,351,102.32. PASAR signed a
subrogation receipt in favor of Malayan. To recover the amount paid and in the exercise of its right of
subrogation, Malayan demanded reimbursement from Loadstar Shipping, which refused to comply.
Consequently, on September 19, 2001, Malayan instituted with the RTC a complaint for damages. In its complaint,
Malayan mainly alleged that as a direct and natural consequence of the unseaworthiness of the vessel, PASAR
suffered loss of the cargo. Loadstar Shipping and Loadstar International denied respondent’s allegations and
averred that respondent’s payment to PASAR, on the basis of the latter’s fraudulent claim, does not entitle
respondent automatic right of recovery by virtue of subrogation.

ISSUE:
Whether or not the respondent is entitled to the right of recovery by virtue of subrogation against petitioners, on
the basis of PASAR’s claim.

RULING:
Malayan’s claim against the petitioners is based on subrogation to the rights possessed by PASAR as consignee of
the allegedly damaged goods. The right of subrogation stems from Article 2207 of the New Civil Code. The rights
of a subrogee cannot be superior to the rights possessed by a subrogor. In other words, a subrogee cannot
succeed to a right not possessed by the subrogor. A subrogee in effect steps into the shoes of the insured and can
recover only if the insured likewise could have recovered. Consequently, an insurer indemnifies the insured
based on the loss or injury the latter actually suffered from. If there is no loss or injury, then there is no
obligation on the part of the insurer to indemnify the insured. Should the insurer pay the insured and it turns out
that indemnification is not due, or if due, the amount paid is excessive, the insurer takes the risk of not being able
to seek recompense from the alleged wrongdoer. This is because the supposed subrogor did not possess the
right to be indemnified and therefore, no right to collect is passed on to the subrogee.
As regards the determination of actual damages, “[i]t is axiomatic that actual damages must be proved with
reasonable degree of certainty and a party is entitled only to such compensation for the pecuniary loss that was
duly proven. As Malayan is claiming for actual damages, it bears the burden of proof to substantiate its claim.
Actual damages are not presumed. The claimant must prove the actual amount of loss with a reasonable degree
of certainty premised upon competent proof and on the best evidence obtainable. Specific facts that could afford
a basis for measuring whatever compensatory or actual damages are borne must be pointed out. Actual damages
cannot be anchored on mere surmises, speculations or conjectures.
It is not disputed that the copper concentrates carried by M/V Bobcat from Poro Point, La Union to Isabel, Leyte
were indeed contaminated with seawater. The issue lies on whether such contamination resulted to damage, and
the costs thereof, if any, incurred by the insured PASAR. In this case, Malayan, as the insurer of PASAR, neither
stated nor proved that the goods are rendered useless or unfit for the purpose intended by PASAR due to
contamination with seawater. Hence, there is no basis for the goods’ rejection under Article 365 of the Code of
Commerce. Clearly, it is erroneous for Malayan to reimburse PASAR as though the latter suffered from total loss
of goods in the absence of proof that PASAR sustained such kind of loss.

FERNANDO vs. NORTHWEST AIRLINES, INC.,

G.R. No. 212038

PERALTA, J.:

FACTS:
The spouses Fernandos are frequent flyers of Northwest Airlines, Inc. and are holders of Elite Platinum
World Perks Card, the highest category given to frequent flyers of the carrier. This case arose from 2 separate
incidents: first, when Jesus Fernando arrived at Los Angeles Airport; second, when the Fernandos were to depart
from the LA Airport on January 29, 2002.

The arrival at Los Angeles Airport on December 20, 2001

Jesus Fernando arrived at the LA Airport via Northwest Airlines. When Fernando presented his
documents at the immigration counter, he was asked by the Immigration Officer to have his return ticket verified
and validated since the date reflected thereon is August 2001. He approached a Northwest personnel but the
latter merely glanced at his ticket without checking its status with the computer and peremptorily said that the
ticket has been used and could not be considered as valid. He then explained to the personnel that he was about
to use the said ticket on August 20 or 21, 2001 on his way back to Manila from LA but he could not book any seat
because of some ticket restrictions so he, instead, purchased new business class ticket on the said date. Hence,
the ticket remains unused and perfectly valid. To avoid further arguments, Fernando gave the number of his Elite
Platinum World Perks Card for the latter to access the ticket control record with the airline's computer and for
her to see that the ticket is still valid but the personnel refused to check the validity of the ticket in the computer
but, instead informed the Immigration Officer that the ticket is not valid because it had been used. The
Immigration Officer only granted Fernando a twelve (12)-day stay.

The departure from the Los Angeles Airport on January 29, 2002
The Fernandos took Northwest for their flight back to Manila. In the trip, the Fernandos used electronic
tickets but the tickets were dated January 26, 2002 and August 21, 2001. They reached the boarding gate few
minutes before departure. Northwest personnel, as a standard procedure, scanned the boarding passes and
collected tickets while the passengers went through the gate. When the Fernandos presented their boarding
passes, they were asked for their tickets because there were no tickets stapled on their boarding passes. Upon
verification, no ticket was found at the ticket counter, the staff told them that they could purchase tickets with
their credit cards and deal with the refund later when they are able to locate the tickets and when they reach
Manila.
The Fernandos did not agree with the solution offered. Instead, they went back to the Northwest ticket
counter. The bookings were then verified and paper tickets were printed for them. Unfortunately, when they went
back to the boarding gate, the plane had departed. Northwest offered alternative arrangements for them but they
rejected the offer. A complaint for damages was instituted by the Fernandos against Northwest.

ISSUE: WHETHER OR NOT THERE WAS BREACH OF CONTRACT OF CARRIAGE AND WHETHER IT WAS
DONE IN A WANTON, MALEVOLENT OR RECKLESS MANNER AMOUNTING TO BAD FAITH

RULING: YES.
The Fernandos' cause of action against Northwest stemmed from a breach of contract of carriage. A
contract of carriage is defined as one whereby a certain person or association of persons obligate themselves to
transport persons, things, or goods from one place to another for a fixed price. Under Article 1732 of the Civil
Code, this "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" is
called a common carrier.

Undoubtedly, a contract of carriage existed between Northwest and the Fernandos. They voluntarily and
freely gave their consent to an agreement whose object was the transportation of the Fernandos from LA to
Manila, and whose cause or consideration was the fare paid by the Fernandos to Northwest. When an airline
issues a ticket to a passenger confirmed for a particular flight on a certain date, a contract of carriage arises. The
passenger then has every right to expect that he would fly on that flight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage. In this action, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the
contract and the fact of its non-performance by the carrier.

In the case at bar, having proven the existence of a contract of carriage between Northwest and the
Fernandos, and the fact of non-performance by Northwest of its obligation as a common carrier, it is clear that
Northwest breached its contract of carriage with the Fernandos. Northwest committed a breach of contract "in
failing to provide the spouses with the proper assistance to avoid any inconvenience" and that the actuations of
Northwest in both subject incidents "fall short of the utmost diligence of a very cautious person expected of it".
Considering that the Fernandos are not just ordinary passengers but frequent flyers of Northwest, the latter
should have been more courteous and accommodating to their needs so that the delay and inconveniences they
suffered could have been avoided. Northwest was remiss in its duty to provide the proper and adequate
assistance to them.

Moreover, Northwest personnel in both subject incidents are constitutive of bad faith. Bad faith does not
simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong. It means breach of a known duty through some motive, interest or ill will that
partakes of the nature of fraud. A finding of bad faith entitles the offended party to moral damages.

We have declared that a contract of carriage, in this case, air transport, is primarily intended to serve the
traveling public and thus, imbued with public interest. The law governing common carriers consequently
imposes an exacting standard of conduct. A contract to transport passengers is quite different in kind and degree
from any other contractual relation because of the relation which an air-carrier sustains with the public. Its
business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers.
The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of
the carrier's employees, naturally, could give ground for an action or damages.
Articles 1733, 1734, 1735, 1755, & 1756

JOSE SANICO AND VICENTE CASTRO, Petitioners, v. WERHERLINA P. COLIPANO, Respondent.

G.R. No. 209969, September 27, 2017
CAGUIOA, J.:

FACTS:
⁃ Weherlina Colipano (Colipano) filed a complaint for breach of contract and damages against
petitioners Sanico and Castro, claiming that on Christmas Day 1993, she and her daughter were
passengers of a jeepney operated by Sonic and driven by Castro.
⁃ Colipano claimed that she was made to sit on an empty bear case at the edge of the rear of the
entrance/exit of the jeep with her sleeping child on her lap.
⁃ At an uphill incline on the road, the jeep slid backwards because it did not have power to reach the
top of the road. Clipano pushed her feet against the step board to prevent herself and her child from
being thrown out of the vehicle
⁃ However, the step board was wet so her foot slipped and was crushed between the stepboard and the
coconut tree which the jeepney bumped.
⁃ Colipano was badly injured and eventually amputated.
⁃ Colipano prayed for actual damages, loss of income, moral damages, exemplary damages, and atty’s
fees.

Castro and Sanico’s contentions

⁃ It was Colipano’s fault that her leg was crushed
⁃ The conductor of the jeep instructed the passengers not to panic but Colipano tried to disembark and
her foot got caught in between the step board and the tree
⁃ Sanico: claimed that he paid for the hospital expenses of Sonic
⁃ Colipano freely executed an affidavit of desistance and release of claim

RTC ruling:
⁃ Sanico and Castro breached the contract of carriage between them and Colipano
⁃ Only awarded actual and compensatory damages to Colipano

ISSUE:
Whether the CA erred in finding that Sanico and Castro breached the contract of carriage with Colipano

RULING: THE PETITION IS PARTLY GRANTED

1. Only Sanico breached the contract of carriage since only Sanico was the party to the contract of
carriage with Colipano.
⁃ Since the cause of action is based on a breach of a contract of carriage, the liability of Sanico is direct
as the contract is between him and Colipano. Castro, being merely the driver of Sanico's jeepney,
cannot be made liable as he is not a party to the contract of carriage.
⁃ Castro was not a party to the contract. As such, Colipano had no cause of action against him. The
complaint against Colipano should be dismissed. Though he was driving the jeepney, he was only an
employee of Sanico who is the owner-operator of the jeepney.
⁃ The obligation to carry Colipano safely was with Sanico.

2. SANICO IS LIABLE AS OPERATOR AND OWNER OF A COMMON CARRIER

⁃ Specific to a contract of carriage, the Civil Code requires common carriers to observe extraordinary
diligence in safely transporting their passengers.
⁃ This extraordinary diligence means that common carriers have the obligation to carry passengers as
far as human care and foresight can provide, using the utmost diligence of very cautious persons with
due regard for all the circumstances (Art. 1755)
⁃ In case of death/injury to their passengers, Common carriers are presumed to have been negligent.
This presumption can only overcome by proof of extraordinary diligence exercise (Art. 1756)
⁃ Being an owner-operator of a common carrier, Sanico was required to observe extraordinary
diligence in transporting Colipano. Thus, the presumption of negligence on Sanico’s part arose when
Colipano was injured. Sanico now had the burden to prove that he exercised extraordinary diligence.
However, he failed to do so.
⁃ the evidence indubitably established Sanico's negligence when Castro made Colipano sit on an empty
beer case at the edge of the rear entrance/exit of the jeepney with her sleeping child on her lap,
which put her and her child in greater peril than the other passengers.
⁃ the defense of engine failure, instead of exonerating Sanico, only aggravated his already precarious
position. The engine failure "hinted lack of regular check and maintenance to ensure that the engine
 is at its best, considering that the jeepney regularly passes through a mountainous area." This failure
to ensure that the jeepney can safely transport passengers through its route which required
navigation through a mountainous area is proof of fault on Sanico's part.

Articles 1754, 1759 & 2000 and Section 1, Rule 87 of the Rules of Court

SULPICIO LINES INC v. SESANTE, GR No. 172682, 27 July 2016

DOCTRINES:
● Article 1756 of the Civil Code lays down the presumption of negligence against the common carrier in the
event of death or injury of its passenger, and mere proof of injury relieves the passengers from
establishing the fault or negligence of the carrier or its employees.
● Actual notification as provided in Article 1998 of the Civil Code is not necessary to render the petitioner as
the common carrier liable for the lost personal belongings of passengers. By allowing them to board the
vessel with his belongings without any protest, the petitioner became sufficiently notified of such
belongings. So long as the belongings were brought inside the premises of the vessel, the petitioner was
thereby effectively notified and consequently duty-bound to observe the required diligence in ensuring the
safety of the belongings during the voyage.
FACTS:
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger vessel owned and
operated by the petitioner, sank near Fortune Island in Batangas. Napoleon Sesante was one of the passengers
who survived the sinking. He sued the petitioner for breach of contract and damages, demanding actual and
moral damages of P500,000.00 and P1,000,000.00, respectively.

In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient due to its
having been cleared to sail from the Port of Manila by the proper authorities; that the sinking had been due to
force majeure; that it had not been negligent; and that its officers and crew had also not been negligent.

RTC rendered awarded in favor of the respondent ₱400,000.00 in temperate damages and ₱1,000,000.00
in moral damages.

The RTC observed that the petitioner, being negligent, was liable to Sesante pursuant to Articles 1739 and
1759 of the Civil Code; that the petitioner had not established its due diligence in the selection and supervision of
the vessel crew; that the ship officers had failed to inspect the stowage of cargoes despite being aware of the
storm signal; that the officers and crew of the vessel had not immediately sent a distress signal to the Philippine
Coast Guard; that the ship captain had not called for then "abandon ship" protocol; and that based on the report
of the Board of Marine Inquiry (BMI), the erroneous maneuvering of the vessel by the captain during the extreme
weather condition had been the immediate and proximate cause of the sinking.

After reconsideration, RTC reduced temperate damages to ₱300,000.00. On appeal with the CA,
temperate damages were further reduced to ₱120,000.00. Petitioner then filed this appeal after denial of its
motion for reconsideration.

PETITIONER’S ARGUMENTS: A breach of the contract of carriage under Article 1759 of the Civil Code
should be read in conjunction with Article 2201 of the same code; that although Article 1759 only provides for
a presumption of negligence, it does not envision automatic liability; and in this case, the petitioner was not
guilty of bad faith considering that the sinking of M/V Princess of the Orient had been due to a fortuitous event,
an exempting circumstance under Article 1174 of the Civil Code.

ISSUES:
1. Whether or not the petitioner is liable for damages under Article 1759 of the Civil Code
 2. Whether or not a notification is required before the common carrier becomes liable for lost
belongings that remained in the custody of the passenger as provided under Article 1998 of the Civil
Code

HELD:
1. Yes. The petitioner is liable for damages.

Article 1759 of the Civil Code explicitly makes the common carrier liable in the event of death or
injury to passengers due to the negligence or fault of the common carrier's employees. On the other hand,
Article 1756 of the Civil Code lays down the presumption of negligence against the common carrier in the event
of death or injury of its passenger.

Clearly, the trial court is not required to make an express finding of the common carrier's fault or
negligence. Even the mere proof of injury relieves the passengers from establishing the fault or negligence of the
carrier or its employees. The presumption of negligence applies so long as there is evidence showing that:
(a) a contract exists between the passenger and the common carrier, and (b) the injury or death took
place during the existence of such contract. In such an event, the burden shifts to the common carrier to prove
its observance of extraordinary diligence, and that an unforeseen event or force majeure had caused the injury.

A common carrier may be relieved of any liability arising from a fortuitous event pursuant to Article 1174
of the Civil Code. But while it may free a common carrier from liability, the provision still requires exclusion of
human agency from the cause of injury or loss. The common carrier must still prove that it did not contribute to the
occurrence of the incident due to its own or its employees' negligence.

However, in this case, the findings of the BMI revealed that the immediate and proximate cause of
the sinking of the vessel had been the gross negligence of its captain in maneuvering the vessel.

NEGLIGENT ACTS OF THE CAPTAIN: The BMI found that the "erroneous maneuvers" during the ill-fated voyage
by the captain of the petitioner's vessel had caused the sinking.
After the vessel had cleared Limbones Point while navigating towards the direction of Fortune
Island, the captain already noticed the listing of the vessel by three degrees to the port side of the vessel, but,
according to the BMI, he did not exercise prudence as required by the situation in which his vessel was
suffering the battering on the starboard side by big waves of seven to eight meters high and strong
southwesterly winds of 25 knots.
The BMI pointed out that he should have considerably reduced the speed of the vessel
based on his experience about the vessel - a close-type ship of seven decks, and of a wide and high
superstructure - being vulnerable if exposed to strong winds and high waves.
He ought to have also known that maintaining a high speed under such circumstances would have
shifted the solid and liquid cargo of the vessel to port, worsening the tilted position of the vessel. It was only
after a few minutes thereafter that he finally ordered the speed to go down to 14 knots, and to put ballast
water to the starboard-heeling tank to arrest the continuous listing at portside. By then, his moves
became an exercise in futility because, according to the BMI, the vessel was already listing to her portside
between 15 to 20 degrees, which was almost the maximum angle of the vessel's loll. It then became
inevitable for the vessel to lose her stability.

2. No, actual notification was not necessary to render the petitioner as the common carrier liable
for the lost personal belongings of Sesante

Petitioner contends that its liability for the loss of Sesante' s personal belongings should conform with
Article 1754, in relation to Articles 1998, 2000 to 2003 of the Civil Code.

The rule that the common carrier is always responsible for the passenger's baggage during the voyage
needs to be emphasized. Article 1754 of the Civil Code does not exempt the common carrier from liability
in case of loss, but only highlights the degree of care required of it depending on who has custody of the
belongings. Hence, the law requires the common carrier to observe the same diligence as the hotel keepers in
case the baggage remains with the passenger; otherwise, extraordinary diligence must be exercised.
Furthermore, the liability of the common carrier attaches even if the loss or damage to the belongings resulted
from the acts of the common carrier's employees, the only exception being where such loss or damages is due to
force majeure.

In YHT Realty Corporation v. Court of Appeals, the Court declared the actual delivery of the goods to the
innkeepers or their employees as unnecessary before liability could attach to the hotelkeepers in the event of
loss of personal belongings of their guests considering that the personal effects were inside the hotel or inn
because the hotelkeeper shall remain accountable.

Accordingly, actual notification was not necessary to render the petitioner as the common carrier liable
for the lost personal belongings of Sesante. By allowing him to board the vessel with his belongings without
any protest, the petitioner became sufficiently notified of such belongings. So long as the belongings were
brought inside the premises of the vessel, the petitioner was thereby effectively notified and
consequently duty-bound to observe the required diligence in ensuring the safety of the belongings
during the voyage. Applying Article 2000 of the Civil Code, the petitioner assumed the liability for loss of the
belongings caused by the negligence of its officers or crew. In view of the finding that the negligence of the officers
and crew of the petitioner was the immediate and proximate cause of the sinking of the M/V Princess of the
Orient, its liability for Sesante's lost personal belongings was beyond question.

ALFREDO [Link], CONCHITA S. RAMOS, BENJAMIN B. RAMOS, NELSON T. RAMOS AND ROBINSON T.
RAMOS, Petitioners, v. CHINA SOUTHERN AIRLINES CO. LTD., Respondent.
G.R. No. 213418, September 21, 2016 -

FACTS:
On 7 August 2003, petitioners purchased five China Southern Airlines roundtrip plane tickets from Active
Travel Agency for $985.00.6 It is provided in their itineraries that petitioners will be leaving Manila on 8 August
2003 at 0900H and will be leaving Xiamen on 12 August 2003 at 1920H.7 Nothing eventful happened during
petitioners' flight going to Xiamen as they were able to successfully board the plane which carried them to
Xiamen International Airport. On their way back to the Manila, however, petitioners were prevented from taking
their designated flight despite the fact that earlier that day an agent from Active Tours informed them that their
bookings for China Southern Airlines 1920H flight are [Link] refusal came after petitioners already
checked in all their baggages and were given the corresponding claim stubs and after they had paid the terminal
fees. According to the airlines' agent with whom they spoke at the airport, petitioners were merely chance
passengers but they may be allowed to join the flight if they are willing to pay an additional 500 Renminbi (RMB)
per person. When petitioners refused to defray the additional cost, their baggages were offloaded from the plane
and China Southern Airlines 1920H flight then left Xiamen International Airport without them.9 Because they
have business commitments waiting for them in Manila, petitioners were constrained to rent a car that took them
to ChuanChio Station where they boarded the train to Hongkong. Upon reaching Hong Kong, petitioners
purchased new plane tickets from Philippine Airlines (PAL) that flew them back to Manila.
Upon arrival in Manila, petitioners went to Active Travel to inform them of their unfortunate fate with China
Southern Airlines. In their effort to avoid lawsuit, Active Travel offered to refund the price of the plane tickets but
petitioners refused to accept the offer. Petitioners then went to China Southern Airlines to demand for the
reimbursement of their airfare and travel expenses in the amount of P87,375.00. When the airline refused to
accede to their demand, petitioners initiated an action for damages before the RTC of Manila against China
Southern Airlines and Active Travel.
In their Answer, China Southern Airlines denied liability by alleging that petitioners were not confirmed
passengers of the airlines but were merely chance passengers. According to the airlines, it was specifically
provided in the issued tickets that petitioners are required to re-confirm all their bookings at least 72 hours
before their scheduled time of departures but they failed to do so which resulted in the automatic cancellation of
their bookings.

ISSUE:
Whether or not China Southern Airline breached the contract of carriage when it automatically cancelled the
bookings of the petitioners when the latter failed to re-confirm their bookings at least 72 hours before their
scheduled time of departures.

RULING:
The Court ruled in the affirmative. When an airline issues a ticket to a passenger confirmed on a particular
flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly
on that flight and on that date. If that does not happen, then the carrier opens itself to a suit for breach of contract
of carriage. In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that
the common carrier was at fault or was negligent. All he has to prove is the existence of the contract and the fact
of its non-performance by the carrier, through the latter's failure to carry the passenger to its destination.
It is beyond question in the case at bar that petitioners had an existing contract of air carriage with China
Southern Airlines as evidenced by the airline tickets issued by Active Travel. When they showed up at the airport
and after they went through the routine security check including the checking in of their luggage and the
payment of the corresponding terminal fees, petitioners were not allowed by China Southern Airlines to board on
the plane. The airlines' claim that petitioners do not have confirmed reservations cannot be given credence by
the Court. The petitioners were issued two-way tickets with itineraries indicating the date and time of their
return flight to Manila. These are binding contracts of carriage. China Southern Airlines allowed petitioners to
check in their luggage and issued the necessary claim stubs showing that they were part of the flight. It was only
after petitioners went through all the required check-in procedures that they were informed by the airlines that
they were merely chance passengers. Airlines do not, as a practice, accept pieces of luggage from passengers
without confirmed reservations. Quite tellingly, all the foregoing circumstances lead us to the inevitable
conclusion that petitioners indeed were bumped off from the flight. We cannot from the records of this case
deduce the true reason why the airlines refused to board petitioners back to Manila. What we can be sure of is
the unacceptability of the proffered reason that rightfully gives rise to the claim for damages.
The prologue shapes the body of the petitioners' rights, that is, that they are entitled to damages, actual, moral
and exemplary. There is no doubt that petitioners are entitled to actual or compensatory damages. With respect
to moral damages, Bad faith does not simply connote bad judgment or negligence. It imports dishonest purpose
or some moral obliquity and conscious doing of a wrong. It means breach of a known duty through some motive,
interest or ill will that partakes the nature of fraud. Bad faith is in essence a question of intention.

In Japan Airlines v. Simangan,29 the Court took the occasion to expound on the meaning of bad faith in a
breach of contract of carriage that merits the award of moral damages:
"Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in
suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of
fraud or bad faith, as in this case. Inattention to and lack of care for the interests of its passengers
who are entitled to its utmost consideration, particularly as to their convenience, amount to bad
faith which entitles the passenger to an award of moral damages. What the law considers as bad
faith which may furnish the ground for an award of moral damages would be bad faith in securing
the contract and in the execution thereof, as well as in the enforcement of its terms, or any other
kind of deceit."

Applying the foregoing yardstick in the case at bar, We find that the airline company acted in bad faith in
insolently bumping petitioners off the flight after they have completed all the pre-departure routine. Bad faith is
evident when the ground personnel of the airline company unjustly and unreasonably refused to board
petitioners to the plane which compelled them to rent a car and take the train to the nearest airport where they
bought new sets of plane tickets from another airline that could fly them home. Petitioners have every reason to
expect that they would be transported to their intended destination after they had checked in their luggage and
had gone through all the security checks. Instead, China Southern Airlines offered to allow them to join the flight
if they are willing to pay additional cost; this amount is on top of the purchase price of the plane tickets. The
requirement to pay an additional fare was an insult upon injury. It is an aggravation of the breach of contract.
Undoubtedly, petitioners are entitled to the award of moral damages. The purpose of awarding moral damages is
to enable the injured party to obtain means, diversion or amusement that will serve to alleviate the moral
suffering [that] he has undergone by reason of defendant['s] culpable action.
China Southern Airlines is also liable for exemplary damages as it acted in a wantonly oppressive manner as
succinctly discussed above against the petitioners. Exemplary damages which are awarded by way of example or
correction for the public good, may be recovered in contractual obligations, as in this case, if the defendant acted
in wanton, fraudulent, reckless, oppressive or malevolent manner.

CATHAY PACIFIC AIRWAYS, LTD. vs. SPOUSES ARNULFO and EVELYN FUENTEBELLA

G. R. No. 188283 ; July 20, 2016

SERENO, CJ:

FACTS:

Speaker of the House authorized Congressmen Fuentebella, Cong. Lopez, and Cong. Fugoso to travel on
official business to Sydney, Australia, to confer with their counterparts in the Australian Parliament. They bought
Business Class tickets for Manila to Sydney via Hong Kong and back. However, they changed their minds and
decided to upgrade to First Class. Cong. Lopez testified that upon assurance that their group would be able to
travel on First Class upon cash payment of the fare difference, he sent a member of his staff that same afternoon
to pay.

Respondents queued in front of the First Class counter in the airport. They were issued boarding passes
for Business Class seats bound for Hong Kong from Manila and Economy Class seats bound for Sydney from Hong
Kong. They only discovered that they had not been given First Class seats when they were denied entry into the
First Class lounge. Respondent Fuentebella went back to the check-in counter to demand that they be given First
Class seats or at the very least, access to the First Class Lounge. Petitioner explained that while respondents
expressed their desire to travel First Class, they could not be accommodated because they had failed to confirm
and the sections were full on the date and time of their scheduled and booked flights.

Respondents alleged that during transit through the Hong Kong airport, they were treated with far less
respect and courtesy by the ground staff their complaints were brushed aside and they were told to just fall in
line in Economy Class.

ISSUE: WHETHER OR NOT THERE WAS A BREACH IN THE CONTRACT OF CARRIAGE

RULING: YES. Moreover, there is a basis for the award of moral and exemplary damages.

The SC affirmed the decision of the RTC and the CA. The ticket as a contract of adhesion whose terms
should be construed against petitioner. It found that respondents had entered into the contract because of the
assurance that they would be given First Class seats. With regard to the question of whether respondents had
confirmed their booking, the CA considered petitioner's acceptance of the fare difference and the issuance of the
First Class tickets as proof that the request for upgrade had been approved. It noted that the tickets bore the
annotation that reconfirmation of flights is no longer necessary, further strengthening the fact of confirmation.
There were no conditions stated on the face of the tickets; hence, respondents could not be expected to know
that the tickets they were holding were open-dated and were subject to the availability of seats. It applied the
rule on contracts of adhesion, and construed the terms against petitioner. Therefore, there was a breach of
contract when petitioner assigned Business Class and Economy Class seats to First Class ticket holders.

Moral and exemplary damages are not ordinarily awarded in breach of contract cases. Damages may be
awarded only when the breach is wanton and deliberately injurious, or the one responsible had acted
fraudulently or with malice or bad faith. Bad faith is a question of fact that must be proven by clear and
convincing evidence.

This Court found no reason to disturb the finding of the trial court that the inattentiveness and rudeness
of the ground staff were gross enough to amount to bad faith. The bad faith in the present case is even more
pronounced because petitioner's ground staff physically manhandled the passengers by shoving them to the line,
after another staff had insulted them by turning her back on them. However, the mere fact that respondent was a
Congressman should not result in an automatic increase in the moral and exemplary damages.

Articles 2224 & 2232

SULPICIO LINES, INC. (NOW KNOWN AS PHILIPPINE SPAN ASIA CARRIER CORPORATION), Petitioner, v.
MAJOR VICTORIO KARAAN, SPOUSES NAPOLEON LABRAGUE AND HERMINIA LABRAGUE, AND ELY LIVA,
Respondents.

G.R. No. 208590, October 03, 2018

Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages,
may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the
nature of the case, be provided with certainty.

Article 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.

FACTS:
 ⁃ Respondents Major Victorio Karaan (Karaan), Napoleon Labrague (Napoleon), and Herminia
Labrague (Herminia) and Ely Liva (Liva) were passengers of MV Princess of the Orient owned by
Petitioner Sulpicio Lines (now Philippine Span Asia Carrier Corporation)
⁃ The vessel sank. The respondents thus lodged a complaint on the ground of breach of contract of
carriage against Sulpicio.
⁃ The respondents, as survivors/passengers, prayed for the award of damages (actual, moral,
exemplary, nominal, and atty’s fees)

Testimonies of Respondents:
⁃ Major Victorio Karaan - he boarded the ship bound for Cebu. While he was in the cabin, he heard a
loud sound like something heaving fell somewhere below his cabin. The ship then started to tilt. He
went out of the room, saw the passengers panicking and no crew available to assist. The ship sank but
he was able to hold on to a life raft until he was rescued the afternoon of the following day. He lost
valuables including a watch and his brother’s land title. He also incurred medical expenses.
⁃ Napoleon - heard a loud sound coming from below the deck. He woke up his wife (Herminia), their
daughter, and their helper (Liva) and evacuated, holding on to the gangplank near the stairway as
water was rushing into the ship. No crew was seen during those times. The family jumped into the
water as the ship was about to sink. Napoleon, who was holding his daughter (an only child), got
separated from her when a big wave hit them. Napoleon, Herminia, and Liva were rescued eventually.
The body of the spouses’ daughter was recovered in Tanza, Cavite.
⁃ Herminia and Liva - affirmed Napoleon’s recount of events

Testimonies from the petitioner Sulpicio:

⁃ Nelson Sato - Employed by Sulpicio since 1995 and assigned as second mate of MV Princess of the
Orient. He was in charge of navigation and preparation before and after the trip, ensuring the
condition of the equipment to be used during the voyage. He maintained that the equipment of the
vessel was functional but he was unable to examine the passenger’s manifest or the list of passengers
who boarded the vessel. He recounted that it was raining and windy but the ship was cleared for
departure. When the ship sideswiped the pier, he said that the ship was not damaged as the fender
was made of rubber. He did not notice the ship being battered by waves, When he woke up he went to
the navigation bridge, gave life vests to passengers and led them to the exit. He floated away from the
ship when the water rushed into the vessel and he was rescued the following day. He immediately
filed a marine protest after being discharged from the hospital. Lastly, Sato attested the there were 40
stewards in charge of passenger safety. He was told by fellow surviving crew members that there was
an announcement to abandonn ship but he failed to hear it due to strong winds. He ensured that the
captain did his best to recover the vessel.
⁃ Atty Geraldine Jorda - she was presented to negate the derogatory records on Captain Mahilum who
led the vessel. Her records show that the captain was never subjected to disciplinary actions and was
one of their best masters and was assigned to handle the company’s best vessel
⁃ Engineer Perrty Chan - in charge of generator maintenance. The whole time, he was at the engine
room monitoring the pressure and temperature together when he received orders to reduce the
revolution to reduce the vessel’s speed. He already knew that the ship was listing. He saw the
panicking passengers and tried to calm them down. He jumped into the water immediately before the
vessel sank and was rescued hours later
⁃ Edgar Samson - radio operator in charge of receiving the weather report/updates/monitoritng of
international frequencies and the vessel’s power supply. He received a report about a tropical
depression which he submitted to the captain. The captain made plots based on this report. By the
time the vessel left, the weather condition was still moderate. He was ordered to make a distract call
but could hardly hear a response due to weak signal and was thus advised to go down to contact the
other stations within the vicinity. He heard the alarm to abandon ship
⁃ Captain Anuto Alfahardo - Philippine coastguard and was in charge of clearing the vessels, ensuring
that they were processed and seaworthy. Per his inspection, the Plimsoll mark of the vessel was still
visible, meaning the vessel was not overloaded. The vessel also was in good trim, meaning that it was
not leaning and was in an upright position. The cargos were also secured, the life saving equipment
were working. The crew was also in the condition to navigate the ship. The clearance was issued
despite the typhoon.
⁃ Salvacion Baron - Vice President for passenger service of Sulpicio. Presented to prove that SLI
provided financial assistance to the victims

ISSUES:
- May temperate and exemplary damages be awarded to the respondents? (YES)

RULING:
2. THE AWARD OF TEMPERATE DAMAGES WAS PROPER
⁃ Our reading of the CA Decision reveals that the CA imposed temperate damages because it deemed
 the amounts put forth by the respondents' insufficiently proven. Verily, the CA stated, "[t]he
respondents, except for their own testimonies, were not able to proffer any other evidence of their
loss. Sans the receipts and the documents supporting their claims of actual damages, the same cannot
be awarded
⁃ Undoubtedly, the law sanctions the award of temperate damages in case of insufficiency of evidence
of actual loss suffered. Article 2224 of the Civil Code states:
- Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has
been suffered but its amount cannot, from the nature of the case, be provided with certainty.
⁃ In this case, we find that no egregious error on the part of the CA in imposing temperate damages.
The records of the case, which remain uncontroverted, undoubtedly establishes that respondents
suffered loss during the unfortunate sinking of M/V Princess of the Orient. However, no independent
proof, other than respondents' bare claims, were presented to provide a numerical value to their loss.
Absent a contrary proof which would justify decreasing or otherwise modifying the amount pegged
by the CA, this Court is constrained to affirm the amounts it imposed as temperate damages.

2. THE AWARD OF EXEMPLARY DAMAGES IS PROPER

⁃ We see no error in the award of exemplary damages considering the lower courts' consistent finding
that respondents are entitled to moral and temperate damages for the sinking of M/V Princess of the
Orient.
⁃ Moreover, the CA is correct when it stated that since petitioner failed to prove that it had exercised
the degree of extraordinary diligence required of common carriers, it should be presumed to have
acted in a reckless manner.
⁃ Article. 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.

(background as to the maneuvers done which led to the sinking of the ship in case ma’am asks for a
brief explanation eme)

⁃ The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the captain of the
petitioner's vessel had caused the sinking.
⁃ After the vessel had cleared Limbones Point while navigating towards the direction of Fortune Island, the
captain already noticed the listing of the vessel by three degrees to the portside of the vessel, but,
according to the BMI, he did not exercise prudence as required by the situation in which his vessel was
suffering the battering on the starboard side by big waves of seven to eight meters high and strong
southwesterly winds of 25 knots.
⁃ The BMI pointed out that he should have considerably reduced the speed of the vessel based on his
experience about the vessel — a close-type ship of seven decks, and of a wide and high superstructure —
being vulnerable if exposed to strong winds and high waves. He ought to have also known that
maintaining a high speed under such circumstances would have shifted the solid and liquid cargo of the
vessel to port, worsening the tilted position of the vessel.
⁃ The BMI concluded that the captain had executed several starboard maneuvers despite the critical
situation of the vessel, and that the maneuvers had greatly added to the tilting of the vessel.

⁃ Clearly, the petitioner and its agents acted recklessly and wantonly. It also bears to emphasize that the
records of the case support the conclusion that petitioner was extremely remiss before and during
the time of the vessel's sinking. Petitioner did not endeavor to dispute the CA's finding that the
vessel's Captain erroneously navigated the ship, and failed to reduce its speed considering the ship's
size and the weather conditions. The crew members were also negligent when they did not make any
stability calculations, and prepare a detailed report of the vessel's cargo stowage plan. The radio
officer failed to send an SOS message in the internationally accepted communication network but
instead used the Single Side Band informing the company about the emergency situation.
⁃ Verily, the above-mentioned conduct, from the Captain and Crew of a common carriers should be
corrected. They carry not only cargo, but are in charge of the lives of its passengers. In this case, their
recklessness cost the loss of 150 lives. Considering the foregoing, this Court finds that the CA properly
imposed exemplary damages.

ADDITIONAL NOTES:
⁃ Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is
socially deleterious in its consequence by creating negative incentives or deterrents against such
behavior.
⁃ Wanton and reckless are virtually synonymous in meaning as respects liability for conduct towards
others. Wanton means characterized by extreme recklessness and utter disregard for the rights of
others; or marked by or manifesting arrogant recklessness of justice or of rights or feelings of others.
Conduct is reckless when it is an extreme departure from ordinary care, in a situation in which a high
degree of danger is apparent. It must be more than any mere mistake resulting from inexperience,
 excitement, or confusion, and more than mere thoughtlessness or inadvertence, or simple inattention.

ASIAN TERMINALS INC, (ATI) v. PADOSON STAINLESS STEEL CORPORATION, GR No. 211876, 25 June 2018

FACTS:
Respondent hired petitioner ATI to provide arrastre, wharfage, and storage services at the South Harbor,
Port of Manila. ATI rendered storage services in relation to a shipment, consisting of nine stainless steel coils and
72 hot-rolled steel coils which were imported on October 5, 2001 and October 30, 2001, respectively in favor of
Padoson, as the consignee. The shipments were stored within ATI's premises until they were discharged on July
29, 2006.
On September 7, 2001, the shipments were subjected to Hold-Order issued by the (BOC) Bureau of
Customs. For the storage services it rendered, ATI made several demands from Padoson for the payment of
arrastre, wharfage, and storage services. However, due to Pasodon’s failure, ATI filed a case against it.
Pasodon averred that during the time when the shipments were in ATI's custody and possession, they
suffered material and substantial deterioration and ATI failed to exercise the extraordinary diligence required of an
arrastre operator, and thus it should be held responsible for the damages.
ATI countered that it exercises due diligence in the storage of the shipments and that the same was
withdrawn from its custody in the same condition and quantity as when they were unloaded from the vessel.
The RTC held that although the computation of storage fees to be paid by Padoson as prayed for in ATI's
complaint were "clear and unmistakable" and which Padoson never denied, the liability to pay the same should
be borne by the BOC. Relying on the case of Subic Bay Metropolitan Authority v. Rodriguez, et al. (SBMA), the RTC
reasoned out that by virtue of the Hold-Order over Padoson's shipments, the BOC has acquired constructive
possession over the same. Consequently, the BOC should be the one liable to ATI's money claims. The RTC,
however, pointed out that since ATI did not implead the BOC in its complaint, the BOC cannot be held to answer
for the payment of the storage fees. This ruling was affirmed by the CA.
ISSUE: Whether or not Padoson is liable to pay the amount prayed for by ATI
HELD: Yes.
The computation of the amount ATI sought from Padoson for the latter's payment of storage fees has
already been found by the RTC, which in turn was concurred in by the CA, as "clear and unmistakable." In fact, as
correctly observed by the RTC, even Padoson, has never denied its obligation with ATI.
Corollary, as to the interest rate applicable, the court reiterated the explanation in Nacar v. Gallery Frames, et al.,
that:
An award of interest in the concept of actual and compensatory damages, the rate of interest, as
well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court at the
rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except
when or until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.
It should be noted, however, that the new rate of six percent (6%) per annum could only be
applied prospectively and not retroactively. Consequently, the former rate of twelve percent (12%) per annum
legal interest shall apply only until June 30, 2013. Come July 1, 2013, the new rate of six percent (6%) per annum
shall be the prevailing rate of interest when applicable.
Nonetheless, the need to determine whether the obligation involved in this case is a loan and forbearance
of money exists.
"The term 'forbearance,' should refer to arrangements other than loan agreements, where a person
acquiesces to the temporary use of his money, goods or credits pending happening of certain events or
fulfillment of certain conditions." Consequently, if those conditions are breached, said person is entitled not
only to the return of the principal amount paid, but also to compensation for the use of his money which would be
the same rate of legal interest applicable to a loan since the use or deprivation of funds therein is similar to a loan.
This case, however, does not involve an acquiescence to the temporary use of a party's money but
merely a failure to pay the storage fees arising from a valid contract of service entered into between ATI
and Padoson.
Considering that there is an absence of any stipulation as to interest in the agreement between the
parties herein, the matter of interest award arising from the dispute, in this case, would actually fall under the
category of an "obligation, not constituting a loan or forbearance of money" as aforecited. Consequently, this
necessitates the imposition of interest at the rate of 6%. The six percent (6%) interest rate shall further be
imposed from the finality of the judgment herein until satisfaction thereof, in light of our recent ruling in Nacar.
Thus, guided by the aforementioned disquisition, the rate of interest on the amount of P8,914,535.28,
representing the unpaid storage fees shall be twelve percent (12%) from August 4, 2006, the date when ATI
made a judicial demand by filing its complaint against Padoson, to June 30, 2013. From July 1, 2013, the effective
date of BSP-MB Circular No. 799, until full satisfaction of the monetary award, the rate of interest shall be six
percent (6%).
ATI is not entitled to exemplary damages and attorney's fees: Pursuant to Articles 222969 and 223470 of the
Civil Code, exemplary damages may be awarded only in addition to moral, temperate, liquidated, or
compensatory damages. Since ATI is not entitled to either moral, temperate, liquidated, or compensatory
damages, then their claim for exemplary damages is bereft of merit. It has been held that as a requisite for the
award of exemplary damages, the act must be accompanied by bad faith or done in wanton, fraudulent, or
malevolent manner — circumstances which are absent in this case.

F. Vigilance over Goods

1. Exempting Circumstance

MAURO GANZON, petitioner, vs. COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
G.R. No. L-48757 May 30, 1988

FACTS:
On November 28, 1956, Gelacio Tumambing engaged in the services of Mauro Ganzon to cargo 305 tons
of scrap iron from Mariveles, Bataan to the port of Manila. Mauro B. Ganzon sent his lighter LCT “Batman” to
Mariveles where it docked in three feet of water. On December 1, 1956, Gelacio Tumambing delivered the scrap
iron to Defendant Filomeno Niza, captain of the lighter, for loading. When about half of the scrap iron was already
loaded, Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded Php. 5, 000 from Gelacio Tumambing.
On December 4, 1956, acting Mayor Basilio Rub, accompanied by three policemen, ordered Captain Fliomeno
Niza and his crew to dump the scrap iron. The rest of the scrap iron was brought to NASSCO. Subsequently, acting
Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron.

ISSUE:
1. Whether or not Mauro Ganzon is exempt from any liability due to the fact that the loss of the
scrap iron was due to the intervention of the Municipal officials of Mariveles, Bataan.
2. Whether or not Ganzon should be held liable under the contract of carriage
RULING:

1. No, Mauro Ganzon is not exempt from any liability due to the fact that the loss of the scrap iron was because of
the intervention of the Municipal officials of Mariveles, Bataan. Petitioner Mauro Ganzon failed to establish that
the acting Mayor Basilio Rub had the power to the disputed order or that it was promulgated under legal process
of authority. The order of the acting Mayor did not establish a legal authority for Mauro Ganzon and his
representatives. No evidence was found for the authority or power of the acting Mayor to issue such an order,
neither has it been shown that the scrap iron belonged to the Municipality of Mariveles, Bataan. Also, Mauro
Ganzon failed to show that the loss of the scraps was due to any of the following causes enumerated in Article
1734 of the Civil Code. In conclusion, Mauro Ganzon is presumed to have been at fault or to have acted
negligently.

2. Yes. Ganzon, through his employees, actually received the scraps and is freely admitted. Pursuant to Art. 1736,
such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the
consignee, or to the person who has a right to receive them. The fact that part of the shipment had not been
loaded on board the lighter did not impair the said contract of transportation as the goods remained in the
custody and control of the carrier, albeit still unloaded.

Failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of
the Civil Code, namely:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

Hence, the petitioner is presumed to have been at fault or to have acted negligently. By reason of this
presumption, the court is not even required to make an express finding of fault or negligence before it could hold
the petitioner answerable for the breach of the contract of carriage. exempted from any liability had he been able
to prove that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all
the circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it was, there
was hardly any attempt on the part of the petitioner to prove that he exercised such extraordinary diligence.
We cannot sustain the theory of caso fortuito - "order or act of competent public authority"(Art. 1174 of the
Civil Code) No authority or power of the acting mayor to issue such an order was given in evidence. Neither has it
been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. Ganzon was not duty bound to
obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such
force or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty in the
fullfilment of the obligation is not considered force majeure.

CENTRAL SHIPPING COMPANY, INC. v INSURANCE COMPANY OF NORTH AMERICA

G.R. No. 150751; September 20, 2004
PANGANIBAN, J.:

DOCTRINE: A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or
deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one of the causes
enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to prevent or minimize the
loss. In the present case, the weather condition encountered by petitioner’s vessel was not a "storm" or a natural
disaster comprehended in the law. Given the known weather condition prevailing during the voyage, the manner of
stowage employed by the carrier was insufficient to secure the cargo from the rolling action of the sea. The carrier
took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for
the loss.

FACTS:
Central Shipping Company received on board its vessel, the M/V ‘Central Bohol’, 376 pieces of Philippine
Apitong Round Logs and undertook to transport said shipment to Manila from Palawan for delivery to Alaska
Lumber Co., Inc. The cargo was insured for ₱3,000,000.00 against total loss. However, while enroute to Manila,
the vessel listed about 10 degrees starboardside, due to the shifting of logs in the hold. However, the vessel
completely sank. Due to the sinking of the vessel, the cargo was totally lost.
The respondent alleged that the total loss of the shipment was caused by the fault and negligence of the
petitioner and its captain and as direct consequence thereof the consignee suffered damage in the sum of
₱3,000,000.00. The petitioner, while admitting the sinking of the vessel, interposed the defense that the vessel
was fully manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and
secured; that the vessel’s master exercised due diligence to prevent or minimize the loss before, during and after
the occurrence of the storm. It also raised as its main defense that the proximate and only cause of the sinking of
its vessel and the loss of its cargo was a natural disaster, a tropical storm which they could not have foreseen.
The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or any
other caso fortuito. It noted that monsoons, which were common occurrences during the months of July to
December, could have been foreseen and provided for by an ocean-going vessel. CA affirmed.

ISSUE: WHETHER OR NOT THE CARRIER IS LIABLE FOR THE LOSS OF THE CARGO

RULING: YES.

Common carriers are bound to observe extraordinary diligence over the goods they transport, according
to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods,
common carriers are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "flood, storm, earthquake, lightning or other natural disaster or calamity.” In
all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence.

In the present case, petitioner has not given the Court sufficient cogent reasons to disturb the conclusion
of the CA that the weather encountered by the vessel was not a "storm" as contemplated by Article 1734(1).
Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V Central
Bohol encountered a southwestern monsoon in the course of its voyage. The pieces of evidence with respect to
the weather conditions encountered by the vessel showed that there was a southwestern monsoon at the time.
Normally expected on sea voyages, however, were such monsoons, during which strong winds were not unusual.

Moreover, even if the weather encountered by the ship is to be deemed a natural disaster under Article
1739 of the Civil Code, petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. In other words,
the damaging effects blamed on the event or phenomenon must not have been caused, contributed to, or
worsened by the presence of human participation. The defense of fortuitous event or natural disaster cannot be
successfully made when the injury could have been avoided by human precaution.

We also find no reason to disturb the CA’s finding that the loss of the vessel was caused not only by the
southwestern monsoon, but also by the shifting of the logs in the hold. Such shifting could been due only to
improper stowage. The manner of stowage in the lower hold was not sufficient to secure the logs in the event the
ship should roll in heavy weather. They were of different lengths ranging from 3.7 to 12.7 meters. Being prone to
shifting, the round logs should not have been stored with nothing to hold them securely in place. Each pile of logs
should have been lashed together by cable wire, and the wire fastened to the side of the hold. Considering the
strong force of the wind and the roll of the waves, the loose arrangement of the logs did not rule out the
possibility of their shifting. By force of gravity, those on top of the pile would naturally roll towards the bottom of
the ship.

Lastly, the evidence indicated that strong southwest monsoons were common occurrences during the
month of July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy rains,
strong winds and rough seas. They should then have taken extra precaution in stowing the logs in the hold, in
consonance with their duty of observing extraordinary diligence in safeguarding the goods. But the carrier took a
calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape responsibility for the
loss.