34202868 transpo-cases-under-atty-de-grano

A. WHAT IS A “COMMON CARRIER”?
- 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. (Art. 1732, Civil
Code).

- 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. (De Guzman
vs. Court of Appeals, No. L-47822, December 22, 1988)

B. CHARACTERISTICS OF A COMMON CARRIER
• Art. 1732 of the Civil Code avoids any distinction between one whose
principal business is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity (sideline).

• It also avoids a 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.

• Article 1732 does not distinguish between a carrier offering its services
to the general public, that is the general community or population, and
one who offers services or solicits business only from a narrow
segment of the general population.

• A person or entity is a common carrier even if he did not secure a
Certificate of Public Convenience

• The Civil Code makes no distinction as to the means of transporting,
as long as it is by land, water or air.

• The Civil Code does not provide that the transportation should be by
motor vehicle.

• A person or entity may be a common carrier even if he has no fixed
publicly known route, maintains no terminals, and issues no tickets.

• Undertakes to carry for all people indifferently and thus is liable for
refusal without sufficient reason (Lastimoso vs. Doliente, 3 SCRA ,
[1961]);

• Cannot lawfully decline to accept a particular class of goods for
carriage to the prejudice of the traffic in these goods;

• No monopoly is favored (Batangas Trans. vs. Orlanes, 52 Phil. 455);

• Provides public convenience.

C. TESTS WHETHER A PARTY IS A COMMON CARRIER OF GOODS:

• It must be engaged in the business of carrying goods for others as a
public employment and must hold itself out as ready to engage in the
transportation of goods generally as a business and not as a casual
occupation;

• It must undertake to carry goods of the kind to which its business is

TRANSPORTATION LAW: Lawrence Jeffrey Delfin, Flerida Emma Manglicmot, Mark Joseph Mupas, 1
Melanie Pascua, Gilbert Ricaforte, Renato Segubiense Jr., Katleen Grace Serrano, Mary Jane Timbang

confined;
• It must undertake to carry by the method by which his business is
conducted and over its established roads; and

• The transportation must be for hire. (First Philippine Industrial Corp. v.
CA, 300 SCRA 661, [1998)

Test whether a party is a common carrier
FIRST PHILIPPINE INDUSTRIAL CORP. VS. COURT OF APPEALS
(101 SCRA 661, 1998)

Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387, as
amended, a contract, install and operate oil pipelines. The original pipeline
concession was granted in 1967 and renewed by the Energy Regulatory
Board in 1992.

Sometime in January 1995, petitioner applied for a mayor’s permit with
the Office of the Mayor of Batangas City. However, before the mayor’s permit
could be issued, the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code. The respondent City Treasure assessed a business
tax on the petitioner amounting to P956,076.04 payable in four installments
based on the gross receipts for products pumped at GPS-1 for the fiscal year
1993 which amounted to P181,681,151.00. in order not to hamper its
operations, petitioner paid the tax under protest in the amount of P239,
019.01 for the first quarter of 1993.

On June 15, 1994, petitioner filed with the RTC of Batangas City a
complaint for tax refund with prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City
Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax on its gross receipts violates
Sec. 133 of the Local Government Code; (2) the authority of cities to impose
and collect a tax on the gross receipts of “contractors and independent
contractors” under Sec. 141(e) and 151 does not include the authority to
collect such taxes on transportation contractors for, as defined under Sec.
131(h), the term “contractors” excludes transportation contactors; and (3) the
City Treasurer illegally and erroneously imposed and collected the said tax,
thus meriting the immediate refund of the tax paid.

Traversing the complaint, the respondents argued that petitioner
cannot be exempt from taxes under Sec. 133 (J) of the Local Government
Code as said exemption applied 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 as trucks,
trains, ships and the like. Respondents further posit that the term “common
carrier” under the said Code pertains to the mode or manner by which a
product is delivered to its destination.

Issue: Whether or not the petitioner is a common carrier so that in the
affirmative, he is not liable to pay the carriers tax under the Local Government
Code of 1991?

Held: Petitioner is a common carrier.


A “common carrier” may be defined, broadly, as one who holds himself
out to the public as engaged in the business of transporting persons or
property from place to place, for compensation, offering his services to the
public generally.

Article 1732 of the Civil Code defines a “common carrier” as “any
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 their services to the public.

The test for determining whether a party is a common carrier of goods
is:
1. He must be engaged in the carrying of goods for others as a public
employment, and must hold himself out as ready to engage in the
transportation of goods or persons 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.

D. Cases:
1. DE GUZMAN VS. COURT OF APPEALS (168 SCRA 612)

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

Issue: Whether or not Cendena is a common carrier?

Held: Yes, Cendena is properly characterized as a common carrier even
though he merely backhauled goods for other merchants, and even if it was
done on a periodic basis rather than on a regular basis, and even if his
principal occupation was not the carriage of goods.

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. It also avoids making a distinction
between a person or enterprise offering transportation services on a regular
or scheduled basis and one offering service on an occasional, episodic or
unscheduled basis. Neither does it make a distinction between a carrier
offering its services to the general public and one who offers services or
solicits business only from a narrow segment of population.

2. PLANTERS PORDUCTS VS. CA (226 SCRA)


Facts: Planters Product Inc. purchased from Mitsubishi international
corporation metric tons of Urea fertilizer, which the latter shipped aboard the
cargo vessel M/V Sun Plum owned by private respondent Kyosei Kisen
Kabushiki Kaisha. Prior to its voyage, a time charter-party on the vessel
respondent entered into between Mitsubishi as shipper/charterer and KKKK
as ship owner, in Tokyo, Japan.

Before loading the fertilizer aboard the vessel, (4) of her holds were
presumably inspected by the charterer’s representative and found fit to take a
load of urea in bulk. After the Urea fertilizer was loaded in bulk by stevedores
hired by and under the supervision of the shipper, the steel hatches were
closed with heavy iron lids. Upon arrival of vessel at port, the petitioner
unloaded the cargo pursuant to the terms and conditions of the charter-party.
The hatches remained open throughout the duration of the discharge.

Upon arrival at petitioner’s warehouse a survey conducted over the
cargo revealed a shortage and the most of the fertilizer was contaminated
with dirt. As such, Planters filed an action for damages. The defendant argued
that the public policy governing common carriers do not apply to them
because they have become private carriers by reason of the provisions of the
charter-party.

Issue: Whether or not the charter-party contract between the ship owner and
the charterer transforms a common carrier into a private carrier?

Held: A charter party may either her be time charter wherein the vessel is
leased to the charterer, wherein the ship is leased to the charterer for a fixed
period of time or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter party provides for the hire of the vessel
only, either for a determinate time or for a single or consecutive voyage.

It is therefor imperative that such common carrier shall remain as such,
notwithstanding the charter of the whole or part of the vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both ship
and its crew as in bareboat or demise that it becomes a private carrier.
Undoubtedly, a shipowner in a time or voyage charter retains in possession
and control of the ship, although her holds may be the property of the
charterer.

3. CALVO V. UCPB GENERAL INSURANCE (G.R. NO. 148496 MARCH 19,
2002)

Facts: Petitioner Virgines Calvo, owner of Transorient Container Terminal
Services, Inc. (TCTSI), and a custom broker, entered into a contract with San
Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical
fluting paper and 124 reels of kraft liner board from the port area to the
Tabacalera Compound, Ermita, Manila. The cargo was insured by
respondent UCPB General Insurance Co., Inc.

On July 14, 1990, contained in 30 metal vans, arrived in Manila on
board “M/V Hayakawa Maru”. After 24 hours, they were unloaded from
vessel to the custody of the arrastre operator, Manila Port Services, Inc.
From July 23 to 25, 1990, petitioner, pursuant to her contract with SMC,
withdrew the cargo from the arrastre operator and delivered it to SMC’s
warehouse in Manila. On July 25, the goods were inspected by Marine Cargo
Surveyors, reported that 15 reels of the semi-chemical fluting paper were


“wet/stained/torn” and 3 reels of kraft liner board were also torn. The
damages cost P93,112.00.

SMC collected the said amount from respondent UCPB under its
insurance contract. Respondent on the other hand, as a subrogee of SMC,
brought a suit against petitioner in RTC, Makati City. On December 20, 1995,
the RTC rendered judgment finding petitioner liable for the damage to the
shipment. The decision was affirmed by the CA.

Issue: Whether or not Calvo is a common carrier?

Held: In this case the contention of the petitioner, that he is not a common
carrier but a private carrier, has no merit.

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 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 1733 deliberately refrained from making such distinction. (De
Guzman v. CA, 68 SCRA 612)

Te concept of “common carrier” under Article 1732 coincide with the
notion of “public service”, under the Public Service Act which partially
supplements the law on common carrier. Under Section 13, paragraph (b) of
the Public Service Act, it 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”

4. FABRE VS. CA (259 SCRA 426 G.R. NO. 111127, JULY 26, 1996)

Facts: Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda
minibus. They used the bus principally in connection with a bus service for
school children which they operated in Manila. It was driven by Porfirio Cabil.

On November 2, 1984 private respondent Word for the World Christian
Fellowship Inc. (WWCF) arranged with the petitioners for the transportation of
33 members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of
P3,000.00.


The usual route to Caba, La Union was through Carmen, Pangasinan.
However, the bridge at Carmen was under repair, so that petitioner Cabil,
who was unfamiliar with the area (it being his first trip to La Union), was
forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At
11:30 that night, petitioner Cabil came upon a sharp curve on the highway.
The road was slippery because it was raining, causing the bus, which was
running at the speed of 50 kilometers per hour, to skid to the left road
shoulder. The bus hit the left traffic steel brace and sign along the road and
rammed the fence of one Jesus Escano, then turned over and landed on its
left side, coming to a full stop only after a series of impacts. The bus came to
rest off the road. A coconut tree which it had hit fell on it and smashed its
front portion. Because of the mishap, several passengers were injured
particularly Amyline Antonio.

Criminal complaint was filed against the driver and the spouses were
also made jointly liable. Spouses Fabre on the other hand contended that
they are not liable since they are not a common carrier. The RTC of Makati
ruled in favor of the plaintiff and the defendants were ordered to pay jointly
and severally to the plaintiffs. The Court of Appeals affirmed the decision of
the trial court.

Issue: Whether the spouses Fabre are common carriers?

Held: Petition was denied. Spouses Fabre are common carriers.
The Supreme Court held that this case actually involves a contract of
carriage. Petitioners, the Fabres, did not have to be engaged in the business
of public transportation for the provisions of the Civil Code on common
carriers to apply to them. As this Court has held: 10 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.

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 1732 deliberately refrained from making such
distinctions.

5. TATAD VS. GARCIA (241 SCRA 334, GR. NO. 114222. APRIL 6, 1995)

Facts: DOTC planned to construct a light railway transit line along Edsa.
EDSA LRT Corporation, Ltd., a foreign corporation was awarded the contract
to build, lease and transfer the said light railway.

The said award was questioned by the petitioners on the basis that a
foreign corporation cannot own the EDSA LRT III, a public utility as it violates
the Constitution.

Issue: Whether or not an owner and lessor of the facilities used by a public
utility constitute a public utility?


Held: EDSA LRT Corporation, Ltd. Is admittedly a foreign corporation “duly
incorporated and existing under the laws of Hong Kong”. However, there is no
dispute that once the EDSA LRT III is constructed, the private respondent, as
lessor, will turn it over to DOTC as lessee, for the latter to operate the system
and pay rentals for the said use.

What private respondent owns are the rail tracks, rolling stocks, 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
themselves constitute a public utility. What constitutes a public utility in 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. In law, there is a clear distinction
between the “operation” of a public utility and the ownership of the facilities
and the equipment used to serve the public.

6. FISHER VS. YANGCO STEAMSHIP (31 PHIL 1)

Facts: The complained alleges that plaintiff is a stockholder in Yangco
Steamship

Company, the owner of the large steam vessels, duly licensed to
engage in the coastwise trade of the Philippine Island; that on or about June
10, 1912, the directors of the company, adopted a resolution which was
thereafter ratified and affirmed by the stockholders of the company “expressly
declaring and providing that the classes of merchandise to be carried by the
company in its business as common carrier do not include dynamite, powder
or other explosives, and expressly prohibiting the officers, agents an d
servants of the company from offering to carry, accepting for carriage or
carrying said dynamite, powder or other explosives.”

Issue: Whether the refusal of the owner and officer of a steam vessel, to
accept for carriage dynamite, powder or other explosives for carriage can be
held to be a lawful act?

Held: The traffic in dynamite gun powder and other explosive is vitally
essential to the material and general welfare of the inhabitants of this islands
and it these products are to continue in general use throughout the
Philippines they must be transported from water to port to port in various
island which make up the Archipelago.

It follows that a refusal by a particular vessel engage as a common
carrier of merchandise in coastwise trade in the Philippine Island to accept
such explosives for carriage constitutes a violation.

The prohibition against discrimination penalized under the statute,
unless it can be shown that there is so Real and substantial danger of
disaster necessarily involved in the courage of any or all of this article of
merchandise as to render such refusal a due or unnecessary or a reasonable
exercise or prudence and discreation on the part of the ship owner.

7. LOADSTAR SHIPPING VS. CA (315 SCRA 339, 1999)


Facts: On November 19, 1984, loadstar received on board its M/V
“Cherokee” bales of lawanit hardwood, tilewood and Apitong Bolidenized for
shipment. The goods, amounting to P6,067, 178. Were insured for the same
amount with the Manila Insurance Company against various risks including
“Total Loss by Total Loss of the Vessel”. On November 20, 1984, on its way
to Manila from the port of Nasipit, Agusan Del Norte, the vessel, along with its
cargo, sank off Limasawa Island. As a result of the total loss of its shipment,
the consignee made a claim with loadstar which, however, ignored the same.
As the insurer, MIC paid to the insured in full settlement of its claim, and the
latter executed a subrogation receipt therefor. MIC thereafter filed a complaint
against loadstar alleging that the sinking of the vessel was due to fault and
negligence of loadstar and its employees.

In its answer, Loadstar denied any liability for the loss of the shipper’s
goods and claimed that the sinking of its vessel was due to force majeure.
The court a quo rendered judgment in favor of MIC., prompting loadstar to
elevate the matter to the Court of Appeals, which however, agreed with the
trial court and affirmed its decision in toto. On appeal, loadstar maintained
that the vessel was a private carrier because it was not issued a Certificate of
Public Convenience, it did not have a regular trip or schedule nor a fixed
route, and there was only “one shipper, one consignee for a special crago”.

Issue: Whether or not M/V Cherokee was a private carrier so as to exempt it
from the provisions covering Common Carrier?

Held: Loadstar is a common carrier.

The Court held that LOADSTAR is a common carrier. It is not
necessary that the carrier be issued a certificate of public convenience, and
this public character is not altered by the fact that the carriage of the goods in
question was periodic, occasional, episodic or unscheduled. Further, the bare
fact that the vessel was carrying a particular type of cargo for one shipper,
which appears to be purely co-incidental; it is no reason enough to convert
the vessel from a common to a private carrier, especially where, as in this
case, it was shown that the vessel was also carrying passengers.

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.

8. FIRST PHILIPPINES INDUSTRIAL CORP. VS. CA (300 SCRA 661)

Facts: Petitioner is a grantee of a pipeline concession under R.A. No. 387, as
amended, a contract, install and operate oil pipelines. The original pipeline
concession was granted in 1967 and renewed by the Energy Regulatory
Board in 1992.

Sometime in January 1995, petitioner applied for a mayor’s permit with
the Office of the Mayor of Batangas City. However, before the mayor’s permit
could be issued, the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code. The respondent City Treasure assessed a business
tax on the petitioner amounting to P956,076.04 payable in four installments


based on the gross receipts for products pumped at GPS-1 for the fiscal year
1993 which amounted to P181,681,151.00. In order not to hamper its
operations, petitioner paid the tax but under protest in the amount of P239,
019.01 for the first quarter of 1993.

On June 15, 1994, petitioner filed with the RTC of Batangas City a
complaint for tax refund with prayer for writ of preliminary injunction against
respondents City of Batangas and Adoracion Arellano in her capacity as City
Treasurer.

Traversing the complaint, the respondents argued that petitioner
cannot be exempt from taxes under Sec. 133(J) of the Local Government
Code as said exemption applied 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 as trucks,
trains, ships and the like. Respondents further posit that the term “common
carrier” under the said Code pertains to the mode or manner by which a
product is delivered to its destination.

Issue: Whether the petitioner, an oil pipeline operator is a common carrier,
and therefore exempted from paying local taxes?

Held: Yes. Petitioner is a common carrier.

Article 1732 of the Civil Code defines a “common carrier” as “any
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 their services to the public.

A “common carrier” may be defined, broadly, as one who holds himself
out to the public as engaged in the business of transporting persons or
property from place to place, for compensation, offering his services to the
public generally.

The test for determining whether a party is a common carrier of goods
is: 1. He must be engaged in the carrying of goods for others as a public
employment, and must hold himself out as ready to engage in the
transportation of goods or persons 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 definition and requirements, there is no doubt that
the petitioner is a common carrier.

9. HOME INSURANCE VS. AMEARICAN STEAMSHIP (23 SCRA 24)

Facts: The Consorcio Pesquero del Peru of South America shipped jute bags
of Peruvian fishmeal through SS Crowborough, consigned to San Miguel
Brewery, Inc. The cargo, which was insured by Home Insurance Company,
arrived at the port of Manila and was discharged to the lighters of the Luzon
Stevedoring Corporation. When the same was delivered to the consignee,
there were shortages amounting to P 12, 033.85, prompting the latter to pay
against Luzon Stevedoring Co.


Because the others denied liability, Home Insurance paid San Miguel
the insurance value loss. This cost was brought by the former to recover
indemnity from Luzon Stevedoring and the ship owner. Luzon Stevedoring
raised the defense that it deliver with due diligence in the same from the
carrier. Mexican Steamship Agencies denied liability on the ground that the
charter party referred to in the bills of lading, the charter, not the ship owner,
was responsible for any loss or damage of the cargo. Furthermore, it claimed
to have exercised due diligence in stowing the goods and as a mere
forwarding agent, it was not responsible for losses or damages to the cargo.

Issue: Whether or not the stipulation in the charter party to owner’s non-
liability was valid as to absolve the American Steamship from liability loss?

Held: The Civil Code provision on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. The stipulation
in the charter party absolving the owner from liability for loss due to the
negligence of its agent is void only if the strict public policy governing
common carriers is applied. Such policy has no force where the public at
large is not involved, as in the case of a ship totally chartered for the use of a
single party.

10. SAN PABLO VS. PANTRANCO (153 SCRA 199)

Facts: The Pantranco South Express, Inc., hereinafter referred to as
PANTRANCO is a domestic corporation engaged in the land transportation
business with PUB service for passengers and freight and various certificates
for public conveniences (CPC) to operate passenger buses from Metro
Manila to Bicol Region and Eastern Samar. On March 27,1980 PANTRANCO
through its counsel wrote to Maritime Industry Authority (MARINA) requesting
authority to lease/purchase a vessel named MN "Black Double" "to be used
for its project to operate a ferryboat service from Matnog, Sorsogon and Allen,
Samar that will provide service to company buses and freight trucks that have
to cross San Bernardo Strait. In a reply of April 29,1981 PANTRANCO was
informed by MARINA that it cannot give due course to the request.

PANTRANCO nevertheless acquired the vessel MN "Black Double" on
May 27, 1981 for P3 Million pesos. It wrote the Chairman of the Board of
Transportation (BOT) through its counsel, that it proposes to operate a ferry
service to carry its passenger buses and freight trucks between Allen and
Matnog in connection with its trips to Tacloban City. PANTRANCO claims that
it can operate a ferry service in connection with its franchise for bus operation
in the highway from Pasay City to Tacloban City "for the purpose of
continuing the highway, which is interrupted by a small body of water, the said
proposed ferry operation is merely a necessary and incidental service to its
main service and obligation of transporting its passengers from Pasay City to
Tacloban City. Such being the case there is no need to obtain a separate
certificate for public convenience to operate a ferry service between Allen and
Matnog to cater exclusively to its passenger buses and freight trucks.

Without awaiting action on its request PANTRANCO started to operate
said ferry service. Acting Chairman Jose C. Campos, Jr. of BOT ordered
PANTRANCO not to operate its vessel until the application for hearing on
Oct. 1, 1981. In another order BOT enjoined PANTRANCO from operating the
MN "Black Double" otherwise it will be cited to show cause why its CPC
should not be suspended or the pending application denied.


Epitacio San Pablo (now represented by his heirs) and Cardinal
Shipping Corporation who are franchise holders of the ferry service in this
area interposed their opposition. They claim they adequately service the
PANTRANCO by ferrying its buses, trucks and passengers. BOT then asked
the legal opinion from the Minister of Justice whether or not a bus company
with an existing CPC between Pasay City and Tacloban City may still be
required to secure another certificate in order to operate a ferry service
between two terminals of a small body of water. On October 20, 1981 then
Minister of Justice Ricardo Puno rendered an opinion to the effect that there
is no need for bus operators to secure a separate CPC to operate a ferryboat
service.

Thus on October 23, 1981 the BOT rendered its decision holding that
the ferryboat service is part of its CPC to operate from Pasay to Samar/Leyte
by amending PANTRANCO's CPC so as to reflect the same.

Cardinal Shipping Corporation and the heirs of San Pablo filed
separate motions for reconsideration of said decision and San Pablo filed a
supplemental motion for reconsideration that were denied by the BOT on July
21, 1981. Hence, San Pablo filed the herein petition for review on certiorari
with prayer for preliminary injunction seeking the revocation of said decision,
and pending consideration of the petition the issuance of a restraining order
or preliminary injunction against the operation by PANTRANCO of said ferry
service

Issue: Whether or not the ferry boat is a common carrier?

Held: Considering the environmental circumstances of the case, the
conveyance of passengers, trucks and cargo from Matnog to Allen is certainly
not a ferryboat service but a coastwise or interisland shipping service. Under
no circumstance can the sea between Matnog and Allen be considered a
continuation of the highway. While a ferryboat service has been considered
as a continuation of the highway when crossing rivers or even lakes, which
are small body of waters separating the land, however, when as in this case
the two terminals, Matnog and Allen are separated by an open sea it can not
be considered as a continuation of the highway.

The contention of private respondent PANTRANCO that its ferry
service operation is as a private carrier, not as a common carrier for its
exclusive use in the ferrying of its passenger buses and cargo trucks is
absurd. PANTRANCO does not deny that it charges its passengers
separately from the charges for the bus trips and issues separate tickets
whenever they board the MN "Black Double" that crosses Matnog to Allen.
Nevertheless, considering that the authority granted to PANTRANCO is to
operate a private ferry, it can still assert that it cannot be held to account as a
common carrier towards its passengers and cargo. Such an anomalous
situation that will jeopardize the safety and interests of its passengers and the
cargo owners cannot be allowed.

Thus the Court holds that the water transport service between Matnog
and Allen is not a ferryboat service but a coastwise or interisland shipping
service. Before private respondent may be issued a franchise or CPC for the
operation of the said service as a common carrier, it must comply with the
usual requirements of filing an application, payment of the fees, publication,
adducing evidence at a hearing and affording the oppositors the opportunity
to be heard, among others, as provided by law.


E. DISTINCTIONS BETWEEN COMMON CARRIER AND PRIVATE
CARRIER

Common Carrier Private Carrier
As to passengers
Holds himself out for all people Contracts with particular individuals
indiscriminately. or groups only.
As to required diligence
Requires extraordinary diligence. Requires only ordinary diligence.
As to state regulation
Subject to regulation. Not subject to regulation.
As to stipulation on limiting liability
Parties may not agree on limiting the Parties may agree on limiting the
carrier’s liability except when provided carrier’s liability, provided not
by law. contrary to law, morals or good
customs.
Presumption as to fault and negligence
Presumption of fault or negligence No fault or negligence is presumed.
applies.
As to laws applicable on damages
Law on common carriers. Law on obligations and contracts.

F. GOVERNING/ APPLICABLE LAW
A. Transportation by Sea
1. Coastwise
▪ Civil Code (Arts.1732-1766) – primary law
▪ Code of Commerce – suppletory law
Note: Carriage of Goods by Sea Act – inapplicable even if the parties
expressly provide for it.

2. Carriage from Foreign Ports To Philippine Ports
▪ Civil Code – primary law
▪ Code of Commerce – all matters not regulated by the Civil
Code.
▪ Carriage of Goods by Sea Act (COGSA) – suppletory to
the Civil Code.

3. Carriage from Philippine Ports To Foreign
Ports-laws of the country to which the goods are to be transported.

B. Land Transportation
a. Common Carriers
▪ Civil Code (Arts.1732-1766) – primary law
▪ Code of Commerce – suppletory law

b. Private Carriers
Object merchandise
▪ Code of Commerce – primary law
▪ Civil Code – suppletory law

C. Air Transportation


1. Domestic Transportation
 Civil Code
 Code of Commerce

2. International Transportation – Warsaw
Convention
 While the Warsaw Convention has the force of law in the
Philippines, it does not have an exclusive enumeration of a carrier’s
liability for contractual breach or absolute limit of liability. It does not
preclude the operation of the Civil Code and other laws.
 The liability of the carrier for the loss, destruction or deterioration of
goods transported to the Philippines from a foreign country, is
primarily governed by the Civil Code not by the Warsaw Convention
which applies only to simple loss of baggage.

There Is International Transportation When:
1. The place of departure and the place of destination are within the
territories of two high contracting parties, regardless of whether or
not there was a break in the transportation or transshipment.
2. The place of departure and the place of destination are within the
territory of a single contracting party if there is an agreed stopping
place within a territory subject to the sovereignty, mandate or
authority of another power, even though the power is not a party to
the convention. (Mapa v. CA, 275 SCRA [1997])

High Contracting Parties
▪ Signatories to the Warsaw Convention and those which subsequently
adhered to it.

In National Development Co. vs. CA (164 SCRA 593). “The law of the
country to which the goods are to be transported governs the liability of the
common carrier in case of loss, destruction or deterioration (Art. 1753, NCC)
XXX The liability of the carrier is governed primarily by the Civil Code and in
all matters not regulated by the said Code, the rights and obligations of
common carriers shall be governed by the code of Commence and by special
laws (Art. 1766 NCC). Hence, the COGSA /a special law is merely
supppletory to the provisions of the Civil Code”. The “place of destinations”
whose law shall be deemed to be the governing law in so far as the liability of
common carrier is concerned refers to the place of “ultimate destination” not
an agreed stopping place. This is particularly true in so far as the warsaw
convention used the term to determine the country where the suit against the
international carrier should be filled. (Santos III vs. NorthWest Orient Airlines,
210 SCRA 256

Cases:

SAMAR MINING CO., INC. VS. NORDEUTSCHER LLOYD (132 SCRA 529)

Facts: Samar Mining imported 1 crate optima welded wire (amounting to
around USD 424 or PhP 1,700) from Germany, which was shipped on a
vessel owned by Nordeutscher Lloyd (M/S Schwabenstein). The shipment
was unloaded in Manila into a barge for transshipment to Davao and
temporarily stored in a bonded warehouse owned by AMCYL. The goods
never reached Davao and were never delivered to or received by the
consignee, Samar Mining Co.


CFI ruled in favor of Samar Mining holding Nordeutscher Lloyd liable.
However, defendants may recoup whatever they may pay Samar Mining by
enforcing the judgment against third party defendant AMCYL.

Issue: Whether Nordeustscher Lloyd is liable for the loss of the goods as
common carrier?

Held: No. At the time of the loss of the goods, the character of possession of
Nordeutscher Lloyd shifted from common carrier to agent of Samar Mining
Co.

The Bill of Lading is serves both as a receipt of goods and is likewise
the contract to transport and deliver the same as stipulated. It is a contract
and is therefore the law between the parties. The Bill of Lading in question
stipulated that Nordeutscher Lloyd only undertook to transport the goods in its
vessel only up to the port of discharge from ship, which is Manila. The Bill of
Lading further stipulated that the goods were to be transshipped by the carrier
from Manila to the port of destination – Davao. By unloading the shipment in
Manila and delivering the goods to the warehouse of AMCYL, the appellant
was acting within the contractual stipulations contained in the Bill of Lading.

Article 1736 of the Civil Code relives the carrier of responsibility over
the shipment as soon as the carrier makes actual or constructive delivery of
the goods to the consignee or to the person who has a right to receive them.

Under the Civil Code provisions governing Agency, an agent can only
be held liable in cases where his acts are attended by fraud, negligence,
deceit or if there is a conflict of interest between him and the principal. Under
the same law an agent is likewise liable if he appoints a substitute when he
was not given the power to appoint one or otherwise appoints one that is
notoriously incompetent or insolvent. These facts were not proven in the
record.

EASTERN SHIPPING LINES INC. VS. INTERMEDIATE APPELLATE
COURT (150 SCRA 463)

Facts: Sometime in or prior to June 1977, the M/S Asiatica, a vessel
operated by petitioner Eastern Shipping Lines Inc., loaded at Kobe, Japan for
transportation to Manila loaded 5,000 pieces of calorized pipes valued at
P256,039.00 which was consigned to Philippine Blooming Mills Co, Inc. and
7 cases of spare parts valued at P92, 361.75 consigned to Central Textile
Mills. Both sets of goods were inured against marine risk for their stated value
with respondent Development Insurance and Surety Corp.

In the same vessel, 2 containers of garment fabrics were also loaded
which was consigned to Mariveles Apparel Corp worth $46,583. The said
cargoes were consigned to Nisshin Fire and Marine Insurance. Another
cargo loaded to the vessel was the surveying instruments consigned to Aman
Enterprises and General Merchandise and insured against respondent Dowa
Fire & Marine Insurance for $1,385.00.

On the way to Manila, M/S Asiatica caught fire and sank. This resulted
to the loss of the ship and its cargoes. The respective Insurers paid the
corresponding marine insurance values and were thus subrogated to the
rights of the insured.


The insurers filed a suit against the petitioner carrier for recovery of the
amounts paid to the insured. However, petitioner contends that it is not liable
on the ground that the loss was due to an extraordinary fortuitous event.

Issue: Whether the Civil Code provisions on Common Carriers or the
Carriage of the Goods by Sea Act will govern the case at bar?

Held: The law of the country to which the goods are to be transported
governs the liability of common carrier in case of their loss, destruction or
deterioration. The liability of petitioner is governed primarily by the Civil Code
however, in all matters not regulated by the Civil Code, the Code of
Commerce and Special Laws will govern with respect to the rights and
obligations of the carrier. Therefore COGSA is suppletory to the provisions of
the Civil Code.

G. GOVERNMENT REGULATION

Case/s

KMU LABOR CENTER VS. GARCIA (239 SCRA 386)

Facts: On June 26,1990, Secretary of DOTC, Oscar M. Orbos issued
memorandum circular No. 90-395 to then LTFRB, Chairman Remedios A.S.
Fernando allowing provincial buses operators to charge passengers within a
range of 15% above and 15% below, the LTFRB official rate for a period of
one (1) year. On December 5, 1990 private respondent PBOAP filed an
application for fare rate increase to P0.085 and again it was reduced to
P0.065 per kilometer rate. The application was opposed by the Philippine
Consumer Foundation Inc. that the proposed rate were exorbitant and
unreasonable and that the application contained no allegation on the rate o
return on December 14, 1990. Public respondent LTFRB granted the fare rate
increase on March 16, 1994. Petitioner KMU filed a petition before the LTFRB
opposing the upward adjustment of bus fares, it was dismissed for lack of
merit, hence this petition.

Issue: Whether or not the Provincial Bus Operators has the power to reduce
and increase fare rated based on the circular order issued by the LTFRB?

Held: Supreme Court held that the authority given by the LTFRB to the
provincial bus operators to set a fare range over and above the authorized
existing fare is illegal and invalid as it is tantamount to an undue delegation of
legislative authority, “Potestas delegata non delegari protest” what has been
delegated further delegation of such power would indeed constitute a
negation of the duty in violation of the trust reposed in the delegate inandated
to discharged it directly. Furthermore rate fixing or making is a delicate and
sensitive government function that requires dexterity of judgment and sound
discretion with the settle goal at arriving at a just and reasonable rate
acceptable to both public utility and the public.

1. REGISTERED OWNER RULE
GELISAN VS. ALDAY (154 SCRA 388)

Facts: Bienvenido Gelisan and Roberto Espiritu entered into a contract where
the former hired the truck of Gelisan for the purpose of transporting goods at
the price of P18.00. It is also agreed that Espiritu shall bear and pay all
losses and damages attending the carriage of the goods to be hauled by him.
Benito Alday, a trucking operator, had a contract to haul the fertilizers of the


Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in
Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter offered
the use of his truck with the driver and helper at 9 centavos per bag of
fertilizer. The offer was accepted by plaintiff Alday and he instructed his
checker Celso Henson to let Roberto Espiritu haul the fertilizer. Espiritu made
two hauls of 200 bags of fertilizer per trip. The fertilizer was delivered to the
driver and helper of Espiritu with the necessary way bill receipts, Exhibits A
and B. Espiritu, however, did not deliver the fertilizer to the Atlas Fertilizer
bodega at Mandaluyong.

Subsequently, plaintiff Alday saw the truck in question on Sto. Cristo
St. and he notified the Manila Police Department, and it was impounded by
the police. It was claimed by Bienvenido Gelisan. As a result of the
impounding of the truck according to Gelisan and that for the release of the
truck he paid the premium of P300 to the surety company.

Benito Alday was compelled to pay the value of the 400 bags of
fertilizer, in the amount of P5,397.33, to Atlas Fertilizer Corporation so that,
on 12 February 1962, he (Alday) filed a complaint against Roberto Espiritu
and Bienvenido Gelisan with the CFI Manila

Bienvenido Gelisan, upon the other hand, claimed that he had no
contractual relations with the plaintiff Benito Alday.

Issue: Whether Gelisan being a registered owner is responsible for
damages?

Held: The Court has invariably held in several decisions that the registered
owner of a public service vehicle is responsible for damages that may arise
from consequences incident to its operation or that may be caused to any of
the passengers therein. The claim of the petitioner that he is not able in view
of the lease contract executed by and between him and Roberto Espiritu
which exempts him from liability to third persons, cannot be sustained
because it appears that the lease contract, adverted to, had not been
approved by the Public Service Commission. It is settled in our jurisprudence
that if the property covered by a franchise is transferred or leased to another
without obtaining the requisite approval, the transfer is not binding upon the
public and third persons.

Bienvenido Gelisan, the registered owner, is not however without
recourse. He has a right to be indemnified by Roberto Espiritu for the amount
that he may be required to pay as damages for the injury caused to Benito
Alday, since the lease contract in question, although not effective against the
public for not having been approved by the Public Service Commission, is
valid and binding between the contracting parties.

BENEDICTO VS.CA (187 SCRA 547)

Facts: Private respondent Greenhills Wood Industries Company, Inc. a
lumber manufacturing firm in Dagupan City, operates a sawmill in Maddela,
Quirino.

In May 1980, private respondent bound himself to sell and deliver to
Bluestar Mahogony, Inc. 100,000 board feet of sawn lumber with the
understanding that the initial delivery would be made on 15 May 1980. To
effect its first delivery, private respondent’s resident manager in Maddela,
Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck to


transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan.
This cargo truck was registered in the name of petitioner Ma. Luis Benedicto,
the proprietor of Macoven Trucking, business enterprise engaged in hauling
freight, with the main office in B.F. Homes, Parañaque.

On 15 May 1980, Cruz in the presence and with the consent of driver
Licuden, supervised the loading of 7,690 board feet of sawn lumber with
invoice value of P16, 918.00 aboard the cargo truck. The cargo never
reached Blue Star.

Issue: Whether the registered owner is liable even though the vehicle have
been transferred to another person?

Held: Supreme Court held that the prevailing rule on common carrier makes
the registered owner liable for consequences flowing from the operations of
the common carrier, even though the specific vehicle involve may already
have been transferred to another person. This doctrine rest upon the principle
that in dealing with the vehicles registered under the Public Service Law, the
public has the right to assume that the registered owner is the actual or lawful
owner thereof.

The prevailing doctrine on common carriers makes the registered
owner liable for consequences flowing from the operations of the carrier, even
though the specific vehicle involved may already have been transferred to
another person. This doctrine rests upon the principle that in dealing with
vehicles registered under the Public Service Law, the public has the right to
assume that the registered owner is the actual or lawful owner thereof. It
would be very difficult and often impossible as a practical matter, for members
of the general public to enforce the rights of action that they may have for
injuries inflicted by the vehicles being negligently operated if they should be
required to prove who the actual owner is. The registered owner is not
allowed to deny liability by proving the identity of the alleged transferee. Thus,
contrary to petitioner’s claim, private respondent is not required to go beyond
the vehicle’s certificate of registration to ascertain the owner of the carrier.

Clearly, to permit a common carrier to escape its responsibility for the
passengers or goods transported by its proving a prior sale of the vehicle or
means of transportation to an alleged vendee would be to attenuate
drastically the carrier’s duty of extraordinary diligence.

2. KABIT SYSTEM
Case/s:

SANTOS VS. SIBUG (104 SCRA 520)

Facts: Petitioner Adolfo Santos was the owner of a passenger jeep, but he
had no certificate of public conveyance for the operation of the vehicle as a
public passenger jeep. Santos then transferred his jeep to the name of Vidad
so that it could be operated under the latter’s certificate of public
convenience. In other words, Santos became what is known as kabit
operator. Vidad executed a re-transfer document presumably to be registered
it and when it was decided that the passenger jeep of Santos was to be
withdrawn from kabit arrangement.

On the accident date, Abraham Sibug was bumped by the said
passenger 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, the
government or any person affected by the representation that said vehicle is
registered under the name of the particular person had the right to rely on his
declaration of his ownership and registration. And the registered owner or any
other person for that matter cannot be permitted to repudiate said declaration
with the objective of proving that the said registered vehicle is owned by
another person and not by the registered owner.

Santos, as the kabit, should not be allowed to defeat the levy in his
vehicle and to avoid his responsibility as a kabit owner for he had led the
public to believe that the vehicle belongs to Vidad. This is one way of curbing
the pernicious kabit system that facilitates the commissions of fraud against
the traveling public.

LITA ENTERPRISES VS. IAC (129 SCRA 464)

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 latter’s certificate of public convenience for a consideration of P1, 000.00
and 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, petitioner’s 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 of
P25, 000.00 and P7, 000.00 for attorney’s fees.

A writ of execution for the decision followed, 2 of the cars of the
respondent’s 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 Article
1412 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 other’s
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 pari
delicto, therefore no affirmative relief can be granted to them.

TEJA MARKETING V. 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 plaintiff's 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 for
stenciling, the plaintiff said that the defendant was hiding the motorcycle from
him. Lastly, the plaintiff also explained that though the ownership of the
motorcycle was already transferred to the defendant, the vehicle was still
mortgaged with the consent of the defendant to the Rural Bank of Camaligan
for the reason that all motorcycle purchased from the plaintiff on credit was
rediscounted with the bank.

Teja Marketing made demands for the payment of the motorcycle but
just the same Nale failed to comply, thus forcing Teja Marketing to consult a
lawyer and file an action for damage before the City Court of Naga in the
amount of P546.21 for attorney's fees and P100.00 for expenses of litigation.
Teja Marketing also claimed that as of 20 February 1978, the total account of
Nale was already P2, 731, 05 as shown in a statement of account; includes
not only the balance of P1, 700.00 but an additional 12% interest per annum
on the said balance from 26 January 1976 to 27 February 1978; a 2% service
charge; and P546.21 representing attorney's fees. On his part, Nale did not
dispute the sale and the outstanding balance of P1,700.00 still payable to
Teja Marketing; but contends that because of this failure of Teja Marketing to
comply with his obligation to register the motorcycle, Nale suffered damages
when 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 in
accidents aside from the loss of the daily income of P15.00 as boundary fee
beginning October 1976 when the motorcycle was impounded by the LTC for
not being registered. The City Court rendered judgment in favor of Teja
Marketing, dismissing the counterclaim, and ordered Nale to pay Teja
Marketing On appeal to the Court of First Instance of Camarines Sur, the
decision was affirmed in toto. Nale filed a petition for review with the
Intermediate Appellate Court. On 18 July 1983, the appellate court set aside
the decision under review on the basis of doctrine of "pari delicto," and
accordingly, dismissed the complaint of Teja Marketing, as well as the
counterclaim of Nale; without pronouncements as to costs. Hence, the
petition 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 been
granted a certificate of public convenience allows another person who owns
motor vehicles to operate under such franchise for a fee. A certificate of
public convenience is a special privilege conferred by the government. Abuse
of this privilege by the grantees thereof cannot be countenanced.

The "kabit system" has been identified as one of the root causes of the
prevalence of graft and corruption in the government transportation offices.
Although not out rightly penalized as a criminal offense, the kabit system is
invariably recognized as being contrary to public policy and, therefore, void
and in existent under Article 1409 of the Civil Code. It is a fundamental
principle 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 to
accord the parties relief from their predicament.

3. BOUNDARY SYSTEM

Case/s:

MAGBOO V. BERNARDO 7 SCRA 952

Facts: Urbano and Emilia Magboo are the parents of Cesar Magboo, a child
of 8 years old, who lived with them and was under their custody until his
death on 24 October 1956 when he was killed in a motor vehicle accident, the
fatal vehicle being a passenger jeepney owned by Delfin Bernardo. At the
time of the accident, said passenger jeepney was driven by Conrado Roque.
The contract between Roque and Bernardo was that Roque was to pay to
Bernardo the sum of P8.00, which he paid to Bernardo, for privilege of driving
the jeepney, it being their agreement that whatever earnings Roque could
make out of the use of the jeepney in transporting passengers from one point
to another in the City of Manila would belong entirely to Roque. As a
consequence of the accident and as a result of the death of Cesar Magboo in
said accident, Roque was prosecuted for homicide thru reckless imprudence
before the CFI Manila. Roque was sentenced to 6 months of arresto mayor,
with the accessory penalties of the law; to indemnify the heirs of the
deceased in, with subsidiary imprisonment in case of insolvency, and to pay
the costs. Pursuant to said judgment Roque served his sentence but he was
not able to pay the indemnity because he was insolvent. An action was filed
by the spouses Magboo against Bernardo is for enforcement of his subsidiary
liability. The trial court ordered Bernardo to pay the. Bernardo appealed to the


Court of Appeals, which certified the case to the Supreme Court on the
ground that only questions of law are involved.

Issue: Whether or not an employer-employee relationship between the
jeepney operator and the driver?

Held: An employer-employee relationship exists between a jeepney owner
and a driver under a boundary system arrangement. The features which
characterize the boundary system - namely the fact that the driver does not
receive a fixed wage but gets only the excess of the amount of fares collected
by him over the amount he pays to the jeep-owner, and the gasoline
consumed by the jeep is for the amount of the driver - are not sufficient to
withdraw the relationship between them from that of employee and employer.
Consequently, the jeepney owner is subsidiary liable as employer in
accordance with Art.103, Revised Penal Code.

II. CONTRACTUAL EFFECTS
A. CAUSE OF ACTION

1. FABRE VS. CA 259 SCRA 426 (G.R. NO. 111127, JULY 26, 1996)

Facts: Petitioner and his wife were owners of a minibus. They used the bus
principally in connection with a bus service for school children which they
operated in Manila and was driven by Porfirio Cabil. His job was to take
school children to and from the school. Sometime during November private
respondent WWCF arranged with petitioners for the transportation of 33
members of its ministry form Manila to La Union and back in consideration of
which private respondent shall pay petitioners the stipulated amount. On the
day of the trip, several members of the ministry came in late, hence, the
departure was delayed. On the may to La Union, the minibus caught an
accident causing damages and injury to several passengers particularly
Amyline Antonio. Apparently, the driver was unable to see a sharp curve
ahead of time for him to be able to avoid the mishap. A criminal complaint
was them filed against the driver, while defendant spouses were also made
jointly liable.

Issue: Whether or not defendant spouses failed to exercise diligence of a
good father of the family?

Held: Court ruled that defendant spouses were negligent in the exercise of
their duties as owners of the minibus for it was clearly established by
evidence that said vehicle was not properly check if it was fit for the long trip.
Moreover, defendants were also negligent in the selection and supervision of
their employee, particularly, the driver, who was only used to driving short
distances.

2. AIR FRANCE VS CARRASCOSO (18 SCRA 155)

Facts: Plaintiff, a civil engineer, was a member of a group of 48 Filipino
pilgrims that left Manila for Lourdes on March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized
agent, Philippine Air Lines, Inc., issued to plaintiff a "first class" round trip
airplane ticket from Manila to Rome. From Manila to Bangkok, plaintiff
traveled in "first class", but at Bangkok, the Manager of the defendant airline
forced plaintiff to vacate the "first class" seat that he was occupying because,
in the words of the witness Ernesto G. Cuento, there was a "white man", who,


the Manager alleged, had a "better right" to the seat. When asked to vacate
his "first class" seat, the plaintiff, as was to be expected, refused, and told
defendant's Manager that his seat would be taken over his dead body; a
commotion ensued, and, according to said Ernesto G. Cuento, "many of the
Filipino passengers got nervous in the tourist class; when they found out that
Mr. Carrascoso was having a hot discussion with the white man [manager],
they came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give
his seat to the white man" and plaintiff reluctantly gave his "first class" seat in
the plane after being threatened that he will be thrown out of the plane if he
does not oblige. The captain of the plane, when asked to intervene, refused
to do so.

Issue: Whether or not there was bad faith on the part of Air France,
petitioner, entitling Rafael Carrascoso, respondent for moral and exemplary
damages as against the petitioner?

Held: The court held in favor of the respondent, Carrascoso.

The responsibility of an employer for the tortious act of its employees
need not be essayed. It is well settled in law. For the willful malevolent act of
petitioner's manager, petitioner, his employer, must answer.

A contract to transport passengers is quite different in kind and degree
from any other contractual relation. And this, because of the relation which an
air-carrier sustains with the public. Its business is mainly with the traveling
public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public
duty. Neglect or malfeasance of the carrier's employees, naturally, could give
ground for an action for damages.

Passengers do not contract merely for transportation. They have a
right to be treated by the carrier's employees with kindness, respect, courtesy
and due consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees.
So it is that any rule or discourteous conduct on the part of employees
towards a passenger gives the latter an action for damages against the
carrier.

The court held that the judgment of the Court of Appeals does not
suffer from reversible error. CA decision affirmed.

3. TIU VS. ARRIESGADO G.R. NO. 138060, SEPTEMBER 1, 2004

Facts: At about 10:00 p.m. of March 15, 1987, the cargo truck marked
"Condor Hollow Blocks and General Merchandise" bearing plate number
GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City.
Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck
passed over a bridge, one of its rear tires exploded. The driver, Sergio
Pedrano, then parked along the right side of the national highway and
removed the damaged tire to have it vulcanized at a nearby shop, about 700
meters away. Pedrano left his helper, Jose Mitante, Jr. to keep watch over the
stalled vehicle, and instructed the latter to place a spare tire six fathoms away
behind the stalled truck to serve as a warning for oncoming vehicles. The
trucks tail lights were also left on. It was about 12:00 a.m., March 16, 1987.

At about 4:45 a.m., D Rough Riders passenger bus with plate number
PBP-724 driven by Virgilio Te Laspiñas was cruising along the national


highway of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus
was also bound for Cebu City, and had come from Maya, Daanbantayan,
Cebu. Among its passengers were the Spouses Pedro A. Arriesgado and
Felisa Pepito Arriesgado, who were seated at the right side of the bus, about
three (3) or four (4) places from the front seat.

As the bus was approaching the bridge, Laspiñas saw the stalled truck,
which was then about 25 meters away. He applied the breaks and tried to
swerve to the left to avoid hitting the truck. But it was too late; the bus
rammed into the trucks left rear. The impact damaged the right side of the bus
and left several passengers injured. Pedro Arriesgado lost consciousness and
suffered a fracture in his right colles. His wife, Felisa, was brought to the
Danao City Hospital. She was later transferred to the Southern Island Medical
Center where she died shortly thereafter.

Respondent Pedro A. Arriesgado then filed a complaint for breach of
contract of carriage, damages and attorneys fees before the Regional Trial
Court of Cebu City, Branch 20, against the petitioners, D Rough Riders bus
operator William Tiu and his driver, Virgilio Te Laspiñas on May 27, 1987. The
respondent alleged that the passenger bus in question was cruising at a fast
and high speed along the national road, and that petitioner Laspiñas did not
take precautionary measures to avoid the accident.

The petitioners, for their part, filed a Third-Party Complaint against the
following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII),
petitioner Tiu’s insurer; respondent Benjamin Condor, the registered owner of
the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They
alleged that petitioner Laspiñas was negotiating the uphill climb along the
national highway of Sitio Aggies, Poblacion, Compostela, in a moderate and
normal speed. It was further alleged that the truck was parked in a slanted
manner, its rear portion almost in the middle of the highway, and that no early
warning device was displayed. Petitioner Laspiñas promptly applied the
brakes and swerved to the left to avoid hitting the truck head-on, but despite
his efforts to avoid damage to property and physical injuries on the
passengers, the right side portion of the bus hit the cargo truck’s left rear.

HELD: The rules which common carriers should observe as to the safety of their
passengers are set forth in the Civil Code, Articles 1733, 1755and 1756. It is
undisputed that the respondent and his wife were not safely transported to the
destination agreed upon. In actions for breach of contract, only the existence of such
contract, and the fact that the obligor, in this case the common carrier, failed to
transport his passenger safely to his destination are the matters that need to be proved.
This is because under the said contract of carriage, the petitioners assumed the
express obligation to transport the respondent and his wife to their destination safely
and to observe extraordinary diligence with due regard for all circumstances. Any
injury suffered by the passengers in the course thereof is immediately attributable to
the negligence of the carrier. Upon the happening of the accident, the presumption of
negligence at once arises, and it becomes the duty of a common carrier to prove that
he observed extraordinary diligence in the care of his passengers. It must be stressed
that in requiring the highest possible degree of diligence from common carriers and in
creating a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers. While evidence may be submitted to overcome such
presumption of negligence, it must be shown that the carrier observed the required
extraordinary diligence, which means that the carrier must show the utmost diligence
of very cautious persons as far as human care and foresight can provide, or that the
accident was caused by fortuitous event. As correctly found by the trial court,
petitioner Tiu failed to conclusively rebut such presumption. The negligence of


petitioner Laspiñas as driver of the passenger bus is, thus, binding against petitioner
Tiu, as the owner of the passenger bus engaged as a common carrier.

B. EXTRAORDINARY DILIGENCE

REQUIREMENT OF EXTRAORDINARY DILIGENCE
Common Carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence on the vigilance
over goods and for the safety of the passengers transported by them
according to all the circumstances of each case. (Art. 1733, Civil Code)

Coverage
1. Vigilance over goods (Arts. 1734-1754)
2. Safety of passengers (Arts. 1755-1763)

Passenger - A person who has entered into a contract of carriage, express or
implied, with the carrier. They are entitled to extraordinary diligence from the
common carrier.

Persons Not Considered As Passengers
1. One who has not yet boarded any part of a vehicle regardless of
whether or not he has purchased a ticket;
2. One who remains on a carrier for an unreasonable length of
time after he has been afforded every safe opportunity to alight;
3. One who has boarded by fraud, stealth, or deceit;
4. One who attempts to board a moving vehicle, although he has a
ticket, unless the attempt be with the knowledge and consent of the
carrier;
5. One who boarded a wrong vehicle, has been properly informed
of such fact, and on alighting, is injured by the carrier; or
6. One who rides any part of the vehicle which is unsuitable or
dangerous or which he knows is not designed or intended for
passengers.

RULES ON PRESUMPTION OF NEGLIGENCE:
A. In the Carriage of Goods:
▪ In case of loss, destruction and deterioration of goods, common carriers
are presumed to be at fault or have acted negligently, unless they
prove that they exercise extraordinary diligence.
▪ In the transport of goods, mere proof of delivery of goods in good order
to a carrier and the subsequent arrival of the same goods at the place
of destination in bad order makes for a prima facie case against the
carrier.

B. In the Carriage of Passengers:
▪ In case of death or injury to passengers, common carriers are presumed
to be at fault or have acted negligently, unless they prove that they
exercise extraordinary diligence. .(Art. 1755,NCC)
▪ The court need not make an express finding of fault or negligence of
common carriers. The law imposes upon common carriers strict
liability, as long as it is shown that there exists a relationship between
the passenger and the common carrier and that injury or death took
place during the existence of the contract.
▪ The common carrier is not an absolute insurer against all possible risks
of transportation or travel. (Pilapil vs. CA et al, 180 SCRA 546)

Doctrine of Proximate Cause – is NOT applicable to contract of carriage


• The injured passenger or owner of goods need not prove causation to
establish his case. The presumption arises upon the happening of the
accident. (Calalas v. CA, 383 SCRA, [2002])
DEFENSES OF COMMON CARRIERS
General Rule: Common carriers are responsible for the loss, destruction or
deterioration of the goods.
Exceptions: The same is due to any of the following causes only:
a. Flood, storm, earthquake, lightning or other natural disaster or calamity;
b. Act of public enemy in war, whether international or civil;
c. Act or omission of the shipper or the owner of the goods;
d. The character of the goods or defects in the packing or in the containers;
e. Order or act of competent authority. (Art.1734, Civil Code)

 The above enumeration is exclusive. If not one of those enumerated
is present, the carrier is liable. (Belgian Chartering and Shipping, N.V.
v. Phil. First Insurance Co.,Inc., 383 SCRA, 2002)
 The exceptions in Art 1734 must be proven whether the presumption of
negligence applies. Common carriers are bound to observe
extraordinary diligence in the vigilance over the goods transported by
them. They are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated. To
overcome the presumption of negligence in case of loss, destruction or
deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the instance when
the presumption of negligence does not attach. (Delsan v. Trans.
American Home Insurance, August 15, 2006)

a. Caso Fortuito / Force Majeure
Requisites:
a. Must be the proximate and only cause of the loss;
b. Event independent of human will;
c. Occurrence makes it impossible for debtor to fulfill the obligation in a
normal manner;
d. Obligor must be free of participation in, or aggravation of, the injury to
the debtor; and
e. Impossible to foresee or impossible to avoid.

o Fire is not considered a natural disaster or calamity as it arises
almost invariably from some act of man or by human means unless
caused by lightning or by natural disaster or calamity. It may even
be caused by the actual fault or privity of the common carrier.
(Eastern Shipping Lines Inc. vs. IAC, 150 SCRA 469, [1987])

o Mechanical defects are not force majeure if the same was
discoverable by regular and adequate inspections. (Aquino T. &
Hernando, Notes and Cases on the Law on Transportation and
Public Utilities, , R.P. 2004 ed. p.120-122)

B. Act of God
Requisites:
1. The common carrier must have exercised extraordinary diligence
before, during and after the time of the accident;
2. The event must be unforeseen or even if it can be foreseen, it cannot
be avoided;
3. There must have been no undue delay on the part of the common
carrier;


4. The proximate cause must not be committed by the common carrier.

 Fortuitous event must be established to be the proximate cause
of the loss. (Asia Lighterage and Shipping, Inc. v. CA, et al., 409
SCRA, [2003])

Exemption to Liability From Natural Disasters or Calamities:
1. The natural disaster must have been the proximate cause of the loss.
2. It must have been the cause of the loss.
3. The common carrier must have exercised due diligence to prevent or
minimize the damage or loss before, during and after the natural
disaster.
4. The common carrier has not negligently incurred delay in transporting
the goods.

C. Acts of Public Enemy In War
Requisites:
1. The act of the public enemy must have been the proximate and only
cause of the loss; and
2. The common carrier must have exercised due diligence to prevent or
minimize the loss before, during or after the act causing the loss,
deterioration or destruction of the goods (Art. 1739, Civil Code)

D. Act or Omission of the Shipper or Owner of Goods
1. The act or omission of the shipper/owner must have been the sole and
proximate cause of the loss. This is an absolute defense.
2. Contributory Negligence: partial defense. (Art. 1741, Civil Code )

Doctrine of Contributory Negligence
 Failure of a person who has been exposed to injury by the fault or
negligence of another, to use such degree of care for his safety and
protection as ordinarily prudent men would use under the
circumstances. (Rakes v. Atlantic, Gulf and Pacific Co., 7 Phil. 359
[1907])

 The common carrier shall be liable even if the shipper or owner merely
contributed to the loss, destruction or deterioration of the goods, the
proximate cause thereof being the negligence of the common carrier,
the latter shall be liable in damages, which, however, shall be equitably
reduced. (Art. 1741, Civil Code)

E. Character of the Goods or Defects in the Packing or in the Container
▪ That the loss, destruction or deterioration was caused by the character
of the goods or the faulty packing or containers.
▪ Even if the damage should be caused by the inherent defect/character
of the goods, the common carrier must exercise due diligence to
forestall or lessen the loss. (Art. 1742, Civil Code)

o The rule is that if the improper packing is known to the carrier or his
employee or is apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the
resulting damage. (A.F. Sanchez Brokerage Inc. vs. C.A., 447
SCRA 427, [2004])

E. Order or Act of Public Authority
▪ The common carrier is not ipso facto relieved from


liability due to the loss, destruction or deterioration of goods caused by
public authority.

Requisites:
▪ The common carrier must prove that the public authority has the power
to issue the order for the seizure or destruction of the goods.
▪ The common carrier must exercise extraordinary diligence to prevent or
minimize the loss, destruction or deterioration of he goods at the time
of the accident.

o Said public authority must have the power to issue the order (Article
1743, Civil Code). Consequently, where the officer acts without legal
process, the common carrier will be held liable. (Ganzon v. CA 161,
SCRA 646 [1988])

Cases:

REPUBLIC VS. LORENZO SHIPPING LINES (7 FEBRUARY 2005)

Facts: The Republic of the Philippines signed an agreement through the
Department of Health and the Cooperative for American Relief Everywhere,
Inc. (CARE) wherein it would acquire from the US government donations of
Non-Fat Dried Milk and other food products. In turn, the Philippines will
transport and distribute the donated to the intended beneficiaries of the
country. As a result, it entered into a contract of carriage of goods with the
herein respondent. The latter shipped 4,868 bags of non-fat dried milk from
Sept-Dec 1988. The consignee named in the bills was Abdurahman Jama,
petitioner’s branch supervisor in Zamboanga City. Upon reaching the port of
Zamboanga, respondent’s agent, Efren Ruste Shipping Agency unloaded the
said milks. Before each delivery, Rogelio Rizada and Ismael Zamora both
delivery checkers of Efren Ruste requested Abdurahman to surrender the
originals of the Bill of Lading. However, the petitioner alleged that they did not
receive anything and they filed a claim against the herein respondent. The
petitioner contended that the respondents failed to exercise extraordinary
diligence.

Issue: Whether the respondents failed to exercise extraordinary diligence
required by law?

Held The surrender of the Bill of Lading is not a condition precedent for a
common carrier to be discharged of its contractual obligation. If the surrender
is not possible, acknowledgment of the delivery by signing the receipt
suffices. The herein respondent did not even bother to prevent the resignation
of abdurhaman Jama to be utilized as a witness.

CENTRAL SHIPPING CO. VS. INSURANCE CO. (SEPTEMBER 20, 200,
121 SCRA 769)

Facts: On July 25, 1990 at Puerto Princesa, Palawan, the petitioner received
on board its vessel, the M/V Central Bohol, 376 pieces of Round Logs and
undertook to transport said shipment to Manila for delivery to Alaska Lumber
Co., Inc. The cargo is insured for P3, 000, 000.00 against total lost under
respondents MarineCargo Policy.

After loading the logs, the vessel starts its voyage. After few hours of
the trip, the ship tilts 10 degrees to its side, due to the shifting of the logs in


the hold. It continues to tilt causing the captain and the crew to abandon ship.
The ship sank.

Respondent alleged that the loss is due to the negligence and fault of
the captain. While petitioner contends that the happening is due to monsoons
which is unforeseen or casa fortuito.

Issue: Whether or not petitioner is liable for the loss of cargo?

Held: From the nature of their business and for reasons of public policy,
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.

The contention of the petitioner that the loss is due to casa fortuito
exempting them from liability is untenable. 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.

The monsoon is not the proximate cause of the sinking but is due to
the improper stowage of logs. The logs were not secured by cable wires,
causing the logs to shift and later on the sinking the ship. This shows that
they did not exercise extraordinary diligence, making them liable for such
loss.

SWEET LINES INC, VS. CA (121 SCRA 769)

Facts: Herein private respondents purchased first-class tickets from petitioner
at the latter’s office in Cebu City. They were to board M/V Sweet Grace bound
for Catbalogan, Western Samar. Instead of departing at the scheduled hour of
about midnight on July 8, 1972, the vessel set sail at 3:00 am of July 9, 1972
only to be towed back to Cebu due to engine trouble, arriving there on the
same day at about 4:00 pm. The vessel lifted anchor again on July 10, 1972
at around 8:00 am. Instead of docking at Catbalogan (the first port of call), the
vessel proceeded direct to Tacloban. Private respondents had no recourse
but to disembark and board a ferry boat to Catbalogan. Hence, the suit for
breach of contract of carriage.

Issue: Whether or not the mechanical defect constitutes a fortuitous event
which would exempt the carrier from liability.

Held: No. As found by the trial court and the Court of Appeals, there was no
fortuitous event or force majeure which prevented the vessel from fulfilling its
undertaking of taking the private respondents to Catbalogan. In the first place,
mechanical defects in the carrier are not considered a caso fortuito that
exempts the carrier from responsibility. In the second place, even granting


arguendo that the engine failure was a fortuitous event, it accounted on for
the delay of departure. When the vessel finally left the port, there was no
longer any force majeure that justified by-passing a port of call.

EASTERN SHIPPING LINES VS. CA 234 SCRA 7

Facts: On December 4, 1981, two fiber drums of riboflavin were shipped from
Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by
defendant Eastern Shipping Lines under a bill of lading. The shipment was
insured under plaintiff's Marine Insurance Policy. Upon arrival of the shipment
in Manila on December 12, 1981, it was discharged unto the custody of
defendant Metro Port Service, Inc. The latter excepted to one drum, said to
be in bad order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporation received
the shipment from defendant Metro Port Service, Inc., one drum opened and
without seal. On January 8 and 14, 1982, defendant Allied Brokerage
Corporation made deliveries of the shipment to the consignee's warehouse.
The latter excepted to one drum which contained spillages, while the rest of
the contents was adulterated/fake.

Plaintiff contended that due to the losses/damage sustained by said
drum, the consignee suffered losses totaling P19, 032.95, due to the fault and
negligence of defendants. Claims were presented against defendants who
failed and refused to pay the same. As a consequence of the losses
sustained, plaintiff was compelled to pay the consignee P19, 032.95 under
the aforestated marine insurance policy, so that it became subrogated to all
the rights of action of said consignee against defendants.

Issue: Whether or not a claim for damage sustained on a shipment of goods
can be a solidary or joint and several, liability of the common carrier, the
arrastre operator and the customs broker?

Held: The common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for
their acceptance by, the person entitled to receive them (Arts. 1736-1738,
Civil Code). When the goods shipped either are lost or arrive in damaged
condition, a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to hold it
liable (Art. 1735, Civil Code). There are, of course, exceptional cases when
such presumption of fault is not observed but these cases, enumerated in
Article 1734 of the Civil Code, are exclusive, not one of which can be applied
to this case.

As to The question of charging both the carrier and the arrastre
operator with the obligation of properly delivering the goods to the consignee,
the legal relationship between the consignee and the arrastre operator is akin
to that of a depositor and warehouseman while the relationship between the
consignee and the common carrier is similar to that of the consignee and the
arrastre operator. Since it is the duty of the arrastre to take good care of the
goods that are in its custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the carrier. Both the
arrastre and the carrier are therefore charged with the obligation to deliver the
goods in good condition to the consignee. A factual finding of both the
Supreme Court and the appellate court was that there was sufficient evidence


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