I. PRELIMINARY CONSIDERATIONSA. Governing Laws1. New Civil Code Primary law2. Warsaw Convention for international transportation by air 3. Code of Commerce governs suppletorily; it governs maritime transaction4. Carriage of Goods by Sea Act for transportation by sea; governs suppletorily5. Salvage Law6. Public Service Act7. Article XII Sec 11 on operation of public convenience of the 1987 Philippine Constitution

Domestic/inter-island/coastwise Applicable to Land, Water, and Air transportation1. Civil Code - primary2. Code of Commerce (Arts. 349, 379, 573-734, 580, 806-845) suppletoryInternational/foreign/overseas (Foreign country to Philippines) Applicable to Water/maritime and Air transportation The law of the country of destination generally applies.1. Civil Code primary2. Code of Commerce suppletory3. Others - suppletorya. Water/maritime: Carriage of Goods by Sea Act (COGSA)b. Air: Warsaw Convention

B. Concept of Public Utility & public serviceSec. 13 (b) of the Public Service Act provides that: The term 'public service' includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever may be its classification, freight or carrier service 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 railway, 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 system, wire or wireless broadcasting stations and other similar public services: Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is offered for hire or compensation to a third party or third engaged in agriculture, not itself or themselves a public service, for operation by the latter for a limited time and for a specific purpose directly connected with the cultivation of his or their farm, the transportation, processing, and marketing of agricultural products of such third party or third parties shall not be considered as operating a public service for the purposes of this Act.Public utilities are privately owned and operated business whose services are essential to the general public.

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JG Summit Holdings vs Court of Appeals GR No. 124293 September 24, 2003

FACTS: National Investment and Development Corporation (NIDC) and Kawasaki Heavy Industries entered into a Joint Venture Agreement in a shipyard business named PHILSECO, with a shareholding of 60-40 respectively. NIDCs interest was later transferred to the National Government.

Pursuant to President Aquinos Proclamation No.5, which established the Committee on Privatization (COP) and Asset Privatization Trust (APT), and allowed for the disposition of the governments non-performing assets, the latter allowed Kawasaki Heavy Industries to choose a company to which it has stockholdings, to top the winning bid of JG Summit Holdings over PHILSECO. JG Summit protested alleging that such act would effectively increase Kawasakis interest in PHILSECOa shipyard is a public utility--and thus violative of the Constitution.

ISSUE: Whether or not respondents act is valid.

HELD: No. A shipyard such as PHILSECO being a public utility as provided by law, the following provision of the Article XII of the Constitution applies:Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association shall be citizens of the Philippines.

Notably, paragraph 1.4 of the JVA accorded the parties the right of first refusal under the same terms. This phrase implies that when either party exercises the right of first refusal under paragraph 1.4, they can only do so to the extent allowed them by paragraphs 1.2 and 1.3 of the JVA or under the proportion of 60%-40% of the shares of stock. Thus, should the NIDC opt to sell its shares of stock to a third party, Kawasaki could only exercise its right of first refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of stock of SNS or PHILSECO. The NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a government corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent its purchase of stocks even beyond 60% of the capitalization as the Constitution clearly limits only foreign capitalization.

National Development Company vs Court of Appeals164 SCRA 593

Facts: In accordance with a memorandum entered into between defendants National Development Company (NDC) and Maritime Company of the Philippines (MCP) on September 13, 1962, defendant NDC as the first preferred mortgagee of three ocean-going vessels including one the name Doa Nati appointed defendant MCP as its agent to manage and operate said vessels in its behalf.The E. Phillipp Corporation of the New York loaded on board the vessel Doa Nati at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to Manila Banking Corporation, Manila and the Peoples Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation.The vessel figured in a collision at Ise Bay, Japan with a japanese vessel as a result of which 550 bales of aforesaid cargo were lost and/or destroyed The damage and lost cargo was worth P344,977.86 which amount, the plaintiff Development Insurance and Surety Corporation as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed.The insurer filed before the CFI of Manila an action for the recovery of said amount from NDC and MCP.

Issue: Whether or not the law of country or port of destination shall apply.

Held:In Easter Shipping Lines, Inc., v. IAC, 150 SCRA 469 (1987), we held under similar circumstances that the law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. Thus, the rule was specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by especial laws (Article 1766, Civil Code). Hence, the carriage of Goods by Sea Act, a special law, is merely suppletory to the provisions of the Civil Code. The goods in question were being transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or damaged due to a collision which was found to have been caused by negligence or fault of both captains of the colliding vessels.Under the above ruling, it is evident that laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in respondent courts application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels. Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault shall indemnify the losses and damages incurred after an expert appraisal. But more in point to the instant case in is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.There is, therefore, no room for NDCs interpretation that the Code of Commerce should apply only to domestic trade and not to foreign trade.MCP next contends that it cannot be liable solidarily with NDC because it is merely the manager and operator of the vessel Doa Nati, nor a ship agent. As the general managing agent, according, to MCP, it can only be liable if it acted in excess of its authority. The Memorandum Agreement of September 13, 1962 shows that NDC appointed MCP as agent, a term broad enough to include the concept of ship agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC. Consequently, under the circumstances, MCP cannot escape liability. It is well-settled that both the owner and agent of the offending vessel are liable for the damage done where both are impleaded.

Tatad Vs Garcia Jr. 243 SCRA 436

Facts:EDSA LRT Consortium, a foreign corporation, was awarded with the construction of Light Rail Transit III (LRT III) as the only bidder who has qualified with the requirements provided by the PBAC. The said foreign corporation will construct the LRT III in a Built-Lease-Transfer agreement that such public utility will be leased by the government through the Department of Transportation and Communication (DOTC) and then it would be subsequently sold by the corporation to the government. An objection was raised by the petitioner stating that the awarding of the bid to the said corporation is against the Constitution. It was provided in the Constitution that only Filipinos are entitled to operate a public utility such as the LRT III.

Issue: Whether or not the awarding of the bid to EDSA LRT Consortium is against the Constitution.

Held:The Court held that there is a distinction in the operation of a public utility and ownership in the facilities and equipment to serve the public. The EDSA LRT Consortium fall under the latter because the said corporation will not operate the public utility. The said corporation will only own the facilities and equipment such as the train carts, the railings and the booths. In addition, such ownership will then be subsequently transferred to the government under Built-Lease-Transfer agreement. With that said, the operation of the public utility will fall to the Filipinos through its government. Therefore, the awarding of the bid to EDSA LRT Consortium is not against the provisions of the Constitution.

C. Constitutional Limitations on Operation of public Utilities (Art XII 1987 Constitution)

Sec. 11 of Article XII of the 1987 Constitution states that: 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 in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

The corporation must be a domestic corporation and that 60% of the capital must be owned by Filipino citizens.

Sec. 18 of Article XII of the 1987 Constitution provides that: The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government.

Q: What are the bases/reasons for regulation of public utilities?A: Basis: Police PowerJustification: Common goodD. Concept of Franchise: Certificate of Public Convenience and Necessity vs Certificate of Public Convenience

Franchise is a grant or privilege from the sovereign power. Certificate of Public Convenience An authorization issued by the appropriate government agency for the operation of public services for which no franchise, either municipal or legislative, is required by law, e.g., common carriers. Certificate of Public Convenience and Necessity An authorization issued by the appropriate government agency for the operation of public service for which a prior franchise is required by law; e.g. telephone and other services. Q: Is a legislative franchise necessary before a public utility can be allowed to secure a certificate of public convenience?A: General Rule: NO.Exception: If a pertinent law requires such legislative franchise.Factors:1. Public interest2. Public convenience3. Public necessity

Q: What conditions must concur in the grant of certificate of public convenience and necessity?

A: REQUREMENTS FOR GRANTING CPC OR CPCN1. Applicant must be a citizen of the Philippines or a corporation or entity 60% of the capital of which is owned by such citizens;2. Applicant must prove public necessity;3. Applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest on a proper and suitable manner; 4. Applicant must have sufficient financial capability to undertake the proposed services and meeting the responsibilities incident to its operation.

In Tatad v Garcia, the SC held that the controlling factor is the citizenship of the person operating a common carrier.

Guiding Principles:1. Prior or Old Operator Rule the first licensee will be protected in his investment and will not be subjected to ruinous competition.*No certificate of public convenience and necessity will be issued to other operator as long as the prior operator still in operation and can satisfy the public and that it still has the capacity to do so.2. Protection Investment Rule protects from unfair competition3. Prior Applicant Rule protects the first applicant. Principle: all things being equal*Public interest is the first and paramount consideration.

II. GENERAL CONCEPTS

A. Contract of Transportation in General

Transportation is a contract whereby a person, natural or juridical, obligates to transport persons, goods, or both, from one place to another, by land, air, or water, for a price or commission.*Importance: For liability purposes

B. Perfection1. Contract to carry (Consensual) agreement to carry the passenger at some future date consensual contract and perfected by mere consent e.g. Aircraft - perfected even without issuance of ticket as long as there was already meeting of minds with respect to the subject matter and consideration2. Contract of Carriage (Real) not until the facilities of the carrier are actually used can the carrier be said to have assumed the obligation of the carrier perfected by actual usee.g. Aircraft - perfected if it was established that the passenger had checked in at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft and baggage already loaded to the aircraft.Public Utility Bus or Jeepneys or Street Cars once it stops it is in effect making a continuous offer to riders; perfected when passenger is already attempting to board the vehicle Trains perfected when a person:a. purchased a ticket/ possess sufficient fare with which to pay for his passageb. presented himself at the proper place and in a proper manner to be transportedc. has a bona fide intention to use facilities of the carrier

British Airways vs Court of Appeals 218 SCRA 699

FACTS: On April 6, 1989, Mahtani decided to visit his relative in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gemar to prepare his travel plan. Since british Airways had no ticket flights from Manila to Bombay, Maktani had to take a connecting flight to Bombay on board British Airways. Prior to his departure, Maktani checked in the PAL counter in Manila his two pieces of luggage containing his clothing and personal effects, confident that upon reaching Hong Kong, the same would be transferred to the BA flight bound for Bombay, Unfortunately, when Maktani arrived in Bombay, he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After plaintiff waiting for his luggage for one week, BA finally advised him to file a claim accomplishing the property

ISSUE: Whether or not defendant BA is liable for compulsory damages and attorneys fee, as well as the dismissal of its third party complaint against PAL

HELD: The contract of transportation was exclusively between Maktani and BA. The latter merely endorsing the Manila to Hong Kong log of the formers journey to PAL, as its subcontractor or agent. Conditions of contacts was one of continuous air transportation from Manila to Bombay. The Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. Since the instant petition was based on breach of contract of carriage, Maktani can only sue BA and not PAL, since the latter was not a party in the contract.

C. Common Carrier1. Statutory Definition (Art 1732, NCC)

Article 1732 of the New Civil Code provides that: 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. one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation.Implications being a common carrier:a. extraordinary diligence must be exercisedb. in case of damage, presumption of negligence on the part of the common carrier

It is the activity of the carrier that is controlling.The fact that there is no license at the time of the incident happen is of no moment for liability purposes

a. Distinguished from private carrier

Common CarrierPrivate Carrier

As to availability:holds himself out for all people indiscriminatelyContracts with particular individuals or groups only

As to required diligence:Extraordinary diligence is requiredOrdinary diligence is required

As to regulation:Subject to state regulationNot subject to state regulation

Stipulation limiting liability:Parties may not agree on limiting the carriers liability except when provided by lawParties may limit the carriers liability, provided it is not contrary to law, morals or good customs

Exempting circumstance:Prove extraordinary diligence and Article 1734 NCCCaso fortuito, Article 1174 NCC

Presumption of Negligence:There is a presumption of fault or negligenceNo presumption of fault or negligence

Governing law:Law on common carriersLaw on obligations and contracts

b. Distinguished from towage, arrastre, stevedoring

TowageArrastreStevedoring

One vessel is hired to bring another vessel to another place; refers to a service rendered to a vessel by towing for the mere purpose of expediting her voyage without reference to any circumstances of danger.The functions of an arrastre operator has nothing to do with the trade and business of navigation, nor to the use or operation of vessels. He is no different from that of a depositary or warehouseman.The function of stevedores involves the loading and unloading of coastwise vessels calling at the port.

The SC held that the following services are not considered a common carrier: 1) Purely arrastre services -comparable to that as warehouseman and depositor2) Purely stevedoring services; and 3) Purely towage services.

In Crisostomo v CA, the SC held that the respondent being a travel agency is not a common carrier because the services offered is not one that carries passenger from one place to another.

c. Tests to determine common carriera. He must 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;b. He must undertake to carry goods of the kind to which his business is confined;c. He must undertake to carry by the method by which his business is conducted and over his established roads;d. The transportation must be for hire

True Test of Common Carrier Is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee

d. Parties to a contract of carriage

1. CARRIAGE OF PASSENGERS Common carrier & Passenger (carried gratuitously or not) Passenger one who travels in a public conveyance by virtue of contract, express or implied, with the carrier as to the payment of fare or that which is accepted as an equivalent thereof.

2. CARRIAGE OF GOODS Parties: shipper & carrier Shipper the person who delivers the goods to the carrier for transportation; pays the consideration or on whose behalf payment is made Consignee person to whom the goods are to be delivered. May be the shipper himself or a third person who is not actually a party to the contract.________________________________________________________________________De Guzman vs Court of Appeals168 SCRA 612

Facts:

Herein respondent Ernesto Cendana was engaged in buying up used bottles and scrap metal in Pangasinan. Normally, after collection respondent would bring such material to Manila for resale. He utilized (2) two six-wheelers trucks which he owned for the purpose. Upon returning to Pangasinan, he would load his vehicle with cargo belonging to different merchants to different establishments in Pangasisnan which respondents charged a freight fee for.Sometime in November 1970, herein petitioner Pedro de Guzman, a merchant and dealer of General Milk Company Inc. in Pangasinan contracted with respondent for hauling 750 cartons of milk. Unfortunately, only 150 cartons made it, as the other 600 cartons were intercepted by hijackers along Marcos Highway. Hence, petitioners commenced an action against private respondent.In his defense, respondent argued that he cannot be held liable due to force majuere, and that he is not a common carrier and hence is not required to exercise extraordinary diligence.

Issues:1. Whether or not respondent can be held liable for loss of the cartons of milk due to force majeure.2. Whether or not respondent is a common carrier.

Held:

1. The court ruled the affirmative. The circumstances do not fall under the exemption from liability as enumerated in Article 1734 of the Civil Code. The general rule is established by the article 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:a. Flood, storm, earthquake, lightning or other natural disasters;b. Act of the public enemy, whether international or civil;c. Act or omission of the shipper or owner of the goods;d. Character of the goods or defects in the packing;e. Order or act of competent public authority.

2. The court ruled the affirmative. Article 1732 of the New Civil Code avoids any distinction between one whose principal business activity is the carrying of persons or goods or both and one who does such carrying only as an ancillary activity. It also avoids a distinction between a person or enterprise offering transportation services on a regular or scheduled basis and one offering such services on an occasional, episodic, and unscheduled basis.

First Philippine Industrial Corporation vs Court of Appeals 300 SCRA 661

Facts:Herein petitioner applied for a mayors permit to operate its pipeline concession. Before such permit was issued, the City treasurer required petitioner to pay local tax. In order not to hamper its operations, petitioner paid the tax under protest.Then the petitioner filed a letter protest addressed to the treasurer claiming exemption from payment of the tax because according to the Local Government Code of 1991, transportation contractors are not included in the enumeration of contractors which are liable to pay taxes. The city treasurer denied the protest. The petitioner filed a case before the trial court for tax refund, however it was subsequently dismissed. Hence, this petition.

Issue:Whether or not the petitioner is a common carrier as contemplated to be exempted under the law.

Held:The court rules the affirmative. The court enunciated the (4) tests in determining whether the carrier is that of a common carrier:a. must be engaged int eh business of carrying goods for other as a public employment and must hold itself out as ready to engage in the transportation of goods generally as a business and not a casual occupationb. it must undertake to carry goods of the kind which its business is confined;c. it must undertake the method by which his business is conducted and over its established roads;d. the transportation must be for hire.In the case at bar, the court categorically ruled that the transporting of oil through pipelines is still considered to be an activity of a common carrier. The petitioner is a common carrier because it is engaged in the business of transporting passengers or goods; like petroleum. It undertakes to carry for all persons indifferently. The fact that the petitioner has limited clientele does not exclude it from the definition of common carrier. Under the petroleum act of the Philippines, the petitioner is considered a common carrier even if it is a pipeline concessionaire.And even as regards the petroleum operation, it is of public utility. Specifically, the Bureau of Internal Revenue considers petitioners as common carrier not subject to withholding tax.

FGU Insurance Corporation vs GPP Sarmiento Truckinh GR No, 141910 August 6, 2002

Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver certain goods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an unidentified truck, resulting in damage to the cargoes. FGU, insurer of the shipment paid to Concepcion Industries, Inc. the amount of the damage and filed a suit against GPS. GPS filed a motion to dismiss for failure to prove that it was a common carrier.

Issue: Whether or not GPS falls under the category of a common carrier.

Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service to no other individual or entity. A common carrier is one which offers its services whether to the public in general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS does not fit the category of a common carrier although it is not freed from its liability based on culpa contractual.

Everett Stearnship Vs CA297 SCRA 496

Facts: Hernandez Trading Co., respondent herein, imported 3 crates of bus spare parts from its supplier, Maruman Trading Company, Ltd., a foreign corporation based in Japan. The crates were shipped from Japan to Manila on board "ADELFAEVERETTE," a vessel owned by the principal of the petitioner herein, Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN. The vessel arrived in Manila and it was discovered that the one crate was missing. This was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner. Respondent rejected the offer and filed a case to collect payment for the loss against the petitioner.

Issue:Whether or not the petitioner is liable for the actual value and not the maximum value recoverable under the bill of lading.

Held:A stipulation in the bill of lading limiting the liability of the common carrier for the loss, damages of cargo to a certain sum, unless the shipper declares or a higher value is sanctioned by law, particularly Articles 1749 and 1780 of the Civil Code. The stipulations in the bill of lading are reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to Y100,000.00 (Yen). However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. The trial courts decision that private respondent could not have fairly agreed to the limited liability clause in the bill of lading because the said condition were printed in small letters does not make the bill of lading invalid.

Spouses Cruz vs Sun Holidays Inc. GR No. 186312, June 29, 2010

Facts: Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners son and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to Batangas.Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to the front, leaving the wheel to one of the crew members.The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco Beach III capsized putting all passengers underwater. The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain, Matute and the other passengers who reached the surface asked him what they could do to save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save yourselves).Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight passengers, including petitioners son and his wife, died during the incident.Issue: Whether or not respondent is a common carrier.Held: 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 (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 refrained from making such distinctions.Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be properly considered ancillary thereto. The constancy of respondents ferry services in its resort operations is underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry services, may be availed of by anyone who can afford to pay the same. These services are thus available to the public.That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to avail of respondents ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have overpaid.

D. Registered Owner Rule and Kabit System (relate to concept of Certificate of Public Convenience and Necessity and Certiificate of Public Convenience)

General Rule: Registered owner rule is applicable in this jurisdiction.

Registered owner rule - states that the person who is the registered owner of a vehicle is liable for any damages caused by the negligent operation of the vehicle although the same was already sold or conveyed to another person at the time of the accident. The registered owner is liable to the injured party subject to his right of recourse against the transferee or the buyer.

Purpose of this rule: easy identification of the owner to be sued for liability.

Recourse: Registered owner may bring the case to the court to sue the buyer or operator of the vehicle at fault.

Exception: in case of stolen vehicle registered owner is not liable.

In the case of Duavit v CA, the SC held that the registered owner is not liable if the vehicle was taken from his garage without his knowledge or consent. To hold the registered owner liable would be absurd as it would be holding liable the owner of a stolen vehicle for an accident caused by the person who stole such vehicle.

Kabit System is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings.

Kabit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Article 1409 of the New Civil Code.If the registered owner and the buyer entered into this transaction they are In pari delicto thus, in case something happen the court will not aid them. The court will leave them as they were.

This arrangement is a circumvention of the requirement for license.

Erezo Vs Jepte 102 Phil 103

Facts:

Defendant-appellant is the registered owner of a six by six truck bearing. On August, 9, 1949, while the same was being driven by Rodolfo Espino y Garcia, it collided with a taxicab at the intersection of San Andres and Dakota Streets, Manila. As the truck went off the street, it hit Ernesto Erezo and another, and the former suffered injuries, as a result of which he died.

The driver was prosecuted for homicide through reckless negligence. The accused pleaded guilty and was sentenced to suffer imprisonment and to pay the heirs of Ernesto Erezo the sum of P3,000. As the amount of the judgment could not be enforced against him, plaintiff brought this action against the registered owner of the truck, the defendant-appellant.

The defendant does not deny at the time of the fatal accident the cargo truck driven by Rodolfo Espino y Garcia was registered in his name. He, however, claims that the vehicle belonged to the Port Brokerage, of which he was the broker at the time of the accident. He explained, and his explanation was corroborated by Policarpio Franco, the manager of the corporation, that the trucks of the corporation were registered in his name as a convenient arrangement so as to enable the corporation to pay the registration fee with his backpay as a pre-war government employee. Franco, however, admitted that the arrangement was not known to the Motor Vehicle Office.

The trial court held that as the defendant-appellant represented himself to be the owner of the truck and the Motor Vehicle Office, relying on his representation, registered the vehicles in his name, the Government and all persons affected by the representation had the right to rely on his declaration of ownership and registration. It, therefore, held that the defendant-appellant is liable because he cannot be permitted to repudiate his own declaration.

Issue:WoN Jepte should be liable to Erezo for the injuries occasioned to the latter because of the negligence of the driver even if he was no longer the owner of the vehicle at the time of the damage (because he had previously sold it to another)

Held:

YES. The registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant

The Revised Motor Vehicle Law provides that no vehicle may be used or operated upon any public highway unless the same is properly registered. Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered for the current year, but that dealers in motor vehicles shall furnish the Motor Vehicles Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer's serial number and motor number.

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties, but to permit the use and operation of the vehicle upon any public

The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicles on the public highways, responsibility therefore can be fixed on a definite individual, the registered owner. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle.

Lim vs Court of Appeals

Facts:Private respondent herein purchased an Isuzu passenger jeepney from Gomercino Vallarta, a holder of a certificate of public convenience for the operation of a public utility vehicle. He continued to operate the public transport business without transferring the registration of the vehicle to his name. Thus, the original owner remained to be the registered owner and operator of the vehicle. Unfortunately, the vehicle got involved in a road mishap which caused it severe damage. The ten-wheeler-truck which caused the accident was owned by petitioner Lim and was driven by co-petitioner Gunnaban. Gunnaban admitted responsibility for the accident, so that petitioner Lim shouldered the costs of hospitalization of those wounded, compensation for the heirs of the deceased passenger and the restoration of the other vehicle involved. He also negotiated for the repair of the private respondent's jeepney but the latter refused and demanded for its replacement. Hence, private respondent filed a complaint for damages against petitioners. Meanwhile, the jeepney was left by the roadside to corrode and decay. The trial court decided in favor of private respondent and awarded him his claim. On appeal, the Court of Appeals affirmed the decision of the trial court. Hence, petitioner filed this petition. Issue: WoN the new owner of a passenger jeepney who continued to operate the same under the so-called kabit system and in the course thereof met an accident has the legal personality to bring the action for damages against the erring vehicle.Held: YES. According to the Court, the thrust of the law in enjoining the kabit system is not much as to penalize the parties but to identify the person upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding public. In the present case, it is once apparent that the evil sought to be prevented in enjoining the kabit system does not exist. First, neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose from the negligence of another vehicle in using the public road to whom no representation, or misrepresentation, as regards the ownership and operation of the passenger jeepney was made and to whom no such representation, or misrepresentation, was necessary. Thus it cannot be said that private respondent Gonzales and the registered owner of the jeepney were in estoppel for leading the public to believe that the jeepney belonged to the registered owner. Third, the riding public was not bothered nor inconvenienced at the very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronged and was seeking compensation for the damage done to him. Certainly, it would be the height of inequity to deny him his right. Hence, the private respondent has the right to proceed against petitioners for the damage caused on his passenger jeepney as well as on his businessKABIT SYSTEMThe kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings. Although the parties to such an agreement are not outrightly penalized by law, the kabit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code. In the early case of Dizon v. Octavio the Court explained that one of the primary factors considered in the granting of a certificate of public convenience for the business of public transportation is the financial capacity of the holder of the license, so that liabilities arising from accidents may be duly compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated under his license. If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no property with which to respond financially for the damage done. Thus, for the safety of passengers and the public who may have been wronged and deceived through the baneful kabit system, the registered owner of the vehicle is not allowed to prove that another person has become the owner so that he may be thereby relieved of responsibility. Subsequent cases affirm such basic doctrine. It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize the parties but to identify the person upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding public. The policy therefore loses its force if the public at large is not deceived, much less involved.Lita Enterprises vs IAC 129 SCRA 347

Facts:

Spouses Nicasio Ocampo and Francisca Garcia (private respondents) purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxi. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprise, Inc., through its representative Manuel Concordia, for the use of the latters certificate of public convenience for a consideration of P1, 000.00and a monthly rental of P200.00/taxicab unit. For the agreement to take effect, the cars were registered in the name of Lita Enterprises, Inc. The possession, however, remains with spouses Ocampo and Garcia who operated and maintained the same under Acme Taxi, petitioners trade name. A year later, one of the taxicabs, driven by their employee, Emeterio Martin, collided with a motorcycle. Unfortunately the driver of the motorcycle ,Florante Galvez died from the injuries it sustained. Criminal case was filed against Emeterio Martin, while a civil case was filed by the heir of the victim against Lita Enterprises. In the decision of the lower court Lita Enterprises was held liable for damages for the amount ofP25, 000.00 and P7, 000.00 for attorneys fees. A writ of execution for the decision followed, 2 of the cars of the respondents spouses were levied and were sold to a public auction. On March 1973, respondent Ocampo decided to register his taxicabs in his own name. The manager of petitioner refused to give him the registration papers. Thus, making spouses file a complaint against petitioner. In the decision, Lita Enterprise was ordered to return the three certificate of registration not levied in the prior case. Petitioner now prays that private respondent be held liable to pay the amount they have given to the heir of Galvez.

Issue:

Whether or not petitioner can recover from private respondent, knowing they are in an arrangement known as kabit system.

Held:

Kabit system is defined as, when a person who has been granted a certificate of convenience allows another person who owns a motor vehicle to operate under such franchise for a fee. This system is not penalized as a criminal offense but is recognized as one that is against public policy; therefore it is void and inexistent. It is fundamental that the court will not aid either of the party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both trial and appellate courts to have accorded the parties relief from their predicament. Specifically Article1412 states that: If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the others undertaking. The principle of in pari delicto is evident in this case. the proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to sold or delivered, or damages for its property agreed to be sold or delivered, or damages for its violation. The parties in this case are in paridelicto, therefore no affirmative relief can be granted to them

Teja Marketing Inc. vs IAC 148 SCRA 347

Facts:

Pedro Nale bought from Teja Marketing a motorcycle with complete accessories and a sidecar. A chattel mortgage was constituted as a security for the payment of the balance of the purchase price. The records of the Land Transportation Commission show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiffs MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission. The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC forstenciling, the plaintiff said that the defendant was hiding the motorcycle fromhim. Lastly, the plaintiff also explained that though the ownership of themotorcycle was already transferred to the defendant, the vehicle was stillmortgaged with the consent of the defendant to the Rural Bank of Camaliganfor the reason that all motorcycle purchased from the plaintiff on credit wasrediscounted with the bank. Teja Marketing made demands for the payment of the motorcycle butjust the same Nale failed to comply, thus forcing Teja Marketing to consult alawyer and file an action for damage before the City Court of Naga in theamount of P546.21 for attorneys fees and P100.00 for expenses of litigation.Teja Marketing also claimed that as of 20 February 1978, the total account ofNale was already P2, 731, 05 as shown in a statement of account; includesnot only the balance of P1, 700.00 but an additional 12% interest per annumon the said balance from 26 January 1976 to 27 February 1978; a 2% servicecharge; and P546.21 representing attorneys fees. On his part, Nale did notdispute the sale and the outstanding balance of P1,700.00 still payable toTeja Marketing; but contends that because of this failure of Teja Marketing tocomply with his obligation to register the motorcycle, Nale suffered damageswhen he failed to claim any insurance indemnity which would amount to no less than P15,000.00 for the more than 2 times that the motorcycle figured inaccidents aside from the loss of the daily income of P15.00 as boundary feebeginning October 1976 when the motorcycle was impounded by the LTC fornot being registered. The City Court rendered judgment in favor of TejaMarketing, dismissing the counterclaim, and ordered Nale to pay TejaMarketing On appeal to the Court of First Instance of Camarines Sur, thedecision was affirmed in toto. Nale filed a petition for review with theIntermediate Appellate Court. On 18 July 1983, the appellate court set asidethe decision under review on the basis of doctrine of "pari delicto," andaccordingly, dismissed the complaint of Teja Marketing, as well as thecounterclaim of Nale; without pronouncements as to costs. Hence, thepetition for review was filed by Teja Marketing and/or Angel Jaucian.

Issue:

Whether the defendant can recover damages against the plaintiff?

Held:

Unquestionably, the parties herein operated under an arrangement,commonly known as the "kabit system" whereby a person who has beengranted a certificate of public convenience allows another person who ownsmotor vehicles to operate under such franchise for a fee. A certificate ofpublic convenience is a special privilege conferred by the government. Abuseof this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root causes of theprevalence of graft and corruption in the government transportation offices.Although not out rightly penalized as a criminal offense, the kabit system isinvariably recognized as being contrary to public policy and, therefore, voidand in existent under Article 1409 of the Civil Code. It is a fundamentalprinciple that the court will not aid either party to enforce an illegal contract,but will leave both where it finds then. Upon this premise it would be error toaccord the parties relief from their predicament.

Santos vs Sibog 104 SCRA 520

Santos v. Sibug

Facts:

Petitioner Adolfo Santos was the owner of a passenger jeep, but hehad no certificate of public conveyance for the operation of the vehicle as apublic passenger jeep. Santos then transferred his jeep to the name of Vidadso that it could be operated under the latters certificate of publicconvenience. In other words, Santos became what is known as kabitoperator. Vidad executed a re-transfer document presumably to be registeredit and when it was decided that the passenger jeep of Santos was to bewithdrawn from kabit arrangement. On the accident date, Abraham Sibug was bumped by the saidpassenger jeep.

Issue:

Whether the Vidad is liable being the registered owner of the jeepney?

Held:

As the jeep in question was registered in the name of Vidad, thegovernment or any person affected by the representation that said vehicle isregistered under the name of the particular person had the right to rely on hisdeclaration of his ownership and registration. And the registered owner or anyother person for that matter cannot be permitted to repudiate said declarationwith the objective of proving that the said registered vehicle is owned byanother person and not by the registered owner. Santos, as the kabit, should not be allowed to defeat the levy in hisvehicle and to avoid his responsibility as a kabit owner for he had led thepublic to believe that the vehicle belongs to Vidad. This is one way of curbingthe pernicious kabit system that facilitates the commissions of fraud againstthe traveling public.

III. CONTRACT OF CARRIAGE OF GOODS

A. Obligation of the Carrier to Observe Vigilance of Goods

e. Duty to exercise extraordinary diligence (Art 1733, NCC, Article 363, 364, 365, CC)

Article 1733 Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.

Reason: The nature of the business is imbued with public interest and public policy; because of the exigencies of the business. The public has no choice but to trust on the skills of the employees of the common carrier. The goods and the life of the passenger are placed in the hands of the common carrier.

Article 363 CC: Outside of the cases mentioned in the second paragraph of Article 361, the carrier shall be obliged to deliver the goods shipped in the same condition in which, according to the bill of lading, they were found at the time they were received, without any damage or impairment, and failing to do so, to pay the value which those not delivered may have at the point and at the time at which their delivery should have been made. If those not delivered form part of the goods transported, the consignee may refuse to receive the latter, when he proves that he cannot make use of them independently of the others.

Article 364 CC: If the effect of the damage referred to in Article 361 is merely a diminution in the value of the gods, the obligation of the carrier shall be reduced to the payment of the amount which, in the judgment of experts, constitutes such difference in value.

Article 365 CC: If, in consequence of the damage, the goods are rendered useless for sale and consumption for the purposes for which they are properly destined, the consignee shall not be bound to receive them, and he may have them in the hands of the carrier, demanding of the latter their value at the current price on that day. If among the damaged goods there should be some pieces in good condition and without any defect, the foregoing provision shall be applicable with respect to those damaged and the consignee shall receive those which are sound, this segregation to be made by distinct and separate pieces and without dividing a single object, unless the consignee proves that impossibility of conveniently making use of them in this form. The same rule shall be applied to merchandise in bales or packages, separating those parcels which appear sound.

Sarkies Tours Philippines Inc vs Court of Appeals 280 SCRA 58

Facts:Fatima Fortades was a passenger of one of the buses of petitioner Sarkies Tours bound for Legazpi City. She had onboard luggages which contained important documents and personal belongings. Her belongings were kept in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that only one bag remained in the open compartment. The others, including Fatima's things, were missing and might have dropped along the way. Despite the suggestion of the passengers to retrace its route in order to recover their luggage, the driver nevertheless neglected them and continued driving. Consequently, respondents filed a case to recover the value of the remaining lost items, as well as moral and exemplary damages, attorney's fees and expenses of litigation. They claimed that the loss was due to petitioner's failure to observe extraordinary diligence in the care of Fatima's luggage and that petitioner dealt with them in bad faith from the start. Petitioner, on the other hand, disowned any liability for the loss on the ground that Fatima allegedly did not declare any excess baggage upon boarding its bus.

Issue:Whether or not Sarkies is liable for damages for lost propery of its passengers.

Held: The Supreme Court held that Sarkies is liable for the loss. The cause of the loss was petitioner's negligence in not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost the entire luggage was lost, to the prejudice of the paying passengers. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. This liability lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the person who has a right to receive them. The awarding of actual damages to respondents is just because their efforts in recovering the lost items must be well compensated. Moral and exemplary damages must also be awarded in the presence of bad faith and negligence on the part of the common carrier.

Westwind Shipping Corporation vs UCPB General Insurance 710 SCRA 544

f. Presumption of Negligence (Art 1735, NCC)Article 1735 NCC: In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, 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.

g. Duration of Liability (Art 1736, 1737 & 1738, NCC)

(1) Carriage of Goods Due diligence should be exercised the moment the goods are delivered to the carrier. Goods are deemed delivered to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them

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 themARTICLE 1737. The common carriers duty to observe extraordinary diligence over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu. (common carrier becomes a warehouseman ordinary diligence)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 if 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.

h. Defense of common carriers (Art 1734, 1739, 1740, 1742 & 1743)

Article 1734 (No other defense may be raised: exclusive or closed list)1. Flood, storm, earthquake, lightning, or other natural disaster or calamity2. Act of the public enemy in war, whether international or civil3. Act or omission of the shipper or owner of the goods4. The character of the goods or defects in the packing or in the containers5. Order or act of competent public authority6. Exercise of extraordinary diligence

The list is exclusive

a. Fortuitous event (Art 1739, NCC)

Fortuitous Event to be a valid defense must be established to be the proximate cause of the lossNote: Since common carrier is presumed is to be negligent, it has been observed that the DOCTRINE of PROXIMATE CAUSE is INAPPLICABLE to a contract of carriage. The injured passenger or owner of goods need not prove causation to establish his case. The absence of causal connection is only a matter of defense. Requisites of Fortuitous Event:1. The cause of the unforeseen and the unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will2. It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid3. The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner4. The obligor (debtor) must be free from any participation in or the aggravation of the injury resulting to the creditor

In order for the common carrier to be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods.Fire not considered as a natural calamity or disasterFire caused by lightning a natural calamityHijacking does not fall under the categories of exempting causes; the common carrier is presumed to be at fault or to have acted negligently unless there is a proof of extraordinary diligence on its partMechanical defects damage or injury resulting from mechanical defects is not a damage or injury that was caused by fortuitous event; carrier is liable to its passengers for damages caused by mechanical defects of the conveyance (breakage of a faulty drag-link spring, fracture of the vehicles right steering knuckle, defective breaks) One of the reason why carrier is made liable despite the presence of mechanical defect is the absence of privity between the passenger and the manufacturer

Case: Juntilla v. Fontanar Tire-blowouts was not considered as fortuitous event although it was alleged that the tires were in good condition; no evidence was presented to show that the evidence were due to adverse road conditions the carrier must prove all angles. The explosion could have been caused by too much air pressure injected into the tires and the fact that the jeepney was overloaded and speeding at the time of the accident.

OTHER INVALID DEFENSES1. Damage to cargo due to EXPLOSION of another cargo not attributable to peril of the seas or accidents of navigation.2. Damage by WORMS and RATS resulting to damage to cargoes cant be cited as an excuse by the carrier.3. Damage by WATER through a port which had been left open or insufficiently fastened on sailing.4. Carrier cannot escape liabilities to third persons if damage was caused by BARRATRY where the master or crew of the ship committed unlawful acts contrary to their duties includes theft and fraudulently running the ship ashore.

Cases: 1. Problem: A carrier bus on its way to its destination encountered an engine failure, thus, it has to be repaired for 2 days. And while in the repair shop, a typhoon came resulting to the spoilage of cargoes. Answer: A typhoon although a natural disaster, is not a valid defense if it is shown that it was not the only cause of the loss. Especially when the facts indicate that the typhoon was foreseeable and could have been detected through the exercise of reasonable care. Cargoes should have been secured while the bus was being repaired for 2 days.

2. Problem: A passenger told the driver that he has valuable items in his bag which was placed under his feet and he asked the driver (to which he is seated near) to watch for the bag while he is asleep.

(a) There have been incidents of throwing of stones at passing vehicles in the North Express Way. While the bus was traversing the super highway, a stone hurled from the overpass and hit the passenger resulting to injuries. Can the passenger hold the bus liable for damages?Answer: Yes. The incident was foreseeable due the prior incidents of stone hurling. The bus should have exercised utmost diligence and employed adequate precautionary measures to secure safety of passengers since the incident was foreseeable. . HOWEVER, if the stone throwing was entirely unforeseeable and the carrier exercised the utmost diligence, then, the bus cant be held liable. Nonetheless, the burden of proof is on the carrier to prove such exercise of diligence. It is up to the carrier to overthrow the presumption of negligence. If the passenger decides to file a case, al the passenger has to do is to prove that she was a passenger of the bus and that she suffered injuries while on board the bus.

(b) Supposing that there were armed men who staged a hold-up while the bus was speeding along the highway. One of them stole the passengers bag and wallet while pointing a gun him. Is the bus liable?Answer: No. Hand-carried luggages are governed by necessary deposit. Besides, theft with use of arms or through irresistible force is a force majeure which exempts carriers from liability.

3. Hi-jacking cannot exculpate the carrier from liability if it is shown that the employees of the carrier were not overwhelmed by the hijackers and that there was no showing of irresistible force. Since, there were 4 employers while there were only 2 hijackers and only one of them was armed with bladed weapon.ON THE OTHER HAND, a hijacking by 3 armed men is an event which is considered to be beyond the control of the carrier. Thus, the carrier may be adjudged from liability if it can be proven that the hijacking was unforeseeable.

Case: Philippine American General Insurance Co. vs. MCG Even in cases where a natural disaster is the proximate and only cause of the loss, a common carrier is still required to exercise due diligence to prevent or minimize loss before, during and after the occurrence of the natural disaster, for it to be exempt from liability under the law for the loss of the goods

Case: Pilapil vs. CA Facts: a bystander alongside national highway hurled a stone at the left side of the bus, hitting petition above his left eye which resulted to partial loss of the left eyes vision SC: A common carrier does not give its consent to become an insurer of any and all risks to passengers and goods. It merely undertakes to perform certain duties to the public as the law imposes, and holds itself liable for any breach thereof. The law does not make the carrier an insurer of the absolute safety of its passengers Article 1763: A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carriers employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission Clearly, a tort committed by a stranger which causes injury to a passenger does not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by the carriers employees to prevent the tort from being committed when the same could have been foreseen and prevented by them

Case: Franklin Gacal vs. PAL It is therefore not enough that the event should not have been foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not the impossibility to foresee the same

b. Public Enemy ( Art. 1739, NCC)

Presupposes a state of war and refers to the government of a foreign nation at war with the country to which the carrier belongs, though not necessarily with that to which the owner of the gods owes allegiance. Thieves, rioter, and insurrectionists are not included. They are merely private depredators for whose acts a carrier is answerable. Rebels in insurrection against their own government are generally not embraced in the definition of public enemy. However, if the rebels hold a portion of territory, they have declared their impendence, cast off their allegiance and has organized armed hostility to the government, and the authority of the latter is at the time overthrown, such an uprising may take on the dignity of a civil war, and so matured and magnified, the parties are belligerent and are entitled to belligerent rights. Depredation by pirates (which are enemy of all civilized nation) excuses the carrier from liability. Common carriers may be exempted from responsibility only if the act of the public enemy has been the proximate and only cause of the loss. Moreover, due diligence must be exercised to prevent or at least minimize the loss before, during and after the performance of the act of the public enemy in order that the carrier may be exempted from liability for the loss, destruction, or deterioration of the goods.

Public enemy includes pirates however it does not include robbery and thief.Pirates are enemies of all civilized nation.

General Rule: rebels and insurreccion is not included.Exception: If it they are cast of and took allegiance a hostile manner territory

Existence of actual war is imperative.

c. Improper Packing (Art 1742, NCC)

Character of the goods and defects in the packaging or in the containers are defenses available to the common carrier. Similarly, the Carriage of Good by Sea Act provides that carrier shall not liable for: 1. Wastage in bulk or weight or any damages arising form the inherent defect, quality or vice of goods; 2. Insufficiency of packing; 3. Insufficiency or inadequacy of the marks, or 4. Latent defects no discoverable by due diligence.

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

Thus, if the carrier accepted the goods knowing the fact of improper packing or even if the carrier does not know but the defect was nonetheless apparent upon ordinary observation, it is not relived from liability for loss or injury to goods resulting therefrom.

Cases:1. Problem: A carrier knowing that some of a cargo of sacks of rice had big holes and others had openings just loosely tied with strings resulting to the spillage of rice during the trip. Thus, there was shortage in the delivery of the cargoes. When sued due to the shortage, the carrier interposed a defense that it was not liable since the shortage was due to the defective condition of the sacks. Decide.Answer: Carrier must still exercise extraordinary diligence if the fact of improper packing is known to the carrier or its servants, or apparent upon ordinary observation. If the carrier accepted the cargo without protests or exception notwithstanding such condition, he is not relived of liability for damage resulting therefrom. Apply Article 1742.

d. Order of Public Authority (Art 1473, NCC)

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

Cases:1. Carrier was not excused from liability since the order of an acting mayor was not considered as a valid order of a public authority. It is required that public authority who issued the order must be duly authorized to issue the order. 2. Carriage of Goods by Sea Act provides that carrier shall not responsible for loss or damage resulting from arrest or restraint of princes, rulers, or people, or seizure under legal process and from quarantine restrictions.The important requisite is that the public authority has the power to issue an order.

De Guzman vs Court of Appeals, supra Delivery of Cartons of Milk Hijacked

Bascos vs Court of Appeals 221 SCRA 318

Facts:

Rodolfo Cipriano, representing CIPTRADE, entered into a hauling contract with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latters 2000m/tons of soya bean meal from Manila to Calamba. CIPTRADE subcontracted with petitioner Estrellita Bascos to transport and deliver the 400 sacks of soya beans. Petitioner failed to deliver the cargo, and as a consequence, Cipriano paid Jibfair the amount of goods lost in accordance with their contract. Cipriano demanded reimbursement from petitioner but the latter refused to pay. Cipriano filed a complaint for breach of contract of carriage. Petitioner denied that there was no contract of carriage since CIPTRADE leased her cargo truck, and that the hijacking was a force majeure. The trial court ruled against petitioner.

Issues:(1) Was petitioner a common carrier?(2) Was the hijacking referred to a force majeure?Held:(1) Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association 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 test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same.(2) Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the presumption. The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

Servando vs Philippines Stream Navigator 117 SCRA 832

Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176, for carriage from Manila to Pulupandan, Negros Occidental cargoes of cavans of rice and cartons of colored paper which were evidenced by bills of lading. Upon arrival of the vessel at Pulupandan the cargoes were discharged, complete and in good order, unto the warehouse of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire, however, appellee Uy Bico was able to take delivery of 907 cavans of rice Appellees' claims for the value of said goods were rejected by the appellant. Issue:Whether or not carrier is liable for the loss of the cargo.

Held:The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss is chargeable against the appellant. Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary diligence from the moment the goods are unconditionally placed in their possession "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. " It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit the responsibility of the carrier for the loss or damage that may be caused to the shipment by inserting therein the following stipulation:

Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage caused by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . . fire . ... The Court sustains the validity of the above stipulation. There is nothing therein that is contrary to law, morals or public policy. Therefore, the carrier is no longer liable for the loss of the goods.

Edgar Cokaliong Shipping Lines vs UCPB General Insurance 404 SCRA 706

DOCTRINE: The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.

FACTS: Shipper: ZosimaMercardo, Nestor AmeliaCarrier: EDGAR COKALIONG SHIPPING LINES, INC.Vessel: M/V TandagInsurer: UCPB General Insurance Co. Inc. (Feliciana Legaspi insured the cargoes)Event: FIRE

Edgar did not pay UCPB. UCPB filed a complaint. RTC absolved Edgar of any liability. CA affirmed.

ISSUE: 1. W/N Edgar is liable2. What is the basis of liability? Amount in the bill of lading or actual amount?

RULING: 1. Yes. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure. May refer to Eastern Shipping Lines, Inc. v. Intermediate Appellate Court. A stipulation that limits liability is valid as long as it is not against public policy.Art. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.

2. Bill of lading. The bill of lading subject of the present controversy specifically provides, among others:18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss.The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency (100,000.00) or its equivalent in any other currency per package or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required.In the present case, the stipulation limiting petitioners liability is not contrary to public policy. In fact, its just and reasonable character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.

It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should bear the loss in excess of the value declared in the Bills of Lading.

Eastern Shipping Lines Inc. vs IAC150 RA 463

Facts:In GR 69044, the M/S ASIATICA, a vessel operated by Eastern Shipping Lines loaded at Kobe, Japan for Manila:(1) 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., (2) 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc.

Both sets of goods were insured for their value with Development Insurance and Surety Corporation.

In GR 71478, the same vessel took on board :1.128 cartons of garment fabrics and accessories, in 2 containers, consigned to Mariveles Apparel Corporation2.two cases of surveying instruments consigned to Aman Enterprises and General Merchandise.

The 128 cartons were insured for their value by Nisshin Fire & Marine Insurance Co., for US$46,583.00. The 2 cases by Dowa Fire & Marine Insurance Co., Ltd., for US$11,385.00. Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured.Eastern Shipping denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event; hence, it is not liable under the law. The Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorneys fees and costs. Eastern Shipping took an appeal to the then Court of Appeals which, on 14 August 1984, affirmed the decision of the trial court. Eastern Shipping filed a petition for review on certiorari.Nisshin, and Dowa, as subrogees of the insured, filed suit against Eastern Shipping for the recovery of the insured value of the cargo lost imputing unseaworthiness of the ship and non-observance of extraordinary diligence by Eastern Shipping. Eastern Shipping denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper. Trial Court rendered judgment in favor of Nisshin and Dowa. CA affirmed decision. Hence this petition on certiorari.Issue:Whether or not the carrier exercised extraordinary diligence.

Held:Eastern Shipping shall pay the Development Insurance the amount of P256,039 for the 28 packages of calorized lance pipes, and P71,540 for the 7 cases of spare parts, with interest at the legal rate from the date of the filing of the Complaint on 13 June 1978, plus P5,000 as attorneys fees, and the costs. The Court, on the other hand, in GR 71478, affirmed the judgment. The evidence of the defendant did not show that extraordinary diligence was observed by the vessel to prevent the occurrence of fire at hatches nos. 2 and 3. Defendants evidence did not likewise show the amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. The complete defense afforded by the COGSA when loss results from fire is unavailing to Eastern Shipping. The Carriage of Goods by Sea Act (COGSA), a special law, is merely suppletory to the provisions of the Civil Code The fire may not be considered a natural disaster or calamity, as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.

Ganzon vs Court of Appeals 161 SCRA 646

Facts:Ganzon, petitioner herein, was hired by Tumambing to haul 305 tons of scrap iron. The contract was for the petitioner to transport the scrap iron to Manila from Bataan. Tumambing delivered the scrap iron to Niza, captain of the lighter LCT Batman, to board it on the same. The crew of the Batman started to load the iron, and when they were about halfway through, Mayor Advincula arrived and demanded P5,000 from Tumambing. The latter resisted and a heated argument started. Mayor Advincula drew his gun and fired at Tumambing. He was brought to the hospital for treatment, lucky for him the wound was not fatal.A few days after this incident, the loading of the scrap metal was resumed. However, the acting Mayor this time went to the port where the Batman was docked. He was accompanied by 3 policemen and he ordered Captain Niza to dump the scrap iron where the lighter was docked. What was left or the iron was confiscated by the Acting Mayor and brought to NASSCO. A receipt was issued showing that the municipality had taken custody of the scraps or iron.Tumambing filed a case in order to recover damages for the loss that he sustained. The lower court rendered a decision in favor of Ganzon. However, on appeal the Court of Appeals reversed the decision ordering Ganzon to pay Tumambing P5,895 as actual damages, P5,000 for exemplary damages and attorneys fees as well. Hence this petition by Ganzon.

Issue:Whether or not Ganzon is liable for the loss that Tumambing sustained.

Held:The Court held that Ganzon is liable for the loss of Tumambing. The defense that the scraps of iron were not unconditionally placed in his custody and control is untenable. Petitioner herein admits that the scraps of iron were delivered to Captain Niza by Tumambing in order to load the same