TRANSPORTATION LAW | ROSIT, JASMINE ANN A.
2C (FINALS)
B. Safety of Passengers
1. ‘Utmost Diligence’ Required of Common Carriers (Article 1755)
Art. 1755. A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances.
Passengers
• There can be no stipulation lessening the utmost diligence
that is owed to passengers.
• Article 1755 provides that the responsibility to observe
extraordinary or utmost diligence provided for in Article 1733
and 1755 cannot be dispensed with or lessened through
stipulation or posting of notices
1.2 Nocum vs. Laguna Tayabas Bus Company
Facts: Herminio L. Nocum was a passenger in appellant’s Bus No. 120
then making a trip within the barrio of Dita, Municipality of Bay, Laguna,
was injured as a consequence of the explosion of firecrackers,
contained in a box, loaded in said bus and declared to its conductor as
containing clothes and miscellaneous items by a co-passenger. The
injuries suffered by Nocum were not due to mechanical defects but to
the explosion of firecrackers.
Issue: WON the bus company was negligent, hence liable for the
injuries suffered by Nocum.
Held:
No. The Bus Company has succeeded in rebutting the presumption of
negligence by showing that it has exercised extraordinary diligence for
the safety of its passengers, “according to the circumstances of the
(each) case.”
Article 1733 qualifies the extraordinary diligence required of common
carriers for the safety of the passengers transported by them to be
“according to all the circumstances of each case.”
In this case, the circumstance that must be considered in measuring a
common carrier’s duty towards its passengers is the reliance that
should be reposed on the sense of responsibility of all the passengers
in regard to their common safety. It is to be presumed that a passenger
will not take with him anything dangerous to the lives and limbs of his
co-passengers, not to speak of his own. Not to be lightly considered
must be the right to privacy to which each passenger is entitled. He
cannot be subjected to any unusual search, when he protests the
innocuousness of his baggage and nothing appears to indicate the
contrary, as in the case at bar. (Hence, the bus company’s failure to
confiscate the baggage cannot be considered as a negligent act, but in
accord to the circumstance of the case.)
N.B.
Thus, in other jurisdictions, and squarely applicable in the instant case:
There is need for evidence of circumstances indicating cause or
causes for apprehension that the passenger’s baggage is dangerous
and that it is failure of the common carrier’s employee to act in the face
of such evidence that constitutes the cornerstone of the common
carrier’s liability in cases similar to the present one.
1.3 Mecenas vs CA
Facts: M/T Tacloban (barge-type oil tanker) collided with M/V Don Juan
(inter-island vessel carrying 750 passengers). When the collision
occurred, the sea was calm, the weather fair and visibility good. As a
result, M/V Don Juan sank and the passengers perished.
Petitioner was the parent of the passenger who died. They
file an action for damages alleging the negligence of Capt. Santisteban
(captain of Don Juan) and Negros Navigation (owner of Don Juan).
Issue:
1. Who was negligent?
M/V Tacloban was primarily and solely at fault. M/V Don
Juan was also at fault.
Rule 18 of the International Rules of the Road which requires
2 power-driven vessels meeting end on or nearly end on each to alter
her course to starboard so that each vessel may pass on the port side
of each other.
In the case, M/V Tacloban, as held by the report of the
Commandant of the Philippine Coast Guard, failed to follow the Rules.
Hence, she was deemed negligent.
However, route observance of the International Rules of the
Road will not relieve a vessel from responsibility if the collision could
have been avoided by proper skill on her part or even a departure from
the rules.
M/V Don Juan having sighted M/V Tacloban when it was still
a long way off was negligent in failing to take early preventive action
and in allowing the 2 vessels to come into close quarters as to render
the collision inevitable when there was no necessity for passing so
near M/V Tacloban for Don Juan could choose its own distance. It is
noteworthy that M/V Tacloban upon turning hard to port shortly before
the moment of collision, signaled its intention to do so by giving 2 short
blasts with its horn. Don Juan gave no answering horn blast to signal
it's own intention and proceeded to turn hard to starboard.
2. Whether or not Capt. Santisteban and Negros Navigation was
negligent.
Yes. The behavior of the captain -playing mahjong "before
and up to the time of collision" constituted gross negligence. This
behavior is unacceptable on the part of the master of a vessel to
whose hands the lives of at least 750 passengers were entrusted.
It does not matter that the Captain was off-duty or on-duty.
Realistically speaking, there is no such thing as off-duty hours for the
master of the vessel at sea that is a common carrier who is required
extraordinary diligence. Hence, Negros Navigation in permitting or in
failing to discover and correct such behavior is also grossly negligent.
1.4 Negros Navigation Coi., Inc. vs. Court of Appeals
Facts: This case is instituted by the respondents to claim damages for
the death of relatives as a result of the sinking of the petitioner’s
vessel, M/V Don Juan, when it collided with M/T Tacloban City, and oil
tanker in the evening of April 22, 1980. Several passengers perished
in the said tragedy and some of the victims were found and brought to
shore, but the four members of private respondents’ families were
never found.
In answer, petitioner admitted that the relatives of the private
respondents indeed bought tickets and the ticket numbers were listed
in the passenger manifest; however denied that the four relatives of
respondents actually boarded the vessel as that their bodies were
never recovered. Petitioner further averred that the Don Juan was
seaworthy and manned by a full and competent crew, and that the
collision was entirely due to the fault of the crew of the M/TTacloban
City.
The trial court ruled in favour of the respondents and
awarded damages. The appellate court affirmed the decision of the
trial court with modification, hence this petition.
Issues:
Whether the relatives of the respondents were actually
passengers of M/V Don Juan
Whether or not the crew members of petitioner were grossly
negligent of their duties and whether or not the total loss of the M/V
Don Juan extinguished petitioner’s liability
Held:
On the first issue, the court decided that it is improper for
petitioner to even suggest that private respondents’ relatives did not
board the ill-fated vessel and perish in the accident simply because
their bodies were not found. In addition, the private respondents were
able to present a witness that their relatives indeed boarded the vessel
as he was with them during the voyage.
It is also decided that there was grossness in the negligence
of the vessel because it was more than twice as fast as the oil tanker, it
was carrying full complement and passengers, it is equipped with a
working radar that picked up the tankers presence white it was still 2.7
miles away, had it taken seriously its duty of extraordinary diligence, it
could have easily avoided the collision. Don Juan might as well have
avoided the collision even if it had exercised ordinary diligence. It was
also reported that the captain was playing mah-jong at the time of
collision and the officer on watch failed to call the attention of the
captain to the imminent danger facing them.
Lastly, the petitioner is liable to pay damages
notwithstanding the total loss of its ship. The rule is that a ship owner
maybe held liable for injuries to passengers notwithstanding the
exclusively real and hypothecary nature of maritime law if fault be
attributed to the ship owner.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
1.5 Korean Airlines v. CA
Facts: Juanito Lapuz was contracted for employment in Saudi Arabia
through Pan Pacific Recruiting Services, Inc. He was supposed to
leave via Korean Airlines, but was initially listed as a “chance
passenger”. According to Lapuz, he was allowed to check in and was
cleared for departure. When he was on the stairs going to the airplane,
a KAL officer pointed at him and shouted, “Down! Down!” and he was
barred from taking the flight. When he asked for another booking, his
ticket was cancelled. He was unable to report for work and so he lost
his employment. KAL alleged that the agent of Pan Pacific was
informed that there are 2 seats possibly available. He gave priority to
Perico, while the other seat was won by Lapuz through lottery. But
because only 1 seat became available, it was given to Perico. The trial
court adjudged KAL liable for damages. The decision was affirmed by
the Court of Appeals, with modification on the damages awarded.
Issues:
(1) Whether there is already a contract of carriage between KAL and
Lapuz to hold KAL liable for breach of contract
(2) Whether moral and exemplary damages should be awarded, and to
what extent
Held: (1) The status of Lapuz as standby passenger was changed to
that of a confirmed passenger when his name was entered in the
passenger manifest of KAL for its Flight No. KE 903. His clearance
through immigration and customs clearly shows that he had indeed
been confirmed as a passenger of KAL in that flight. KAL thus
committed a breach of the contract of carriage between them when it
failed to bring Lapuz to his destination. A contract to transport
passengers is different in kind and degree from any other contractual
relation. The business of the carrier is mainly with the traveling public.
It invites people to avail themselves of the comforts and advantages it
offers. The contract of air carriage generates a relation attended with a
public duty. Passengers have the 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 discourteous conduct on the part of these employees
toward a passenger gives the latter an action for damages against the
carrier. The breach of contract was aggravated in this case when,
instead of courteously informing Lapuz of his being a "wait-listed"
passenger, a KAL officer rudely shouted "Down! Down!" while pointing
at him, thus causing him embarrassment and public humiliation. The
evidence presented by Lapuz shows that he had indeed checked in at
the departure counter, passed through customs and immigration,
boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In
fact, his baggage had already been loaded in KAL's aircraft, to be
flown with him to Jeddah. The contract of carriage between him and
KAL had already been perfected when he was summarily and
insolently prevented from boarding the aircraft.
(2) The Court of Appeals granted moral and exemplary damages
because:
a. The findings of the court a quo that the defendant-appellant has
committed breach of contract of carriage in bad faith and
in wanton, disregard of plaintiff-appellant's rights as
passenger laid the basis and justification of an award for
moral damages.
b. In the instant case, we find that defendant-appellant Korean Air
Lines acted in a wanton, fraudulent, reckless, oppressive
or malevolent manner when it "bumped off" plaintiff-
appellant on November 8, 1980, and in addition treated
him rudely and arrogantly as a "patay gutom na contract
worker fighting Korean Air Lines," which clearly shows
malice and bad faith, thus entitling plaintiff-appellant to
moral damages.
c. Considering that the plaintiff-appellant's entitlement to moral
damages has been fully established by oral and
documentary evidence, exemplary damages may be
awarded. In fact, exemplary damages may be awarded,
even though not so expressly pleaded in the complaint.
By the same token, to provide an example for the public
good, an award of exemplary damages is also proper.
A review of the record of this case shows that the injury suffered by
Lapuz is not so serious or extensive as to warrant an award of P1.5
million. The assessment of P100,000 as moral and exemplary
damages in his favor is, in our view, reasonable and realistic.
1.6 Gatchalian vs Delim
FACTS: Petitioner Reynalda Gatchalian boarded, as a paying
passenger, respondent's "Thames" mini bus at a point in San Eugenio,
Aringay, La Union, bound for Bauang, of the same province. On the
way, while the bus was running along the highway in Barrio Payocpoc,
Bauang, Union, "a snapping sound" was suddenly heard at one part of
the bus and, shortly thereafter, the vehicle bumped a cement flower pot
on the side of the road, went off the road, turned turtle and fell into a
ditch. Several passengers, including petitioner Gatchalian, were
injured. They were promptly taken to Bethany Hospital at San
Fernando, La Union, for medical treatment. Upon medical examination,
petitioner was found to have sustained physical injuries on the leg, arm
and forehead.
While injured. passengers were confined in the hospital, Mrs.
Adela Delim, wife of respondent, visited them and later paid for their
hospitalization and medical expenses. She also gave petitioner P12.00
with which to pay her transportation expense in going home from the
hospital. However, before Mrs. Delim left, she had the injured
passengers, including petitioner, sign an already prepared Joint
Affidavit which stated, among other things:
That we are no longer interested to file a complaint, criminal or civil
against the said driver and owner of the said Thames, because it was
an accident and the said driver and owner of the said Thames have
gone to the extent of helping us to be treated upon our injuries.
It was also stated in the affidavit that after the investigation,
the cause of the accident was a mechanical defect. Notwithstanding
the document, petitioner Gathalian filed with the then Court of First
Instance of La Union an action extra contractu to recover
compensatory and moral damages. She alleged in the complaint that
her injuries sustained from the vehicular mishap had left her with a
conspicuous white scar measuring 1 by 1/2 inches on the forehead,
generating mental suffering and an inferiority complex on her part; and
that as a result, she had to retire in seclusion and stay away from her
friends. She also alleged that the scar diminished her facial beauty and
deprived her of opportunities for employment. She prayed for an award
of: P10,000.00 for loss of employment and other opportunities;
P10,000.00 for the cost of plastic surgery for removal of the scar on her
forehead; P30,000.00 for moral damages; and P1,000.00 as attorney's
fees.
Respondent averred that the mishap was due to force
majeure, that petitioner had already been paid and she waived any
right of action on the basis of the joint affidavit.
ISSUE: Was there a valid waiver of petitioner’s right of action against
the common carrier
HELD: NO. what is involved here is the liability of a common carrier for
injuries sustained by passengers in respect of whose safety a common
carrier must exercise extraordinary diligence, we must construe any
such purported waiver most strictly against the common carrier. For a
waiver to be valid and effective, it must not be contrary to law, morals,
public policy or good customs.
We agree with the majority of the Court of Appeals who held that no
valid waiver of her cause of action had been made by petitioner. The
relevant language of the Joint Affidavit may be quoted again:
That we are no longer interested to file a complaint, criminal or civil
against the said driver and owner of the said Thames, because it was
an accident and the said driver and owner of the said Thames have
gone to the extent of helping us to be treated upon our injuries.
(Emphasis supplied)
A waiver, to be valid and effective, must in the first place be couched in
clear and unequivocal terms which leave no doubt as to the intention of
a person to give up a right or benefit which legally pertains to him. 4 A
waiver may not casually be attributed to a person when the terms
thereof do not explicitly and clearly evidence an intent to abandon a
right vested in such person.
1.7 Yrasuegui vs. Philippine Airlines
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Facts: Petitioner Yrasuegui, an international flight steward of Philippine
Airlines Inc. (PAL) was dismissed because of his failure to adhere to
the weight standards of the airline company.
In consequence thereof, petitioner filed a complaint for illegal
dismissal against PAL before the Labor Arbiter (LA). Te Labor Arbiter
ruled that the petitioner was illegally dismissed. It also issued a writ of
execution directing the reinstatement of the petitioner without loss of
seniority and other benefits, and also the payment of backwages.
Respondent PAL appealed to the NLRC which affirmed the LA’s
decision. Respondent PAL appealed to the Court of Appeals. CA
reversed the NLRC case.
Issue:
Was the dismissal of the petitioner valid?
Held: Yes. The Court upheld the legality of the petitioner’s dismissal.
Separation pay, however, should be awarded in favor of the employee
as an act of social justice or based on equity. This is so because his
dismissal is not serious misconduct. Neither is it reflective of his moral
character.
The obesity of petitioner, when placed in the context of his
work as flight attendant, becomes an analogous cause under Article
282 (e) of the Labor ode. His obesity may not be unintended, but is
nonetheless voluntary. “Voluntariness basically means that the just
cause is solely attributable to the employee without any external force
influencing or controlling his actions. This element runs through all just
causes under Art. 282, whether they be in nature of a wrongful action
or omission. Gross and habitual neglect, a recognized just cause, is
considered voluntary although it lacks the element of intent found in
Art. 282 (a), (c), and (d).
Employment in particular jobs may not be limited to persons
of a particular sex, religion, or national origin unless the employer can
show that sex, religion, or national origin is an actual qualification for
performing the job. The qualification is called a bona fide occupational
[55]
qualification (BFOQ). In the United States, there are a few federal
and many state job discrimination laws that contain an exception
allowing an employer to engage in an otherwise unlawful form of
prohibited discrimination when the action is based on a BFOQ
necessary to the normal operation of a business or enterprise.
Argument that BFQQ is a statutory defense must fail.
Petitioner contends that BFOQ is a statutory defense. It
]
does not exist if there is no statute providing for it. Further, there is no
existing BFOQ statute that could justify his dismissal.
First, the Constitution, the Labor Code, and RA No. 7277 or
the Magna Carta for Disabled Persons contain provisions similar to
BFOQ.
Second, in British Columbia Public Service Employee
Commission (BSPSERC) v. The British Columbia Government and
Service Employee’s Union (BCGSEU), the Supreme Court of Canada
adopted the so-called “Meiorin Test” in determining whether an
employment policy is justified. Under this test, (1) the employer must
show that it adopted the standard for a purpose rationally connected to
the performance of the job; (2) the employer must establish that the
standard is reasonably necessary to the accomplishment of that work-
related purpose; and (3) the employer must establish that the standard
is reasonably necessary in order to accomplish the legitimate work-
related purpose. Similarly, in Star Paper Corporation v. Simbol, this
Court held that in order to justify a BFOQ, the employer must prove
that (1) the employment qualification is reasonably related to the
essential operation of the job involved; and (2) that there is factual
basis for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the job.
In short, the test of reasonableness of the company policy is
used because it is parallel to BFOQ. BFOQ is valid
“provided it reflects an inherent quality reasonably necessary for
satisfactory job performance.”
The weight standards of PAL are reasonable. A common
carrier, from the nature of its business and for reasons of public policy,
is bound to observe extraordinary diligence for the safety of the
passengers it transports.
Petitioner is entitled to separation pay, even if terminated for just
cause. Exceptionally, separation pay is granted to a legally dismissed
employee as an act of “social justice”, or based on “equity”. Provided
the dismissal:
(1) Was not for serious misconduct;
(2) Does not conduct on the moral character of the employee
Thus, he was granted separation pay equivalent to one-half (1/2)
month’s pay for every year of service.
1.8 Sps. Viloria vs. Continental Airlines
Facts: On or about July 21, 1997 and while in the United States,
Fernando purchased for himself and his wife, Lourdes, two (2) round
trip airline tickets from San Diego, California to Newark, New Jersey on
board Continental Airlines. Fernando purchased the tickets at
US$400.00 each from a travel agency called “Holiday Travel” and was
attended to by a certain Margaret Mager (Mager). According to
Spouses Viloria, Fernando agreed to buy the said tickets after Mager
informed them that there were no available seats at Amtrak, an
intercity passenger train service provider in the United States.
Subsequently, Fernando requested Mager to reschedule their flight to
Newark to an earlier date or August 6, 1997. Mager informed him that
flights to Newark via Continental Airlines were already fully booked and
offered the alternative of a round trip flight via Frontier Air.
As he was having second thoughts on traveling via Frontier
Air, Fernando went to the Greyhound Station where he saw an Amtrak
station nearby. Fernando made inquiries and was told that there are
seats available and he can travel on Amtrak anytime and any day he
pleased. Fernando then purchased two (2) tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and
confronted Mager with the Amtrak tickets, telling her that she had
misled them into buying the Continental Airlines tickets by
misrepresenting that Amtrak was already fully booked. Fernando
reiterated his demand for a refund but Mager was firm in her position
that the subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to
CAI on February 11, 1998, demanding a refund and alleging that
Mager had deluded them into purchasing the subject tickets.
In a letter dated June 21, 1999, Fernando demanded for the
refund of the subject tickets as he no longer wished to have them
replaced. In addition to the dubious circumstances under which the
subject tickets were issued, Fernando claimed that CAI’s act of
charging him with US$1,867.40 for a round trip ticket to Los Angeles,
which other airlines priced at US$856.00, and refusal to allow him to
use Lourdes’ ticket, breached its undertaking under its March 24, 1998
letter.
On September 8, 2000, Spouses Viloria filed a complaint
against CAI, praying that CAI be ordered to refund the money they
used in the purchase of the subject tickets with legal interest from July
21, 1997 and to payP1,000,000.00 as moral damages, P500,000.00 as
exemplary damages and P250,000.00 as attorney’s fees.
Issue:
Does a principal-agent relationship exist between CAI and
Holiday Travel? Assuming that an agency relationship exists between
CAI and Holiday Travel, is CAI bound by the acts of Holiday Travel’s
agents and employees such as Mager?
Doctrine and Held: Contrary to the findings of the CA, all the elements
of an agency exist in this case. The first and second elements are
present as CAI does not deny that it concluded an agreement with
Holiday Travel, whereby Holiday Travel would enter into contracts of
carriage with third persons on CAI’s behalf. The third element is also
present as it is undisputed that Holiday Travel merely acted in a
representative capacity and it is CAI and not Holiday Travel who is
bound by the contracts of carriage entered into by Holiday Travel on its
behalf. The fourth element is also present considering that CAI has not
made any allegation that Holiday Travel exceeded the authority that
was granted to it. In fact, CAI consistently maintains the validity of the
contracts of carriage that Holiday Travel executed with Spouses Viloria
and that Mager was not guilty of any fraudulent misrepresentation.
That CAI admits the authority of Holiday Travel to enter into contracts
of carriage on its behalf is easily discernible from its February 24, 1998
and March 24, 1998 letters, where it impliedly recognized the validity of
the contracts entered into by Holiday Travel with Spouses Viloria.
When Fernando informed CAI that it was Holiday Travel who issued to
them the subject tickets, CAI did not deny that Holiday Travel is its
authorized agent.
This Court cannot therefore allow CAI to take an altogether
different position and deny that Holiday Travel is its agent without
condoning or giving imprimatur to whatever damage or prejudice that
may result from such denial or retraction to Spouses Viloria, who relied
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
on good faith on CAI’s acts in recognition of Holiday Travel’s authority.
Estoppel is primarily based on the doctrine of good faith and the
avoidance of harm that will befall an innocent party due to its injurious
reliance, the failure to apply it in this case would result in gross travesty
20
of justice. Estoppel bars CAI from making such denial.
nd
2 Issue
A prior determination of the nature of the passenger’s cause
of action is necessary. If the passenger’s cause of action against the
airline company is premised on culpa aquiliana or quasi-delict for a tort
committed by the employee of the airline company’s agent, there must
be an independent showing that the airline company was at fault or
negligent or has contributed to the negligence or tortuous conduct
committed by the employee of its agent. The mere fact that the
employee of the airline company’s agent has committed a tort is not
sufficient to hold the airline company liable. There is no vinculum
juris between the airline company and its agent’s employees and the
contractual relationship between the airline company and its agent
does not operate to create a juridical tie between the airline company
and its agent’s employees. Article 2180 of the Civil Code does not
make the principal vicariously liable for the tort committed by its agent’s
employees and the principal-agency relationship per se does not make
the principal a party to such tort; hence, the need to prove the
principal’s own fault or negligence.
On the other hand, if the passenger’s cause of action for
damages against the airline company is based on contractual breach
or culpa contractual, it is not necessary that there be evidence of the
airline company’s fault or negligence. All that he has to prove is the
existence of the contract and the fact of its non-performance by the
carrier.”
It is incumbent upon Spouses Viloria to prove that CAI
exercised control or supervision over Mager by preponderant evidence.
The existence of control or supervision cannot be presumed and CAI is
under no obligation to prove its denial or nugatory assertion.
Therefore, without a modicum of evidence that CAI exercised control
over Holiday Travel’s employees or that CAI was equally at fault, no
liability can be imposed on CAI for Mager’s supposed
misrepresentation.
CONCLUSION
CAI’s liability for damages for its refusal to accept Lourdes’
ticket for the purchase of Fernando’s round trip ticket is offset by
Spouses Viloria’s liability for their refusal to pay the amount, which is
not covered by the subject tickets. Moreover, the contract between
them remains, hence, CAI is duty bound to issue new tickets for a
destination chosen by Spouses Viloria upon their surrender of the
subject tickets and Spouses Viloria are obliged to pay whatever
amount is not covered by the value of the subject tickets.
Another consideration that militates against the propriety of
holding CAI liable for moral damages is the absence of a showing that
the latter acted fraudulently and in bad faith. Article 2220 of the Civil
Code requires evidence of bad faith and fraud and moral damages are
generally not recoverable in culpa contractual except when bad faith
48
had been proven. The award of exemplary damages is likewise not
warranted. Apart from the requirement that the defendant acted in a
wanton, oppressive and malevolent manner, the claimant must prove
his entitlement to moral damages
1.9 Emergency Rule
“Thus, it was held that "where a carrier's employee is confronted with a
sudden emergency, the fact that he is obliged to act quickly and
without a chance for deliberation must be taken into account, and he is
held to the some degree of care that he would otherwise be required to
exercise in the absence of such emergency but must exercise only
such care as any ordinary prudent person would exercise under like
circumstances and conditions, and the failure on his part to exercise
the best judgement the case renders possible does not establish lack
of care and skill on his part which renders the company, liable. . . . “
A.L. Ammen
Isaac v. A.L Ammen Transportation Co.
FACTS: Plaintiff boarded a bus of defendant as paying passenger from
Ligao, Albay, bound for Pili, Camarines Sur, but before reaching his
destination, the bus collided with a pick-up car which was coming from
the opposite direction and, as a result, his left arm was completely
severed and fell inside the back part of the bus. Plaintiff filed an action
for damages against the bus company, alleging that the collision and
the injury he obtained were mainly due to the gross incompetence and
recklessness of the driver employed by the bus company.
ISSUE: Has defendant observed extraordinary diligence in avoiding the
collision which resulted in the injury caused to the plaintiff? – YES
HELD: The Court made the ff. restatement of the principles governing
the liability of a common carrier:
(1) the liability of a carrier is contractual and arises upon breach of its
obligation. There is breach if it fails to exert extraordinary diligence
according to all the circumstances of each case;
(2) a carrier is obliged to carry its passenger with the utmost diligence
of a very cautious person, having due regard for all the circumstances;
(3) a carrier is presumed to be at fault or to have acted negligently in
case of death of, or injury to, passengers, it being its duty to prove that
it exercised extraordinary diligence; and
(4) the carrier is not an insurer against all risks of travel.
The Court upheld the finding of the lower court that the bus
driver has done what a prudent man could have done to avoid the
collision, as he was driving at a moderate speed and was even able to
swerve the bus to the extreme right of the road, but the pick-up car still
hit the bus. This relieves the bus company from liability.
The Court also found that the plaintiff was guilty of
contributory negligence, for when he boarded the bus in question, he
seated himself on the left side thereof resting his left arm on the
window sill but with his left elbow outside the window, this being his
position in the bus when the collision took place. It is for this reason
that the collision resulted in the severance of said left arm from the
body of the plaintiff thus doing him a great damage.
It is true that such contributory negligence cannot relieve appellee
of its liability but will only entitle it to a reduction of the amount of
damage caused (Article 1762, new Civil Code), but this is a
circumstance which further militates against the position taken by
appellant in this case.
"It is the prevailing rule that it is negligence per se for a
passenger on a railroad voluntarily or inadvertently to
protrude his arm, hand, elbow, or any other part of his body
through the window of a moving car beyond the outer edge
of the window or outer surface of the car, so as to come in
contact with object? or obstacles near the track, and that no
recovery can be had for an injury which but for such
negligence would not have been sustained. * * *" (10 C. J.
1139)
2. Doctrine of Last Clear Chance; Applicability
Doctrine –
• When both parties involved in the accident were both
negligent, the negligence of the party will not be
considered the proximate cause if the other party has
the last clear chance of avoiding the injury
• Not be applicable if the case is between a passenger
and the carrier and the concurrent negligence of the
carrier and a third party are the proximate causes of the
injury
2.1 Philippine Rabbit Bus Lines, Inc. vs. IAC
DOCTRINE: (1) The principle of "the last clear" chance is applicable in
a suit between the owners and drivers of the two colliding vehicles. It
does not arise where a passenger demands responsibility from the
carrier to enforce its contractual obligations. For it would be inequitable
to exempt the negligent driver and its owners on the ground that the
other driver was likewise guilty of negligence.
(2)In culpa contractual, the moment a passenger dies or is injured, the
carrier is presumed to have been at fault or to have acted negligently,
and this disputable presumption may only be overcome by evidence
that he had observed extra-ordinary diligence as prescribed in Articles
1733, 1755 and 1756 of the New Civil Code or that the death or injury
of the passenger was due to a fortuitous event.
(3) The driver cannot be held jointly and severally liable with the carrier
in case of breach of the contract of carriage. Firstly, the contract of
carriage is between the carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively responsible to the
passenger, even if such breach be due to the negligence of his driver.
In other words, the carrier can neither shift his liability on the contract
to his driver nor share it with him, for his driver's negligence is his.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Secondly, that would make the carrier's liability personal instead of
merely vicarious and consequently, entitled to recover only the share
which corresponds to the driver contradictory to the explicit provision of
Article 2181 of the New Civil Code.
FACTS: At 11am on December 24, 1966, Catalina Pascua, Caridad
Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo,
Alejandro Morales and Zenaida Parejas boarded the jeepney owned by
spouses Isidro Mangune and Guillerma Carreon and driven by
Tranquilino Manalo at Dau, Mabalacat, Pampanga bound for Carmen,
Rosales, Pangasinan to spend Christmas with their families for P
24.00. Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right
rear wheel of the jeepney detached causing it to run in an unbalanced
position. Driver Manalo stepped on the brake, causing the jeepney to
make a U-turn, invading and eventually stopping on the opposite lane
of the road (the jeepney's front faced the south (from where it came)
and its rear faced the north (towards where it was going)). The jeepney
occupied and blocked the greater portion of the western lane, which is
the right of way of vehicles coming from the north.
Petitioner Phil. Rabbit Bus Lines claims that almost immediately after
the sudden U-turn the bus bumped the right rear portion of the jeep.
Defendants, on the other hand, claim that the bus stopped a few
minutes before hitting the jeepney. Either way, as a result of the
collision, three passengers of the jeepney (Catalina Pascua, Erlinda
Meriales and Adelaida Estomo) died while the other jeepney
passengers sustained physical injuries.
A criminal complaint was filed against the two drivers for Multiple
Homicide. The case against delos Reyes (driver of Phil. Rabbit) was
dismissed for insufficieny of evidence. Manalo (jeepney driver),
however, was convicted and sentenced to suffer imprisonment.
3 complaints for recovery of damages were then filed before the CFI of
Pangasinan. (1) Spouses Casiano Pascua and Juana Valdez sued as
heirs of Catalina Pascua while Caridad Pascua sued in her behalf
Court of First Instance of Pangasinan. (2) Spouses Manuel Millares
and Fidencia Arcica sued as heirs of Erlinda Meriales. And (3) spouses
Mariano Estomo and Dionisia Sarmiento sued as heirs of Adelaida
Estomo. All three cases impleaded spouses Mangune and Carreon,
Manalo (jeepney owners), Rabbit and delos Reyes as defendants.
Plaintiffs anchored their suits against spouses Mangune and Carreon
and Manalo on their contractual liability. As against Rabbit and delos
Reyes, plaintiffs based their suits on their culpability for a quasi-delict.
Filriters Guaranty Assurance Corporation, Inc. was also impleaded as
additional defendant in the first case only.
The trial court ruled in favour of then plaintiffs, finding defendants
negligent and having breached the contract of carriage with their
passengers and ordering them, jointly and severally, to pay the
plaintiffs damages.
The IAC reversed the ruling of the trial court, applying primarily (1) the
doctrine of last clear chance, (2) the presumption that drivers who
bump the rear of another vehicle guilty and the cause of the accident
unless contradicted by other evidence, and (3) the substantial factor
test (which concluded that bus driver delos Reyes, NOT jeepney driver
Manalo, was negligent).
Issue: Who are liable for the death and injuries of the passenger? -
Trial court decision reinstated with modification. Only Isidro Mangune,
Guillerma Carreon and Filriters Guaranty Assurance Corporation, Inc.
are liable to the victims or their heirs.
RATIO:
(1) The principle of "the last clear" chance is applicable in a suit
between the owners and drivers of the two colliding vehicles.
It does not arise where a passenger demands responsibility
from the carrier to enforce its contractual obligations. For it
would be inequitable to exempt the negligent driver of the
jeepney and its owners on the ground that the other driver
was likewise guilty of negligence.
(2) The IAC erred in applying the presumption that the driver
who bumps the rear of another vehicle is guilty and the
cause of the accident, unless contradicted by other
evidence. This presumption is based on the responsibility
given to a rear vehicle of avoiding a collision with the front
vehicle for it is the rear vehicle who has full control of the
situation as it is in a position to observe the vehicle in front of
it. Such presumption is rebutted by the evidence that shows
that the jeepney, which was then traveling on the eastern
shoulder, making a straight, skid mark of approximately 35
meters, crossed the eastern lane at a sharp angle, making a
skid mark of approximately 15 meters from the eastern
shoulder to the point of impact. (Basically, the U-turn was
sudden and delos Reyes could not have reasonably
anticipated it even though he was the rear vehicle)
(3) Likewise, the bus cannot be made liable under the
substantial factor test (that if the actor's conduct is a
substantial factor in bringing about harm to another, the fact
that the actor neither foresaw nor should have foreseen the
extent of the harm or the manner in which it occurred does
not prevent him from being liable). Contrary to the findings of
the appellate court, the bus was travelling within the speed
limit allowed in highways. He also had only a few seconds to
react to the situation. To require delos Reyes to avoid the
collision is to ask too much from him. Aside from the time
element involved, there were no options available to him to
have avoided the collision.
The proximate cause of the accident was the negligence of jeepney
driver Manalo and spouses Mangune and Carreon. They all failed to
exercise the precautions that are needed precisely pro hac vice.
In culpa contractual, the moment a passenger dies or is injured, the
carrier is presumed to have been at fault or to have acted negligently,
and this disputable presumption may only be overcome by evidence
that he had observed extra-ordinary diligence as prescribed in Articles
1733, 1755 and 1756 of the New Civil Code or that the death or injury
of the passenger was due to a fortuitous event.
The negligence of Manalo was proven during the trial by the
unrebutted testimonies of Caridad Pascua, the police who arrived on
the scene, his (Manalo's) conviction and the application of the doctrine
of res ipsa loquitur supra. Spouses Mangune and Carreon alleged that
their mechanic regularly maintains the jeepney and on the day before
the collision, the mechanic actually checked the vehicle and even
tightened the bolts, thus the incident was caused by a caso fortuito.
The SC upheld the trial court’s findings that "in an action for damages
against the carrier for his failure to safely carry his passenger to his
destination, an accident caused either by defects in the automobile or
through the negligence of its driver, is not a caso fortuito which would
avoid the carriers’ liability.
The SC modified the decision holding spouses Mangune and Carreon
jointly and severally liable with Manalo. The driver cannot be held
jointly and severally liable with the carrier in case of breach of the
contract of carriage. Firstly, the contract of carriage is between the
carrier and the passenger, and in the event of contractual liability, the
carrier is exclusively responsible to the passenger, even if such breach
be due to the negligence of his driver. In other words, the carrier can
neither shift his liability on the contract to his driver nor share it with
him, for his driver's negligence is his. Secondly, that would make the
carrier's liability personal instead of merely vicarious and consequently,
entitled to recover only the share which corresponds to the driver
contradictory to the explicit provision of Article 2181 of the New Civil
Code.
2.2 Bustamante vs. Court of Appeals
Facts: At about 6:30 in the morning of April 20, 1983, a collision
occurred between a gravel and sand truck, with Plate No. DAP 717,
and a Mazda passenger bus with Motor No. Y2231 and Plate No. DVT
259 along the national road at Calibuyo, Tanza, Cavite. The front left
side portion (barandilla) of the body of the truck sideswiped the left side
wall of the passenger bus, ripping off the said wall from the driver’s
seat to the last rear seat. Due to the impact, several passengers of the
bus were thrown out and died as a result of the injuries they sustained.
The trial court held that the negligent acts of both drivers
contributed to or combined with each other in directly causing the
accident which led to the death of the passengers. It could not be
determined from the evidence that it was only the negligent act of one
of them which was the proximate cause of the collision. In view of this,
the liability of the two drivers for their negligence must be solidary. The
Court of Appeals ruled on the contrary, it held that the bus driver had
the last clear chance to avoid the collision and his reckless negligence
in proceeding to overtake the hand tractor was the proximate cause of
the collision.
Issue:
Whether or not the Doctrine of Last Clear Chance applies in the case
at bar.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Ruling: The principle of “last clear chance” applies “in a suit between
the owners and drivers of colliding vehicles. It does not arise where a
passenger demands responsibility from the carrier to enforce its
contractual obligations. For it would be inequitable to exempt the
negligent driver of the jeepney and its owners on the ground that the
other driver was likewise guilty of negligence.” Furthermore, as
between defendants: The doctrine cannot be extended into the field of
joint tortfeasors as a test of whether only one of them should be held
liable to the injured person by reason of his discovery of the latter’s
peril, and it cannot be invoked as between defendants concurrently
negligent. As against third persons, a negligent actor cannot defend by
pleading that another had negligently failed to take action which could
have avoided the injury. The Court is convinced that the respondent
Court committed an error of law in applying the doctrine of last clear
chance as between the defendants, since the case at bar is not a suit
between the owners and drivers of the colliding vehicles but a suit
brought by the heirs of the deceased passengers against both owners
and drivers of the colliding vehicles. Therefore, the respondent court
erred in absolving the owner and driver of the cargo truck from liability.
2.3 Maritime Collision
So, under the English rule which conforms very nearly to the common-
law rule as applied in the American courts, it has been held that the
fault of the first vessel in failing to exhibit proper lights or to take the
proper side of the channel will relieve from liability one who negligently
runs into such vessels before he sees it; although it will not be a
defense to one who, having timely warning of the danger of collision,
fails to use proper care to avoid it.
3. Accommodation Passenger
3.1 Lara vs. Valencia
FACTS: Lara was an inspector for the Bureau of Forestry. The
defendant is engaged in the business of exporting logs from his lumber
concession in Cotabato. Lara went to said concession upon
instructions of his chief to classify the logs of defendant which were
about to be loaded on a ship anchored in the port of Parang. The work
of Lara lasted for six days during which he contracted malaria fever.
On a later date, Lara who then in a hurry to return to Davao asked
defendant if he could if he could take him in his pick-up as there was
then no other means of transportation, to which defendant agree, and
in that same morning the pick-up left Parang bound for Davao taking
along six passengers, including Lara.
The pick-up has a front seat where the driver and two passengers
can be accommodated and the back has a steel flooring enclosed with
a steel walling of 16 to 17 inches tall on the sides and with a 19 inches
tall walling at the back. In the middle Lara sat on a bag. Before
leaving, Parang, defendant invited Lara to sit with him on the front seat
but Lara declined. It was their understanding that upon reaching
barrio Samoay, Cotabato, the passengers would alight and take a
passenger bus bound for Davao, but when they arrived at that place,
only one alighted and the other passengers requested defendant to
allow them to ride with him up to Davao because there was then no
available bus that they could take in going to that place. Defendant
again accommodated the passengers.
When they continued their trip, the sitting arrangement of the
passengers remained the same, Lara being seated on a bag in the
middle with his arms on a suitcase and his head covered by a jacket.
Upon reaching Km. 96, barrio Catidtuan, Lara accidentally fell from the
pick-up and as a result he suffered serious injuries. Valencia stopped
the pick-up to see what happened to Lara. He sought the help of the
residents of that place and applied water to Lara but to no avail. They
brought Lara to the nearest place where they could find a doctor and
not having found any they took him to St. Joseph’s clinic of Kidapwan.
But when Lara arrived, he was already dead. From there they
proceeded to Davao City and immediately notified the local authorities.
ISSUES & ARGUMENTS
• W/N defendant is duty bound to exercise extraordinary diligence
as required of a common carrier by our law?
HOLDING & RATIO DECIDENDI
No. Defendant is only required to observe ordinary care, and is not in
duty bound to exercise extraordinary diligence
It therefore appears that the deceased, as well his
companions who rode in the pick-up of defendant, were merely
accommodation passengers who paid nothing for the service and so
they can be considered as invited guests within the meaning of the law.
As accommodation passengers or invited guests, defendant as owner
and driver of the pick-up owes to them merely the duty to exercise
reasonable care so that they may be transported safely to their
destination. Thus, "The rule is established by the weight of authority
that the owner or operator of an automobile owes the duty to an invited
guest to exercise reasonable care in its operation, and not
unreasonably to expose him to danger and injury by increasing the
hazard of travel. This rule, as frequently stated by the courts, is that an
owner of an automobile owes a guest the duty to exercise ordinary or
reasonable care to avoid injuring him. Since one riding in an
automobile is no less a guest because he asked for the privilege of
doing so, the same obligation of care is imposed upon the driver as in
the case of one expressly invited to ride" (5 Am. Jur., 626-627).
Defendant, therefore, is only required to observe ordinary care, and is
not in duty bound to exercise extraordinary diligence as required of a
common carrier by our law (Articles 1755 and 1756, new Civil Code).
3.2 Distinguished from Gratuitous Passenger and Discounted
Passenger
The parties in a contract of passengers are the common carrier and the
passenger. A passenger is defined as 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
Grautuitous or reduced fare – A passenger is still considered as a
passenger even if he is being carried gratuitously or under a reduced
fare. Subject to the rule in Article 1758 which provides that when a
passenger is carried gratuitously, a stipulation limiting the common
carrier’s liability for negligence is valid.
4. Caveat Vlator; Carrier Not Insurer Against All Risks of Travel;
Exception
Passengers must take such risks incident to the mode of travel.
Carriers are not insurers of the lives of their passengers. Thus, in air
travel, adverse weather conditions or extreme climatic changes are
some of the perils involved in air travel, the consequences of which the
passenger must assume or expect.
No assumption of risk
• In case the passenger voluntarily boarded a carrier that was
filled to capacity
• There is also no assumption of risk by the mere fact that the
carrier posted notices against such liability
4.1 Japan Airlines vs. Court of Appeals
Facts: Private respondents boarded the JAL flights to Manila with a
stop over at Narita Japan at the airlines' expense. Upon arrival at
Narita private respondents were billeted at Hotel Nikko Narita for the
night. The next day, private respondents went to the airport to take
their flight to Manila. However, due to the Mt. Pinatubo eruption
rendered NAIA inaccessible to airline traffic. Hence, private
respondents' trip to Manila was cancelled indefinitely. JAL then booked
another flight fort the passengers and again answered for the hotel
accommodations but still the succeeding flights were cancelled.
Issue: Whether or not JAL was obligated to answer for the
accommodation expenses due to the force majeure.
Held: No, there is no question that when a party is unable to fulfill his
obligation because of "force majeure," the general rule is that he
cannot be held liable for damages for non- performance. Corollarily,
when JAL was prevented from resuming its flight to Manila due to the
effects of Mt. Pinatubo eruption, whatever losses or damages in the
form of hotel and meal expenses the stranded passengers incurred,
cannot be charged to JAL. Yet it is undeniable that JAL assumed the
hotel expenses of respondents for their unexpected overnight stay on
June 15, 1991.
It has been held that airline passengers must take such risks incident
to the mode of travel. In this regard, adverse weather conditions or
extreme climatic changes are some of the perils involved in air travel,
the consequences of which the passenger must assume or expect.
While JAL was no longer required to defray private respondents' living
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
expenses during their stay in Narita on account of the fortuitous event,
JAL had the duty to make the necessary arrangements to transport
private respondents on the first available connecting flight to Manila.
Petitioner JAL reneged on its obligation to look after the comfort and
convenience of its passengers when it declassified private respondents
from "transit passengers" to "new passengers" as a result of which
private respondents were obliged to make the necessary arrangements
themselves for the next flight to Manila.
4.2 Japan Airlines v. Asuncion
FACTS: Michael and Jeannete boarded a Japan Airlines plane bound
for Los-Angeles. As they have a stop-over in Narita, they decided to
stay at the Hotel Nikko-Narita. An airline staff endorsed their
application for shore pass, which is required of foreigners if they intend
to stay for not more than 72 hours.
During the interview of Michael conducted by the Japanse
immigration official, the later noticed that his height seemed to be
shorter than that indicated in his passport. Their application for shore
passes were denied, and they were escorted to the Narita Airport Rest
House to be billeted overnight. They were made to stay at the hotel
until their departure the next day to Los Angeles. They were also billed
US400.00 each for their stay and security service and meals.
Michael and Jeannete filed a case for damages against Japan Airlines,
alleging that JAL did not fully apprise them of their travel requirements
and they rudely and forcibly detained while at Narita.
JAL on the other hand contended that the denial of the shore
passes of Michale and Jeannete by the immigration agency of Japan
was an act of state over which they have no control. JAL also cannot
impose upon the authorities not ti billet them at the Narita Aiport Rest
House.
After trial at the Regional Trial Court, the court found JAL liable for
damages. The Court of Appeals also sustained the ruling.
ISSUE:
WoN the airline may be held liable for the denial of the shore passes of
Michael and Jeanette?
HELD:
“Under Article 1755 of the Civil Code, a common carrier such as JAL is
bound to carry its passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances. When an airline
issues a ticket to a passenger, confirmed for a particular flight on a
certain date, a contract of carriage arises. The passenger has every
right to expect that he be transported on that flight and on that date and
it becomes the carrier’s obligation to carry him and his luggage safely
to the agreed destination.10 If the passenger is not so transported or if
in the process of transporting he dies or is injured, the carrier may be
held liable for a breach of contract of carriage.11
We find that JAL did not breach its contract of carriage with
respondents. It may be true that JAL has the duty to inspect whether its
passengers have the necessary travel documents, however, such duty
does not extend to checking the veracity of every entry in these
documents. JAL could not vouch for the authenticity of a passport and
the correctness of the entries therein. The power to admit or not an
alien into the country is a sovereign act which cannot be interfered with
even by JAL. This is not within the ambit of the contract of carriage
entered into by JAL and herein respondents. As such, JAL should not
be faulted for the denial of respondents’ shore pass applications.”
4.3 Necesito v. Paras
FACTS: Civil Code: ART. 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard
for the all the circumstances.
Severina Garces and her son Precillano Necesito boarded a
passenger truck of the Philippine Rabbit bus lines driven by Francisco
Bandonell. The truck entered a wooden bridge, but the front wheels
swerved to the right.
The driver lost control, and after wrecking the bridge’s
wooden rails, the truck fell on its right side into a creek where water
was abreast deep. Garces died due to drowning while Necesito
suffered injuries.
Two actions for damages and attorney’s fees totalling over
Php 85,000 were filed with the Tarlac CFI against the carrier. The
carrier pleaded that the accident was due to “engine or mechanical
trouble” independent or beyond the control of the defendants or of the
driver Bandonell.
The trial court found that the bus was proceeding slowly due
to the bad condition of the road and that accident was due to the
fracture of the truck’s right steering knuckle which could not be known
by the carrier. Thus, it dismissed the complaints holding that the
accident was exclusively due to fortuitous events.
ISSUE:
WoN the carrier is liable for the manufacturing defect of the steering
knucle, and whether the evidence discloses that in regard thereto the
carrier exercised the diligence required by law
HELD: YES. while the carrier is not an insurer of the safety of the
passengers, a passenger is entitled to recover damages from a carrier
for an injury resulting from a defect in an appliance purchased from a
manufacturer, whenever it appears that the defect would have been
discovered by the carrier if it had exercised the degree of care which
under the circumstances was incumbent upon it, with regard to
inspection and application of the necessary tests. In this connection,
the manufacturer of the defective appliance is considered in law the
agent of the carrier, and the good repute of the manufacturer will not
relieve the carrier from liability. The rationale of the carrier’s liability is
the fact that the passenger has no privity with the manufacturer of the
defective equipment hence, he has no remedy against him, while the
carrier usually has. Carrier’s liability rests upon negligence, his failure
to exercise the “utmost” degree of diligence that the law requires, and
in case of a passenger’s death or injury the carrier bears the burden of
satisfying the court that he has duly discharged the duty of prudence
required.
5. Commencement, Duration and Termination of Carrier’s
Responsibility
With respect to carriage of passengers by trains, the extraordinary
responsibility of common carriers commences the moment the
person who purchases the ticket from the carrier presents himself
at the proper place and in a proper manner to be transported with
a bona fide intent to ride the coach
a. Trains
• Even if the injury of the victim was sustained while
waiting for a coach on the platform
• A person, who after alighting a train, walks along the
station platform is considered still a passenger.
Similarly, a person who is still retrieving his baggage is
still within the responsibility of the carrier
b. Carriage by Sea
With respect to carriage of passengers by sea, the duty of the
carrier commences as soon as a person with bona fide intention
of taking passage places himself in the care of the carrier or its
employees and is accepted as passenger
c. Land Transportation
• Motor vehicles are duty bound to stop their
conveyances for a reasonable length of time in order to
afford passengers an opportunity to board and enter,
and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or
jerking of their conveyances while they do so. This rule
is that once a public utility stops, it is making a
continuous offer to bus riders
• Duty will not ordinarily terminate until the passenger
has, after reaching his destination, safely alighted from
the carrier’s conveyance or had a reasonable
opportunity to leave the carrier’s premises.
• All persons who remain on the premises within a
reasonable time after leaving the conveyance are to be
deemed passengers, an what is a reasonable time or
reasonable delay within this rule is to be determined
from all the circumstances, and includes reasonable
time to see after his baggage and prepare for his
departure.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
5.1 Del Prado v. Manila Electric Co.
FACTS: Teodorico Florenciano, Meralco’s motorman, was driving the
company’s street car along Hidalgo Street. Plaintiff Ignacio Del Prado
ran across the street to catch the car. The motorman eased up but did
not put the car into complete stop. Plaintiff was able to get hold of the
rail and step his left foot when the car accelerated. As a result, plaintiff
slipped off and fell to the ground. His foot was crushed by the wheel of
the car. He filed a complaint for culpa contractual.
ISSUES:
(1) Whether the motorman was negligent
(2) Whether Meralco is liable for breach of contract of carriage
(3) Whether there was contributory negligence on the part of the
plaintiff
HELD:
(1) We may observe at the outset that there is no obligation on the part
of a street railway company to stop its cars to let on intending
passengers at other points than those appointed for stoppage.
Nevertheless, although the motorman of this car was not bound to stop
to let the plaintiff on, it was his duty to do no act that would have the
effect of increasing the plaintiff's peril while he was attempting to board
the car. The premature acceleration of the car was, in our opinion, a
breach of this duty.
(2) The relation between a carrier of passengers for hire and its
patrons is of a contractual nature; and a failure on the part of the
carrier to use due care in carrying its passengers safely is a breach of
duty (culpa contractual). Furthermore, the duty that the carrier of
passengers owes to its patrons extends to persons boarding the cars
as well as to those alighting therefrom.
Where liability arises from a mere tort (culpa aquiliana), not involving a
breach of positive obligation, an employer, or master, may exculpate
himself by proving that he had exercised due diligence to prevent the
damage; whereas this defense is not available if the liability of the
master arises from a breach of contractual duty (culpa contractual). In
the case before us the company pleaded as a special defense that it
had used all the diligence of a good father of a family to prevent the
damage suffered by the plaintiff; and to establish this contention the
company introduced testimony showing that due care had been used
in training and instructing the motorman in charge of this car in his art.
But this proof is irrelevant in view of the fact that the liability involved
was derived from a breach of obligation.
(3) It is obvious that the plaintiff's negligence in attempting to board the
moving car was not the proximate cause of the injury. The direct and
proximate cause of the injury was the act of appellant's motorman in
putting on the power prematurely. Again, the situation before us is one
where the negligent act of the company's servant succeeded the
negligent act of the plaintiff, and the negligence of the company must
be considered the proximate cause of the injury. The rule here
applicable seems to be analogous to, if not identical with that which is
sometimes referred to as the doctrine of "the last clear chance." In
accordance with this doctrine, the contributory negligence of the party
injured will not defeat the action if it be shown that the defendant might,
by the exercise of reasonable care and prudence, have avoided the
consequences of the negligence of the injured party. The negligence of
the plaintiff was, however, contributory to the accident and must be
considered as a mitigating circumstance.
5.2Dangwa Transportation Co. v. Court of Appeals
FACTS:
• May 13, 1985: Theodore M. Lardizabal was driving a passenger bus
belonging to Dangwa Transportation Co. Inc. (Dangwa)
• The bus was at full stop bet. Bunkhouses 53 and 54 when Pedro
alighted
• Pedro Cudiamat fell from the platform of the bus when it suddenly
accelerated forward
• Pedro was ran over by the rear right tires of the vehicle
• Theodore first brought his other passengers and cargo to their
respective destinations before bringing Pedro to Lepanto Hospital
where he expired
• Private respondents filed a complaint for damages against Dangwa
for the death of Pedro Cudiamat
• Dangwa: observed and continued to observe the extraordinary
diligence required in the operation of the co. and the supervision of
the employees even as they are not absolute insurers of the public at
large
• RTC: in favour of Dangwa holding Pedrito as negligent and his
negligence was the cause of his death but still ordered to pay in
equity P 10,000 to the heirs of Pedrito
• CA: reversed and ordered to pay Pedrito indemnity, moral damages,
actual and compensatory damages and cost of the suit
ISSUE:
WoN Dangwa should be held liable for the negligence of its driver
Theodore
HELD:
YES. CA affirmed.
A public utility once it stops, is in effect making a continuous offer to
bus riders (EVEN when moving as long as it is still slow in
motion)
Duty of the driver: do NOT make acts that would
have the effect of increasing peril to a passenger
while he is attempting to board the same
Premature acceleration of the bus in this
case = breach of duty
Stepping and standing on the platform of the bus is already
considered a passenger and is entitled all the rights and
protection pertaining to such a contractual relation
Duty extends to boarding and alighting
GR: By contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely
and observe extraordinary diligence with a due regard for all
the circumstances, and any injury that might be suffered by
the passenger is right away attributable to the fault or
negligence of the carrier
EX: carrier to prove that it has exercised extraordinary
diligence as prescribed in Art. 1733 and 1755 of the Civil
Code
Failure to immediately bring Pedrito to the hospital despite
his serious condition = patent and incontrovertible proof of
their negligence
Hospital was in Bunk 56
st
1 proceeded to Bunk 70 to allow a passenger
(who later called the family of Pedrito on his own
will) to alight and deliver a refrigerator
In tort, actual damages is based on net earning
5.3 Light Rail Transit Authority v. Navidad
FACTS:
• October 14, 1993, 7:30 p.m. : Drunk Nicanor Navidad (Nicanor)
entered the EDSA LRT station after purchasing a “token”.
• While Nicanor was standing at the platform near the LRT tracks, the
guard Junelito Escartin approached him.
• Due to misunderstanding, they had a fist fight Nicanor fell on the
tracks and killed instantaneously upon being hit by a moving
train operated by Rodolfo Roman
• December 8, 1994: The widow of Nicanor, along with her children,
filed a complaint for damages against Escartin, Roman,
LRTA, Metro Transit Org. Inc. and Prudent (agency of
security guards) for the death of her husband.
• LRTA and Roman filed a counter-claim against Nicanor and a
cross-claim against Escartin and Prudent
• Prudent: denied liability – averred that it had exercised due
diligence in the selection and surpervision of its security
guards
• LRTA and Roman: presented evidence
• Prudent and Escartin: demurrer contending that Navidad had failed
to prove that Escartin was negligent in his assigned task
• RTC: In favour of widow and against Prudent and Escartin,
complaint against LRT and Roman were dismissed for lack
of merit
• CA: reversed by exonerating Prudent and held LRTA and Roman
liable
ISSUE:
WoN LRTA and Roman should be liable according to the contract of
carriage
HELD:
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
NO. Affirmed with Modification: (a) nominal damages is DELETED
(CANNOT co-exist w/ compensatory damages) (b) Roman is absolved.
Law and jurisprudence dictate that a common carrier, both from the
nature of its business and for reasons of public policy, is
burdened with the duty off exercising utmost diligence in
ensuring the safety of passengers
Civil Code:
Art. 1755. A common carrier is bound to carry the
passengers safely as far as human care and
foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the
circumstances
Art. 1756. In case of death or injuries to
passengers, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755
Art. 1759. Common carriers are liable for the
death of or injuries to passengers through the
negligence or wilful acts of the former’s
employees, although such employees may have
acted beyond the scope of their authority or in
violation of the orders of the common carriers
This liability of the common carriers does NOT cease upon proof that
they
Exercised all the diligence of a good father of a family in
the selection and
supervision of their employees
Art. 1763. A common carrier is responsible for injuries
suffered by a passenger on account of the wilful acts or
negligence of other passengers or of strangers, if the
common carrier’s employees through the exercise of
the diligence of a good father of a family could have
prevented or stopped the act or omission.
Carriers presumed to be at fault or been negligent and by
simple proof of injury, the passenger is relieaved of the duty
to still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove
that the injury is due to an unforeseen event or to force
majeure
Where it hires its own employees or avail itself of the
services of an outsider or an independent firm to undertake
the task, the common carrier is NOT relieved of its
responsibilities under the contract of carriage
GR: Prudent can be liable only for tort under Art. 2176 and
related provisions in conjunction with Art. 2180 of the Civil
Code. (Tort may arise even under a contract, where tort
[quasi-delict liability] is that which breaches the contract)
EX: if employer’s liability is negligence or fault on
the part of the employee, employer can be made liable
on the basis of the presumption juris tantum that the
employer failed to exercise diligentissimi patris families
in the selection and supervision of its employees.
EX to the EX: Upon showing due diligence in the
selection and supervision of the employee
Factual finding of the CA: NO link bet. Prudent and the death
of Nicanor for the reason that the negligence of Escartin was
NOT proven
NO showing that Roman himself is guilty of any culpable act
or omission, he must also be absolved from liability
Contractual tie bet. LRT and Nicanor is NOT itself
a juridical relation bet. Nicanor and Roman
Roman can be liable only for his own fault or
negligence
5.4 La Mallorca v. De Jesus
FACTS:
On October 1959, Lolita de Jesus was riding a bus owned by La
Mallorca and Pampanga Bus Company which had a head on collision
against a freight truck. Apparently, the bus had a tire blow out which
resulted to the accident. Lolita died and so her father, Valentin de
Jesus, filed a civil case for damages against La Mallorca. The lower
court rendered judgment in favor of De Jesus and ordered La Mallorca
to pay for actual, compensatory, and moral damages including counsel
fees. This decision was affirmed by the Court of Appeals. La Mallorca
assailed the decision as it argued that a tire blow out is a fortuitous
event and should not be taken as negligence.
ISSUE:
WoN a tire blow out is a fortuitous event.
HELD:
No. As found by the lower court, the tire blow out in this case was due
to the fact that the inner circle of the wheel of the bus was pressed so
closely to the rim which caused it to eventually explode. This
mechanical defect in the installation of the wheel could have been
easily discovered had the bus been subjected to a thorough check up
before it was allowed to hit the road. La Mallorca is therefore negligent
and the tire explosion is not a fortuitous event for it could have been
avoided had the bus been properly maintained.
The Supreme Court also emphasized in this case that moral damages
are recoverable by reason of the death of a passenger caused by the
breach of contract of a common carrier, as provided in Article 1764, in
relation to Article 2206, of the Civil Code.
5.5 Aboitiz Shipping Co. v. Court of Appeals
FACTS: Anacleto Viana boarded the vessel M/V Antonia, owned by
Aboitiz Shipping Corporation, at the port at San Jose, Occidental
Mindoro, bound for Manila. After said vessel had landed, the Pioneer
Stevedoring Corporation took over the exclusive control of the cargoes
loaded on said vessel pursuant to the Memorandum of Agreement
between Pioneer and petitioner Aboitiz.
The crane owned by Pioneer was placed alongside the
vessel and one (1) hour after the passengers of said vessel had
disembarked, it started operation by unloading the cargoes from said
vessel. While the crane was being operated, Anacleto Viana who had
already disembarked from said vessel obviously remembering that
some of his cargoes were still loaded in the vessel, went back to the
vessel, and it was while he was pointing to the crew of the said vessel
to the place where his cargoes were loaded that the crane hit him,
pinning him between the side of the vessel and the crane. He was
thereafter brought to the hospital where he later expired three (3) days
thereafter.
Private respondents Vianas filed a complaint for damages
against petitioner for breach of contract of carriage. Aboitiz denied
responsibility contending that at the time of the accident, the vessel
was completely under the control of respondent Pioneer Stevedoring
Corporation as the exclusive stevedoring contractor of Aboitiz, which
handled the unloading of cargoes from the vessel of Aboitiz.
ISSUE:
WoN Aboitiz is negligent and is thus liable for the death.
HELD: Yes. x x x [T]he victim Anacleto Viana guilty of contributory
negligence, but it was the negligence of Aboitiz in prematurely turning
over the vessel to the arrastre operator for the unloading of cargoes
which was the direct, immediate and proximate cause of the victim's
death.
The rule is that the relation of carrier and passenger
continues until the passenger has been landed at the port of
destination and has left the vessel owner's dock or premises. 11 Once
created, the relationship will not ordinarily terminate until the passenger
has, after reaching his destination, safely alighted from the carrier's
conveyance or had a reasonable opportunity to leave the carrier's
premises. All persons who remain on the premises a reasonable time
after leaving the conveyance are to be deemed passengers, and what
is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances, and includes a reasonable time
to see after his baggage and prepare for his departure. 12 The carrier-
passenger relationship is not terminated merely by the fact that the
person transported has been carried to his destination if, for example,
such person remains in the carrier's premises to claim his baggage.
It is apparent from the foregoing that what prompted the
Court to rule as it did in said case is the fact of the passenger's
reasonable presence within the carrier's premises. That
reasonableness of time should be made to depend on the attending
circumstances of the case, such as the kind of common carrier, the
nature of its business, the customs of the place, and so forth, and
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
therefore precludes a consideration of the time element per se without
taking into account such other factors. It is thus of no moment whether
in the cited case of La Mallorca there was no appreciable interregnum
for the passenger therein to leave the carrier's premises whereas in the
case at bar, an interval of one (1) hour had elapsed before the victim
met the accident. The primary factor to be considered is the existence
of a reasonable cause as will justify the presence of the victim on or
near the petitioner's vessel. We believe there exists such a justifiable
cause.
It is of common knowledge that, by the very nature of
petitioner's business as a shipper, the passengers of vessels are
allotted a longer period of time to disembark from the ship than other
common carriers such as a passenger bus. With respect to the bulk of
cargoes and the number of passengers it can load, such vessels are
capable of accommodating a bigger volume of both as compared to the
capacity of a regular commuter bus. Consequently, a ship passenger
will need at least an hour as is the usual practice, to disembark from
the vessel and claim his baggage whereas a bus passenger can easily
get off the bus and retrieve his luggage in a very short period of time.
Verily, petitioner cannot categorically claim, through the bare expedient
of comparing the period of time entailed in getting the passenger's
cargoes, that the ruling in La Mallorca is inapplicable to the case at bar.
On the contrary, if we are to apply the doctrine enunciated therein to
the instant petition, we cannot in reason doubt that the victim Anacleto
Viana was still a passenger at the time of the incident. When the
accident occurred, the victim was in the act of unloading his cargoes,
which he had every right to do, from petitioner's vessel. As earlier
stated, a carrier is duty bound not only to bring its passengers safely to
their destination but also to afford them a reasonable time to claim their
baggage.
6. Presumption of Negligence: Liability of Carriers for Death or
Injury to Passengers; Exceptions
In case of loss of effects or cargo or passengers or death or injuries
• The common carrier is presumed to be at fault or have acted
negligently unless he had observed extraordinary diligence
in the vigilance thereof
• The court need not make an express finding of fault or
negligence of common carriers, the law imposes liability as
long as it is shown that
(1) There exists a contract between the passenger; and
(2) That the loss, deterioration, injury or death took place during
the existence of the contract.
Exception
• When it was established that the accident was solely caused
by the negligence of the other vehicle that was involved in
the collisionn
Art. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in Articles 1733 and 1755.
Art. 1757. The responsibility of a common carrier for the safety of
passengers as required in Articles 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting of notices, by statements
on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a stipulation
limiting the common carrier's liability for negligence is valid, but not for
wilful acts or gross negligence.
The reduction of fare does not justify any limitation of the common
carrier's liability.
6.1 Calalas v. Court of Appeals
FACTS: Private respondent Eliza Sunga, then freshman at Siliman
University , took a passenger jeepney owned and operated by
petitioner Vicente Calalas. As the jeepney was filled to capacity, Sunga
was given by the conductor an extension seat, a wooden stool at the
back of the door at the rear end of the vehicle. When the jeepney
stopped to a let passenger off and Sunga was about to give way to the
outgoing passenger, an Izuzu truck driven by Verena and owned by
Salva bumped the left rear portion of the jeepney. Sunga sustained
multiple injuries and remained on a cast for three months.
Sunga filed a complaint for damages against Calalas, for
breach of contract of carriage. Calalas, on the other hand,filed a third
party complaint against Francisco Salva, the owner of the truck. The
lower court rendered judgment against Salva and absolved Calalas
of liability.
It took cognizance of other case (Civil Case No. 3490), filed
by Calalas against Salva and Verena ,for quasi-delict, in which branch
37 of the same court held Salva and his driver Verena jointly liable to
Calalas for the damage to his jeepney
The CA reversed the lower courts ruling on the ground the
ground that Sunga’s cause of action was based on a contract of
carriage, not quasi-deplict, and that the common carrier failed to
exercise the diligence required under the Civil Code. The appellate
court dismissed the third-party complaint against Salva and adjudged
Calalas liable for damages to Sunga.
ISSUE:
HELD: In quasi-delict, the negligence or fault should be clearly
established because it is the basis of the action, whereas in breach of
contract, the action can be prosecuted merely by proving the existence
of the contract and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his destination. In
case od death or injuries to passengers, Article 1756 of the CC
provides that common carriers are presumed to have been at fault or
have acted negligently unless they proved that they observed
extraordinary diligence as defined in Arts. 1733 and 1755. This
provision necessarily shifts to the common carrier the burden of proof.
It is immaterial that the proximate cause of the collision
between the jeepney and the truck was the negligence of the truck
driver. The doctrine of proximate cause is applicable only in action for
quasi-delict, not in actions involving breach of contract. The doctrine is
a device for imputing liability to a person where there is no relation
created by law.
7. Negligence or Intentional Assault by Carrier’s Employee
Acts of Employees
• The carrier is liable for the acts of its employees
• Carrier cannot escape liability by claiming that he exercised
due diligence in the selection and supervision of the
employee
Art. 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or wilful acts of the former's
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
7.1 Gillaco v. Manila Railroad Co.
FACTS:
Lieut. Gillaco, husband of plaintiff, was a passenger in the early
morning train of MRR from Calamba, Laguna to Manila, at about 7:30
a.m. When the train reached the Paco, Railroad Station, a train guard
(Devesa) of MRR assigned in the Manila-San Fernando, La Union
Line, was in the station waiting for the same train to take him to
Tutuban Station, to report for duty which was to start from 9:00 a.m. to
7:00 a.m. of the same day. Devesa, having a long standing personal
grudge with Gillaco, hot and killed the latter with a carbine furnished by
respondent, upon seeing him inside the train coach. Gillaco died.
Devesa was convicted with homicide by final judgement of the CA.
Court of First Instance awarded damages to the plaintiff.
Defense by MRR - no liability attaches to it as employer of
the killer; that it is not responsible subsidiary ex delicto, under Art. 103
of the Revised Penal Code, because the crime was not committed
while the slayer was in the actual performance of his ordinary duties
and service; nor is it responsible ex contractu, since the complaint did
not aver sufficient facts to establish such liability, and no negligence on
appellant's party was shown.
Court below - Railroad company responsible on the ground
that a contract of transportation implies protection of the passengers
against acts of personal violence by the agents or employees of the
carrier
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
ISSUE:
WoN MRR is liable for the damages for the death of Gillaco caused by
Devesa.
HELD:
While a passenger is entitled to protection from personal violence by
the Civil Code or its agents or employees since the contract of
transportation obligates the carrier to transport a passenger safely to
his destination, the responsibility of the Civil Code extends only to
those acts that the Civil Code could foresee or avoid through the
exercise of the degree of care and diligence required of it.
The Old Civil Code did not impose upon Civil Code the absolute liability
for assaults of their employees upon the passengers.
[OCC: It is sufficient to reiterate that the source of the
defendant's legal liability is the contract of carriage; that by entering
into that contract he bound himself to carry the plaintiff safely and
securely to their destination; and that having failed to do so he is liable
in damages unless he shows that the failure to fulfill his obligation was
due to causes mentioned in article 1105 of the Civil Code, which reads
as follows:
"No one shall be liable for events which could not be foreseen or
which, even if foreseen, were inevitable, with the exception of the
cases in which the law expressly provides otherwise and those in
which the obligation itself imposes such liability."]
The act of the guard was entirely unforeseeable by MRR
which had no means to ascertain or anticipate that the two would meet
nor could it foresee every personal rancour that might exist between its
employees and its passengers. The shooting was a caso fortuito within
the definition of article 105 of the OCC and was both being
unforeseeable and inevitable under the circumstances. Hence,
resulting breach of appellant's contract of safe carriage with the late
Tomas Gillaco was excused thereby.
[The lower Court and the appellees both relied on the
American authorities that particularly hold carriers to be insurers of the
safety of their passengers against willful assault and intentional ill
treatment on the part of their servants, it being immaterial that the act
should be one of
private retribution on the part of the servant, impelled by personal
malice toward the passenger (10 Am. Jur. 108; Ed. Note to
Gassenheimer vs. Wester R. Co. 40 LRA (NS), p. 999, et seq.) But as
can be inferred from the previous jurisprudence of this Court , the Civil
Code of 1889 did not impose such absolute liability (Lasam vs. Smith,
supra). The liability of a carrier as an insurer was not recognized in this
jurisdiction]
When the crime took place, the guard had no duties to
discharge. Devesa was therefore under no obligation to safeguard the
passenger of the Calamba-Manila train, where the deceased was
riding; and the killing of Gillaco was not done in line of duty. His
position would be that of a passenger also waiting transportation and
not of an employee assigned to discharge duties that the Railroad
had assumed by its contract with the deceased. As a result, Devesa's
assault cannot be deemed in law a breach of Gillaco's contract of
transportation by a servant or employee of the carrier.
[The only good reason for making the carrier responsible for
the misconduct of the servant perpetrated in his own interest, and not
in that of his employer, or otherwise within the scope of his
employment, is that the servant is clothed with the delegated authority,
and charge with the duty by the carrier, to execute his undertaking with
the passenger. And it cannot be said, we think, that there is any such
delegation to the employees at a station with reference to passenger
embarking at another or traveling on the train. Of course, we are
speaking only of the principle which holds a carrier responsible for
wrong done to passenger by servants acting in their own interest, and
not in that of the employer. That principle is not the ordinary rule,
respondent superior, by which the employer is held responsible only for
act or omissions of the employee in the scope of his employment; but
the only reason in our opinion for a broader liability arises from the fact
that the servant, in mistreating the passenger wholly for some private
purpose of his own, in the very act, violates the contractual obligation
of the employer for the performance of which he has put the employee
in his place.
The reason does not exist where the employee who
committed the assault was never in a position in which it became his
duty to his employer to represent him in discharging any duty of the
latter toward the passenger. The proposition that the carrier clothes
every employee engaged in the transportation business with the
comprehensive duty of protecting every passenger with whom he may
in any way come in contact, and hereby makes himself liable for every
assault commited by such servant, without regard to the inquiry
whether or not the passenger has come within the sphere of duty of
that servant as indicated by the employment, is regarded as not only
not sustained by the authorities, but as being unsound and oppressive
both to the employer and the employee. (Houston& T. C. R. Co. vs.
Bush, 32 LRA (NS), p. 1205.)]
7.2 Maranan v. Perez
Facts: Rogelio Corachea, on October 18, 1960, was a passenger in a
taxicab owned and operated by Pascual Perez when he was stabbed
and killed by the driver, Simeon Valenzuela. Valenzuela was
prosecuted for homicide in the Court of First Instance of Batangas and
was found guilty. While appeal was pending in the Court of Appeals,
Antonia Maranan, Rogelio's mother, filed an action to recover
damages. The court decided in plaintiff’s favor. Hence the instant
petition.
Issue: Whether or not defendant- operators could be held liable for
damages
Held: Yes. Defendant-appellant relies solely on the ruling enunciated
in Gillaco v. Manila Railroad Co., 97 Phil. 884, that the carrier is under
no absolute liability for assaults of its employees upon the passengers.
The attendant facts and controlling law of that case and the one at bar
are very different however. In the Gillaco case, the passenger was
killed outside the scope and the course of duty of the guilty employee.
Now here, the killing was perpetrated by the driver of the very cab
transporting the passenger, in whose hands the carrier had entrusted
the duty of executing the contract of carriage. In other words, unlike the
Gillaco case, the killing of the passenger here took place in the course
of duty of the guilty employee and when the employee was acting
within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions
of the Civil Code of 1889 which, unlike the present Civil Code, did not
impose upon common carriers absolute liability for the safety of
passengers against wilful assaults or negligent acts committed by their
employees. The death of the passenger in the Gillaco case was truly a
fortuitous event which exempted the carrier from liability.
The Civil Code provisions on the subject of Common
Carriers are new and were taken from Anglo-American Law. There, the
basis of the carrier's liability for assaults on passengers committed by
its drivers rests either on (1) the doctrine of respondeat superior or (2)
the principle that it is the carrier's implied duty to transport the
passenger safely.
Under the first, which is the minority view, the carrier is liable
only when the act of the employee is within the scope of his authority
and duty. It is not sufficient that the act be within the course of
employment only. Under the second view, upheld by the majority and
also by the later cases, it is enough that the assault happens within the
course of the employee's duty. It is no defense for the carrier that the
act was done in excess of authority or in disobedience of the carrier's
orders. The carrier's liability here is absolute in the sense that it
practically secures the passengers from assaults committed by its own
employees. As can be gleaned from Art. 1759, the Civil Code of the
Philippines evidently follows the rule based on the second view. At
least three very cogent reasons underlie this rule. (1) the special
undertaking of the carrier requires that it furnish its passenger that full
measure of protection afforded by the exercise of the high degree of
care prescribed by the law, inter alia from violence and insults at the
hands of strangers and other passengers, but above all, from the acts
of the carrier's own servants charged with the passenger's safety; (2)
said liability of the carrier for the servant's violation of duty to
passengers, is the result of the formers confiding in the servant's
hands the performance of his contract to safely transport the
passenger, delegating therewith the duty of protecting the passenger
with the utmost care prescribed by law; and (3) as between the carrier
and the passenger, the former must bear the risk of wrongful acts or
negligence of the carrier's employees against passengers, since it, and
not the passengers, has power to select and remove them.
Accordingly, it is the carrier's strict obligation to select its
drivers and similar employees with due regard not only to their
technical competence and physical ability, but also, no less important,
to their total personality, including their patterns of behavior, moral
fibers, and social attitude.
Applying this stringent norm to the facts in this case,
therefore, the lower court rightly adjudged the defendant carrier liable
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
pursuant to Art. 1759 of the Civil Code. The dismissal of the claim
against the defendant driver was also correct. Plaintiff's action was
predicated on breach of contract of carriage7 and the cab driver was
not a party thereto. His civil liability is covered in the criminal case
wherein he was convicted by final judgment.
8. Passenger’s Duty to Observe Diligence to Avoid Injury;
Contributory Negligence
Art. 1761. The passenger must observe the diligence of a good father
of a family to avoid injury to himself.
Art. 1762. The contributory negligence of the passenger does not bar
recovery of damages for his death or injuries, if the proximate cause
thereof is the negligence of the common carrier, but the amount of
damages shall be equitably reduced.
Causation
• The negligence of the shipper or passenger may be the
proximate and only cause of the loss, in which case, the
carrier should not be made liable. The carrier may be able to
overcome the presumption of negligence and may be able to
prove that it exercised extraordinary diligence in handling the
goods or in transporting the passenger
Avoidable consequence
• Even if the carrier is responsible for the loss or injury, the
passenger is also required to lessen the damage or injury
under what is known as the doctrine of avoidable
consequences.
8. 1 Isaac v. A.L. Ammen Trans.
Facts: Plaintiff boarded defendant’s bus as paying passenger from
Albay. The bus collided with a pick-up truck which was coming from
opposite direction trying to swerve from a pile of gravel. As a result, his
left arm was completely severed. Plaintiff chose to hold defendant
liable on its contractual obligation. Plaintiff brought an action for
damages which the lower court dismissed holding the driver of the
pick-up car negligent and not that of the bus.
Issue: Whether or not the common carrier is liable.
Held: The bus was running at a moderate speed. The driver of the bus
upon the speeding pick-up truck swerved the bus to the very extreme
right of the road. Said driver would not move the bus further without
endangering the safety of his passengers. Notwithstanding all these
efforts, the rear left side was hit. This finding of the lower court was
sustained. Also, of the carrier’s employee is confronted with a sudden
emergency, he is not held to the same degree of care he would
otherwise, he required in the absence of such emergency.
By placing his left arm on the window, he is guilty of
contributory negligence cannot relieve the carrier but can only reduce
its liability (ART. 1762), this is a circumstance which further militates
against plaintiff’s position. It is a prevailing rule that it is negligence per
se for passengers on a railroad to protrude any part of his body and
that no recovery can be had for an injury.”
8.2 Philippine National Railways v. Court of Appeals
Facts: Winifredo Tupang, husband of plaintiff, boarded a train of
appellant at Libmanan, Camarines Sur, as a paying passenger bound
for Manila. Due to some mechanical defect, the train stopped at
Sipocot, Camarines Sur, for repairs. Unfortunately, upon passing Iyam
Bridge at Lucena, Quezon, Winifredo Tupang fell off the train resulting
in his death.The train did not stop despite the alarm raised by the other
passengers that somebody fell from the train. Upon complaint filed by
Rosario the lower court after trial, held PNR liable for damages for
breach of contract of carriage. The decision was sustained by the
appellate court hence the present petition, wherein PNR raised for the
first time, as a defense, the doctrine of state immunity from suit. It
alleged that it is a mere agency of the Philippine government without
distinct or separate personality of its own, and that its funds are
governmental in character and, therefore, not subject to garnishment or
execution.
Issue: Whether or not PNR can raise the defense of doctrine of state
immunity from suit.
Held: No. The PNR was created under Rep. Act 4156, as amended.
Section 4 of the said Act provides: The Philippine national Railways
shall have the following powers: a. To do all such other things and to
transact all such business directly or indirectly necessary, incidental or
conducive to the attainment of the purpose of the corporation; and
b. Generally, to exercise all powers of a corporation under the
Corporation Law. Under the foregoing section, the PNR has all the
powers, the characteristics and attributes of a corporation under the
Corporation Law. There can be no question then that the PNR may sue
and be sued and may be subjected to court processes just like any
other corporation. Now, is PNR negligent? Yes. The appellate court
found, the petitioner does not deny, that the train boarded by the
deceased Winifredo Tupang was so over-crowded that he and many
other passengers had no choice but to sit on the open platforms
between the coaches of the train. It is likewise undisputed that the train
did not even slow down when it approached the Iyam Bridge which
was under repair at the time, Neither did the train stop, despite the
alarm raised by other passengers that a person had fallen off the train
at lyam Bridge. The petitioner has the obligation to transport its
passengers to their destinations and to observe extraordinary diligence
in doing so. Death or any injury suffered by any of its passengers gives
rise to the presumption that it was negligent in the performance of its
obligation under the contract of carriage. Thus, as correctly ruled by
the respondent court, the petitioner failed to overthrow such
presumption of negligence with clear and convincing evidence.
But while petitioner failed to exercise extraordinary diligence
as required by law, it appears that the deceased was chargeable with
contributory negligence. Since he opted to sit on the open platform
between the coaches of the train, he should have held tightly and
tenaciously on the upright metal bar found at the side of said platform
to avoid falling off from the speeding train. Such contributory
negligence, while not exempting the PNR from liability, nevertheless
justified the deletion of the amount adjudicated as moral damages and
exemplary damages. Exemplary damages may be allowed only in
cases where the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.
9. Injury to Passenger Due to Acts of Co-Passenger or Stranger
Art. 1763. A common carrier is responsible for injuries suffered by a
passenger on account of the wilful acts or negligence of other
passengers or of strangers, if the common carrier's employees through
the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission.
With respect to acts of strangers and other passengers resulting in
injury to a passenger
• The availability of such defense is also subject to the
exercise of a carrier of due diligence to prevent or stop the
act or omission
• This defense is not available if the carrier’s driver even
allowed another person who is not an employee or a regular
driver to take over the task of driving the vehicle
9.1 Pilapil v. Court of Appeals
FACTS: Petitioner Pilapil, on board respondent’s bus was hit above his
eye by a stone hurled by an unidentified bystander. Respondent’s
personnel lost no time in bringing him to a hospital, but eventually
petitioner partially lost his left eye’s vision and sustained a permanent
scar.
Thus, Petitioner lodged an action for recovery of damages
before the Court of First Instance of Camarines Sur which the latter
granted. On appeal, the Court of Appeals reversed said decision.
ISSUE:
WoN common carriers assume risks to passengers such as the stoning
in this case?
HELD: In consideration of the right granted to it by the public to engage
in the business of transporting passengers and goods, 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.
While the law requires the highest degree of diligence from
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
common carriers in the safe transport of their passengers and creates
a presumption of negligence against them, it does not, however, 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 wilful acts or negligence of
other passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission.
Clearly under the above provision, 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
carrier's employees to prevent the tort from being committed when the
same could have been foreseen and prevented by them. Further,
under the same provision, it is to be noted that when the violation of
the contract is due to the willful acts of strangers, as in the instant
case, the degree of care essential to be exercised by the common
carrier for the protection of its passenger is only that of a good father of
a family.
9.2 Bachelor Express, Inc. v. Court of Appeals
Facts: The bus owned by Petitioners came from Davao City on its way
to Cagayan de Oro City passing Butuan City. While at Tabon-Tabon,
Butuan City, the bus picked up a passenger, that about fifteen minutes
later, a passenger at the rear portion suddenly stabbed a PC soldier
which caused commotion and panic among the passengers. When the
bus stopped, passengers Ornominio Beter and Narcisa Rautraut were
found lying down the road, the former already dead as a result of head
injuries and the latter also suffering from severe injuries which caused
her death later. The passenger assailant alighted from the bus and ran
toward the bushes but was killed by the police. Thereafter, the heirs of
Ornominio Beter and Narcisa Rautraut, private respondents herein filed
a complaint for "sum of money" against Bachelor Express, Inc., its
alleged owner and the driver Rivera. The lower court dismissed the
complaint. CA reversed the decision, hence the instant petition.
Issue: Whether or not petitioner is negligent.
Held: Yes. The liability, if any, of the petitioners is anchored on culpa
contractual or breach of contract of carriage. Art. 1732, 1733, 1755 and
1756 are applicable. There is no question that Bachelor is a common
carrier. Hence, Bachelor is bound to carry its passengers safely as far
as human care and foresight can provide using the utmost diligence of
very cautious persons, with a due regard for all the circumstances. In
the case at bar, Ornominio Beter and Narcisa Rautraut were
passengers of a bus belonging to Bachelor and, while passengers of
the bus, suffered injuries which caused their death. Consequently,
pursuant to Article 1756 of the Civil Code, Bachelor is presumed to
have acted negligently unless it can prove that it had observed
extraordinary diligence in accordance with Articles 1733 and 1755 of
the New Civil Code.
Bachelor denies liability for the death of Beter and Rautraut
in that their death was caused by a third person who was beyond its
control and supervision. In effect, the petitioner, in order to overcome
the presumption of fault or negligence under the law, states that the
vehicular incident resulting in the death of passengers Beter and
Rautraut was caused by force majeure or caso fortuito over which the
common carrier did not have any control. The running amuck of the
passenger was the proximate cause of the incident as it triggered off a
commotion and panic among the passengers such that the passengers
started running to the sole exit shoving each other resulting in the
falling off the bus by passengers Beter and Rautraut causing them fatal
injuries. The sudden act of the passenger who stabbed another
passenger in the bus is within the context of force majeure. However,
in order that a common carrier may be absolved from liability in case of
force majeure, it is not enough that the accident was caused by force
majeure. The common carrier must still prove that it was not negligent
in causing the injuries resulting from such accident. In this case,
Bachelor was negligent.
Considering the factual findings of the Court of Appeals-the
bus driver did not immediately stop the bus at the height of the
commotion; the bus was speeding from a full stop; the victims fell from
the bus door when it was opened or gave way while the bus was still
running; the conductor panicked and blew his whistle after people had
already fallen off the bus; and the bus was not properly equipped with
doors in accordance with law-it is clear that the petitioners have failed
to overcome the presumption of fault and negligence found in the law
governing common carriers. The petitioners' argument that the
petitioners "are not insurers of their passengers" deserves no merit in
view of the failure of the petitioners to prove that the deaths of the two
passengers were exclusively due to force majeure and not to the
failure of the petitioners to observe extraordinary diligence in
transporting safely the passengers to their destinations as warranted
by law.
9.3 Fortune Express Inc. v. Court of Appeals
Facts: A bus of petitioner figured in an accident with a jeepney in
Kauswagan, Lanao del Norter, resulting in the death of several
passengers of the jeepney, including two Maranaos. A constabulary
agent investigated and found out that the owner of the jeepney was a
Maranao and that certain Maranaos were planning to take revenge on
the petitioner by burning some of its buses. The operations manager of
petitioner was advised to take precautionary measures. Four days after
the accident, three armed Maranaos who pretended to be passengers
seized a bus petitioner bound for Iligan City and set it on fire. Atty.
Talib Caorong, whose heirs are private respondents herein was a
passenger of the bus and was shot and killed during the incident. The
private respondents brought this suit for breach of contract of carriage.
Complaint was dismissed in the lower court but its decision was
reversed in CA, hence the instant petition, with petitioners contention
that the acts of the Maranaos is caso fortuito.
Issue: Was there breach of contract of carriage?
Held: Yes. Art. 1763 of the Civil Code provides that a common carrier
is responsible for injuries suffered by a passenger on account of wilfull
acts of other passengers, if the employees of the common carrier could
have prevented the act through the exercise of the diligence of a good
father of a family. In the present case, it is clear that because of the
negligence of petitioner's employees, the seizure of the bus by
Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan
de Oro that the Maranaos were planning to take revenge on the
petitioner by burning some of its buses and the assurance of
petitioner's operation manager, Diosdado Bravo, that the necessary
precautions would be taken, petitioner did nothing to protect the safety
of its passengers. Had petitioner and its employees been vigilant they
would not have failed to see that the malefactors had a large quantity
of gasoline with them. Under the circumstances, simple precautionary
measures to protect the safety of passengers, such as frisking
passengers and inspecting their baggages, preferably with non-
intrusive gadgets such as metal detectors, before allowing them on
board could have been employed without violating the passenger's
constitutional rights.
Petitioner invokes the ruling in Pilapil v. Court of Appeals,
and De Guzman v. Court of Appeals, in support of its contention that
the seizure of its bus by the assailants constitutes force majeure. In
Pilapil v. Court of Appeals, it was held that a common carrier is not
liable for failing to install window grills on its buses to protect the
passengers from injuries cause by rocks hurled at the bus by lawless
elements. On the other hand, in De Guzman v. Court of Appeals, it was
ruled that a common carriers is not responsible for goods lost as a
result of a robbery which is attended by grave or irresistable threat,
violence, or force.
It is clear that the cases of Pilapil and De Guzman do not
apply to the prensent case. Art. 1755 of the Civil Code provides that "a
common carrier is bound to carry the passengers as far as human care
and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances." Thus, we held in
Pilapil and De Guzman that the respondents therein were not negligent
in failing to take special precautions against threats to the safety of
passengers which could not be foreseen, such as tortious or criminal
acts of third persons. In the present case, this factor of unforeseeability
(the second requisite for an event to be considered force majeure) is
lacking. As already stated, despite the report of PC agent Generalao
that the Maranaos were planning to burn some of petitioner's buses
and the assurance of petitioner's operation manager (Diosdado Bravo)
that the necessary precautions would be taken, nothing was really
done by petitioner to protect the safety of passengers.
The petitioner contends that Atty. Caorong was guilty of
contributory negligence in returning to the bus to retrieve something.
But Atty. Caorong did not act recklessly. It should be pointed out that
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
the intended targets of the violence were petitioners and its employees,
not its passengers. The assailant's motive was to retaliate for the loss
of life of two Maranaos as a result of the collision between petitioner's
bus and the jeepney in which the two Maranaos were riding.
Mananggolo, the leader of the group which had hijacked the bus,
ordered the passengers to get off the bus as they intended to burn it
and its driver. The armed men actually allowed Atty. Caorong to
retrieve something from the bus. What apparently angered them was
his attempt to help the driver of the bus by pleading for his life. He was
playing the role of the good Samaritan. Certainly, this act cannot be
considered an act of negligence, let alone recklessness.
CHAPTER IV. ACTIONS AND DAMAGES IN CASE OF BREACH
Art. 1764. Damages in cases comprised in this Section shall be
awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
1. Concurrent Causes of Actions
1.1 Distinctions; Importance (Del Prado vs Manila Electric Co.,)
With Third Persons
• If the negligence of third persons concurs with the breach the
liability of the third persons who was driving another vehicle
and/or his employer may be based on quasi delict.
Solidary Liability
• In case the negligence of the carrier’s driver and a third
person concurs, the liability of the parties – carrier and his
driver, third person – is joint and several
Alternative Compensation Scheme
• In order to provide the commuting public with an easier way
of recovering damages for the injuries sustained due to the
operation of common carriers, special laws provide for
mandatory insurance coverage for passengers and cargos
• Maritime transportation – mandatory insurance coverage for
passengers to meet the financial responsibility of domestic
ship operator for breach of contract of carriage
2. Solidary Liability
2.1 Fireman’s Fund Insurance Co. v Metro Port Service Inc
2.2 Eastern Shipping Lines v CA
FACTS: This is an action against defendants shipping company,
arrastre operator and broker-forwarder for damages sustained by a
shipment while in defendants' custody, filed by the insurer-subrogee
who paid the consignee the value of such losses/damages.
The losses/damages were sustained while in the respective
and/or successive custody and possession of defendants carrier
(Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage).
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.
DECISION OF LOWER COURTS: * trial court: ordered payment of
damages, jointly and severally * CA: affirmed trial court.
ISSUES AND RULING:
(a) 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;
YES, it is solidary. 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.
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; Ganzon vs. Court of
Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil.
863). 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.
2.3 Philippine First Insurance Co., Inc v Wallem Phils. Shipping, Inc.
2.4 Tiu v Arriesgado
Facts:
On March 13, 1992, Congress, with the approval of the
President, passed into law RA 7227. This was for the conversion of
former military bases into industrial and commercial uses. Subic was
one of these areas. It was made into a special economic zone.
In the zone, there were no exchange controls. Such were
liberalized. There was also tax incentives and duty free importation
policies under this law.
On June 10, 1993, then President Fidel V. Ramos issued
Executive Order No. 97 (EO 97), clarifying the application of the tax
and duty incentives. It said that
On Import Taxes and Duties. — Tax and duty-free
importations shall apply only to raw materials, capital goods and
equipment brought in by business enterprises into the SSEZ
On All Other Taxes. — In lieu of all local and national taxes
(except import taxes and duties), all business enterprises in the SSEZ
shall be required to pay the tax specified in Section 12(c) of R.A. No.
7227.
Nine days after, on June 19, 1993, the President issued
Executive Order No. 97-A (EO 97-A), specifying the area within which
the tax-and-duty-free privilege was operative.
Section 1.1. The Secured Area consisting of the presently
fenced-in former Subic Naval Base shall be the only completely tax
and duty-free area in the SSEFPZ. Business enterprises and
individuals (Filipinos and foreigners) residing within the Secured Area
are free to import raw materials, capital goods, equipment, and
consumer items tax and duty-free.
Petitioners challenged the constitutionality of EO 97-A for
allegedly being violative of their right to equal protection of the laws.
This was due to the limitation of tax incentives to Subic and not to the
entire area of Olongapo. The case was referred to the Court of
Appeals.
The appellate court concluded that such being the case,
petitioners could not claim that EO 97-A is unconstitutional, while at the
same time maintaining the validity of RA 7227.
The court a quo also explained that the intention of Congress
was to confine the coverage of the SSEZ to the "secured area" and not
to include the "entire Olongapo City and other areas mentioned in
Section 12 of the law.
Hence, this was a petition for review under Rule 45 of the
Rules of Court.
Issue:
Whether the provisions of Executive Order No. 97-A confining the
application of R.A. 7227 within the secured area and excluding the
residents of the zone outside of the secured area is discriminatory or
not owing to a violation of the equal protection clause.
Held. No. Petition dismissed.
Ratio: Citing Section 12 of RA 7227, petitioners contend that the SSEZ
encompasses (1) the City of Olongapo, (2) the Municipality of Subic in
Zambales, and (3) the area formerly occupied by the Subic Naval
Base. However, they claimed that the E.O. narrowed the application to
the naval base only.
OSG- The E.O. Was a valid classification.
Court- The fundamental right of equal protection of the laws is not
absolute, but is subject to reasonable classification. If the groupings
are characterized by substantial distinctions that make real differences,
one class may be treated and regulated differently from another. The
classification must also be germane to the purpose of the law and must
apply to all those belonging to the same class.
Inchong v Hernandez- Equal protection does not demand absolute
equality among residents; it merely requires that all persons shall be
treated alike, under like circumstances and conditions both as to
privileges conferred and liabilities enforced.
Classification, to be valid, must (1) rest on substantial
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
distinctions, (2) be germane to the purpose of the law, (3) not be
limited to existing conditions only, and (4) apply equally to all members
of the same class.
RA 7227 aims primarily to accelerate the conversion of
military reservations into productive uses. This was really limited to the
military bases as the law's intent provides. Moreover, the law tasked
the BCDA to specifically develop the areas the bases occupied.
Among such enticements are: (1) a separate customs
territory within the zone, (2) tax-and-duty-free importations, (3)
restructured income tax rates on business enterprises within the zone,
(4) no foreign exchange control, (5) liberalized regulations on banking
and finance, and (6) the grant of resident status to certain investors
and of working visas to certain foreign executives and workers. The
target of the law was the big investor who can pour in capital.
Even more important, at this time the business activities
outside the "secured area" are not likely to have any impact in
achieving the purpose of the law, which is to turn the former military
base to productive use for the benefit of the Philippine economy.
Hence, there was no reasonable basis to extend the tax incentives in
RA 7227.
It is well-settled that the equal-protection guarantee does not
require territorial uniformity of laws. As long as there are actual and
material differences between territories, there is no violation of the
constitutional clause.
Besides, the businessmen outside the zone can always
channel their capital into it.
RA 7227, the objective is to establish a "self-sustaining,
industrial, commercial, financial and investment center”. There will
really be differences between it and the outside zone of Olongapo.
The classification of the law also applies equally to the
residents and businesses in the zone. They are similarly treated to
contribute to the end goal of the law.
2.5 Philippine Rabbit Bus Lines vs IAC
2.6 Eastern Shipping Lines v BPI/MS Insurance Corp
PART II – SHIPPING LAW
CHAPTER 1 – GENERAL CONCEPTS
1. Maritime Law; Admiralty Law
1.1 Definitions; Distinctions
Internet distinction
Admiralty law contracts in the high seas
• Contractual and tortious disputes arising from the operations
of ships
Maritime law
• All law related to ships and shipping
Book meaning
• Sometimes used synonymously
• That system of law which particularly relates to marine
commerce and navigation, to business transacted at sea or
relating to navigation to ships and shipping, to seamen, to
the transportation of persons and property be sea and to
marine affairs generally.
1.2 History: Largely Judge-made and Evolved from Commercial
Practice
• Pre-haspanic inhabitants of the archipelago were
boatbuilding and seafaring people
• They had different kinds of seacraft
• The pre-Hispanic Filipinos used barangays or binidays which
were medium sized vessels, the larger viyers, and the still
larger bicoros which were probably sailing vessesls for long
voyages
th
• It was only in the 19 century when Philippine commerce
improved
• The upward course of the Philipppine economy is reflected in
the increased shipping tonnage entering Philippine ports
• By the last decade of the century (1890s), the tonnage
increased eight or nine times than previous decades
• In 1888 alone, when the Code of Commerce was introduced
to this country, there were 415 ships that entered Philippine
Ports with a total tonnage of 313, 117
th
• The laws that were designed to answer the needs in the 19
century are still the applicable basic laws in maritime
commerce in this jurisdiction
2. Characteristics of Maritime Transactions; Real and
Hypothecary
2.1 Limited Liability Rule: Nature and Rationale
• No vessel, no liability
• The shipowner’s or agent’s liability is merely co-extensive
with his interest in the vessel such that a total loss thereof
results in its extinction
• The real and hypothecary nature of maritime law simply
means that the liability of the carrier in connection with
losses related to maritime contracts is confined to the vessel,
which is hypothecated for such obligations or which stands
as the guaranty for their settlement
• Rationale:
o To offset against these adverse conditions and to
encourage shipbuilding and maritime commerce, it
was deemed necessary to confine the liability of
the owner or agent arising form the operation of a
ship to the vessel, equipment, and freight, or
insurance, if any
2.2 Statutory Provisions
• Art 587 (liability to third persons)
o ARTICLE 587. The ship agent shall also be civilly
liable for the indemnities in favor of third persons
which may arise from the conduct of the captain in
the care of the goods which he loaded on the
vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and
the freight it may have earned during the voyage.
• Art 643 and 837 (collision cases)
o ARTICLE 643. If the vessel and her cargo should
be totally lost, by reason of capture or wreck, all
rights shall be extinguished, both as regards the
crew to demand any wages whatsoever, and as
regards the ship agent to recover the advances
made.
If a portion of the vessel or of the cargo, or of both,
should be saved, the crew engaged on wages,
including the captain, shall retain their rights on the
salvage, so far as they go, on the remainder of the
vessel as well as on the amount of the freightage
of the cargo saved; but sailors who are engaged
on shares shall not have any right whatsoever on
the salvage of the hull, but only on the portion of
the freightage saved. If they should have worked
to recover the remainder of the shipwrecked
vessel they shall be given from the amount of the
salvage an award in proportion of the efforts made
and to the risks, encountered in order to
accomplish the salvage.
o ARTICLE 837. The civil liability incurred by the
shipowners in the case prescribed in this section,
shall be understood as limited to the value of the
vessel with all its appurtenances and freightage
earned during the voyage.
2.3 Scope; When Not Applicable
Scope
1. The carrier cannot invoke article 1733 and 1735 (extra-
ordinary diligence). In all matters not regulated by the
Civil Code, the Code of Commerce and other special
laws shall govern. Since the Civil Code contains no
provision regulating liability of shipowners or agents in
the event of total loss or destruction of the vessel, it is
the provisions of the Code Commerce that govern.
2. Limited the liability of the agent to the value of the
vessel
3. If the shipowner or agent may be held civilly liable for
injury or death of passengers arising from the
negligence of the captain in cases of collissions or
shipwrecks, his liability is mere co-extensive with his
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
interest in the vessel such that a total loss thereof
results in its extinction.
• Assuming that (petitioner) is liable for a breach of
contract of carriage, the exclusively “real and
hypothecary nature” of maritime law operates to
limit such liability to the value of the vessel, or to
the insurance thereon, if any.
4. If the vessel is co-owned, the limited liability to third
persons shall be satisfied by the co-owners in
accordance with
• ARTICLE 590. The co-owners of a vessel shall be
civilly liable in the proportion of their interests in
the common fund, for the results of the acts of the
captain, referred to in Article 587. Each co-owner
may exempt himself from this liability by the
abandonment, before a notary, of the part of the
vessel belonging to him.
When not applicable
1. When the injury or death to a passenger is due either to the
fault of the shipowner, or the concurring negligence of the
shipowner and the captain;
2. Where the vessel is insured
3. In workmen’s compensation claim
4. The total destruction of the vessel does not affect the liability
of the owner for repairs of the vessel completed before its
lost
2.3.1 Nautical Fault vs Commercial Fault
Nautical Fault
• During the voyage (in the navigation of the vessel)
• Navigational fault, error in navigation of the vessel
Commercial Fault
• Direct control of the carrier
• How the vessel is operated
2.3.2 Personal Contract Doctrine
A ship owner personally under took that he will be liable, JSU (joint
and solidary undertaking), the shipper can’t say the his liability is
limited only to the value of the vessel
2.4 Abandonment; When Required; Exception
When required
• Is an indispensable requirement before the shipowner or ship
agent can enjoy the benefits of the limited liability principle.
o If the carrier does not want to abandon the vessel,
then he is still liable even beyond the value of the
vessel
Exception
• The only instance where such abandonment is dispensed
with is when the vessel was entirely lost
2.5 Computing the Limit of Liability
2.5.1 What are Included?
2.5.2 “Offending Vessel” in Tug and Tow Scenario; Flotilla Rule
A method of calculating the ceiling of liability in the event of loss while
ships are under tow, using the tonnage of all ships in the flotilla.
2.6 Procedure for Enforcement; Concursus Proceeding
A concursus proceeding is one in which two or more persons
having competing or conflicting claims to money, property, or
mortgages or privileges on property are impleaded and required to
assert their respective claims contradictorily against all other
parties to the proceeding. (US Law)
2.7 Cases
2.7.1 Luzon Stevedoring Corporation vs CA
Facts: A maritime collision occurred between the tanker CAVITE
owned by LSCO and MV Fernando Escano (a passenger ship) owned
by Escano, as a result the passenger ship sunk. An action in admiralty
was filed by Escano against Luzon. The trial court held that LSCO
Cavite was solely to blame for the collision and held that Luzon’s claim
that its liability should be limited under Article 837 of the Code of
Commerce has not been established. The Court of Appeals affirmed
the trial court. The SC also affirmed the CA. Upon two motions for
reconsideration, the Supreme Court gave course to the petition.
Issue: Whether or not in order to claim limited liability under Article 837
of the Code of Commerce, it is necessary that the owner abandon the
vessel
Held: Yes, abandonment is necessary to claim the limited liability
wherein it shall be limited to the value of the vessel with all the
appurtenances and freightage earned in the voyage. However, if the
injury was due to the ship owner’s fault, the ship owner may not avail of
his right to avail of limited liability by abandoning the vessel.
The real nature of the liability of the ship owner or agent is embodied in
the Code of Commerce. Articles 587, 590 and 837 are intended to limit
the liability of the ship owner, provided that the owner or agent
abandons the vessel. Although Article 837 does not specifically provide
that in case of collision there should be abandonment, to enjoy such
limited liability, said article is a mere amplification of the provisions of
Articles 587 and 590 which makes it a mere superfluity.
The exception to this rule in Article 837 is when the vessel is totally lost
in which case there is no vessel to abandon, thus abandonment is not
required. Because of such loss, the liability of the owner or agent is
extinguished. However, they are still personally liable for claims under
the Workmen’s Compensation Act and for repairs on the vessel prior to
its loss.
In case of illegal or tortious acts of the captain, the liability of the owner
and agent is subsidiary. In such cases, the owner or agent may avail of
Article 837 by abandoning the vessel. But if the injury is caused by the
owner’s fault as where he engages the services of an inexperienced
captain or engineer, he cannot avail of the provisions of Article 837 by
abandoning the vessel. He is personally liable for such damages.
In this case, the Court held that the petitioner is a t fault and since he
did not abandon the vessel, he cannot invoke the benefit of Article 837
to limit his liability to the value of the vessel, all appurtenances and
freightage earned during the voyage.
2.7.2 Gov’t of the Philippine Islands vs Insular Maritime Co
Facts:
• The Government of the Philippine Islands seeks by this
action to recover from The Insular Maritime Company the
sum of P30,437.91 for repairs made by the Bureau of
Commerce and Industry on the motor ship Insular.
• The Insular Maritime Company became the owner of one
vessel only, the Insular, valued at P150,000.
• On October 29, 1919, The Insular Maritime Company asked
the Bureau of Commerce and Industry to perform certain
repairs on the Insular.
• The Government consented and terminated said repairs on
November 29 of the same year.
• Subsequent thereto, on April 15, 1920, the Insular suffered a
total loss by fire.
• The bill prepared by the chief accountant of the Bureau of
Commerce and Industry for work done on the motor ship
Insular in the amount of P30,437.91, was dated July 31,
1920. Collection of the claim was attempted pursuant to
formal demand made by the Acting Insular Auditor of date
April 30, 1921.
• It will thus be noted, as was emphasized by the defense and
by His Honor, the trial judge, that no steps were taken by the
Government to secure payment for the repairs until after the
loss of the vessel Insular.
• The trial judge further found in effect, as a legal conclusion,
that the loss of the vessel Insular extinguished the obligation.
The Attorney-General challenges the correctness of this
view.
Issue: WON the obligation of Insular Maritime Company to pay the
Bureau of Commerce and Industry for the repairs done has
extinguished.
Held: No. The obligation to pay on the part of Insular Maritime
Company still exists.
Ratio:
• The decision of the trial judge was predicated on his
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
understanding of the provisions of article 591 of the Code of
Commerce in relation with other articles of the same Code,
and with the decision of this court in the case of Philippine
Shipping Co. vs. Garcia Vergara
• As to the applicability of article 591 of the Code of
Commerce, there is nothing in the language to denote that
the liability of the owners of a vessel is wiped out by the loss
of that vessel.
• As to the applicability of the decision in the case of Philippine
Shipping Co. vs. Garcia Vergara, supra, the facts are not the
same. There, the owners and agents of a vessel causing the
loss of another vessel by collision were held "not liable
beyond the vessel itself causing the collision," but were "not
required to pay such indemnification for the reason that the
obligation thus incurred has been extinguished on account of
the loss of the thing bound for the payment thereof." Here;
there is a contractual relation which remains unaffected by
the loss of the thing concerned in the contract and which is
governed principally by the provisions of the Civil Code.
• The rights and liabilities of owners of ships are in many
respects essentially the same as in the case of other owners
of things.
• As a general rule, the owners of a vessel and the vessel
itself are liable for necessary repairs.
• Naturally the total destruction of the vessel extinguishes a
maritime lien, as there is no longer any res to which it can
attach. But the total destruction of the vessel does not affect
the liability of the owners for repairs on the vessel completed
before its loss.
• The trial court was accordingly right in its exposition of the
fact but not in its application of the law.
• Judgment must therefore be as it is hereby reversed, and in
lieu of the judgment appealed from, another shall be entered
here in favor of the plaintiff and against the defendant for the
sum of P30,437.91 with legal interest from July 20, 1921,
when the complaint was presented, until payment. Without
special findings as to costs in either instance, it is so
ordered.
2.7.3 Dela Torre vs Court of Appeals
2.7.4 Central Shipping Co. Inc vs Insurance Company of North
America
FACTS: On July 25, 1990 at Puerto Princesa, Palawan, Central
Shipping Company received on board its vessel, the M/V ‘Central
Bohol’, 376 pieces [of] Philippine Apitong Round Logs and undertook
to transport said shipment to Manila for delivery to Alaska Lumber Co.,
Inc.
“The cargo was insured for P3,000,000.00 against total loss under
Insurance Company of North America’s Marine Cargo Policy No.
MCPB- 00170. The vessel completely sank. Due to the sinking of the
vessel, the cargo was totally lost. The consignee, Alaska Lumber Co.
Inc., presented a claim for the value of the shipment to Central
Shipping but the latter failed and refused to settle the claim, hence
Insurance company, being the insurer, paid said claim and now seeks
to be subrogated to all the rights and actions of the consignee as
against Central Shipping. Central Shipping raised as its main defense
that the proximate and only cause of the sinking of its vessel and the
loss of its cargo was a natural disaster, a tropical storm which neither
Central Shipping nor the captain of its vessel could have foreseen.
DECISION OF LOWER COURTS:
(1) RTC: Central Shipping Liable. RTC was unconvinced that the
sinking of M/V Central Bohol had been caused by the weather or any
other caso fortuito. It noted that monsoons, which were common
occurrences during the months of July to December, could have been
foreseen and provided for by an ocean-going vessel.
(2) CA: affirmed RTC. Given the season of rains and monsoons, the
ship captain and his crew should have anticipated the perils of the sea.
The CA found no merit in petitioner’s assertion of the vessel’s
seaworthiness. It held that the Certificates of Inspection and
Drydocking were not conclusive proofs thereof. In order to consider a
vessel to be seaworthy, it must be fit to meet the perils of the sea.
ISSUES & RULING: (1) Whether the carrier is liable for the loss of the
cargo; and
Yes. A common carrier is presumed to be at fault or negligent. It shall
be liable for the loss, destruction or deterioration of its cargo, unless it
can prove that the sole and proximate cause of such event is one of
the causes enumerated in Article 1734 of the Civil Code, or that it
exercised extraordinary diligence to prevent or minimize the loss. In the
present case, the weather condition encountered by petitioner’s vessel
was not a “storm” or a natural disaster comprehended in the law. Given
the known weather condition prevailing during the voyage, the manner
of stowage employed by the carrier was insufficient to secure the cargo
from the rolling action of the sea. The carrier took a calculated risk in
improperly securing the cargo. Having lost that risk, it cannot now
disclaim any liability for the loss.
Established is the fact that between 10:00 p.m. on July 25, 1990 and
1:25 a.m. on July 26, 1990, M/V Central Bohol encountered a
southwestern monsoon in the course of its voyage. Having made such
factual representation in its Note of Marine Protest, petitioner cannot
now be allowed to retreat and claim that the southwestern monsoon
was a “storm.” Normally expected on sea voyages, however, were
such monsoons, during which strong winds were not unusual.
According to PAGASA, a storm has a wind force of 48 to 55 knots,
equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale.
The second mate of the vessel stated that the wind was blowing
around force 7 to 8 on the Beaufort Scale. Consequently, the strong
winds accompanying the southwestern monsoon could not be
classified as a “storm.” Such winds are the ordinary vicissitudes of a
sea voyage.
Also, even if it were a storm, it was not the proximate and only cause of
the loss. The loss of the vessel was caused not only by the
southwestern monsoon, but also by the shifting of the logs in the hold.
Such shifting could been due only to improper stowage.
(2) Whether the doctrine of limited liability is applicable
No. The doctrine of limited liability under Article 587 of the Code of
Commerce is not applicable to the present case. This rule does not
apply to situations in which the loss or the injury is due to the
concurrent negligence of the shipowner and the captain.
2.7.5 Aboitiz Shipping Corp vs CA
Facts: Anacleto Viana was a passenger of M/V Antonia bound for
Manila which was owned by defendant Aboitiz. After the said vessel
has landed, the Pioneer Stevedoring Corp., as the arrastre operator,
took over the exclusive control of the cargoes loaded on it. One hour
after the passengers had disembarked, Pioneer Stevedoring started
operation by unloading the cargoes using its crane. Viana who had
already disembarked remembered that some of his cargoes were still
inside the vessel. While pointing to the crew of the vessel the place
where his cargoes were, the crane hit him, pinning him between the
side of the vessel and the crane which resulted to his death. Viana’s
wife filed a complaint for damages against Aboitiz for breach of
contract f carriage. Aboitiz, however filed a third party complaint
against Pioneer since it had control completely over the vessel during
the incident. Furthermore, petitioner contends that one hour has
already elapsed from the time Viana disembarked, thus he has already
ceased to be a passenger.
Issue: Whether or not Aboitiz is liable for the death of Viana.
Held: The Supreme Court held that the failure of Aboitiz to exercise
extraordinary diligence for the safety of its passengers makes Aboitiz
liable. It has been recognized as a rule that the relation of the carrier
and passenger does not cease the moment the passenger alights from
the carrier’s vehicle, but continues until the passenger has had a
reasonable time or a reasonable opportunity to leave the carrier’s
premises. A reasonable time or a reasonable delay within this rule is to
be determined from all the circumstances. The primary factor to be
considered is the existence of a reasonable cause as will justify the
presence of the victim on or near the petitioner’s vessel. In the case at
bar, such justifiable cause exists because he had to come back for his
cargo. Aboitiz has failed to safeguard its passenger with extraordinary
diligence in requiring or seeing to it that precautionary measures were
strictly and actually enforced to subserve their purpose of preventing
entry into a forbidden area.
2.7.6 Allied Banking Corporation vs Cheng Yong
Doctrine:
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Under the parole evidence rule, the terms of a contract are conclusive
upon the parties and evidence which shall vary a complete and
enforceable agreement embodied in a document is inadmissible.
Simply put, when the parties have reduced their agreement into writing,
they are deemed to have intended such written agreement to be the
sole repository and memorial of everything that they have agreed
upon. All their prior and contemporaneous agreements are deemed to
be merged in the written document so that, as between them and their
successors-in-interest, such writing becomes exclusive evidence of the
terms thereof and any verbal agreement which tends to vary, alter or
modify the same is not admissible.
Facts:
1. Philippine Pacific Fishing Company, Inc. (Philippine Pacific),
through its then Vice-Chairman of the Board and concurrent
President Marilyn Javier, obtained from Allied Banking
Corporation (Allied Bank), a packing credit accommodation
amounting to One Million Seven Hundred Fifty Two
Thousand Pesos (P1,752,000.00). To secure the obligation,
Marilyn Javier and the spouses Cheng Yong and Lilia Gaw
(spouses Cheng, for short), executed a Continuing
Guaranty/Comprehensive Surety bearing date 27 March
1981.
2. Philippine Pacific, due to business reverses and alleged
misuse of corporate funds by its operating officers, defaulted
in the payment of said obligation. An intra-corporate dispute
among its stockholders followed, prompting the filing against
Philippine Pacific of a petition for receivership before the
Securities and Exchange Commission (SEC).
3. Thereafter, the corporation was reorganized, following which
the spouses Cheng Yong and Lilia Gaw were elected as its
president and treasurer, respectively. The spouses Cheng
also hold similar positions in another company, the Glee
Chemicals Phils., Inc. (GCPI), which, incidentally, also had a
credit line with Allied Bank. Meanwhile, the parties agreed to
create and constitute a management committee, instead of
placing Philippine Pacific under receivership. Hence, in an
order dated 14 August 1981, the SEC formally created a
management committee whose functions, include, among
others, the following: to acquire, lease, sell, mortgage or
otherwise encumber such assets with the prior approval of
the Commission.
4. Philippine Pacific executed in favor of Allied Bank a
promissory note in the same amount as the packing credit
accommodation. Aside from affixing their signatures on the
same promissory note in their capacity as officers of
Philippine Pacific, the spouses Cheng also signed the note in
their personal capacities and as co-makers thereof.
However, Philippine Pacific failed to pay according to the
schedule of payments set out in the promissory note. Later,
Allied Bank filed with the sheriff of Navotas an application for
extra-judicial foreclosure of the chattel mortgage constituted
on "Jean III".
5. Pursuant thereto, notices of extra-judicial sale were served
on the concerned parties by the Ex-Officio sheriff of Malabon
while the vessel was moored at the Navotas Fishing Port
Complex and under a charter contract with Lig Marine
Products, Inc. Spouses Cheng, to prevent the auction sale of
the vessel, filed with the Regional Trial Court at Quezon City
an action for declaratory relief with prayer for injunctive
remedies. Initially, that court issued a writ of preliminary
injunction restraining the sale but later lifted it upon dismissal
of the main case for declaratory relief.
6. Eventually, in a decision dated 08 February 1989, the trial
court declared both the promissory note dated 12 August
1981 and the deed of chattel mortgage over the vessel "Jean
III" invalid and unenforceable.
7. During its presentation, the Cheng spouses introduced the
promissory note as evidence.
Issue: Is the promissory note admissible in evidence?
Held: No, it is not.
Ratio: Under the parole evidence rule, the terms of a contract are
conclusive upon the parties and evidence which shall vary a complete
and enforceable agreement embodied in a document is inadmissible.
Simply put, when the parties have reduced their agreement into writing,
they are deemed to have intended such written agreement to be the
sole repository and memorial of everything that they have agreed
upon. All their prior and contemporaneous agreements are deemed to
be merged in the written document so that, as between them and their
successors-in-interest, such writing becomes exclusive evidence of the
terms thereof and any verbal agreement which tends to vary, alter or
modify the same is not admissible.
Here, the terms of the subject promissory note and the deed of chattel
mortgage are clear and explicit and devoid of any conditionality upon
which its validity depends. To be sure, Allied Bank was not a party to
SEC Case No. 2042 where the management committee was ordered
created – hence, it would not be correct to presume that it had notice of
the existence of the management committee which, incidentally, was
still to be created when the subject promissory note was executed.
Notably, while the parties in SEC Case No. 2042 agreed to form the
management committee, it was only on 14 August 1981 when the
committee was actually created and its members appointed. Clearly
then, the subject promissory note was outside the realm of authority of
the management committee. Accordingly, the chattel mortgage
accessory to it is likewise valid. Therefore, the promissory note is not
admissible in evidence.
2.7.7 Yangco vs Laserna
Facts: At about one o'clock in the afternoon of May 26, 1927, the
steamer S.S. Negros, belonging to petitioner here, Teodoro R. Yangco,
left the port of Romblon on its return trip to Manila. Typhoon signal No.
2 was then up, of which fact the captain was duly advised and his
attention thereto called by the passengers themselves before the
vessel set sail. The boat was overloaded as indicated by the load line
which was 6 to 7 inches below the surface of the water. The
passengers, numbering about 180, were overcrowded, the vessel's
capacity being limited to only 123 passengers. As the sea became
increasingly violent, the captain ordered the vessel to turn left,
evidently to return to port, but in the maneuver, the vessel was caught
sidewise by a big wave which caused it to capsize and sink. Many of
the passengers died in the mishap. Separate civil actions were filed
against petitioner to recover damages for the death of the passengers.
Issue: May the shipowner or agent, notwithstanding the total loss of the
vessel as a result of the negligence of its captain, be properly held
liable in damages for the consequent death of its passengers?
Held: No. This question is controlled by the provisions of article 587 of
the Code of Commerce. Said article reads:
The agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the
goods which the vessel carried; but he may exempt himself therefrom
by abandoning the vessel with all her equipments and the freight he
may have earned during the voyage.
The provisions accords a shipowner or agent the right of
abandonment; and by necessary implication, his liability is confined to
that which he is entitled as of right to abandon — "the vessel with all
her equipment and the freight it may have earned during the voyage."
Lawful acts and obligations of the captain beneficial to the vessel may
be enforced as against the agent for the reason that such obligations
arise from the contract of agency while as to any liability incurred by
the captain through his unlawful acts, the ship agent is simply
subsidiarily civilly liable. This liability of the agent is limited to the
vessel and it does not extend further. For this reason the Code of
Commerce makes the agent liable to the extent of the value of the
vessel, as the codes of the principal maritime nations provide with the
vessel, and not individually.
If the shipowner or agent may in any way be held civilly liable at all for
injury to or death of passengers arising from the negligence of the
captain in cases of collisions or shipwrecks, his liability is merely co-
extensive with his interest in the vessel such that a total loss thereof
results in its extinction.
Assuming that petitioner is liable for a breach of contract of carriage,
the exclusively "real and hypothecary nature" of maritime law operates
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
to limit such liability to the value of the vessel, or to the insurance
thereon, if any. In the instant case it does not appear that the vessel
was insured. Whether the abandonment of the vessel sought by the
petitioner in the instant case was in accordance with law of not, is
immaterial. The vessel having totally perished, any act of abandonment
would be an idle ceremony.
Yangco is therefore absolved from the complaints.
2.7.8 Government of the Philippine Islands vs Philippine
Steamship Co.
Facts: At about 10 p.m. on 10 February 1920, the coastwise vessel
Isabel (owned by Fernandez Hermanos), equipped with motor and
sails, left the port of Manila with primary destination to Balayan,
Batangas, carrying, among its cargo, 911 sacks of rice belonging to the
Government of the Philippine Islands and consigned to points in the
south. After the boat had been under weigh for about 4 hours, and had
passed the San Nicolas Light near the entrance into Manila Bay, the
watch and the mate on the bridge of the Isabel discerned the light of
another vessel, which proved to be the Antipolo (owned by Philippine
Steamship Co. Inc.), also a coastwise vessel, on its way to Manila and
coming towards the Isabel. At about the same time both the watch and
mate on the bridge of the Antipolo also saw the Isabel, the two vessels
being then about one mile and a half or two miles apart. Each vessel
was going approximately at the speed of 6 miles an hour, and in about
10 minutes they had together traversed the intervening space and
were in close proximity to each other. When the mate of the Antipolo,
who was then at the wheel, awoke to the danger of the situation and
saw the Isabel “almost on top of him,” to use the words of the
committee on marine accidents reporting the incident, he put his helm
hard to the starboard. As chance would have it, however, the mate on
the Isabel at this critical juncture lost his wits and, in disregard of the
regulations and of common prudence, at once placed his own helm
hard to port, with the result that his boat veered around directly in the
path of the other vessel and a collision became inevitable. Upon this
the mate on the Antipolo fortunately stopped his engines, but the Isabel
continued with full speed ahead, and the two vessels came together
near the bows. The Isabel immediately sank, with total loss of vessel
and cargo, though the members of her crew were picked up from the
water and saved.
The Government of the Philippine Islands sought to recover the sum of
P14,648.25, the alleged value of 911 sacks of rice which were lost at
sea on 11 February 1920. In the CFI judgment was entered for the
recovery by the Government from the Philippine Steamship Company,
Inc., of the full amount claimed, with interest from the date of filing of
the complaint. From this judgment, said company appealed.
The Supreme Court affirmed the judgment appealed from; with costs
against Philippine Steamship Co. Inc.
2.7.9 Lopez vs Duruelo et al
Facts: On 10 February 1927, Augusto Lopez, who is a resident of the
municipality of Silay, Occidental Negros, was desirous of embarking
upon the interisland steamer San Jacinto in order to go to Iloilo. This
boat was at the time in the anchoring ground of the port of Silay, some
half a mile distant from the port. Lopez therefore embarked at the
landing in the motor boat Jison, which was then engaged in conveying
passengers and luggage back and forth from the landing to boats at
anchor, and which was owned and operated by Albino Jison, with Juan
Duruelo as patron. The engineer (maquinista) aboard on this trip was
one Rodolin Duruelo, a boy of only 16 years of age. He is alleged to
have been a mere novice without experience in the running of motor
boats; and the day of the occurrence now in contemplation is said to
have been the third day of his apprenticeship in this capacity. It is
alleged that the Jison, upon this trip, was grossly overladen, having
aboard 14 passengers, while its capacity was only for 8 or 9. As the
motor boat approached the San Jacinto in a perfectly quiet sea, it
came too near to the stern of the ship, and as the propeller of the ship
had not yet ceased to turn, the blades of the propeller struck the motor
boat and sank it at once. As the Jison sank, Lopez was thrown into the
water against the propeller, and the revolving blades inflicted various
injuries upon him, consisting of a bruise in the breast, two serious
fractures of the bones of the left leg, and a compound fracture of the
left femur. As a consequence of these injuries Lopez was kept in bed in
a hospital in the City of Manila from 28 February until 19 October 1927,
or approximately 8 months.
Lopez instituted an action in the CFI of Occidental Negros for the
purpose of recovering damages (P120,000) for personal injuries
inflicted upon him by reason of the negligence of Duruelo and Jison.
Duruelo and Jison demurred to the complaint, and the demurrer having
been sustained, Lopez elected to stand upon his complaint, which was
accordingly dismissed. Lopez appealed.
The Supreme Court reversed the judgment appealed from, overruled
the demurrer, and required Jison to answer the complaint within 5 days
after notification of the return of the decision to the court of origin; with
costs against Jison.
2.7.10 Philippine American General Insurance Company Inc. vs
CA
Doctrine: The ship agent is liable for the negligent acts of the captain in
the care of goods loaded on the vessel. This liability however can be
limited through abandonment of the vessel, its equipment and
freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable
despite the abandonment, as where the loss or injury was due to the
fault of the shipowner and the captain.
Facts:
1. 6 July 1983 - Coca-Cola Bottlers Philippines, Inc., loaded on
board “MV Asilda,” a vessel owned and operated by
respondent Felman Shipping Lines (FELMAN), 7,500 cases
of 1-liter Coca-Cola softdrink bottles to be transported from
Zamboanga City to Cebu City for consignee Coca- Cola
Bottlers Philippines, Inc., Cebu.
• The shipment was insured with petitioner Philippine
American General Insurance Co., Inc. (PHILAMGEN).
2. “MV Asilda” left the port of Zamboanga in fine weather at
eight o’clock in the evening of the same day.
3. 7 July 1983 - The vessel sank in the waters of Zamboanga
del Norte together with its cargo, which includes the 7,500
cases of Coca-Cola softdrink bottles.
4. 15 July 1983 - The consignee Coca-Cola Bottlers
Philippines, Inc., Cebu plant, filed a claim with respondent
FELMAN for recovery of damages due to the loss of its
softdrink bottles.
5. Respondent denied the claim so Coca-Cola filed an
insurance claim with PHILAMGEN which paid its claim of
P755,250.00.
6. Claiming its right of subrogation PHILAMGEN now seeks
recourse againt respondent FELMAN. Consequently, on 29
November 1983, PHILAMGEN sued the shipowner for sum
of money and damages.
7. PHILAMGEN’s contentions:
• The sinking and total loss of “MV Asilda” and its cargo
were due to the vessel’s unseaworthiness since it was
put to sea in an unstable condition; and
• The vessel was improperly manned and that its officers
were grossly negligent in failing to take appropriate
measures to proceed to a nearby port or beach after
the vessel started to list.
8. FELMAN’s contentions:
• No right of subrogation in favor of PHILAMGEN was
transmitted by the shipper; and
• FELMAN had abandoned all its rights, interests and
ownership over “MV Asilda” together with her freight
and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of
Commerce.
9. RTC – Ruled in favor of FELMAN
• It found that “MV Asilda” was seaworthy when it left the
port of Zamboanga (as confirmed by certificates issued
by the Philippine Coast Guard and the shipowner’s
surveyor attesting to its seaworthiness). Thus the loss
of the vessel and its entire shipment could only be
attributed to either a fortuitous event, in which case, no
liability should attach unless there was a stipulation to
the contrary, or to the negligence of the captain and his
crew, in which case, Art. 587 of the Code of Commerce
should apply.
10. CA – Ruled in favor of FELMAN • “MV Asilda” was found to
be unseaworthy for being top-heavy as 2,500 cases of Coca-
Cola softdrink bottles were improperly stowed on deck. In
other words, while the vessel possessed the necessary
Coast Guard certification indicating its seaworthiness with
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
respect to the structure of the ship itself, it was not
seaworthy with respect to the cargo. Nonetheless, the
appellate court denied the claim of PHILAMGEN on the
ground that the assured’s implied warranty of seaworthiness
was not complied with.
Issue: Whether the limited liability under Art. 587 of the Code of
Commerce should apply
Held: No
Ratio:
• Art. 587 of the Code of Commerce is not applicable to
the case at bar. Simply put, the ship agent is liable for
the negligent acts of the captain in the care of goods
loaded on the vessel. This liability however can be
limited through abandonment of the vessel, its
equipment and freightage as provided in Art. 587.
Nonetheless, there are exceptional circumstances
wherein the ship agent could still be held answerable
despite the abandonment, as where the loss or injury
was due to the fault of the shipowner and the captain.
The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a
shipowner’s liability, does not apply to cases where the
injury or average was occasioned by the shipowner’s
own fault. It must be stressed at this point that Art. 587
speaks only of situations where the fault or negligence
is committed solely by the captain. Where the
shipowner is likewise to be blamed, Art. 587 will not
apply, and such situation will be covered by the
provisions of the Civil Code on common carrier.
• It was already established at the outset that the sinking
of “MV Asilda” was due to its unseaworthiness even at
the time of its departure from the port of Zamboanga. It
was top-heavy as an excessive amount of cargo was
loaded on deck. Closer supervision on the part of the
shipowner could have prevented this fatal
miscalculation. As such, FELMAN was equally
negligent. It cannot therefore escape liability through
the expedient of filing a notice of abandonment of the
vessel by virtue of Art. 587 of the Code of Commerce.
• Under Art 1733 of the Civil Code, “(c)ommon 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..." In
the event of loss of goods, common carriers are
presumed to have acted negligently. FELMAN, the
shipowner, was not able to rebut this presumption.
3. Maritime Contracts, in General
4. Maritime Torts, in General
• Civil wrongs on navigable waters
• Any conduct which is tortuous under general law and which
is connected with the ship or it use creates a maritime lien
• It includes collision claims and personal injury claims
(PD 1521)
Section 17. Preferred Maritime Lien, Priorities, Other Liens (a) Upon
the sale of any mortgaged vessel in any extra-judicial sale or by order
of a district court of the Philippines in any suit in rem in admiralty for
the enforcement of a preferred mortgage lien thereon, all pre-existing
claims in the vessel, including any possessory common-law lien of
which a lienor is deprived under the provisions of Section 16 of this
Decree, shall be held terminated and shall thereafter attach in like
amount and in accordance with the priorities established herein to the
proceeds of the sale. The preferred mortgage lien shall have priority
over all claims against the vessel, except the following claims in the
order stated: (1) expenses and fees allowed and costs taxed by the
court and taxes due to the Government; (2) crew's wages; (3) general
average; (4) salvage; including contract salvage; (5) maritime liens
arising prior in time to the recording of the preferred mortgage; (6)
damages arising out of tort; and (7) preferred mortgage registered prior
in time.
(b) If the proceeds of the sale should not be sufficient to pay all
creditors included in one number or grade, the residue shall be divided
among them pro rata. All credits not paid, whether fully or partially shall
subsist as ordinary credits enforceable by personal action against the
debtor. The record of judicial sale or sale by public auction shall be
recorded in the Record of Transfers and Encumbrances of Vessels in
the port of documentation.
• Martime torts are defined as civil wrongs committed on
navigable waters
• As a general principle, any conduct which is tortuous under
general law and which is connected with the ship or its uses
creates a martime lien. It includes collision claims and
personal injury claims
5. Admiralty Jurisdiction
• BP 129 as amended by RA 7691 – (Regional Trial Court has
jurisdiction) in all actions in admiralty and maritime
jurisdiction where the demand or claim exceeds Php
300,000.00 or, in Metro Manila where such demand or claim
exceeds Php 400,000.00
5.1 Importance
5.2 Torts: maritime Locus and Maritime Nexus criteria
5.3 Contracts: Locational Test vs Subject Matter Test
• The English rule follows the location test wherein martime
and admiralty jurisdiction, with a few exceptions, is exercised
only on contracts made upon the sea and to be executed
thereon
• American rule where the criterion in determining whether a
contract is maritime depends on the nature and subject
matter of the contract, having reference to maritime service
and transactions
o Whether or not a contract is maritime depends not
on the place where the contract is made and is to
be executed, making the locality test, but on the
subject matter of the contract, making the true
criterion a maritime service or a maritime
transaction
5.3.1 International Harvester Company of the Philippines vs
Aragon
FACTS:
International Harvester Company of the Philippines is the S/S Belle of
the Sea took on board at Los Angeles, California, U. S. A., goods for
shipment to Manila, and covered by Bill of Lading No. 105; WhenS/S
Belle of the Seaarrived in Manila, the cargoes were duscharged at the
Government piers under the supervision and custody of Manila
Terminal Co., Inc.
Out of the goods covered by Bill of Lading No. 105, one carton of
assorted samples with a stipulated value of P200 was not delivered to
Yaras and Company which was lost through the negligence either of
the Manila Terminal Co., Inc., or of the International Harvester
Company of the Philippines. The complaint prayed for judgment either
against the defendant Manila Terminal Co., Inc., or the International
Harvester Company of the Philippines, agent of the vessel Belle of the
Sea for the amount of P200, with legal interest from the date of the
filing of the complaint.
*Before the trial in the Municipal Court of Manila could be proceeded
with, the International Harvester of the Philippines filed a motion to
dismiss, on the ground that the Municipal Court of Manila had no
jurisdiction to try case because the action involves admiralty or
maritime jurisdiction, which motion was overruled by the municipal
court.
*The Court of First Instance of Manila rendered judgment favor of the
International Harveter Company of the Philippines, ordering the judge
of the municipal court to desist from taking cognizance of civil case
against the International Harvester Company of the Philippines.
ISSUE(s):
WON the municipal court can take cognizance of civil case for recovery
of the undelivered goods against the International Harvester Company
of the Philippines.
RULING:
Wherefore, the judge of the municipal court is ordered to desist from
taking cognizance of civil case against the International Harvester
Company of the Philippines.
REASON(s):
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
In view of our conclusion that the cause of action of Yaras and
Company against International Harvester Company of the Philippines
involves admiralty over which the courts of first instance have original
jurisdiction and to which the jurisdiction of the justice of the peace
courts (including municipal courts) does not extend the respondent
judge was properly restrained from further proceeding with civil case
No. IV-262.
The liability of the International Harvester Company of the Philippines
is predicated on the contract of carriage by sea between the
International Harvester Company of the Philippines and Yaras and
Company as evidenced by Bill of Lading No. 105, independently of the
liability of the Manila Terminal Co., Inc, as operator of an arrastre
service.
Admiralty has jurisdiction over all maritime contracts, in whatever form,
wherever they were executed or are to be performed, but not over non-
maritime contracts. Whether or not a contract is maritime does not
depend upon the English rule which conceded jurisdiction only to
contracts made upon and the to be performed upon navigable water,
making the locality the test. It depends on the subject-matter of the
contract, making the true criterion a maritime service or a maritime
transaction.
Specifically, admiralty has jurisdiction of a proceeding in rem or
in personam for the breach of a contract of affreightment, whether
evidenced by a bill of lading or a charter party. And typical of a
controversy over contracts of affreightment is a suit of one party
against the other for loss of or damage to the cargo.
5.3.2 Crescent Petroleum, Ltd. vs MV Lok Maheshwari
FACTS:
Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel
of Indian registry that is owned by respondent Shipping Corporation of
India (SCI), a corporation organized and existing under the laws of
India and principally owned by the Government of India. It was time-
chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla),
a South Korean company. Halla, in turn, sub-chartered the Vessel
through a time charter to Transmar Shipping, Inc. (Transmar).
Transmar further sub-chartered the Vessel to Portserv Limited
(Portserv). Both Transmar and Portserv are corporations organized
and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent
Petroleum, Ltd. (Crescent), a corporation organized and existing under
the laws of Canada that is engaged in the business of selling
petroleum and oil products for the use and operation of oceangoing
vessels, to deliver marine fuel oils (bunker fuels) to the Vessel.
Petitioner Crescent granted and confirmed the request through an
advice via facsimile dated November 2, 1995. As security for the
payment of the bunker fuels and related services, petitioner Crescent
received two (2) checks in the amounts of US$100,000.00 and
US$200,000.00. Thus, petitioner Crescent contracted with its supplier,
Marine Petrobulk Limited (Marine Petrobulk), another Canadian
corporation, for the physical delivery of the bunker fuels to the Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker
fuels amounting to US$103,544 inclusive of barging and demurrage
charges to the Vessel at the port of Pioneer Grain, Vancouver,
Canada. The Chief Engineer Officer of the Vessel duly acknowledged
and received the delivery receipt. Marine Petrobulk issued an invoice
to petitioner Crescent for the US$101,400.00 worth of the bunker fuels.
Petitioner Crescent issued a check for the same amount in favor of
Marine Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised
invoice dated November 21, 1995 to "Portserv Limited, and/or the
Master, and/or Owners, and/or Operators, and/or Charterers of M/V
‘Lok Maheshwari’" in the amount of US$103,544.00 with instruction to
remit the amount on or before December 1, 1995. The period lapsed
and several demands were made but no payment was received. Also,
the checks issued to petitioner Crescent as security for the payment of
the bunker fuels were dishonored for insufficiency of funds. As a
consequence, petitioner Crescent incurred additional expenses of
US$8,572.61 for interest, tracking fees, and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu City,
petitioner Crescent instituted before the RTC of Cebu City an action
"for a sum of money with prayer for temporary restraining order and
writ of preliminary attachment" against respondents Vessel and SCI,
Portserv and/or Transmar.
On May 3, 1996, the trial court issued a writ of attachment against the
Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew its
prayer for a temporary restraining order and posted the required bond.
On May 18, 1996, summonses were served to respondents Vessel and
SCI, and Portserv and/or Transmar through the Master of the Vessel.
On May 28, 1996, respondents Vessel and SCI, through Pioneer
Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte
motion to approve Pioneer’s letter of undertaking, to consider it as
counter-bond and to discharge the attachment. On May 29, 1996, the
trial court granted the motion; thus, the letter of undertaking was
approved as counter-bond to discharge the attachment.
ISSUE:
Whether the Philippine court has or will exercise jurisdiction and
entitled to maritime lien under our laws on foreign vessel docked on
Philippine port and supplies furnished to a vessel in a foreign port?
RULING:
In a suit to establish and enforce a maritime lien for supplies furnished
to a vessel in a foreign port, whether such lien exists, or whether the
court has or will exercise jurisdiction, depends on the law of the country
where the supplies were furnished, which must be pleaded and proved.
The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such
single-factor methodologies as the law of the place of supply. The
multiple-contact test to determine, in the absence of a specific
Congressional directive as to the statute’s reach, which jurisdiction’s
law should be applied. The following factors were considered: (1) place
of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the
injured; (4) allegiance of the defendant shipowner; (5) place of
contract; (6) inaccessibility of foreign forum; and (7) law of the forum.
This is applicable not only to personal injury claims arising under the
Jones Act but to all matters arising under maritime law in general
The Court cannot sustain petitioner Crescent’s insistence on the
application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and
hold that a maritime lien exists. Out of the seven basic factors listed in
the case of Lauritzen, Philippine law only falls under one – the law of
the forum. All other elements are foreign – Canada is the place of the
wrongful act, of the allegiance or domicile of the injured and the place
of contract; India is the law of the flag and the allegiance of the
defendant shipowner. Applying P.D. No. 1521,a maritime lien exists
would not promote the public policy behind the enactment of the law to
develop the domestic shipping industry. Opening up our courts to
foreign suppliers by granting them a maritime lien under our laws even
if they are not entitled to a maritime lien under their laws will encourage
forum shopping. In light of the interests of the various foreign elements
involved, it is clear that Canada has the most significant interest in this
dispute. The injured party is a Canadian corporation, the sub-charterer
which placed the orders for the supplies is also Canadian, the entity
which physically delivered the bunker fuels is in Canada, the place of
contracting and negotiation is in Canada, and the supplies were
delivered in Canada.
CHAPTER 2: MERCHANT VESSELS (ART 573-585)
1. General Concept; Definition
Vessel or watercraft
PD 474 Sec 3(b)
• Any barge, lighter, bulk carrier, passenger ship, freighter,
tanker, container ship, fishing boats or other artificial
contrivance utilizing any source of motive power, designed,
used or capable of being used as a means of water
transportation operating either as common contract carrier,
including fishing vessels covered under Presidential Decree
No. 43, except (i) those owned and/or operated by the
Armed Forces of the Philippines and by foreign governments
for military purposes, and (ii) bancas, sailboats and other
waterborne contrivance of less than three gross tons
capacity and not motorized.
• Lopez vs Duruelo
o Not intended to include all ships, craft or floating
structures of every kind without limitation, and the
provisions of that section should not be held to
include a minor craft engaged only in a river and
bay traffic
o Vessels are licensed to engage in maritime
commerce, or commerce by sea (Code of
Commerce)
§ Other vessels of a minor nature not
engaged in maritime commerce, such as
river boats and those carrying
passengers from ship to shore, must be
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
governed, as to their liability to
passengers, by the provisions of the
Civil Code or other appropriate special
provisions of law
Kinds of vessels
1. A passenger ship is a ship which carries more than 12
passengers
2. A cargo ship is any ship which is not a passenger ship
3. A tanker is a cargo ship constructed or adapted for the
carriage in bulk of liquid cargoes of an inflammable nature
4. A fishing vessel is a vessel used for catching fish, whales,
seals, walrus or other living resources of the sea
5. A nuclear ship is a ship provided with a nuclear power plant
6. “New ship” means a ship the keel of which is laid or which is
at a similar stage of construction on or after the date of
coming into force of the SOLAS 1974
7. “Existing ship” means a ship which is not a new ship
1.1 Lopez vs Duruelo
Facts: On 10 February 1927, Augusto Lopez, who is a resident of the
municipality of Silay, Occidental Negros, was desirous of embarking
upon the interisland steamer San Jacinto in order to go to Iloilo. This
boat was at the time in the anchoring ground of the port of Silay, some
half a mile distant from the port. Lopez therefore embarked at the
landing in the motor boat Jison, which was then engaged in conveying
passengers and luggage back and forth from the landing to boats at
anchor, and which was owned and operated by Albino Jison, with Juan
Duruelo as patron. The engineer (maquinista) aboard on this trip was
one Rodolin Duruelo, a boy of only 16 years of age. He is alleged to
have been a mere novice without experience in the running of motor
boats; and the day of the occurrence now in contemplation is said to
have been the third day of his apprenticeship in this capacity. It is
alleged that the Jison, upon this trip, was grossly overladen, having
aboard 14 passengers, while its capacity was only for 8 or 9. As the
motor boat approached the San Jacinto in a perfectly quiet sea, it
came too near to the stern of the ship, and as the propeller of the ship
had not yet ceased to turn, the blades of the propeller struck the motor
boat and sank it at once. As the Jison sank, Lopez was thrown into the
water against the propeller, and the revolving blades inflicted various
injuries upon him, consisting of a bruise in the breast, two serious
fractures of the bones of the left leg, and a compound fracture of the
left femur. As a consequence of these injuries Lopez was kept in bed in
a hospital in the City of Manila from 28 February until 19 October 1927,
or approximately 8 months.
Lopez instituted an action in the CFI of Occidental Negros for the
purpose of recovering da
mages (P120,000) for personal injuries inflicted upon him by reason of
the negligence of Duruelo and Jison. Duruelo and Jison demurred to
the complaint, and the demurrer having been sustained, Lopez elected
to stand upon his complaint, which was accordingly dismissed. Lopez
appealed.
The Supreme Court reversed the judgment appealed from, overruled
the demurrer, and required Jison to answer the complaint within 5 days
after notification of the return of the decision to the court of origin; with
costs against Jison.
1.2 Reasonable Observer Test
Lozman vs City of Riviera Beach, Florida
Facts of the Case: In 2002, Fane Lozman purchased a floating
residential structure. The structure was rectangular and made of
plywood. It contained no bilge pumps, no raked bow, no navigation
aids, no lifeboats, no propulsion mechanism, no steering, and cleats,
which were inappropriate for towing.
Lozman kept his floating home in a marina in the City of
Riviera Beach. Lozman signed a lease with the city, moored the
floating home to the dock, and affixed the home to land based utilities.
Later, the city council passed a revised dockage agreement and
accompanying Marina Rules. Pursuant to these rules, the city informed
Lozman it would revoke his permission to remain on the Marina unless
he executed a new agreement and complied with the new regulations.
Lozman did not execute a new agreement and continued to remain at
the marina.
In response, the city filed an in rem suit in federal court for
trespass under federal maritime law. The city filed for partial summary
judgment on its trespass claim. Lozman argued that his floating home
was not a “vessel” under 1 U.S.C. § 3, and therefore not subject to
maritime law. The district court granted the city’s motion and held that
Lozman’s floating home was a “vessel” for purposes admiralty
jurisdiction. The United States Court of Appeals for the Eleventh Circuit
agreed with the lower court, and Lozman appealed the appellate
court’s determination that his floating home was a “vessel” under 1
U.S.C. § 3.
Question: Is a floating structure a "vessel" under 1 U.S.C. § 3, thus
triggering federal maritime jurisdiction, if that structure is indefinitely
moored, receives power and other utilities from shore, and is not
intended to be used in maritime transportation or commerce?
Decision: 7 votes for Lozman, 2 vote(s) against
Legal provision: The Federal Maritime Lien Act, 28 U.S.C. § 1333
(district court admiralty jurisdiction), Rules of Construction Act
No. Justice Stephen G. Breyer, writing for a 7-2 majority,
reversed the 11th Circuit. The Supreme Court held that the 11th
Circuit's definition of "vessel" is too broad. The Cort focused on the
language of the statute, which states that a vessel is "capable of being
used...as a means of transportation." While the floating home can
move, it is not used for transportation in a practical way. The Court
employed a "reasonable observer" test, holding that something's ability
to float, does not automatically make it a vessel.
Justice Sonia Sotomayor dissented, arguing that the reasonable
observer test introduces a subjective element that upsets long
established maritime precedent. The dissent would also remand the
case to develop the record further. Justice Anthony M. Kennedy joined
in the dissent.
1.3 Dead Ship Doctrine
Principle applied in Maritime law whereby admiralty law is no longer
made applicable to a ship whose purpose is so changed that it is no
longer considered a vessel as it has no further navigation function.
1.4 Importance of Determining “Merchant Vessel” Status
1.5 Definition of “Vessel” per Convention on the International
Regulations for Preventing at Sea (COLREGS)
• Rule 3 (a) includes every description of water craft, including
non-displacement craft and seaplanes, used or capable of
being used as a means of transportation on water
2. Doctrine of Vessel Personification
2.1 United States vs Steamship “Rubi”
Facts: On 9 February 1913, Steamer “Rubi” arrived in the city of Manila
from a coastwise port but while on a continuous voyage from the
foreign port of Hongkong. At the time of her arrival in the port of Manila
she had on board concealed in an unknown place 13.380 kilos of
opium and 2.620 kilos of morphine. At the same time the steamer had
other cargo which was duly manifested as required by law, and that the
said opium and morphine were not manifested. While the steamer was
lying in the harbor two members of the steamer’s crew, one known as
a ‘coal passer’ and the other as a ‘donkey man,’ attempted to
discharge the opium and morphine from the vessel but in doing so
delivered it to secret service agents of the Bureau of Customs.
Thereupon the steamer was seized and the Collector of Customs
imposed a penalty of P500 on account of the violation of section 77 of
Act 355, the usual proceedings having been followed in imposing the
penalty.
The United States and the Insular Collector of Customs applied with
the Court of First Instance of Manila for a petition for a judgment
confirming the action of the Insular Collector of Customs in imposing
an administrative fine on the steamship Rubi for bringing unmanifested
cargo into the port of Manila. The Steamship Rubi was represented by
Warner, Barnes & Co. (Ltd.), general agents in the Philippine Islands
for her owners. The trial judge dismissed the petition on the ground
that “there was no knowledge on the part of the master of the vessel of
the opium and morphine, and so far as he was concerned it was not
cargo. He being the master of the vessel, who should make manifests
of all cargo, could not manifest that which he did not know of, and the
vessel could not know more or have knowledge of more than he had,
for his knowledge was that of the vessel. Hence, the appeal.
The Supreme Court reversed the judgment entered in the court below,
with the costs of this instance de oficio, and ordered that the record
should be remanded to the court below with instructions to enter the
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
appropriate orders in accord with the prayer of the petition.
3. Personal Property or Real Property?
• Vessels are personal property under Article 416 of the Civil
Code (Article 585 of the Code of Commerce)
• ARTICLE 585. For all purposes of law not modified or
restricted by the provisions of this Code, vessels shall
continue to be considered as personal property.
• Art. 416. The following things are deemed to be personal
property:
(1) Those movables susceptible of appropriation which are
not included in the preceding article;
(2) Real property which by any special provision of law is
considered as personal property;
(3) Forces of nature which are brought under control by
science; and
(4) In general, all things which can be transported from place
to place without impairment of the real property to which they
are fixed.
3.1 Rubiso vs Rivera
DOCTRINE:
The requisite of registration in the registry of the purchase of a vessel
is necessary and indispensable in order that the purchaser's rights are
maintained against a claim by third persons.
FACTS:
1. It was alleged in the complaint that the plaintiffs were the owners of
a pilot boat Valentina stranded in Tingloy in Bauan, Batangas and
Rivera took charge of the boat, claiming to be the owner, and plaintiffs
thus unable to derive profit from it.
2. The boat is owned by "Gelito and Co" with co-partners Gelito for 2/3
share and Sy Qui for 1/3 share. Afterwards Gelito sold his share to Sy
Qui.
3. Sy Qui then sold the boat to Rivera for 2500 pesos on Jan 4, 1915
and had it registered in the Bureau of Customs on March 17, 1915.
4. Then to enforce a payment of a certain sum of money, the boat was
bought by Rubiso in a public auction on January 23, 1915 and had it
registered in the Collector of Customs on January 27, 1915.
5. The complaint asks the defendant for indemnification and the
delivery of the boat.
ISSUE:
1. WoN Rubiso has a better right to the boat Valentina.
PROVISIONS:
Article 573 of the Code of Commerce: Merchant vessels constitute
property which may be acquired and transferred by any of
the means recognized by law. The acquisition of a vessel
must appear in a written instrument, which shall not produce
any effect with respect to third persons if not inscribed in the
registry of vessels.
RULING + RATIO:
1. YES.
• Even though Rivera was the first one who bought the
boat, it was Rubiso who registered the vessel first in the
office of the Collector of Customs. Rivera only
registered the vessel on March 17, 1915 while Rubiso
had it registered on January 27, 1915 in the same
month of the purchase.
• With respect to the rights of the two purchasers,
whichever of them who registered the vessel first is the
one entitled by the protection of the law, which
considers him the absolute owner of the boat and free
from encumbrances and claims.
• Rivera is now considered a third person who was
directly affected by the registration. Ships and vessels,
whether moved by steam or sail, partake the nature of
real property on account of their value in the world of
commerce.
DISPOSITION: Judgment is affirmed with costs against appellant.
3.2 Philippine Refining Co. vs Jarque
Facts: On varying dates the Philippine Refining Co., Inc., and
Francisco Jarque executed three mortgages, denominated as “chattel
mortgage” on the motor vessels Pandan and Zaragoza. The first two
mortgages do not have an appended affidavit of good faith, while the
third contains such. The third mortgage was subscribed by Jarque and
MN Brink (in what capacity the latter signed is not disclosed) and was
not registered in the customs house until 17 May 1932, or within the
period of 30 prior to the commencement of insolvency proceedings
against Jarque. A fourth mortgage was executed by Jarque and
Ramon Aboitiz on the motorship Zaragoza and was entered in the
chattel mortgage registry of the register of deeds on 12 May 1932, or
again within the 30-day period before the institution of insolvency
proceedings.
A petition was filed with the CFI Cebu on 2 June 1932 in which it was
prayed that Francisco Jarque be declared an insolvent debtor, with the
result that an assignment of all the properties of the insolvent debtor,
was executed in favor of Jose Corominas. The petition on the matter of
Jarque’s insolvency was granted. However, the judge declined to order
the foreclosure of the mortgages, but on the contrary sustained the
special defenses of fatal defectiveness of the mortgages.
The Supreme Court affirmed the judgment, with costs against
appellant.
4. Blue Water Vessel vs Brown Water Vessel
Blue Water - A term used to distinguish ocean-going vessels from
vessels used on inland or coastal waters (referred to as "Brown
Water"). Blue water vessels are generally larger and more strongly
built to endure the open ocean without the benefit of shelter, unlike
brown water vessels that can seek a safe harbor when a storm is
forecast.
A merchant vessel engaged for international shipping
Brown Water - A term used to describe vessels, e.g. tugs and barges,
working on inland rivers or coastal waters, as opposed to vessels on
the ocean.
A vessel inter-island shipping or domestic shipping
5. Vessel Arrest; Procedure
5.1 Crescent Petroleum, Ltd. vs MV Lok Maheshwari
FACTS:
Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel
of Indian registry that is owned by respondent Shipping Corporation of
India (SCI), a corporation organized and existing under the laws of
India and principally owned by the Government of India. It was time-
chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla),
a South Korean company. Halla, in turn, sub-chartered the Vessel
through a time charter to Transmar Shipping, Inc. (Transmar).
Transmar further sub-chartered the Vessel to Portserv Limited
(Portserv). Both Transmar and Portserv are corporations organized
and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent
Petroleum, Ltd. (Crescent), a corporation organized and existing under
the laws of Canada that is engaged in the business of selling
petroleum and oil products for the use and operation of oceangoing
vessels, to deliver marine fuel oils (bunker fuels) to the Vessel.
Petitioner Crescent granted and confirmed the request through an
advice via facsimile dated November 2, 1995. As security for the
payment of the bunker fuels and related services, petitioner Crescent
received two (2) checks in the amounts of US$100,000.00 and
US$200,000.00. Thus, petitioner Crescent contracted with its supplier,
Marine Petrobulk Limited (Marine Petrobulk), another Canadian
corporation, for the physical delivery of the bunker fuels to the Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker
fuels amounting to US$103,544 inclusive of barging and demurrage
charges to the Vessel at the port of Pioneer Grain, Vancouver,
Canada. The Chief Engineer Officer of the Vessel duly acknowledged
and received the delivery receipt. Marine Petrobulk issued an invoice
to petitioner Crescent for the US$101,400.00 worth of the bunker fuels.
Petitioner Crescent issued a check for the same amount in favor of
Marine Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised
invoice dated November 21, 1995 to "Portserv Limited, and/or the
Master, and/or Owners, and/or Operators, and/or Charterers of M/V
‘Lok Maheshwari’" in the amount of US$103,544.00 with instruction to
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
remit the amount on or before December 1, 1995. The period lapsed
and several demands were made but no payment was received. Also,
the checks issued to petitioner Crescent as security for the payment of
the bunker fuels were dishonored for insufficiency of funds. As a
consequence, petitioner Crescent incurred additional expenses of
US$8,572.61 for interest, tracking fees, and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu City,
petitioner Crescent instituted before the RTC of Cebu City an action
"for a sum of money with prayer for temporary restraining order and
writ of preliminary attachment" against respondents Vessel and SCI,
Portserv and/or Transmar.
On May 3, 1996, the trial court issued a writ of attachment against the
Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew its
prayer for a temporary restraining order and posted the required bond.
On May 18, 1996, summonses were served to respondents Vessel and
SCI, and Portserv and/or Transmar through the Master of the Vessel.
On May 28, 1996, respondents Vessel and SCI, through Pioneer
Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte
motion to approve Pioneer’s letter of undertaking, to consider it as
counter-bond and to discharge the attachment. On May 29, 1996, the
trial court granted the motion; thus, the letter of undertaking was
approved as counter-bond to discharge the attachment.
ISSUE:
Whether the Philippine court has or will exercise jurisdiction and
entitled to maritime lien under our laws on foreign vessel docked on
Philippine port and supplies furnished to a vessel in a foreign port?
RULING:
In a suit to establish and enforce a maritime lien for supplies furnished
to a vessel in a foreign port, whether such lien exists, or whether the
court has or will exercise jurisdiction, depends on the law of the country
where the supplies were furnished, which must be pleaded and proved.
The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such
single-factor methodologies as the law of the place of supply. The
multiple-contact test to determine, in the absence of a specific
Congressional directive as to the statute’s reach, which jurisdiction’s
law should be applied. The following factors were considered: (1) place
of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the
injured; (4) allegiance of the defendant shipowner; (5) place of
contract; (6) inaccessibility of foreign forum; and (7) law of the forum.
This is applicable not only to personal injury claims arising under the
Jones Act but to all matters arising under maritime law in general
The Court cannot sustain petitioner Crescent’s insistence on the
application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and
hold that a maritime lien exists. Out of the seven basic factors listed in
the case of Lauritzen, Philippine law only falls under one – the law of
the forum. All other elements are foreign – Canada is the place of the
wrongful act, of the allegiance or domicile of the injured and the place
of contract; India is the law of the flag and the allegiance of the
defendant shipowner. Applying P.D. No. 1521,a maritime lien exists
would not promote the public policy behind the enactment of the law to
develop the domestic shipping industry. Opening up our courts to
foreign suppliers by granting them a maritime lien under our laws even
if they are not entitled to a maritime lien under their laws will encourage
forum shopping. In light of the interests of the various foreign elements
involved, it is clear that Canada has the most significant interest in this
dispute. The injured party is a Canadian corporation, the sub-charterer
which placed the orders for the supplies is also Canadian, the entity
which physically delivered the bunker fuels is in Canada, the place of
contracting and negotiation is in Canada, and the supplies were
delivered in Canada.
5.2 Quasha Asperilla Ancheta Valmonte Peña & Marcos vs Hon.
Juan
FACTS: A sea vessel, MV San Vicente - registered in the Philippines,
was chartered by foreigners and foreign companies to deliver cargo
from Sweden to Jeddah, Saudi Arabia. The payment scheme was
supposed to be by “time charter”. Payment would have been in the
amount of US $ 3,200 a day. However, after two months, the
foreigners failed to pay the daily hire. It had docked in Jeddah but did
not unload its cargo due to the fact of non-payment. Filipinas Carriers
(FILCAR) exercised its lien over the goods transported as per the
Charter Party (their contract). FILCAR asked to court for sale of the
goods in the ship to satisfy the debt of the foreign companies to them.
Later, the law firm of Quasha Asperilla Ancheta Valmonte Peña &
Marcos intervened in the case on behalf of the agent of some of the
foreign companies/defendants of the case. The agent’s name was
Ahmed Baroom and he was supposedly the agent of AB Charles
Thorburn & Co. and some companies in Saudi Arabia. Later, Baroom
withdrew from pursuing the case but he failed to pay his lawyers
(Quasha). The law firm of Quasha then filed a writ of preliminary
attachment in a different CFI (Pasig the original case was in the CFI of
Manila) claiming that it has a right to a portion of the goods as payment
for its attorney’s fees. The goods however have already been sold by
the respondent court, the law firm now goes after the proceeds of the
sale.
ISSUE: W/N Quasha is entitled to a portion of the goods or its
proceeds?
RULING: No. The law firm should have pursued its claim to attorney’s
fees in the same court as an “intervention petition for recovery of
attorney’s fees.” The respondent CFI of Manila had already acquired
jurisdiction over the goods as the case pending with it was already
deciding upon the question of who the real owner of the cargo was. In
filing with another CFI, multiplicity of suits occurred. The “charging lien”
filed in Pasig was erroneous, an “intervention petition for recovery of
attorney’s fees” in the CFI of Manila was the proper action that should
have been taken. This negligence by the law firm entitles it to no relief,
the instant petition must be dismissed. Besides the goods have already
been sold and delivered to a foreign buyer, the court has lost
jurisdiction over it. Everything is already fait accompli (already done
and beyond alteration).
5.3 Commissioner of Customs vs Court of Appeals
FACTS: The whole controversy revolves around a vessel and its cargo.
On January 7, 1989, the vessel M/V "Star Ace," coming from
Singapore laden with cargo, entered the Port of San Fernando, La
Union (SFLU) for needed repairs. The vessel and the cargo had an
appraised value, at that time, of more or less Two Hundred Million
Pesos (P200,000,000). When the Bureau of Customs later became
suspicious that the vessel’s real purpose in docking was to smuggle its
cargo into the country, seizure proceedings were instituted under S.I.
Nos. 02-89 and 03-89 and, subsequently, two Warrants of Seizure and
Detention were issued for the vessel and its cargo.
Respondent Cesar S. Urbino, Sr., does not own the vessel or any of its
cargo but claimed a preferred maritime lien under a Salvage
Agreement dated June 8, 1989. To protect his claim, Urbino initially
filed two motions in the seizure and detention cases: a Motion to
Dismiss and a Motion to Lift Warrant of Seizure and Detention.
Apparently not content with his administrative remedies, Urbino sought
relief with the regular courts by filing a case for Prohibition, Mandamus
and Damages before the RTC of SFLU, seeking to restrain the District
Collector of Customs from interfering with his salvage operation. The
RTC of SFLU dismissed the case for lack of jurisdiction because of the
pending seizure and detention cases. Urbino then elevated the matter
to the CA. The Commissioner of Customs, in response, filed a Motion
to Suspend Proceedings, advising the CA that it intends to question the
jurisdiction of the CA before this Court. The motion was denied. Hence,
in this petition the Commissioner of Customs assails the Resolution "F"
recited above and seeks to prohibit the CA from continuing to hear the
case.
ISSUE: Whether Urbino's claim is a preferred lien in this case.
HELD: No. First of all, the Court finds the decision of the RTC of
Manila, in so far as it relates to the vessel M/V "Star Ace," to be void as
jurisdiction was never acquired over the vessel. In filing the case,
Urbino had impleaded the vessel as a defendant to enforce his alleged
maritime lien. This meant that he brought an action in rem under the
Code of Commerce under which the vessel may be attached and sold.
However, the basic operative fact for the institution and perfection of
proceedings in rem is the actual or constructive possession of the res
by the tribunal empowered by law to conduct the proceedings. This
means that to acquire jurisdiction over the vessel, as a defendant, the
trial court must have obtained either actual or constructive possession
over it. Neither was accomplished by the RTC of Manila.
In his comment to the petition, Urbino plainly stated that "petitioner has
actual[sic] physical custody not only of the goods and/or cargo but the
subject vessel, M/V Star Ace, as well." This is clearly an admission that
the RTC of Manila did not have jurisdiction over the res. While Urbino
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
contends that the Commissioner of Custom’s custody was illegal, such
fact, even if true, does not deprive the Commissioner of Customs of
jurisdiction thereon. This is a question that ought to be resolved in the
seizure and forfeiture cases, which are now pending with the CTA, and
not by the regular courts as a collateral matter to enforce his lien. By
simply filing a case in rem against the vessel, despite its being in the
custody of customs officials, Urbino has circumvented the rule that
regular trial courts are devoid of any competence to pass upon the
validity or regularity of seizure and forfeiture proceedings conducted in
the Bureau of Customs, on his mere assertion that the administrative
proceedings were a nullity.
On the other hand, the Bureau of Customs had acquired jurisdiction
over the res ahead and to the exclusion of the RTC of Manila. The
forfeiture proceedings conducted by the Bureau of Customs are in the
nature of proceedings in rem and jurisdiction was obtained from the
moment the vessel entered the SFLU port. Moreover, there is no
question that forfeiture proceedings were instituted and the vessel was
seized even before the filing of the RTC of Manila case.
The Court is aware that Urbino seeks to enforce a maritime lien and,
because of its nature, it is equivalent to an attachment from the time of
its existence. Nevertheless, despite his lien’s constructive attachment,
Urbino still cannot claim an advantage as his lien only came about after
the warrant of seizure and detention was issued and implemented. The
Salvage Agreement, upon which Urbino based his lien, was entered
into on June 8, 1989. The warrants of seizure and detention, on the
other hand, were issued on January 19 and 20, 1989. And to remove
further doubts that the forfeiture case takes precedence over the RTC
of Manila case, it should be noted that forfeiture retroacts to the date of
the commission of the offense, in this case the day the vessel entered
the country. A maritime lien, in contrast, relates back to the period
when it first attached, in this case the earliest retroactive date can only
be the date of the Salvage Agreement. Thus, when the vessel and its
cargo are ordered forfeited, the effect will retroact to the moment the
vessel entered Philippine waters.
Accordingly, the RTC of Manila decision never attained finality as to
the defendant vessel, inasmuch as no jurisdiction was acquired over it,
and the decision cannot be binding and the writ of execution issued in
connection therewith is null and void.
5.4 Sister ships: Susceptibility to Arrest (Sec 3 Arrest of Sea-
going ships convention)
A sister ship may also be arrested. An action in rem lies in relation to a
number of claims the jurisdiction can be invoked not only against the
offending ship in question but also against a "sister ship" i.e., a ship in
the same beneficial ownership as the ship in regard to which the claim
arose.
Under Art. 3 of the International Convention Relating to the Arrest of
Sea-going ships (Brussels, May 10 1952), a claimant may arrest either
the particular ship in respect of which the maritime claim arose, or any
other ship which is owned by the person who was, at the time when the
maritime claim arose, the owner of the particular ship, even though the
ship arrested be ready to sail; but no ship, other than the particular ship
in respect of which the claim arose, may be arrested in respect of any
of the maritime claims enumerated in article 1, (o), (p) or (q).
(o ) disputes as to the title to or ownership of any ship;
(p) disputes between co-owners of any ship as to the ownership,
possession, employment, or earnings of that ship;
(q) the mortgage or hypothecation of any ship.
6. Maritime Liens
6.1 Distinguished from Non-Maritime Liens; Importance
Maritime Lien
• A privileged claim on a vessel for some service rendered to it
to facilitate its use in navigation.
• It is a special property right in a ship given to a creditor by
law as security for a debt or claim subsisting from the
moment the debt arises with the right to have the ship sold
and debt paid out of the proceeds
6.1.1 Conflict of Law Problem in Enforcing Maritime Lien; Tests
In the case of Crescent Petroleum Ltd. vs. M/V Lok Maheshwari, the
various tests used to determine whether a maritime lien exists are:
1. WON such lien exists depends on the law of the
country where the supplies were furnished
Cases: The Scotia(1888), The Kaiser Wilhelm II (1916),
The Woudrichem (1921) and The City of Atlanta (1924)
2. The Lauritzen-Romero_Rhoditis trilogy of cases, the
following factors should be considered:
· Place of the wrongful act
· Law of the flag
· Allegiance or domicile of the injured
· Allegiance of the defendant ship owner
· Place of contract
· Inaccessibility of foreign forum
· Law of the forum
6.1.1.1 Crescent Petroleum, Ltd vs MV Lok Maheshwari,
FACTS:
Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel
of Indian registry that is owned by respondent Shipping Corporation of
India (SCI), a corporation organized and existing under the laws of
India and principally owned by the Government of India. It was time-
chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla),
a South Korean company. Halla, in turn, sub-chartered the Vessel
through a time charter to Transmar Shipping, Inc. (Transmar).
Transmar further sub-chartered the Vessel to Portserv Limited
(Portserv). Both Transmar and Portserv are corporations organized
and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent
Petroleum, Ltd. (Crescent), a corporation organized and existing under
the laws of Canada that is engaged in the business of selling
petroleum and oil products for the use and operation of oceangoing
vessels, to deliver marine fuel oils (bunker fuels) to the Vessel.
Petitioner Crescent granted and confirmed the request through an
advice via facsimile dated November 2, 1995. As security for the
payment of the bunker fuels and related services, petitioner Crescent
received two (2) checks in the amounts of US$100,000.00 and
US$200,000.00. Thus, petitioner Crescent contracted with its supplier,
Marine Petrobulk Limited (Marine Petrobulk), another Canadian
corporation, for the physical delivery of the bunker fuels to the Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker
fuels amounting to US$103,544 inclusive of barging and demurrage
charges to the Vessel at the port of Pioneer Grain, Vancouver,
Canada. The Chief Engineer Officer of the Vessel duly acknowledged
and received the delivery receipt. Marine Petrobulk issued an invoice
to petitioner Crescent for the US$101,400.00 worth of the bunker fuels.
Petitioner Crescent issued a check for the same amount in favor of
Marine Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised
invoice dated November 21, 1995 to "Portserv Limited, and/or the
Master, and/or Owners, and/or Operators, and/or Charterers of M/V
‘Lok Maheshwari’" in the amount of US$103,544.00 with instruction to
remit the amount on or before December 1, 1995. The period lapsed
and several demands were made but no payment was received. Also,
the checks issued to petitioner Crescent as security for the payment of
the bunker fuels were dishonored for insufficiency of funds. As a
consequence, petitioner Crescent incurred additional expenses of
US$8,572.61 for interest, tracking fees, and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu City,
petitioner Crescent instituted before the RTC of Cebu City an action
"for a sum of money with prayer for temporary restraining order and
writ of preliminary attachment" against respondents Vessel and SCI,
Portserv and/or Transmar.
On May 3, 1996, the trial court issued a writ of attachment against the
Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew its
prayer for a temporary restraining order and posted the required bond.
On May 18, 1996, summonses were served to respondents Vessel and
SCI, and Portserv and/or Transmar through the Master of the Vessel.
On May 28, 1996, respondents Vessel and SCI, through Pioneer
Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte
motion to approve Pioneer’s letter of undertaking, to consider it as
counter-bond and to discharge the attachment. On May 29, 1996, the
trial court granted the motion; thus, the letter of undertaking was
approved as counter-bond to discharge the attachment.
ISSUE:
Whether the Philippine court has or will exercise jurisdiction and
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
entitled to maritime lien under our laws on foreign vessel docked on
Philippine port and supplies furnished to a vessel in a foreign port?
RULING:
In a suit to establish and enforce a maritime lien for supplies furnished
to a vessel in a foreign port, whether such lien exists, or whether the
court has or will exercise jurisdiction, depends on the law of the country
where the supplies were furnished, which must be pleaded and proved.
The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such
single-factor methodologies as the law of the place of supply. The
multiple-contact test to determine, in the absence of a specific
Congressional directive as to the statute’s reach, which jurisdiction’s
law should be applied. The following factors were considered: (1) place
of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the
injured; (4) allegiance of the defendant shipowner; (5) place of
contract; (6) inaccessibility of foreign forum; and (7) law of the forum.
This is applicable not only to personal injury claims arising under the
Jones Act but to all matters arising under maritime law in general
The Court cannot sustain petitioner Crescent’s insistence on the
application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and
hold that a maritime lien exists. Out of the seven basic factors listed in
the case of Lauritzen, Philippine law only falls under one – the law of
the forum. All other elements are foreign – Canada is the place of the
wrongful act, of the allegiance or domicile of the injured and the place
of contract; India is the law of the flag and the allegiance of the
defendant shipowner. Applying P.D. No. 1521,a maritime lien exists
would not promote the public policy behind the enactment of the law to
develop the domestic shipping industry. Opening up our courts to
foreign suppliers by granting them a maritime lien under our laws even
if they are not entitled to a maritime lien under their laws will encourage
forum shopping. In light of the interests of the various foreign elements
involved, it is clear that Canada has the most significant interest in this
dispute. The injured party is a Canadian corporation, the sub-charterer
which placed the orders for the supplies is also Canadian, the entity
which physically delivered the bunker fuels is in Canada, the place of
contracting and negotiation is in Canada, and the supplies were
delivered in Canada.
6.2 Executory Contracts Doctrine
• A lien does not attach for breach of an executory contract
even though the contract is the type which normally gives
rise to a lien
• A liability arises in admiralty for breach of contract but if the
parties have performed his obligation, his remedy against the
other is only for breach in action in personam
6.3 Assignment and Subrogation
• A third person who satisfies the obligation to an original
maritime lienor may claim from the debtor because the third
person is subrogated to the rights of the maritime lienor over
the vessel.
Subrogation
• Transfer of all rights of the creditor to a third person, who
subsitutes him in all rights.
PNB vs CA
6.4 Enforceability During Corporate Rehabilitation
Negros Navigation Co. Inc vs Cort of Appeals
Facts:
NNC, a shipping company, engaged the services of THI for the
repair of its vessels. Upon failure to pay the repairman’s lien, THI filed
an action against NNC and had several vessels attached to which the
RTC (Cebu) granted. NNC filed a petition for corporate rehabilitation
with prayer of suspension of payments with the RTC (Manila) due to
reverses experienced during the Asian Financial Crisis and the
devaluation of peso. RTC Manila granted the petition and issued a
Stay Order stating that all claims against NNC were covered by the
order. In an appeal with the CA, THI claimed that the issuance of the
stay order impaired its right to collect the repairman’s lien from NNC,
however, the appellate court dismissed the petition of THI for lack of
merit. Hence, the present petition.
Issue:
1. WON the maritime liens may only be divested in
admiralty proceedings, hence, in conflict with a
rehabilitation proceeding
2. WON the Stay Order impaired THI’s right to collect from
NNC
Ruling:
No. THI maintains that its maritime liens against the vessels
of NNC were impaired by the issuance of the stay order. THI argues
that the issuance of the stay order by the Manila RTC, acting as
rehabilitation court, was erroneous considering that maritime liens
cannot be enforced, divested, and otherwise affected or dealt with
except by an admiralty court in an admiralty proceeding in rem. THI
cited various foreign jurisprudence to the effect that maritime liens are
enforceable only by a suit in rem. It further averred that the mere
suspension of the in rem proceedings in the admiralty case prejudiced
its substantive rights under Presidential Decree (PD) 1521.
The argument of THI is misplaced. There is no conflict as to
which law should apply to the case at bench. THI wishes to impress
this Court that its claim for repairman’s lien is a maritime lien and,
accordingly, may be enforced only in a proceeding in rem. The Court
agrees that PD 1521 is the governing law concerning its maritime lien
for the services it rendered to NNC. However, when NNC filed a
petition for corporate rehabilitation and suspension of payments, and
the Manila RTC found that the petition was sufficient in form and in
substance and appointed the rehabilitation receiver, the admiralty
proceeding was appropriately suspended in accordance with Section 6
of the Interim Rules on Corporate Rehabilitation.
Rehabilitation contemplates continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its
former position of successful operation and solvency. The purpose of
rehabilitation proceedings is precisely to enable the company to gain a
new lease on life and thereby allow creditors to be paid their claims
from its earnings. The rehabilitation of a financially distressed
corporation benefits its employees, creditors, stockholders and, in a
larger sense, the general public.
PD 902-A mandates that upon appointment of a management
committee, rehabilitation receiver, board or body, all actions for claims
against corporations, partnerships or associations under management
or receivership pending before any court, tribunal, board or body shall
be suspended. PD 902-A does not make any distinction as to what
claims are covered by the suspension of actions for claims against
corporations under rehabilitation. No exception is made therein in favor
of maritime claims. Thus, since the law does not make any exemptions
or distinctions, neither should we. Ubi lex non distinguit nec nos
distinguere debemos.
The justification for the suspension of actions or claims, without
distinction, pending rehabilitation proceedings is to enable the
management committee or rehabilitation receiver to effectively exercise
its/his powers free from any judicial or extra-judicial interference that
might unduly hinder or prevent the "rescue" of the debtor company. To
allow such other actions to continue would only add to the burden of
the management committee or rehabilitation receiver, whose time,
effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and
rehabilitation.
It is undisputed that THI holds a preferred maritime lien over
NNC’s assets by virtue of THI’s unpaid services. The issuance of the
stay order by the rehabilitation court does not impair or in any way
diminish THI’s preferred status as a creditor of NNC. The enforcement
of its claim through court action was merely suspended to give way to
the speedy and effective rehabilitation of the distressed shipping
company. Upon termination of the rehabilitation proceedings or in the
event of the bankruptcy and consequent dissolution of the company,
THI can still enforce its preferred claim upon NNC.
When a distressed company is placed under rehabilitation, the
appointment of a management committee follows to avoid collusion
between the previous management and creditors it might favor, to the
prejudice of the other creditors. The stay order is effective on all
creditors of the corporation without distinction, whether secured or
unsecured. All assets of a corporation under rehabilitation receivership
are held in trust for the equal benefit of all creditors to preclude one
from obtaining an advantage or preference over another by the
expediency of attachment, execution or otherwise.
6.5 Writ of Attachment Not Necessary to Enforce Lien
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Quasha vs Hon. Juan
FACTS: A sea vessel, MV San Vicente - registered in the Philippines,
was chartered by foreigners and foreign companies to deliver cargo
from Sweden to Jeddah, Saudi Arabia. The payment scheme was
supposed to be by “time charter”. Payment would have been in the
amount of US $ 3,200 a day. However, after two months, the
foreigners failed to pay the daily hire. It had docked in Jeddah but did
not unload its cargo due to the fact of non-payment. Filipinas Carriers
(FILCAR) exercised its lien over the goods transported as per the
Charter Party (their contract). FILCAR asked to court for sale of the
goods in the ship to satisfy the debt of the foreign companies to them.
Later, the law firm of Quasha Asperilla Ancheta Valmonte Peña &
Marcos intervened in the case on behalf of the agent of some of the
foreign companies/defendants of the case. The agent’s name was
Ahmed Baroom and he was supposedly the agent of AB Charles
Thorburn & Co. and some companies in Saudi Arabia. Later, Baroom
withdrew from pursuing the case but he failed to pay his lawyers
(Quasha). The law firm of Quasha then filed a writ of preliminary
attachment in a different CFI (Pasig the original case was in the CFI of
Manila) claiming that it has a right to a portion of the goods as payment
for its attorney’s fees. The goods however have already been sold by
the respondent court, the law firm now goes after the proceeds of the
sale.
ISSUE: W/N Quasha is entitled to a portion of the goods or its
proceeds?
RULING: No. The law firm should have pursued its claim to attorney’s
fees in the same court as an “intervention petition for recovery of
attorney’s fees.” The respondent CFI of Manila had already acquired
jurisdiction over the goods as the case pending with it was already
deciding upon the question of who the real owner of the cargo was. In
filing with another CFI, multiplicity of suits occurred. The “charging lien”
filed in Pasig was erroneous, an “intervention petition for recovery of
attorney’s fees” in the CFI of Manila was the proper action that should
have been taken. This negligence by the law firm entitles it to no relief,
the instant petition must be dismissed. Besides the goods have already
been sold and delivered to a foreign buyer, the court has lost
jurisdiction over it. Everything is already fait accompli (already done
and beyond alteration).
6.6 Preference and Concurrence of Liens
6.6.1 Inverse Order Rule
Qui Prior Est Tempore, Portior Est Jure: Last in Time, First in
Right
Competing license are initially ranked as to superiority by class. The
top priority liens will be paid first. However, if the funds in the registry of
the admiralty court are insufficient to fully pay all the claims within a
particular class, the issue of priority of claim within the class itself must
be resolved.
General Rule: the inverse order rule, claims of the same class are
given priority amongst themselves according to the invers order of their
accrual. “the last lien given will supercede the preceeding”
6.6.2 Special Time Rules
6.6.2.1 Order of Preference per Ship Mortgage Decree (PD No.
1521)
6.6.2.2 Common Law
Damage Lien Preferred, Voyage Rule Calendar Year Rule
7. Carrier’s Lien
7.1 Overseas Factors, Inc. vs South Sea Shipping Co., Ltd,
Facts: On 3 and 9 September 1954 the National Rice and Corn
Corporation (NARIC) and the Overseas Factors, Inc. entered into two
contracts whereby the latter undertook to supply the former with 5,000
metric tons of Kangni rice at P.51 per ganta and 5,000 metric tons of
Joshi rice at P.49 per ganta. On 10 September 1954 the NARIC
established for its account with the Philippine National Bank (PNB_ in
Manila two irrevocable letters of credit (62655 & 62656) in the amounts
of $529,125 and $508,375, in favor of the Pakistan Development
Corporation, Ltd. (PDC), Karachi, Pakistan. On 30 October 1954, S. M.
Yeung, authorized representative of the South Sea Shipping Co., Ltd.,
wrote to José W. Diokno, authorized representative of the Overseas
Factors, in Karachi, Pakistan, enumerating the terms and conditions of
the charter party they have agreed upon for shipment of the rice to be
imported by the Overseas Factors from Pakistan aboard the SS Ocean
Trader owned by the South Sea Shipping. At the foot of the letter, José
W. Diokno affixed his signature signifying his intention to confirm the
terms and conditions therein enumerated. On the same date, 30
October 1954, S. M. Yeung, in behalf of the South Sea Shipping, and
Chung Kien Tieng, in behalf of the Overseas Factors, entered into a
formal contract of charter party in Karachi, Pakistan, incorporating the
terms and conditions enumerated in the letter. On 12 November 1954
the terms and conditions of the charter party regarding the rate and
payment of freight were amended by the parties in Hongkong. On 4
November 1954 Juan A. Magsino, in behalf of Overseas Factors
entered into an agreement with Abdulaye A. Badat, sole proprietor of
Ivlom Corporation, in Karachi, Pakistan, whereby the said corporation
undertook to supply the Overseas Factors, with 5,000 metric tons of
Kangni rice of the quality and specifications enumerated in PNB Letter
of Credit 62655. Badruddin H. Mavani undertook to supply the
Overseas Factors with the needed Joshi rice. On 5 November 1954 the
Overseas Factors and Gertrudes Carlos, co-financier of the former in
its contract with the NARIC to supply it with the needed rice, jointly and
severally applied to the South Sea Surety & Insurance Co., Inc. to act
as surety upon a bond demanded by the South Sea Shipping in the
amount of P315,000 to guarantee the payment by the charterers in
Hongkong of the freight, demurrage, dead freight and other losses that
might arise. On the same date, 5 November 1954, the Overseas
Factors, as principal, and Carlos, as co-principal, and the South Sea
Surety, as surety, executed a performance bond in the amount of
P315,000 in favor of the South Sea Shipping to guarantee the full
payment by the charterers at Hongkong of all freight, demurrage, dead
freight and other losses that might arise, within 14 days from the date
of departure of the vessel from Karachi, Pakistan. From 16 to 23
November 1954, 2,567.6053 metric tons gross of Joshi rice and from
20 to 25 November 1954, 5,054.0662 metric tons gross of Kangni rice
or a total of 7,621.6715 metric tons of rice were loaded on board the
SS Ocean Trader in Karachi, Pakistan. On 25 and 29 November the
bills of lading covering the said shipments of rice duly signed by the
shipper’s agent were issued in the name of the PNB, Manila, as
consignee. It appears in the two bills of lading that the party to be
notified upon arrival in Manila was the NARIC. On 25 November 1954
the SS Ocean Trader sailed from Karachi, Pakistan and arrived in
Manila on 18 December 1954. The captain and crew members of the
SS Ocean Trader refused to unload the cargo of rice unless the
balance of the freight and other charges due were paid by the
charterers.
An action was brought on 29 December 1954 in the Court of First
Instance of Manila praying the Court to direct the captain and the crew
of SS Ocean Trader to convert the amount in rupees paid by Overseas
Factors and Carlos in Karachi, Pakistan, into British sterling pounds,
computed at the legal rate of exchange as allowed by the Government
of Pakistan; to deliver to Overseas Factors and Carlos the bills of
lading of the cargo of rice; to permit the unloading by Overseas Factors
and Carlos of the cargo of rice from the SS Ocean Trader pending trial
of the case; to desist or refrain from interfering with such unloading
upon the filing of an additional surety bond, if necessary, in an amount
that the Court may fix to answer for damages that South Sea Shipping,
A. Magsaysay, and the captain and crew of SS Ocean Trader may
suffer as a result of such injunction, and to pay the costs; and the
Collector of Customs to see to it that the cargo of rice from the SS
Ocean Trader be unloaded. Overseas Factors and Carlos also prayed
that the demurrages sought to be collected by South Sea Shipping, et.
al. be computed at the rate L300 and not at L700 a day; and for other
just and equitable relief (civil 24972). South Sea Shipping, et. al.
answered the complaint and set up a counterclaim of P316,364.38 for
freightage, demurrage, charges for detention and other expenses of
the vessel while on detention. Overseas Factors and Carlos
controverted South Sea Shipping, et. al.’s counterclaim. The NARIC
filed a complaint in intervention to protect its interest and the South
Sea Surety filed a cross-claim against Overseas Factors. After trial, the
Court rendered judgment in favor of Overseas Factors and Carlos and
against South Sea Shipping; holding therein that (1) the total amount of
369,000 Pakistan rupees received by S. M. Yeung was in full payment
of the transportation of the rice in question from Karachi to Manila, and
that the delay in the unloading of such rice in Manila was not due to
Overseas Shipping and Carlos’ fault; and (2) the claim for lien on the
shipment of rice has no legal basis for the reason that the freight had
already been paid in Karachi, Pakistan, before such shipment arrived
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
in Manila. The Court ordered the cancellation of the injunction bond
filed by Overseas Factors and Carlos as well as the performance bond
executed to guaranty the payment of freight. The Court dismissed the
complaint with respect to A. Magsaysay, Inc., the Captain and the
Crew of the S.S. Ocean Trader, and the Collector of Customs of
Manila, it appearing that they have nothing to do with the controversy
between Overseas Factors and South Sea Shipping. The Court
dismissed the counterclaim, and ordered South Sea Shipping to pay
the costs. South Sea Shipping and A. Magsaysay appealed.
The Supreme Court modified the judgment appealed by ordering
Overseas Factors and Carlos to pay South Sea Shipping the sums of
P203,449.57, the balance of the freightage still unpaid, P6,720 as
demurrage in loading the cargo and P6,720 as demurrage for detention
of the vessel, without prejudice to any amount sought to be collected
for demurrage which is to be submitted to arbitration in London, against
which the equivalent amount in Philippine currency of the sum of
L12,838-0-6d or Rs119,221-5-0 as above stated is set off; and holding
that South Sea Shipping did not lose its lien on the cargo of rice,
without pronouncement as to costs. The Court dismissed the complaint
and the complaint in intervention as to the other defendant appellants,
and the counterclaim against South Sea Surety, and the latter’s cross-
claim.
7.2 Ouano vs Court of Appeals
Facts: Julius C. Ouano is the registered owner and operator of the
motor vessel known as M/V Don Julio Ouano. On 8 October 1980,
Ouano leased the said vessel to Florentino Rafols Jr. under a charter
party. The consideration for the letting and hiring of said vessel was
P60,000.00 a month, with P30,000.00 as down payment and the
balance of P30,000.00 to be paid within 20 days after actual departure
of the vessel from the port of call. It was also expressly stipulated that
the charterer should operate the vessel for his own benefit and should
not sublet or sub-charter the same without the knowledge and written
consent of the owner. On 11 October 1980, Rafols contracted with
Market Developers, Inc. (MADE) through its group manager, Julian O.
Chua, under an agreement denominated as a “Fixture Note” to
transport 13,000 bags of cement from Iligan City to General Santos
City, consigned to Supreme Merchant Construction Supply, Inc.
(SMCSI) for a freightage of P46,150.00. Said amount was agreed to be
payable to Rafols by MADE in two installments, that is, P23,075.00
upon loading of the cement at Iligan City and the balance of
P23,075.00 upon completion of loading and receipt of the cement
cargo by the consignee. The fixture note did not have the written
consent of Ouano. Rafols had on board the M/V Don Julio Ouano his
sobre cargo (jefe de viaje) when it departed from Iligan City until the
cargo of cement was unloaded in General Santos City, the port of
destination. On 13 October 1980, Ouano wrote a letter to MADE
through its manager, Chua, “to strongly request, if not demand to hold
momentarily any payment or partial payment whatsoever due M/V Don
Julio Ouano until Mr. Florentino Rafols makes good his commitment” to
petitioner. On 20 October 1980, MADE, as shipper, paid Rafols the
amount of P23,075.00 corresponding to the first installment of the
freightage for the aforestated cargo of cement. The entire cargo was
thereafter unloaded at General Santos City Port and delivered to the
consignee, SMCSI, without any attempt on the part of either the
captain of M/V Don Julio Ouano or the said sobre cargo of Rafols, or
even of Ouano himself who was then in General Santos City Port, to
hold and keep in deposit either the whole or part of the cement cargo
to answer for freightage. Neither was there any demand made on
Rafols, et. al. for a bond to secure payment of the freightage, nor to
assert in any manner the maritime lien for unpaid freight over the cargo
by giving notice thereof to the consignee SMCI. The cement was sold
in due course of trade by SMCSI to its customers in October and
November 1980.
On 6 January 1981, Ouano filed a complaint in the RTC of Cebu
against MADE, as shipper; SMCSI, as consignee; and Rafols, as
charterer, seeking payment of P23,000.00 representing the freight
charges for the cement cargo, aside from moral and exemplary
damages in the sum of P150,000.00, attorney’s fees and expenses of
litigation. On 10 March 1981, MADE filed its answer, while Ang and
Chua filed theirs on 10 February 1982 and 31 May 1982, respectively.
Rafols was declared in default for failure to file his answer despite due
service of summons. On 25 May 1985, the trial court rendered a
decision in favor of Ouano, (1) ordering MADE, Chua, SMCSI, Ang
(Chua Pek Giok) and Rafols, jointly and severally, to pay to Ouano the
sum of P23,075.00 corresponding to the first 50% freight installment on
the latter’s vessel ‘M/V Don Julio Ouano’ included as part of the
purchase price paid by SMCSI to MADE, plus legal interest from 6
January 1981 date of filing of the original complaint; (2) sentencing
MADE, Chua and Rafols, jointly and solidarily, to pay Ouano
P50,000.00 in concept, of moral and exemplary damages, and
P5,000.00 attorney’s fees; and (3) sentencing SMCSI and Ang, jointly
and severally, to pay Ouano P200,000.00 attorney’s fees and
expenses of litigation, P4,000.00, including P1,000.00 incurred by
Ouano for travel to General Santos City to coordinate in serving an
alias summons per sheriff’s return of service, with costs against Rafols,
et.al.
On appeal, and on 30 August 1990, the Court of Appeals reversed the
decision, and absolved MADE, et. al. from the complaint; but affirmed
the decision with respect to Rafols. Ouano filed a motion for
reconsideration which was denied by the Court of Appeals on 15
October 1990. Hence, the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the assailed
judgment of the Court of Appeals.
7.3 Who bears costs arising from retention of cargo in the
exercise of carrier’s lien?
8. Ownership of Merchant Vessels
8.1 Acquisition
- vessels may be sold, donated, and be acquired through
prescription.
- Theory of Mode and Title: ownership is acquired by another
ONLY if mode and title concurs
o Mode is the specific special condition of
things, of the aptitude and intent of
persons, and of compliance with the
conditions established by law.
o Title is the juridical justification for the
acquisition/a transfer of ownership/other
real right.(remote cause of acquisition)
- Under Present laws, vessels under the jurisdiction of the
Maritime Authority can be transferred ONLY with notice to
said administrative agency. Art. 573 provides that “The
acquisition of a vessel must appear in a written instrument,
which shall not produce any effect with respect to third
persons if not inscribed in the registry of vessels.”
Art 573. Merchant vessels constitute property which may be
acquired and transferred by any of the means recognized by
law. The acquisition of a vessel must appear in a written
instrument, which shall not produce any effect with respect to
third persons if not inscribed in the registry of vessels.
The ownership of a vessel shall likewise be acquired by
possession in good faith, continued for three years, with a
just title duly recorded. In the absence of any of these
requisites, continuous possession for ten years shall be
necessary in order to acquire ownership.
A captain may not acquire by prescription the vessel of which he is in
command.
8.1.1 Prescription
- In reference to Art. 573, the provision contemplates 2 types
of acquisitive prescription:
a. Ordinary prescription
b. Extra-ordinary prescription – if the possessor
is in bad faith, the acquisitive prescription is
extra-ordinary and the prescriptive period is
10 years.
- These are the following requisites for a person to acquire
ownership through ordinary prescription:
1. The person who claims ownership must be in
continuous possession
2. Possession must be for a period of 3 years
3. Possession must be in good faith
8.1.2 Sale
- the mode of transferring title or ownership is
tradition/delivery.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
- Art. 1477 The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive
delivery thereof.
- Sale must be registered with the marina to affect 3rd
persons.
- Arts. 576, 577 and 578 of the Code of Commerce relates to
voluntary sale of vessels
- Arts. 578 governs the sale of vessels in a foreign port.
Hence, said article does not apply if the issue in a case
involves the determination as to which creditor is entitled to
the proceeds of the foreclosure sale of the vessels.
8.2 Registration
- Vessels are registered through the Maritime Industry
Authority
- Rule: the person who is the registered owner of the vessel
is presumed to be the owner of vessel.
- Fubiso v. Rivera: the purchaser at the public auction who
was careful to record his acquisition, opportunely and on
prior date, has a better right then the defendant who
subsequently recorded his purchase.
- The sale/transfer of a vessels is NOT BINDING if it’s not
registered.
Rubiso vs Rivera
DOCTRINE:
The requisite of registration in the registry of the purchase of a vessel
is necessary and indispensable in order that the purchaser's rights are
maintained against a claim by third persons.
FACTS:
1. It was alleged in the complaint that the plaintiffs were the owners of
a pilot boat Valentina stranded in Tingloy in Bauan, Batangas and
Rivera took charge of the boat, claiming to be the owner, and plaintiffs
thus unable to derive profit from it.
2. The boat is owned by "Gelito and Co" with co-partners Gelito for 2/3
share and Sy Qui for 1/3 share. Afterwards Gelito sold his share to Sy
Qui.
3. Sy Qui then sold the boat to Rivera for 2500 pesos on Jan 4, 1915
and had it registered in the Bureau of Customs on March 17, 1915.
4. Then to enforce a payment of a certain sum of money, the boat was
bought by Rubiso in a public auction on January 23, 1915 and had it
registered in the Collector of Customs on January 27, 1915.
5. The complaint asks the defendant for indemnification and the
delivery of the boat.
ISSUE:
2. WoN Rubiso has a better right to the boat Valentina.
PROVISIONS:
Article 573 of the Code of Commerce: Merchant vessels constitute
property which may be acquired and transferred by any of
the means recognized by law. The acquisition of a vessel
must appear in a written instrument, which shall not produce
any effect with respect to third persons if not inscribed in the
registry of vessels.
RULING + RATIO:
2. YES.
• Even though Rivera was the first one who bought the
boat, it was Rubiso who registered the vessel first in the
office of the Collector of Customs. Rivera only
registered the vessel on March 17, 1915 while Rubiso
had it registered on January 27, 1915 in the same
month of the purchase.
• With respect to the rights of the two purchasers,
whichever of them who registered the vessel first is the
one entitled by the protection of the law, which
considers him the absolute owner of the boat and free
from encumbrances and claims.
• Rivera is now considered a third person who was
directly affected by the registration. Ships and vessels,
whether moved by steam or sail, partake the nature of
real property on account of their value in the world of
commerce.
DISPOSITION: Judgment is affirmed with costs against appellant.
8.2.1 MARINA Rules
- MARINA Memorandum Circular No. 90 governs the registration and
documentation of vessels to entitle it to the protection of Philippine
laws and the right to fly the Philippine flag subject to the obligations
and disabilities under the laws of the Philippines.
- COVERAGE: This Guidelines shall apply to:
1. All types of vessels of domestic ownership and of more
than 15 GRT;
2. All vessels engaged in towing/pushing or carrying
goods and/or passengers for hire regardless of
tonnage; and
3. All vessels acquired under PDs 760/866/1711.
Registration of vessels 15 GRT and below under this Circular shall be
optional, PROVIDED that such vessels as are not entered in the
Philippine register of ships shall be required to secure a vessel identity
certificate (Certificate of Number).
The following vessels shall not be covered:
1. Warships and naval vessels;
2. All vessels of foreign registry temporarily used in the
Philippine waters for less than one year;
3. Non-motorized bancas, sailboats, and other
waterborne contrivance or less than three gross tons
capacity.
8.2.2 Flags of Convenience; Open Registers
- is the business practice of registering a merchant ship in a
sovereign state different from that of the ship's owners, and
flying that state's civil ensign on the ship. Ships are
registered under flags of convenience to reduce operating
costs or avoid the regulations of the owner's country
- Art. 92 of UNCLOS provides that there must be a genuine link
between the state and the ship in order to confer nationality
over ship.
- PHILIPPINES IS NOT A FLAG OF CONVENIENCE
COUNTRY
8.3 Ship Manifest
- a document listing the cargo, passengers, and crew of a
ship, aircraft, or vehicle, for the use of customs and other
officials.
- The manifest may be used by people having an interest in
the transport to ensure that passengers and cargo listed as
having been placed on board the transport at the beginning
of its passage continue to be on board when it arrives at its
destination.
8.4 Ship Mortgage Decree
- PD 1521 is the posterior law as compared to the code of
commerce (Art. 580)
8.4.1.1 Poliand Industrial Ltd vs National Development Company
FACTS: Between 1979 and 1981, Asian Hardwood (HK corp) loaned
to Galleon, a domestic company engaged in maritime transport of
goods, $3.3M. Said loan were to be used to augment Galleon’s
working capital due to the purchase of new shipping vessels. As a
result, Galleon incurred an obligation amounting to $3.39M in favor of
Asian Hardwood.
To finance its acquisitions of the vessels, Galleon obtained loans from
several Japanese lenders. In October 1979, Galleon and DBP
executed a deed of undertaking where DBP guaranteed the prompt
payment of Galleon’s loans with the Japanese lenders. In return,
Galleon mortgaged five of its vessels in favor of DBP.
Sometime in January 1981, Marcos issued LOI no. 1155 ordering NDC
to acquire the entire shares of Galleon payable without interest within 5
years. Also, DBP was to advance to Galleon within 3 years from its
effectivity the principal amount and interest of Galleon’s obligations.
August 1981, Galleon and NDC executed a MOA for the share
purchase agreement after which NDC is to assume management and
operations of Galleon (although its president, Cuenca, is to remain in
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
his post until May 1982). Using its own funds, NDC paid Asian
Hardwood on January 1982 $1M as partial payment for Galleon’s
obligations.
In February 1982, LOI no. 1195 was issued directing the foreclosure of
the mortgage of the said vessels due to Galleon’s failure to pay its
debts; subsequently, said vessels were foreclosed and sold to NDC.
Asian Hardwood assigned its rights over the outstanding obligation of
Galleon ($2.31M) to World Universal Trading who in turn assigned it to
petitioner Poliand sometime in July 1989.
In 1991, Poliand demanded from Galleon, NDC and DBP the
satisfaction of the outstanding balance. Petitioner claimed that under
LOI no. 1155 and MOA between Galleon and NDC, Galleon, NDC and
DBP are solidarily liable to Polian as assignee of the rights of the credit
advances.
DBP denied being a party to any of the alleged loan transactions; also
alleged that Poliand had no cause of action against DBP as it did not
sign any memorandum to act as guarantor for the loans obtained by
Galleon.
NDC denied any participation in the execution of the loan
accommodations, alleging that it was acting as only as a manager of
Galleon. It cannot be liable for Galleon’s obligations since no purchase
and sale agreement was executed and the delivery of required shares
of stock of Galleon did not take place.
RTC found that DBP and NDC are liable under LOI no. 1155 and NDC
was liable based on the MOA executed where it agreed that it will
prioritize repayments of Galleon’s liabilities. CA, however, rendered a
modified judgment, absolving DBP of any liability in view of POLIAND’s
failure to clearly prove its action against DBP. The appellate court also
discharged NDC of any liability arising from the credit advances/loan
obligations obtained by GALLEON on the ground that NDC did not
acquire ownership of GALLEON but merely assumed control over its
management and operations. However, NDC was held liable to
POLIAND for the payment of the preferred maritime lien based on LOI
No. 1195 which directed NDC to “discharge such maritime liens as
may be necessary to allow the foreclosed vessels to engage on the
international shipping business,” as well as attorney’s fees and costs of
suit.
ISSUE: Whether or not LOI no. 1155 has the force and effect of law,
thus making NDC and/or DBP liable to Polian on the loan
accommodations and credit advances incurred by Galleon
HELD:
1. Since no such execution and consequent transfer of
shareholdings took place, NDC did not acquire ownership of
GALLEON. Furthermore, Poliand could not prove that it had
any cause of action against DBP.
2. LOI No. 1155 does not have the force and effect of law and
cannot be a valid source of obligation. Letters of instructions
are simply directives of the President of the Philippines,
issued in the exercise of his administrative power of control,
to heads of departments and/or officers under the executive
branch of the government for observance by the officials
and/or employees thereof. Being administrative in nature,
they do not have the force and effect of a law and, thus,
cannot be a valid source of obligation. However, since
Marcos, at the time of execution of said LOI had both
legislative and executive powers, it must be determined if the
LOI was executed in performance of his legislative powers.
To form part of the law of the land, the decree, order or LOI
must be issued by the President in the exercise of his
extraordinary power of legislation as contemplated in Section
6 of the 1976 amendments to the Constitution, whenever in
his judgment, there exists a grave emergency or threat or
imminence thereof, or whenever the interim Batasan
Pambansa or the regular National Assembly fails or is
unable to act adequately on any matter for any reason that in
his judgment requires immediate action.
3. POLIAND does not have any cause of action against DBP
under LOI No. 1155. Being a mere administrative issuance,
LOI No. 1155 cannot be a valid source of obligation because
it did not create any privity of contract between DBP and
POLIAND or its predecessors-in-interest.
8.4.2 MARINA Rules
8.5 Other Code of Commerce Provisions
CHAPTER 3 – PERSONS IN MARITIME COMMERCE (ART 586-651)
1. Shipowners and Shipagents
1.1 Part Owners (Proprietario)
1.2 Shipagents (Naviero); Difference with Ordinary Agent
1.2.1 Solidary Liability with Shipowner
1.2.1.1 Versoza vs Lim
1.2.1.2 National Development Company vs Court of Appeals
Facts: In accordance with a memorandum agreement entered into
between National Development Corporation (NDC) and Maritime
Corporation of the Philippines Inc. (MCP) on 13 September 1962, NDC
as the first preferred mortgagee of three ocean going vessels including
one with the name ‘Doña Nati’ appointed MCP as its agent to manage
and operate said vessel for and in its behalf and account. Thus, on 28
February 1964 the E. Philipp Corporation of New York loaded on board
the vessel ‘Doña Nati’ at San Francisco, California, a total of 1,200
bales of American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the People’s Bank and Trust Company acting
for and in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation. Also loaded on the same
vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporation consisting of 200
cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En
route to Manila the vessel Doña Nati figured in a collision at 6:04 a.m.
on 15 April 1964 at Ise Bay, Japan with a Japanese vessel ‘SS
Yasushima Maru’ as a result of which 550 bales of aforesaid cargo of
American raw cotton were lost and/or destroyed, of which 535 bales as
damaged were landed and sold on the authority of the General
Average Surveyor for Y6,045,500 and 15 bales were not landed and
deemed lost. The damaged and lost cargoes was worth P344,977.86
which amount, the Development Insurance and Surety Corporation
(DISC) as insurer, paid to the Riverside Mills Corporation as holder of
the negotiable bills of lading duly endorsed. Also considered totally lost
were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned
to the order of Manila Banking Corporation, Manila, acting for Guilcon,
Manila. The total loss was P19,938.00 which DISC as insurer paid to
Guilcon as holder of the duly endorsed bill of lading. Thus, DISC had
paid as insurer the total amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or damaged cargoes.
On 22 April 1965, DISC filed before the then Court of First Instance of
Manila an action for the recovery of the sum of P364,915.86 plus
attorney’s fees of P10,000.00 against NDC and MCP. On 12
November 1969, after DISC and MCP presented their respective
evidence, the trial court rendered a decision ordering MCP and NDC to
pay jointly and solidarily to DISC the sum of P364,915.86 plus the legal
rate of interest to be computed from the filing of the complaint on 22
April 1965, until fully paid and attorney’s fees of P10,000.00. Likewise,
in said decision, the trial court granted MCP’s cross-claim against
NDC.
MCP interposed its appeal on 20 December 1969, while NDC filed its
appeal on 17 February 1970 after its motion to set aside the decision
was denied by the trial court in its order dated 13 February 1970. On
17 November 1978, the Court of Appeals promulgated its decision
affirming in toto the decision of the trial court. Hence, the appeals by
certiorari. On 25 July 1979, the Supreme Court ordered the
consolidation of the above cases.
The Supreme Court denied the subject petitions for lack of merit, and
affirmed the assailed decision of the Appellate Court.
1. Law of country of destination governs liability of common carrier
As held in Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-470
[1987]) where it was 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” (Article 1753, Civil Code). Thus, the rule was specifically
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
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
special 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.
2. Actual collision occurring in foreign waters immaterial
Herein, it has been established that the goods in question are
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 the negligence or fault of both
captains of the colliding vessels. Under the above ruling, it is evident
that the laws of the Philippines will apply, and it is immaterial that the
collision actually occurred in foreign waters, such as Ise Bay, Japan.
3. Extraordinary diligence required of common carriers; Negligence
presumed
Under Article 1733 of the Civil Code, common carriers from the nature
of their business and for reasons of public policy are bound to observe
extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them according to all
circumstances of each case. Accordingly, under Article 1735 of the
same Code, in all cases other than those mentioned is Article 1734
thereof, the common carrier shall be presumed to have been at fault or
to have acted negligently, unless it proves that it has observed the
extraordinary diligence required by law.
4. Collision does not fall under matters regulated by Civil Code;
Application of Article 826 to 839 of the Code of Commerce proper
The collision, however, falls among matters not specifically regulated
by the Civil Code, so that no reversible error can be found in the lower
court’s application to the present case of Articles 826 to 839, Book
Three of the Code of Commerce, which deal exclusively with collision
of vessels.
5. Articles 826 and 827 of the Code of Commerce; Liability of owner
either when imputable to the personnel of the vessel or imputable to
both 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 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.
6. Primary liability of shipowner on occasion of collision due to fault of
captain
Under the provisions of the Code of Commerce, particularly Articles
826 to 839, the shipowner or carrier, is not exempt from liability for
damages arising from collision due to the fault or negligence of the
captain. Primary liability is imposed on the shipowner or carrier in
recognition of the universally accepted doctrine that the shipmaster or
captain is merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage (Yeung Sheng
Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
7. Code of Commerce applies both to domestic and foreign trade;
COGSA does not repeal nor limit Code of Commerce’s application
The Code of Commerce applies not only to domestic trade but also
foreign trade. Aside from the fact that the Carriage of Goods by Sea
Act (Commonwealth Act 65) does not specifically provide for the
subject of collision, said Act in no uncertain terms, restricts its
application “to all contracts for the carriage of goods by sea to and from
Philippine ports in foreign trade.” Under Section 1 thereof, it is explicitly
provided that “nothing in this Act shall be construed as repealing any
existing provision of the Code of Commerce which is now in force, or
as limiting its application.” By such incorporation, it is obvious that said
law not only recognizes the existence of the Code of Commerce, but
more importantly does not repeal nor limit its application.
8. DISC a subrogee, has a right of action against MCP
Herein, Riverside Mills Corporation and Guilcon, Manila are the holders
of the duly endorsed bills of lading covering the shipments in question
and an examination of the invoices in particular, shows that the actual
consignees of the said goods are the aforementioned companies.
Moreover, no less than MCP itself issued a certification attesting to this
fact. Accordingly, as it is undisputed that the insurer, DISC paid the
total amount of P364,915.86 to said consignees for the loss or damage
of the insured cargo, it is evident that DISC has a cause of action to
recover (what it has paid) from MCP.
9. MCP an agent; Agency broad enough to include shipagent in
maritime law
The Memorandum Agreement of 13 September 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.
10. Owner and agent of offending vessel liable when both are
impleaded
It is well settled that both the owner and agent of the offending vessel
are liable for the damage done where both are impleaded (Philippine
Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of
collision, both the owner and the agent are civilly responsible for the
acts of the captain (Yueng Sheng
Transportation Law, 2004 ( 101 )
Haystacks (Berne Guerrero)
Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of
the Code of Commerce; Standard Oil Co. of New York v. Lopez
Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of
the naviero in the sense of charterer or agent, is not expressly provided
in Article 826 of the Code of Commerce, it is clearly deducible from the
general doctrine of jurisprudence under the Civil Code but more
specially as regards contractual obligations in Article 586 of the Code
of Commerce. Moreover, the Court held that both the owner and agent
(Naviero) should be declared jointly and severally liable, since the
obligation which is the subject of the action had its origin in a tortious
act and did not arise from contract (Verzosa and Ruiz, Rementeria y
Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though
he may not be the owner of the vessel, is liable to the shippers and
owners of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his rights
against the owner of the ship, to the extent of the value of the vessel,
its equipment, and the freight (Behn, Meyer Y Co. v. McMicking et al.
11 Phil. 276 [1908]).
11. Value of goods declared in bills of lading, liability of MCP not
limited to P200 per package or per bale of raw cotton as stated in
paragraph 17 of bill of lading
The declared value of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence during the trial.
Besides, common carriers, in the language of the court in Juan Ysmael
& Co., Inc. v. Barretto et al., (51 Phil. 90 [1927]) “cannot limit its liability
for injury to a less of goods where such injury or loss was caused by its
own negligence.” Negligence of the captains of the colliding vessel
being the cause of the collision, and the cargoes not being jettisoned to
save some of the cargoes and the vessel, the trial court and the Court
of Appeals acted correctly in not applying the law on averages (Articles
806 to 818, Code of Commerce).
12. Action not prescribed; Section 3 (6)
The bills of lading issued allow trans-shipment of the cargo, which
simply means that the date of arrival of the ship Doña Nati on 18 April
1964 was merely tentative to give allowances for such contingencies
that said vessel might not arrive on schedule at Manila and therefore,
would necessitate the trans-shipment of cargo, resulting in consequent
delay of their arrival. In fact, because of the collision, the cargo which
was supposed to arrive in Manila on 18 April 1964 arrived only on June
12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in
question been saved, they could have arrived in Manila on the said
dates. Accordingly, the complaint was filed on 22 April 1965, i.e. long
before the lapse of 1 year from the date the lost or damaged cargo
“should have been delivered” in the light of Section 3, sub-paragraph
(6) of COGSA.
1.3 Powers
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
1.4 Limitations of Powers
1.5 General Duties
1.5.1 Duty to Account
1.5.2 Duty to Provide Seaworthy Vessel; Doctrine of
Unseaworthiness
1.5.3 Reimbursement and Liabilities
1.5.3.1 Doctrine/Principle of Maintenance and Care
1.6 Discharge of Captain and Crew
1.6.1 Yu Con vs Ipil
Facts: Yu Con, a merchant and a resident of the town of San Nicolas,
of the city of Cebu, engaged in the sale of cloth and domestic articles
and having a share in a shop, or small store, situated in the town of
Catmon, of said province, had several times chartered from Narciso
Lauron, a banca named Maria belonging to the latter, of which Glicerio
Ipil was master and Justo Solamo, supercargo, for the transportation of
certain merchandise and some money to and from the said town and
the port of Cebu. On 17 October, 1911 Yu Con chartered the said
banca from Lauron for the transportation of various merchandise from
the port of Cebu to Catmon, at the price of P45 for the round trip, which
merchandise was loaded on board the said craft which was then at
anchor in front of one of the graded fills of the wharf of said port. In the
afternoon of the following day, he delivered to the other two
defendants, Ipil, and Solamo, master and supercargo, respectively, of
the banca, the sum of P450, which was in a trunk belonging to Yu Con
and was taken charge of by Ipil and Solamo, who received this money
from Yu Con, for the purpose of its delivery to the latter’s shop in
Catmon for the purchase of corn in this town. While the money was still
in said trunk aboard the vessel, on the night of 18 October, the time
scheduled for the departure of the Maria from the port of Cebu, said
master and said supercargo transferred the P450 from Yu Con’s trunk,
where it was, to theirs, which was in a stateroom of the banca, from
which stateroom both the trunk and the money disappeared during that
same night, and that the investigations, made to ascertain their
whereabouts, produced no result.
Yu Con brought action to enable him to recover from Ipil, Lauron, and
Solamo in solidum the sum of P450 lost. Yu Conbased his action on
the charge that the disappearance of said sum was due to the
abandonment, negligence, or voluntary breach, on the part of the
defendants, of the duty they had in respect to the safe- keeping of said
sum.
At the termination of the trial, the court, held that the sole cause of the
disappearance of the money from the said banca was the negligence
of the master and the supercargo, Ipil and Solamo, respectively, and
that Lauron was responsible for that negligence, as owner of the
banca, pursuant to articles 586, 587, and 618 of the Code of
Commerce, Yu Con therefore being entitled to recover the amount lost.
Judgment was rendered on 20 April 1914, in favor of Yu Con and
against Ipil, et. al. jointly and severally for the sum of P450, with
interest thereon at the rate of 6% per annum from the date of filing of
the complaint, 24 October 1911, with costs. Yu Con was absolved from
the counterclaim. From this judgment Ipil, et. al. excepted and at the
same time moved for a new trial. Their motion was denied, to which
ruling they also excepted, and, through the proper bill of exceptions,
entered an appeal to the Supreme Court.
The Supreme Court affirmed the judgment appealed from, with the
costs of this instance against Ipil, et. al.
1. Master and supercargo gave no satisfactory explanation in regard
disappearance of trunk and money
The master and the supercargo, gave no satisfactory explanation in
regard to the disappearance of the trunk and the money therein
contained, from the stateroom in which the trunk was, nor as to who
stole or might have stolen it. The master and the supercargo of the
banca merely testified that they did not know who the robbers were,
for, when the robbery was committed, they were sound asleep, as they
were tired, and that he believed that the guard Simeon also fell asleep
because he, too, was tired. Both of them testified that the small window
of the stateroom had been broken, and the first of them, i. e., the
master, stated that all the window-blinds had been removed from the
windows, as well as part of the partition in which they were and that the
trunk in which the money was contained could have been passed
through said small window, because the Chinaman’s trunk, which
differed but a little from the one stolen, could be passed through the
same opening. However, no evidence whatever was offered to prove
that it might have been possible to remove the trunk from the
stateroom through the opening made by the breaking of the small
window, neither was the size of the trunk proven, so that it might be
verified whether the statement made by the latter was true, viz., that it
might have been possible to remove from the stateroom through said
opening the trunk in which the P450 were contained, which sum, the
same as the trunk, its container, had not been found, in spite of the
investigation made for the purpose. Furthermore, it was not proven, nor
is there any circumstantial evidence to show, that the robbery in
question was committed by persons not belonging to the craft.
2. Loss occurred through manifest fault and negligence of Ipil, et. al.;
No force majeure
The loss or disappearance of the property of Yu Con, which, were in
the possession of Ipil and Solamo, the master and the supercargo of
the banca Maria, occurred through the manifest fault and negligence of
the latter, for, not only did they fail to take the necessary precautions in
order that the stateroom containing the trunk in which they kept the
money should be properly guarded by members of the crew and put in
such condition that it would be impossible to steal the trunk from it or
that persons not belonging to the vessel might force an entrance into
the stateroom from the outside, but also they did not expressly station
some person inside the stateroom for the guarding and safe-keeping of
the trunk, for it was not proven that the cabin-boy Gabriel slept there,
nor that the other cabin-boy, Simeon Solamo, was on guard that night.
On the contrary, it was proven that all the people on the vessel slept
soundly that night; which fact cannot, in any manner, serve them as an
excuse, nor can it be accepted as an explanation of the statement that
they were not aware of what was then occurring on board. If the trunk
was actually stolen by outsiders and removed through the small
window of the stateroom, a detail which also was not proven, but, on
the contrary, increases their liability, because it is very strange that
none of them who were six and were around or near the stateroom,
should have heard the noise which the robbers must have made in
breaking its window. All of these circumstances, together with that of its
having been impossible to know who took the trunk and the money and
the failure to recover the one or the other, make the conduct of master
and supercargo and of the other members of the crew of the banca,
eminently suspicious and prevent the Court holding that the
disappearance or loss of the money was due to a fortuitous event, to
force majeure, or that it was an occurrence which could not have been
foreseen, or which, if foreseen, was inevitable.
3. Manresa; Liability of Carriers
Manresa, in his Commentaries on the Civil Code (Vol. 10 p. 773), in
treating of the provisions of the said code concerning transportation by
sea and by land of both persons and things, says ‘’Liability of carriers.
— In order that a thing may be transported, it must be delivered to the
carrier, as the Code says. From the time it is delivered to the carrier or
shipper until it is received by the consignee, the carrier has it in his
possession, as a necessary condition for its transportation, and is
obliged to preserve and guard it; wherefore it is but natural and logical
that he should be responsible for it. The Code discovers in the relation
of all these elements the factors which go to make up the conception of
a trust. and, taking into account that the delivery of the thing on the part
of the shipper is unavoidable, if the transportation is to take place,
esteems that, at least in certain respects, such trusts are necessary.”
4. Ipil and Solamo depositories, are liable under Article 1770, and
Articles 1601 and 1602 in relation to Articles 1783 and 1784
Ipil and Solamo, being the depositaries of the sum in question, and
they having failed to exercise for its safe-keeping the diligence required
by the nature of the obligation assumed by them and by the
circumstances of the time and the place, in pursuance of the provisions
of articles 1601 and 1602, in their relation to articles 1783 and 1784,
and as prescribed in article 1770, of the Civil Code, they are liable for
its loss or misplacement and must restore it to Yu Con, together with
the corresponding interest thereon as an indemnity for the losses and
damages caused him through the loss of the said sum.
5. Lauron has responsibility as to selection and supervision of Ipil and
Solamo; Lauron party to contract with Yu Con
Narciso Lauron was the owner of the vessel in which the loss or
misplacement of the P450 occurred, of which vessel, Glicerio Ipil was
master and Justo Solamo, supercargo, both of whom were appointed
to, or chosen for, the positions they held, by Lauron himself. The sum
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
was delivered to the said master, Ipil, and the merchandise to be
transported by means of said vessel from the port of Cebu to the town
of Catmon was laden by virtue of a contract executed by and between
Yucon and the owner of the vessel, Narciso Lauron. Said vessel was
engaged in the transportation of merchandise by sea and made
voyages to and from the port of Cebu to Catmon, and had been
equipped and victualed for this purpose by its owner, with whom, Yu
Con contracted for the transportation of the merchandise which was to
be carried from the port of Cebu to the town of Catmon.
6. Vessel construed; Reus
The word vessel serves to designate every kind of craft by whatever
particular or technical name it may now be known or which nautical
advancements may give it in the future. (Commentaries on the Code of
Commerce, in the General Review of Legislation and Jurisprudence,
founded by D. Jose Reus y Garcia, Vol. 2, p. 136.)
7. Vessel construed; Escriche
According to the Dictionary of Legislation and Jurisprudence by
Escriche, a vessel is any kind of craft, considering solely the hull.
8. Ship and Vessel construed; Blanco
Blanco, the commentator on mercantile law, in referring to the
grammatical meaning of the words “ship” and “vessels,” says, in his
work, that these terms designate every kind of craft, large or small,
whether belonging to the merchant marine or to the navy. And referring
to their juridical meaning, he adds: “This does not differ essentially
from the grammatical meaning; the words ‘ship’ and ‘vessel’ also
designate every craft, large or small, so long as it be not an accessory
of another, such as the small boat of a vessel, of greater or less
tonnage. This definition comprises both the craft intended for ocean or
for coastwise navigation, as well as the floating docks, mud lighters,
dredges, dumpscows or any other floating apparatus used in the
service of an industry or in that of maritime commerce. . . .” (Vol. 1, p.
389.)
9. Banca in present case a vessel
According to the definitions, the banca called Maria, chartered by Yu
Con from Narciso Lauron, was a “vessel”, pursuant to the meaning this
word has in mercantile law, that is, in accordance with the provisions of
the Code of Commerce in force.
10. Ipil is also considered as captain; Article 609
Glicerio Ipil, the master of the said banca, Maria, must also be
considered as its captain, in the legal acceptation of this word. The
same Code of Commerce in force in these Islands compares, in its
article 609, masters with captains. It is to be noted that in the Code of
Commerce of Spain the denomination of arraeces is not included in
said article as equivalent to that of masters, as it is in the Code of
these Islands.
11. Article 609; General Review of Legislation and Jurisprudence
Commenting on Article 609, the General Review of Legislation and
Jurisprudence says: “The name of captain or master is given,
according to the kind of vessel, to the person in charge of it. The first
denomination is applied to those who govern vessels that navigate the
high seas or ships of large dimensions and importance, although they
be engaged in the coastwise trade. Masters are those who command
smaller ships engaged exclusively in the coastwise trade. For the
purposes of maritime commerce, the words ‘captain’ and ‘master’ have
the same meaning; both being the chiefs or commanders of ships.”
(Vol. 2, p. 168.)
12. Article 587 of the Code of Commerce
Article 587 of the Code of Commerce in force provides that “The agent
shall be civilly liable for the indemnities in favor of third persons which
arise from the conduct of the captain in the care of the goods which the
vessel carried; but he may exempt himself herefrom by abandoning the
vessel with all her equipments and the freight he may have earned
during the trip.”
13. Article 618 of the Code of Commerce
Article 618 of the same Code also prescribes that “The captain shall be
civilly liable to the agent and the latter to the third persons who may
have made contracts with the former — (1) For all the damages
suffered by the vessel and its cargo by reason of want of skill or
negligence on his part, If a misdemeanor or crime has been committed
he shall be liable in accordance with the Penal Code. (2) For all the
thefts committed by the crew, reserving his right of action against the
guilty parties.”
14. Article 624 of the 1829 Code of Commerce
The Code of Commerce previous to the one now in force, to wit, that of
1829, in its article 624, provided that the agent or shipowner should not
be liable for any excesses which, during the navigation, might be
committed by the captain and crew, and that, for the reason of such
excesses it was only proper to bring action against the persons and
property of those found guilty.
15. Reasons for fundamental difference between provisions of old and
new Code of Commerce; Estasen
Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280),
makes the remarks, in referring to the exposition of reasons presented
by the Code Commission which prepared and presented for approval
the Code of Commerce now in force, in which exposition of reasons
were set forth the fundamental differences between the provisions
contained in both codes. He says: “Another very important innovation
introduced by the Code is that relative to the liability for misdemeanors
and crimes committed by the captain or by members of the crew This
is a matter of the greatest importance on which a variety of opinions
has been expressed by different juris-consults. The old code declares
the captain civilly liable for all damage sustained by the vessel or its
cargo through lack of skill or care on his part, through violations of the
law, or through unlawful acts committed by the crew. As regards the
agent or shipowner, it declares in unmistakable terms that he shall in
no wise be liable for any excesses which, during the navigation, may
be committed by the captain and the crew. Upon an examination, in the
light of the principles of modern law, of the standing legal doctrine on
the nonliability of the shipowner for the unlawful acts, that is, the crimes
or quasi crimes, committed by the captain and the crew, it is observed
that it cannot by maintained in the absolute and categorical terms in
which it is formulated. It is well and good that the shipowner be not
held criminally liable for such crimes or quasi crimes; but he cannot be
excused from liability for the damage and harm which, in consequence
of those acts, may be suffered by the third parties who contracted with
the captain, in his double capacity of agent and subordinate of the
shipowner himself. In maritime commerce, the shippers and
passengers in making contracts with the captain do so through the
confidence they have in the shipowner who appointed him; they
presume that the owner made a most careful investigation before
appointing him, and, above all, they themselves are unable to make
such an investigation, and even though they should do so, they could
not obtain complete security, inasmuch as the shipowner can,
whenever he sees fit, appoint another captain instead. The shipowner
is in the same case with respect to the members of the crew, for,
though he does not appoint directly, yet, expressly or tacitly, he
contributes to their appointment. On the other hand, if the shipowner
derives profits from the results of the choice of the captain and the
crew, when the choice turns out successful, it is also just that he
should suffer the consequences of an unsuccessful appointment, by
application of the rule of natural law contained in the Partidas, viz., that
he who enjoys the benefits derived from a thing must likewise suffer
the losses that ensue therefrom. Moreover, the Penal Code contains a
general principle that resolves the question under consideration, for it
declares that such persons as undertake and carry on any industry
shall be civilly liable, in default of those who may be criminally liable,
for the misdemeanors and crimes committed by their subordinates in
the discharge of their duties. The Code of Commerce in force omits the
declaration of non-liability contained in the old code, and clearly makes
the shipowner liable civilly for the loss suffered by those who
contracted with the captain, in consequence of the misdemeanors and
crimes committed by the latter or by the members of the crew.”
16. Lauron civilly liable to Yu Con
In accordance with the provisions of the Code of Commerce in force,
Narciso Lauron, as the proprietor and owner of the craft of which
Glicerio Ipil was the master and in which, through the fault and
negligence of the latter and of the supercargo Justo Solamo, there
occurred the loss, theft, or robbery of the P450 that belonged to Yu
Con and were delivered to said master and supercargo, a theft which,
on the other hand, does not appear to have been committed by a
person not belonging to the craft, should, for said loss or theft, be held
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
civilly liable to Yu Con, who executed with Lauron the contract for the
transportation of the merchandise and money between the port of
Cebu and the town of Catmon, by means of the said craft.
1.6.2 Wing Kee Compradoring Co vs The Bark “Monongahela”
The plaintiff in this case, Wing Kee Compradoring Company, seeks to
recover from the defendants, principally the Admiral Line, as agent for
the Bark Monongahela , the sum of P17,675.64, with interest and
costs, on account of goods, wares, an d merchandise sold and
delivered by the plaintiff to the defendants for the use of the crew of the
Bark Monongahela.
The case, as submitted to the appellate court, must be reconstructed
as best it may, from pleadings not altogether clear an d explicit, from
facts taken in part from the decision of the trial court, and in part from
the exhibits, the stenographic notes not having been written up, and
from the briefs on the questions of law which are involved. Turning first
to the pleadings, we find the plaintiff in its amended complaint p raying
for judgment against the defendants jointly and severally for the sum of
P17,675.64, meaning, thereby, we presume, that it had a just and
preferred claim upon and against the Bark Monongahela, and that the
debt was due from the Admiral Line, the agent; C. G. Lothigius, the
captain of the boat; and the owners of the boat, either Victor S. Fox &
Co., Inc., or the United States Shipping Board Emergency Fleet
Corporation. Captain Lothigius and the Admiral Line answered.
The owners were not cited to appear. No action against the bark was
taken. Following the trial, judgment was rendered dismissing the
complaint, without special finding as to costs. Turning next to the facts,
the exhibits of record show that beginning with March 16, 1921, and
ending with August 16, 1921, various supplies were furnished the Bark
Monongahela by Wing Kee Compradoring Company. Most of the bills
for these goods are made out against the "Admiral Line, S.S.
Monongahela ." All are considered by the master and the first steward.
It appears, therefore , that the plaintiff was looking to the Admiral Line
for payment.
The first requisitions for the supplies are on forms headed "The
Admiral Line." Then follows Manila, the date, and the name, "Wing Kee
Compradoring Co." Next is the order, reading: "Please deliver to S. S.
Monongahela now lying at Bay, the following goods and send bills to
the Admiral Line:". After this goods are named. At the foot is found,
"United States Shipping Board Emergency Fleet Corporation,"
although these words are erased in a few of the requisitions, "The
Admiral Line (Pacific Steamship Co.) Operating Agents. By J. J.
Armstrong." On the side of the requisitions in red ink is the following:
"Note: This requisition must be receipted by either Chief Officer, Chief
Steward or Chief Engineer and returned to the Admiral Line, with six
copies of invoice immediately after delivery of goods." After May 4,
1921, the requisitions seem to have been made out by the steward and
the master. We deduce from these documents that the Admiral Line
was the operating agent for Monongahela, and was responsible as
such until the agency w as terminated.
In the Manila Daily Bulletin for August 2, 1921, appeared the following:
"Notice — Bark Monongahela — The undersigned hereby give notice
that they are not responsible in any manner whatsoever for any
indebtedness incurred by the Bark Monongahela, its Master and/or
Crew — The Admiral Line." The trial judge found as a f act that on or
before August 4, 1921, the Admiral Line had ceased to act as agent for
the Monongahela. Nevertheless, supplies were furnished the
Monongahela after these dates by the plaintiff. Turning finally to the
law, we find section 1 of Title 2 of our Code of Commerce , given up to
the subject, "Owners of Vessels and Their Agents." The first artic le in
this section (art. 586), and the provision of law which in our judgment is
controlling, reads: The owner of a vessel and the agent shall be civilly
liable for the acts of the captain and for the obligations contracted by
the latter to repair, equip, and provision the vessel, provided the
creditor proves that the amount claimed was in vested therein. By
agent is understood the person intrusted with the provisioning of a
vessel, or who represents her in the port in which she happens to be.
The civil law, in this respect, is not at all dissimilar to the common law.
By the general law of the United States, as well as of England and of
Europe, it has been held, that when the agents buy in their own names,
but really for the account of their principal, the seller has an option to
look to either for payment, unless (1) he trusted the agent exclusively;
or (2) by the usage and understanding of the business the agent only is
held; or (3) unless the special circumstances of the case show that
only the agent was intended to be bound and the seller knew it or was
chargeable with knowledge of it.
Although the English rule that, where the agents buys in his own name
for the account of a foreign principal, the agent only is bound appears
not to have been followed in the United States, ye t the general
doctrine is the same, that the seller has an option to resort to either.
Applying more directly the law to the pleadings and the facts, it is first
to be noted that the plaintiff has not followed out its allegation that it
has a claim against the Bark Monongahela, and might not have
prospered any way, considering the rather dubious doctrine announced
in the case of Health vs. Steamer San Nicolas. Not only this, but the
plaintiff has made no effort to bring the owner of the bark into the case
and has pushed with no enthusiasm its case against the captain of the
boat. What apparently the plaintiff wants is for the Admiral Line, as the
agent for the Bark Monongahela, to pay the claim, leaving the latter to
reimburse itself, if sees fit, from the owners. To all this appellee
answers that as the agency has ceased, action cannot be brought
against the Admiral Line. To our minds this is a rather far-fetched
argument, for, pursued to its logical conclusion, every agent for a
vessel could thus avoid responsibility pursuant to article 568 of the
Code of Commerce, by giving u p its agency when threatened with suit
to enforce the obligations of third parties.
Moreover, the bills were presented when the Admiral Line was yet the
agent. In resume, therefore, we are of opinion and so hold that the
Admiral Line, as agent for the Bark Monongahela, is liable to the
plaintiff for supplies furnished the Monongahela between March 16,
1921 and August 2, 1921, but is not responsible for supplies furnished
after that date. The mathematical additions show that t he debt of the
Admiral Line to the plaintiff amounts to P16,526.29. In accordance with
the foregoing, judgment is reversed, and the plaintiff shall have and
recover from the defendant, the Admiral Line, the sum of P16,526.29,
without interest and costs. So ordered.
1.6.3 Walter Smith & Co. vs Cadwaller Gibson Lumber Co
1.6.4 Manila Steamship Company, Inc vs Insa Abdulhaman
Facts: From 7:00 - 8:00 p.m. of 4 May 1948, the M/L “Consuelo V”,
laden with cargoes and passengers left the port of Zamboanga City
bound for Siokon under the command of Faustino Macrohon. She was
then towing a kumpit, named “Sta. Maria Bay”. The weather was good
and fair. Among her passengers were Insa Abdulhaman, his wife
Carimla Mora and their 5 children. Insa Abdulhaman and his wife paid
their fare before the voyage started. On that same night the M/S
“Bowline Knot” was navigating from Maribojoc towards Zamboanga.
Between 9:30 to 10:00 p.m. the dark clouds bloated with rain began to
fall and the gushing strong wind began to blow steadily harder, lashing
the waves into a choppy and roaring sea. Such weather lasted for
about an hour and then it became fair although it was showering and
the visibility was good enough. When some of the passengers of the
M/L “Consuelo V” were then sleeping and some were lying down
awake, all of a sudden they felt the shocking collision of the M/L
“Consuelo V” and a big motorship, which later on was identified as the
M/V “Bowline Knot”. Because the M/L “Consuelo V” capsized, her crew
and passengers, before realizing what had happened, found
themselves swimming and floating on the crest of the waves and as a
result of which 9 passengers were dead and missing and all the
cargoes carried on said boat. Among the dead passengers found were
Maria, Amlasa, Bidoaya and Bidalla, all surnamed Inasa, while the
body of the child Abdula Inasa of 6 years of age was never recovered.
Before the collision, none of the passengers were warned or informed
of the impending danger as the collision was so sudden and
unexpected. All those rescued at sea were brought by the M/V
“Bowline Knot” to Zamboanga City.
The case was begun in the CFI of Zamboanga (Civil Case 170) by Insa
Abdulhaman against the Manila Steamship Co., owner of the M/S
“Bowline Knot”, and Lim Hong To, owner of the M/L “Consuelo V”, to
recover damages for the death of his 5 children and loss of personal
properties on board the M/L “Consuelo V” as a result of a maritime
collision between said vessel and the M/S “Bowline Knot” on 4 May
1948, a few kilometers distant from San Ramon Beach, Zamboanga
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
City.
On appeal, the Court of Appeals affirmed the findings of the Board of
Marine Inquiry as to the cause of the collision, i.e. the commanding
officer of the colliding vessels had both been negligent in operating
their respective vessels. Wherefore, the Court held the owners of both
vessels solidarily liable to Insa Abdulhaman for the damages caused to
him by the collision, under Article 827 of the Code of Commerce; but
exempted Lim Hong To from liability by reason of the sinking and total
loss of his vessel, the M/L “Consuelo V”, while the Manila Steamship
Co., owner of the M/S “Bowline Knot”, was ordered to pay all of Insa
Abdulhaman’s damages in the amount of P20,784.00 plus 1⁄2 of the
costs. It is from this judgment that Manila Steamship Co. had appealed
to the Supreme Court.
The Supreme Court held that (1) That the Manila Steamship Co.,
owner of the M/S “Bowline Knot”, is directly and primarily responsible in
tort for the injuries caused to the plaintiff by the collision of said vessel
with the launch “Consuelo V”, through the negligence of the crews of
both vessels, and it may not escape liability on the ground that it
exercised due diligence in the selection and supervision of the officers
and crew of the “Bowline Knot”; (2) That Lim Hong To, as owner of the
motor launch “Consuelo V”, having caused the same to sail without
licensed officers, is liable for the injuries caused by the collision over
and beyond the value of said launch; and (3) That both vessels being
at fault, the liability of Lim Hong To and Manila Steamship Co. to the
plaintiff herein is in solidum, as prescribed by Article 827 of the Code of
Commerce. The Court, thus, modified the decision of the Court of
Appeals is modified, and affirmed that of the CFI, in the sense of
declaring both original defendants solidarily liable to Insa Abdulhaman
in the sum of P20,784.00 and the cost of the litigation, without
prejudice to the right of the one who should pay the judgment in full to
demand contribution from his co-defendant.
1. Tort in question not civil tort but a maritime tort resulting in a collision
at sea, governed by Articles 826 to 939 of the Code of Commerce
While it is true that Insa Abdulhaman’s action against Manila
Steamship is based on a tort or quasi- delict, the tort in question is not
a civil tort under the Civil Code but a maritime tort resulting in a
collision at sea, governed by Articles 826-939 of the Code of
Commerce. Under Article 827 of the Code of Commerce, in case of
collision between two vessels imputable to both of them, each vessel
shall suffer her own damage and both shall be solidarily liable for the
damages occasioned to their cargoes. The characteristic language of
the law in making the “vessels” solidarily liable for the damages due to
the maritime collision emphasizes the direct nature of the
responsibilities on account of the collision incurred by the shipowner
under maritime law, as distinguished from the civil law and mercantile
law in general. This direct responsibility is recognized in Article 618 of
the Code of Commerce under which the captain shall be civilly liable to
the ship agent, and the latter is the one liable to third persons.
2. Where shipagent liable to third persons
As pointed out in the collision case of Yueng Sheng Exchange &
Trading Co. vs. Urrutia & Co., 12 Phil. 747, 753: “The responsibility
involved in the present action is that derived from the management of
the vessel, which was defective on account of lack of skill, negligence,
or fault, either of the captain or of the crew, for which the captain is
responsible to the agent, who in his turn is responsible to the third
party prejudiced or damaged. (Article 618, Code of Commerce).”
3. Shipowners and shipagents civilly liable for the acts of the captain
and for indemnities due to third persons
In fact, it is a general principle, well established maritime law and
custom, that shipowners and ship agents are civilly liable for the acts of
the captain (Code of Commerce, Article 586) and for the indemnities
due the third persons (Article 587); so that injured parties may
immediately look for reimbursement to the owner of the ship, it being
universally recognized that the ship master or captain is primarily the
representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42
Phil. 256, 260). This direct liability, moderated and limited by the
owner’s right of abandonment of the vessel and earned freight (Article
587), has been declared to exist, not only in case of breached
contracts, but also in cases of tortious negligence (Yu Biao Sontua vs.
Osorio, 43 Phil. 511, 515). Where the vessel is one of freight, a public
concern or public utility, its owner or agents is liable for the tortious
acts of his agents (Articles 587, 613, and 618 Code of Commerce; and
Article 1902, 1903, 1908, Civil Code). This principle has been
repeatedly upheld in various decisions of the Supreme Court.
4. Defense of due diligence of bonus paterfamilias to exempt
shipowner from liability for fault would render nugatory solidarity liability
established by Article 827 Code of Commerce
To admit the defense of due diligence of a bonus paterfamilias (in the
selection and vigilance of the officers and crew) as exempting the
shipowner from any liability for their faults, would render nugatory the
solidary liability established by Article 827 of the Code of Commerce
for the greater protection of injured parties. Shipowners would be able
to escape liability in practically every case, considering that the
qualifications and licensing of ship masters and officers are determined
by the State, and that vigilance is practically impossible to exercise
over officers and crew of vessels at sea. To compel the parties
prejudiced to look to the crew for indemnity and redress would be an
illusory remedy for almost always its members are, from captains
down, mere wage earners.
5. Walter Smith Co. vs. Cadwallader Gibson Lumber not in point
The case of Walter S. Smith & Co. vs. Cadwallader Gibson Lumber
Co., 55 Phil. 517, is not the point. Said case treated of a civil tort, in
that the vessel of the defendant, allegedly negligently managed by its
captain in the course of its maneuvers to moor at plaintiff’s wharf,
struck the same and partially demolished it, causing damage to
plaintiff. Because the tort allegedly committed was civil, the provisions
of Article 1903 of the Civil Code were correctly applied. The present
case, on the other hand, involves tortious conduct resulting in a
maritime collision; wherefore, the liability of the shipowner is governed
by the provisions of the Code of Commerce and not by the Civil Code.
6. Liability of Lim Hong To cannot be limited according to the Limited
Liability Rule; Lim Hong To in violation of law
Disregarding the question whether mere inability to meet the salary
demands of duly licensed masters and engineers constitutes non-
availability thereof that would excuse noncompliance with the law and
authorize operation without licensed officers under Act 3553, the fact
remains that by operating with an unlicensed master, Lim Hong To
deliberately increased the risk to which the passengers and shippers of
cargo aboard the “Consuelo V” would be subjected. In his desire to
reap greater benefits in the maritime trade, Lim Hong To willfully
augmented the dangers and hazards to his vessel’s unwarry
passengers, who would normally assume that the launch officers
possessed the necessary skill and experience to evade the perils of
the sea. Hence, the liability of Lim Hong To cannot be the identical to
that of a shipowner who bears in mind the safety of the passengers
and cargo by employing duly licensed officers. To hold that Lim Hong
To may limit his liability to the value of his vessels, is to erase all
difference between compliance with law and the deliberate disregard
thereof.
7. Limited Liability Rule does not apply where the injury or average is
due to shipowner’s own fault
The international rule is to the effect that the right of abandonment of
vessels, as a legal limitation of a shipowner’s liability, does not apply to
cases where the injury or the average is due to shipowner’s own fault.
8. Farina, Drecho Comercial Maritimo
Fariña (Derecho Comercial Maritimo, Vol. I, pp. 122-123), on the
authority of judicial precedents from various nations, sets the rule to be
as follows: “Esta generalmente admitido que el propietario del buque
no tiene derecho a la limitacion legal de responsibilidad si los daños o
averias que dan origen a la limitacion provienen de sus propias culpas.
El Convenio de Bruselas de 25 de agosto de 1924 tambien invalida la
limitacion en el caso de culpa personal en los accidentes o averías
sobrevenidos (Art. 2°).”
9. Danjon, Derecho Maritimo
To the same effect, a noted French author (Danjon) states ((Derecho
Maritimo, Vol. 2, p. 332): “La limitacion de la responsabilidad maritima
ha sido admitida para proteger a los armadores contra los actos
abusivos de sus encargados y no dejar su patrimonio entero a la
discrecion del personal de sus buques, porque este personal cumple
sus obligaciones en condiciones especiales; pero los armadores no
tienen por sobre los demas derecho a ser amparados contra ellos
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
mismos ni a ser protegidos contra sus propios actos.”
10. Liability of Lim Hong To must be beyond the value of his vessal
That Lim Hong To understood that he would incur greater liability than
that normally borne by shipowners, is clear from his assumption of “
full” risk and responsibility for all the consequences” of the operation of
the M/L “Consuelo V”; a responsibility expressly assumed in his letter,
and imposed in his special permit, in addition to the vessel itself being
held answerable. This express assumption of “full risk and
responsibility” would be meaningless unless intended to broaden the
liability of respondent Lim Hong To beyond the value of his vessel.
1.6.5 Yu Biao Santua & Co vs Osorio
2. Captains, Masters and Skippers
2.1 Concept; Distinction
2.2 Qualifications
2.3 Powers, Functions and Duties
2.3.1 “Captain Goes Down With His Ship”
2.3.2 Inter-Orient Maritime Enterprises vs NLRC
2.4 Discretion of Captain or Master
Inter-Orient Maritime Enterprises vs NLRC
2.5 Code of Commerce Provisions on Captain
2.5.1 Sweet Lines vs Court of Appeals
Facts: Micaela B. Quintos, Fr. Jose Bacatan SJ, Marciano Cabras and
Andrea Veloso purchased first-class tickets from Sweet Lines Inc. at
the latter’s office in Cebu City. They were to board Sweet Lines’ vessel,
M/V Sweet Grace, bound for Catbalogan, Western Samar. Instead of
departing at the scheduled hour of about midnight on 8 July 1972, the
vessel set sail at 3:00 A.M. of 9 July 1972 only to be towed back to
Cebu due to engine trouble, arriving there at about 4:00 P.M. on the
same day. Repairs having been accomplished, the vessel lifted anchor
again on 10 July 1972 at around 8:00 A.M. Instead of docking at
Catbalogan, which was the first port of call, the vessel proceeded direct
to Tacloban at around 9:00 P.M. of 10 July 1972. Quintos, et. al. had
no recourse but to disembark and board a ferryboat to Catbalogan.
Hence, a suit for damages for breach of contract of carriage was filed
by Quintos, et. al., where the Trial Court (CFI Cebu, Branch VIII)
ordered Sweet Lines to pay the former to pay (1) P75,000.00 as moral
damages divided as follows: P30,000.00 for Mrs. Micaela B. Quintos,
P25,000.00 for Jesuit Father Jose Bacatan; P10,000.00 for Mrs.
Andrea Veloso and P10,000.00 for Mike Cabras; (2) P30,000.00 as
exemplary or corrective damages; (3) Interest at the legal rate of 6%
per annum on the moral and exemplary damages as set forth above
from the date of this decision until said damages are fully paid; (4)
P5,000.00 as attorney’s fees; and (5) The costs. The court also
dismissed the counterclaim.
The decision of the trial court was affirmed by the Appellate Court.
Hence, the appeal.
The Supreme Court modified the judgment appealed from to the effect
that Sweet Lines was sentenced to indemnify Quintos, et. al. in the
sum of P3,000.00 each, without interest, plus P1,250.00, each, by way
of attorney’s fees and litigation expenses; with costs against Sweet
Lines.
1. Article 614, Code of Commerce
Article 614 of the Code of Commerce provides that “a captain who,
having agreed to make a voyage, fails to fulfill his undertaking, without
being prevented by fortuitous event or force majeure, shall indemnify
all the losses which his failure may cause, without prejudice to criminal
penalties which may be proper.”
2. Article 698, Code of Commerce
Article 698 of the Code of Commerce provides that “in case of
interruption of a voyage already begun, the passengers shall only be
obliged to pay the fare in proportion to the distance covered, without
right to recover damages if the interruption is due to fortuitous event or
force majeure, but with a right to indemnity, if the interruption should
have been caused by the captain exclusively. If the interruption should
be caused by the disability of the vessel, and the passenger should
agree to wait for her repairs, he may not be required to pay any
increased fare of passage, but his living expenses during the delay
shall be for his own account.”
3. Fortuitous event not present
The crucial factor in Articles 614 and 698 is the existence of a
fortuitous event or force majeure. Without it, the right to damages and
indemnity exists against a captain who fails to fulfill his undertaking or
where the interruption has been caused by the captain exclusively.
Herein, there was no fortuitous event or force majeure which prevented
the vessel from fulfilling its undertaking of taking 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.
4. Arguendo that engine failure is fortuitous event, there was no
fortuitous event to bypass a port of call
In the second place, even granting arguendo that the engine failure
was a fortuitous event, it accounted only for the delay in departure.
When the vessel finally left the port of Cebu on 10 July 1972, there was
no longer any force majeure that justified by-passing a port of call. The
vessel was completely repaired the following day after it was towed
back to Cebu. In fact, after docking at Tacloban City, it left the next day
for Manila to complete its voyage.
5. Reason why Catbalogan was bypassed
The reason for by-passing the port of Catbalogan was to enable the
vessel to catch up with its schedule for the next week. There were 50
passengers for Tacloban compared to 20 passengers for Catbalogan,
so that the Catbalogan phase could be scrapped without too much loss
for the company.
6. Conditions in the carrier’s ticket cannot prevail over Articles 614 and
698
The carrier cannot rely on the conditions in small bold print at the back
of the ticket reading: “The passenger’s acceptance of this ticket shall
be considered as an acceptance of the following conditions: (3) In case
the vessel cannot continue or complete the trip for any cause
whatsoever, the carrier reserves the right to bring the passenger to
his/her destination at the expense of the carrier or to cancel the ticket
and refund the passenger the value of his/her ticket; xxx (11) The
sailing schedule of the vessel for which this ticket was issued is subject
to change without previous notice.” Herein, the carrier did not comply
with the same. It did not cancel the ticket nor did it refund the value of
the tickets to its affected passengers. Besides, it was not the vessel’s
sailing schedule that was involved. The passengers’ complaint is
directed not at the delayed departure the next day but at the by-
passing of Catbalogan, their destination. Furthermore, the conditions
relied upon by the carrrier cannot prevail over Articles 614 and 698 of
the Code of Commerce heretofore quoted.
7. Owner of vessel and shipagent civilly liable for acts of the captain
The voyage to Catbalogan was “interrupted” by the captain upon
instruction of management. The “interruption” was not due to fortuitous
event or for majeure nor to disability of the vessel. Having been caused
by the captain upon instruction of management, the passengers’ right
to indemnity is evident. The owner of a vessel and the ship agent shall
be civilly liable for the acts of the captain.
8. Bad faith defined
Bad faith means a breach of a known duty through some motive or
interest or illwill. Self-enrichment or fraternal interest, and not personal
illwill, may have been the motive, but it is malice nevertheless.
9. Bad faith present; Findings of the lower courts as to facts conclusive
upon the Supreme Court
Both the Trial Court and the Appellate Court found that there was bad
faith on the part of the carrier in that: (1) Defendants-appellants did not
give notice to plaintiffs-appellees as to the change of schedule of the
vessel; (2) Knowing fully well that it would take no less than fifteen
hours to effect the repairs of the damaged engine, defendants-
appellants instead made announcement of assurance that the vessel
would leave within a short period of time, and when plaintiffs-appellees
wanted to leave the port and gave up the trip, defendants- appellants’
employees would come and say, ‘we are leaving, already.’ (3)
Defendants-appellants did not offer to refund plaintiffs-appellees’
tickets nor provide them with transportation from Tacloban City to
Catbalogan.
That finding of bad faith is binding on us, since it is not the function of
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
the Court to analyze and review evidence on this point all over again.
10. Moral damages due; Award of the lower court excessive
Under Article 2220 of the Civil Code, moral damages are justly due in
breaches of contract where the defendant acted fraudulently or in bad
faith. Herein, however, under the circumstances, the award of moral
damages is excessive and accordingly should be reduced to
P3,000.00, respectively, for each of the claimants.
11. Award of attorney’s fees justified
The total award of attorney’s fees of P5,000.00 is in order considering
that the case has reached the Supreme Court.
12. Award of exemplary damages at court’s discretion
Insofar as exemplary damages are concerned, although there was bad
faith, the Court was not inclined to grant them in addition to moral
damages. Exemplary damages cannot be recovered as a matter of
right; the Court decides whether or not they should be adjudicated. The
objective to meet its schedule might have been called for, but the
carrier should have taken the necessary steps for the protection of its
passengers under its contract of carriage.
13. Article 2215 (2) NCC inapplicable
Article 2215(2) of the Civil Code invoked by the carrier is in-applicable
herein. The harm done to private respondents outweighs any benefits
they may have derived from being transported to Tacloban instead of
being taken to Catbalogan, their destination and the vessel’s first port
of call, pursuant to its normal schedule.
3. Pilot
3.1 Master and Pilot
3.1.1 Master Pro Hac Vice; Limitation
3.2 Shipowner and Pilot
3.3 Pilot and Pilot Association
3.4 Compulsory Pilotage
Far Eastern Shipping Co vs CA
FACTS: On June 20, 1980, the M/V PAVLODAR, flying under the
flagship of the USSR, owned and operated by the Far Eastern
Shipping Company (FESC), arrived at the Port of Manila from
Vancouver, British Columbia at about 7:00 o'clock in the morning. The
vessel was assigned Berth 4 of the Manila International Port, as its
berthing space. Captain Roberto Abellana was tasked by the
Philippine Port Authority to supervise the berthing of the vessel.
Appellant Senen Gavino was assigned by the Appellant Manila Pilots'
Association (MPA) to conduct docking maneuvers for the safe
berthing of the vessel to Berth No. 4.
Gavino boarded the vessel at the quarantine anchorage and stationed
himself in the bridge, with the master of the vessel, Victor Kavankov,
beside him. After a briefing of Gavino by Kavankov of the particulars
of the vessel and its cargo, the vessel lifted anchor from the
quarantine anchorage and proceeded to the Manila International Port.
The sea was calm and the wind was ideal for docking maneuvers. -
When the vessel reached the landmark (the big church by the Tondo
North Harbor) one-half mile from the pier, Gavino ordered the engine
stopped. When the vessel was already about 2,000 feet from the pier,
Gavino ordered the anchor dropped. Kavankov relayed the orders to
the crew of the vessel on the bow. The left anchor, with 2 shackles,
were dropped. However, the anchor did not take hold as expected.
The speed of the vessel did not slacken. A commotion ensued
between the crew members. A brief conference ensued between
Kavankov and the crew members. When Gavino inquired what was all
the commotion about, Kavankov assured Gavino that there was
nothing to it. - After Gavino noticed that the anchor did not take hold,
he ordered the engines half-astern. Abellana, who was then on the
pier apron noticed that the vessel was approaching the pier fast.
Kavankov likewise noticed that the anchor did not take hold. Gavino
thereafter gave the "full-astern" code. Before the right anchor and
additional shackles could be dropped, the bow of the vessel rammed
into the apron of the pier causing considerable damage to the pier.
The vessel sustained damage too. Kavankov filed his sea protest.
Gavino submitted his report to the Chief Pilot who referred the report
to the Philippine Ports Authority. Abellana likewise submitted his
report of the incident. - The rehabilitation of the damaged pier cost the
Philippine Ports Authority the amount of P1,126,132.25.
PERTINENT RULES on PILOTAGE
The Port of Manila is within the Manila Pilotage District which is under
compulsory pilotage pursuant to Section 8, Article III of Philippine
Ports Authority Administrative Order No. 03-85:
SEC. 8. Compulsory Pilotage Service. — For entering a harbor
and anchoring thereat, or passing through rivers or straits within a
pilotage district, as well as docking and undocking at any pier/wharf,
or shifting from one berth or another, every vessel engaged in
coastwise and foreign trade shall be under compulsory pilotage.
In case of compulsory pilotage, the respective duties and
responsibilities of the compulsory pilot and the master have been
specified by the same regulation:
SEC. 11. Control of vessels and liability for damage. — On
compulsory pilotage grounds, the Harbor Pilot providing the service
to a vessel shall be responsible for the damage caused to a vessel
or to life and property at ports due to his negligence or fault. He can
only be absolved from liability if the accident is caused by force
majeure or natural calamities provided he has exercised prudence
and extra diligence to prevent or minimize damage.
The Master shall retain overall command of the vessel even on
pilotage grounds whereby he can countermand or overrule the
order or command of the Harbor Pilot on board. In such event, any
damage caused to a vessel or to life and property at ports by
reason of the fault or negligence of the Master shall be the
responsibility and liability of the registered owner of the vessel
concerned without prejudice to recourse against said Master
Such liability of the owner or Master of the vessel or its pilots
shall be determined by competent authority in appropriate
proceedings in the light of the facts and circumstances of each
particular case.
SEC. 32. Duties and responsibilities of the Pilot or Pilots'
Association. — The duties and responsibilities of the Harbor Pilot
shall be as follows: xxx xxx xxx
f) a pilot shall be held responsible for the direction of a vessel
from the time he assumes his work as a pilot thereof until he leaves
it anchored or berthed safely; Provided, however, that his
responsibility shall cease at the moment the Master neglects or
refuses to carry out his order.
- Customs Administrative Order No. 15-65 issued twenty years
earlier likewise provided in Chapter I thereof for the responsibilities
of pilots:
Par. XXXIX. — A Pilot shall be held responsible for the direction
of a vessel from the time he assumes control thereof until he leaves
it anchored free from shoal; Provided, That his responsibility shall
cease at the moment the master neglects or refuses to carry out his
instructions.
xxx xxx xxx
Par. XLIV. — Pilots shall properly and safely secure or anchor
vessels under their control when requested to do so by the master
of such vessels.
ISSUE: WON both the pilot and the master were negligent
HELD: YES. The SC started by saying that in a collision between a
stationary object and a moving object, there is a presumption of fault
against the moving object (based on common sense and logic). It then
went on to determine who between the pilot and the master was
negligent.
PILOT
A pilot, in maritime law, is a person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in certain waters. He is an
expert who’s supposed to know the seabed, etc. that a master of a
ship may not know because the pilot is familiar with the port. He is
charged to perform his duties with extraordinary care because the
safety of people and property on the vessel and on the dock are at
stake.
Capt. Gavino was found to be negligent. The court found that his
reaction time (4 minutes) to the anchor not holding ground and the
vessel still going too fast was too slow. As an expert he should’ve
been reacting quickly to any such happenings.
MASTER
In compulsory pilotage, the pilot momentarily becomes the master of
the vessel. The master, however may intervene or countermand the
pilot if he deems there is danger to the vessel because of the
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
incompetence of the pilot or if the pilot is drunk. - Based on Capt.
Kavankov’s testimony, he never sensed the any danger even when
the anchor didn’t hold and they were approaching the dock too fast.
He blindly trusted the pilot. This is negligence on his part. He was right
beside the pilot during the docking, so he could see and hear
everything that the pilot was seeing and hearing.
The master’s negligence translates to unseaworthiness of the vessel,
and in turn means negligence on the part of FESC.
CONCURRENT TORTFEASORS
As a general rule, that negligence in order to render a person liable
need not be the sole cause of an injury. It is sufficient that his
negligence, concurring with one or more efficient causes other than
plaintiff's, is the proximate cause of the injury. Accordingly, where
several causes combine to produce injuries, person is not relieved
from liability because he is responsible for only one of them, it being
sufficient that the negligence of the person charged with injury is an
efficient cause without which the injury would not have resulted to as
great an extent, and that such cause is not attributable to the person
injured. It is no defense to one of the concurrent tortfeasors that the
injury would not have resulted from his negligence alone, without the
negligence or wrongful acts of the other concurrent tortfeasor. Where
several causes producing an injury are concurrent and each is an
efficient cause without which the injury would not have happened, the
injury may be attributed to all or any of the causes and recovery may
be had against any or all of the responsible persons although under
the circumstances of the case, it may appear that one of them was
more culpable, and that the duty owed by them to the injured person
was not the same. No actor's negligence ceases to be a proximate
cause merely because it does not exceed the negligence of other
actors. Each wrongdoer is responsible for the entire result and is liable
as though his acts were the sole cause of the injury. - There is no
contribution between joint tortfeasors whose liability is solidary since
both of them are liable for the total damage. Where the concurrent or
successive negligent acts or omissions of two or more persons,
although acting independently, are in combination the direct and
proximate cause of a single injury to a third person, it is impossible to
determine in what proportion each contributed to the injury and either
of them is responsible for the whole injury. Where their concurring
negligence resulted in injury or damage to a third party, they become
joint tortfeasors and are solidarily liable for the resulting damage under
Article 2194 of the Civil Code.
Disposition Petition denied. CA affirmed. Capt. Gavino and FESC are
solidarily liable.
3.5 Liability of Pilot and Pilot Association
3.5.1 High Standard Care
4. Officers and Crew
4.1 Regulation of Merchant Marine Profession and Employment
4.2 Minimum Safe Manning
4.3 Security of Tenure; Contractual Nature of Employment
4.4 Fleet Seaman Doctrine
4.5 Code of Commerce Provisions
4.6 Officers (Deck and Engine)
4.7 Ratings (Deck and Engine
5. Supercargo (sobrecargo)
6. Purser
7. Supernumerary (sobrasaliente)
CHAPTER IV - MARITIME CONTRACTS: CHARTER PARTIES
(ARTS. 652 - 718, CODE OF COMMERCE)
1. Definition and Concept
A contract whereby an entire ship or some principal part of the ship is
let by the owner thereof to a merchant or other person for a specified
time or use for the conveyance of goods, in consideration of the
payment of freight.
1.1 implied Terms
1.1.1. Seaworthiness (Santiago Lighterage Corporation v. CA)
To be seaworthy, a vessel “must have that degree of fitness which an
ordinary, careful and prudent owner would require his vessel to have at
the commencement of her voyage, having regard to all the probable
circumstances of it.” Thus the degree of seaworthiness varies in
relation to the contemplated voyage. Crossing the Atlantic calls for
stronger equipment than sailing across the Visayan Sea. It is essential
to consider that once the necessary degree of seaworthiness has been
ascertained, this obligation is an absolute one, i.e. the undertaking is
that the vessel actually is seaworthy. It is no excuse that the
shipowner took every possible precaution to make her so, if in fact he
failed.
In examining what is meant by seaworthiness we must bear in mind
the dual nature of the carrier’s obligations under a contract of
affreightment. To satisfy these duties the vessel must (a) be efficient
as an instrument of transport and (b) as a storehouse for her
cargo. The latter part of the obligation is sometimes referred to as
cargoworthiness.
1.1.2. Reasonable Dispatch
1.1.3. Against Improper Deviation
2. Kinds
2.1. Bareboat Charter
• Shipowner leases to the charterer the whole vessel,
transferring to the latter the entire commande, possession
and consequent control over the vessel’s navigation,
including the master and the crew, who becomes the
charterer’s “servants”.
• The charterer becomes the owner “pro hac vice” of the
vessel since he mans the vessel with his own set of master
and crew, effectively becoming the owner for the voyage or
service stipulated subject to any liability for damages arising
from negligence.
• Charterer assumes the customary rights and liabilities of
shipowner in relation to third persons; the master of the
vessel is the agent of charterer and not of the shipowner.
2.1.1. Beneficial Owner v. Disponent Owner; Owner Pro Hac Vice
Beneficial owner – real owner of the ship
Disponent owner – charterer
2.1.2. Litonjua Shipping v. National Seamen Board
2.2 Time Charter
Vessel is leased to charterer for a fixed period of time; charterer is
liable for delay
2.3. Voyage Charter
Vessel is leased for a single or particular voyage; owner is liable for
delay
2.4. Special Types: Slot or Space Charter, Cross Charter, Trip
CHarter, Tonnage Contract, etc. (PHILAM Insurance Company v.
Heung A Shipping Corporation)
3. Effect on Carrier’s Character (Planter Products Inc vs CA)
Generally, the character of the common carrier as such is not affected
by the charter party if the same is a contract of affreightment
4. Persons Who May Make Charterparty
The owner of the vessel who have legal control and possession of the
vessel. A third person (broker) may intervene in the execution of the
charter between the principals.
• Charterer- may subcharter the entire vessel to a third person
but only in the event that there is no prohibition in the original
charter. The subcharter is an independent contract involving
only the charterer and subcharterer and therefore does not
give rise to any contractual relation between owner and
subcharterer.
• Part owners- not precluded from chartering for their own
commercial purposes; enjoy preference in the charter over
other persons who offer equal conditions and freight
• Ship agent- not allowed to make contracts for a new charter
unless duly authorized by the owner. He may make charter if
such authority has been extended to him.
• Captain or master- one of the inherent powers is to enter into
a valid and binding charter parties but only in the absence of
ship agent or consignee and only if he acts in accordance
with the instructions of the agent or owner and protects that
latter’s interests. In violation of such instructions, agent or
owner has right to recover damages against the erring
captain.
5. Requisites; Form (Market Developers Inc vs. IAC)
• Consent of the contracting parties
• An existing vessel which should be placed at the disposition
of the shipper
• Freight
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
• Compliance with the formal requisites under Article 652: in
writing, drawn in duplicate, signed by the parties
6. Related Concepts and Other Typical Charter Clauses
6.1. Safe Port/Safe Berth Clause
where the charterer reserves the right to decline to risk his vessel in an
unsafe port
6.2 Cancellation Clause
Stipulation in an agreement that grants (to one or both parties) the right
to terminate it before its expiration, under specified terms and
conditions. Remedy in favor of the charterer. relevant in the approach
voyage stage;
6.3 Jupiter Clause
Analogous to cancellation clause. Remedy in favor of the shipowner;
relevant in the loading stage (2nd of the 4 stages of voyage charter);
delay of the charterer to load at the specified date.
6.4 Freight and hire
6.5 Deadfreight
where the charterer failed to occupy the leased portion of the vessel,
he may thereby be made liable by the shipowner for the “deadfreight”
that occurred.
6.6 Laytime and Notice of Readiness
Laytime is the time allowed to the charterers to load or discharge cargo
in return for payment of freight to the owners. Most charterparties
require the owners to serve a notice of readiness at load or discharge
port stating that the vessel is ready in all respects for cargo operations.
6.7 Demurrage Clause
Asum of money due by express contract for the detention of the vessel
in loading or unloading beyond the time allowed for that purpose in the
charter party. The Charterer shall answer for the demurrage incurred
thereby, usually fixed in the charter party.
A penalty
6.8 Dispatch Clause
An incentive
6.9 Inclusion/Exclusion of Sundays and Holidays in Computing
Laytime
6.10 Cesser Clause
Stipulation where the charterer’s liability ceases as soon as the cargo
is shipped and the advance of freight, dead freight and demurrage in
loading (if any) are paid, the owners have a ien on the cargo for
freight, dead freight, demurrage and general average contributions.
6.11 F.I.O.S. Clause
Free In and Out Stowed
A carrier acting under a charter party is not liable for damage to cargo
caused by a negligent stevedore where the bill of lading provided that
the cargo was to be FIOS.
6.12 Arbitration Clause (National Union Fire Insurance Company
of Pittsburg vs Stolt-Nielson Philippines Inc.)
A clasue in a contract
7. Charterparty Rights and Obligations of
7.1 Ship Owner or Captain
1. Evident failure/refusal on the party of the shipowner/his
agents to receive cargo which had been contracted to be
transported under the charter party constitutes a sure breach
of the charter party, as to warrant a suit for damages by the
charterer for such breach
2. Shipowner is bound to observe the capacity of the
vessel/that which is indicated expressly in the registry, a
margin GREATER THAN 2% between the represented and
her actual capacity which is NOT allowable
3. Generally, any loss incurred by a shipper whose cargo is
refused on account of the receipt by the shipowner of a
greater amount of cargo belonging to other persons shall be
for the account of the shipowner in the form of indemnity. If
there is only 1 shipper and there was apparent fraud/error in
the vessel’s capacity, the charterer may opt to have the
freight reduced if he does not choose to rescind the charter,
with a further right to be indemnified therefor.
4. If there are several charter parties, and due to lack of space,
NOT ALL could be accommodated and NOT 1 wants to
rescind the charter, preference shall be given to the FIRST
IN LOADING his cargo and the other shall have
preference in the ORDER OF THE DATES OF THEIR
CHARTER. In the absence of priority, they may choose to
load IN PROPORTION to the amounts of weight/space that
they may have contracted, with a right to be indemnified for
the loss.
5. Shipowner may effect a substitution in respect of the vessel
as along as the substitute vessel had been duly inspected
and is seaworthy
6. After of the vessel is loaded, the shipowner MAY NOT
SUBSTITUTE the chartered vessel unless, he procures the
consent of the charterers/shippers. Otherwise, he runs the
risk of answering for all damages suffered during the voyage
by those who did not give their consent.
1. If the vessel has been chartered in whole, Captain MAY NOT
accept cargo from any other person unless, the consent of
the charterer is obtained. Otherwise, the captain may be
compelled by the charterer to unload said cargo and pay
damage that he may suffer on account thereof.
2. Shipowner is generally held liable for damages incurred by
the charterer due to the voluntary delay of the captain in
putting to sea, provided he was requested by notarial/judicial
notice, to put to sea at the proper time.
7.2 Charterer
1. RIGHT TO SUBCHARTER the vessel to a 3rd person only if
he is so authorized by the ship owner. Otherwise, he shall be
held liable to the shipowner for any damage cause to the
latter by virtue of the subcharter.
2. A charterer who loads goods different form that contracted
upon (without knowledge of ship owner/captain), and results
to damage due to confiscation, embargo, detention, and
other causes, to the said ship owner, shall be liable to
indemnify the parties injured.
3. Should ILLICIT CARGO be shipped by the charterer in the
chartered vessel with the knowledge of the
shipowner/captain, said charterer shall be JOINTLY LIABLE
with the shipowner for all damages cause to the other
shippers.
4. Charterer and shippers MAY NOT abandon the goods
damaged due to inherent defects or by reason of fortuitous
event for the purpose of paying the freight and other
expenses incurred. Abandonment may be proper however if
the cargo, if consisting of liquid, may have leaked out and
non remains except ¼ of their contents.
8. Character of Bill of Lading in Charterparty Arrangements
9. Code of Commerce
9.1 Subcharter
9.2 O’Farrely Cia vs Manila Electric Co.
9.3 Caltex (Phils) vs Sulpicio Lines, Inc
10. Charterparty Chain
11. Charterparty Indemnity
Chapter V – Maritime Contracts: Contract of Affreightment
A. Contract of Affreightment
1. Definition and Concept
Involves the use of shipping space leased by the owner in part or as a
whole, to carry goods for others, and Time-Charter – leased for a fixed
period of time, Voyage – Single voyage
1.1. Characteristics
1.2. Distinguished from Charterparty
A Charterparty is a contract by which with the entire ship or some
principal part thereof is let by the owner to another person for a
specified period of time or use.
1.3. Implied Warranties
1.3.1. Seaworthiness
1.4. Mutual Remedies of Ship and Cargo in Contracts of
Affreightment
1.5. Entirety of Affreightment Contract
1.5.1. Exceptions
1.5.2. Effect of Freight Earned Clause (a.k.a. Prepaid Freight
Clause)
1.5.3. Pro Rata Payment at Intermediate Port
2. Types of Cargo
2.1. Dry Cargo
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
2.1.1 Dry/Solid Bulk
2.1.2 Break Bulk (General Cargo)
2.1.3. Container
2.1.4. Special
2.1.4.1. Heavy-lift
2.1.4.2. Livestock
2.1.4.3. Dangerous
2.2. Wet Cargo
2.2.1 Liquid Bulk
2.2.2. Gas
2.3. Cargo in Holds vs Deck Cargo
Cargo in Holds- goods in the cargo area or cargo deck or storage area
Deck Cargo - goods on an extended structure of a ship; carried outside
rather than within the enclosed cargo spaces
2.4. Importance of Identifying Type of Cargo
B. Bill of Lading and Other Shipping Documents
1. Concept and Nature of Bill of Lading (B/L)
1.1. Importance in Trade and Commerce
It is a written acknowledgement of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a
person named or on his or her order
1.2. Three-fold Character
• As a receipt or an evidence that the goods have been
received by the carrier
• As a contract evidencing the agreement between the parties
• As a muniment of title, representing the goods
1.3. Kinds of B/L
1.3.1. On Board vs. Received
On Board – it states that the goods have been received on board the
specified vessel that will carry them
Received Shipment – it states that the goods have been received for
shipment with or without specifying the vessel on which they are to be
shipped
1.3.2. Negotiable vs Non-negotiable (straight)
Non-negotiable- goods have been paid for or do not require payment
(donation); shipping company will deliver the goods to its consignee on
presentation of an identification. Also called consignment bill of lading.
1.3.3. Clean vs Foul/Claused
Clean – does not indicate any defect in the goods
Foul – contains a notation thereon indicating the goods covered by it
are in bad condition
1.3.4. Through B/L
Issued by the carrier who is obliged to use the facilities of other carriers
as well as his own facilities for the purpose of transporting the goods
from the city of the seller to the city of the buyer, which bill of lading is
honored by the second and other interested carriers who do not issue
their own bills
1.3.5. Custody vs Port
Custody – one wherein the goods are already received by the carrier
but the vessel indicated therein has not yet arrived on the port
Port – issued by the carrier to whom the goods have been delivered
and vessel indicated in the bill of lading, by which the goods are to be
shipped already in the port where the goods are theld for shipment
1.3.6. Spent B/L
Spent – covers goods that already have been delivered by the carrier
without a surrender of a signed copy of the bill
1.4. Other Names Used for Bill of Lading
Waybill
1.5. Distinguished From Sea Waybill
1.6. Electronic B/L
2. When Effective; Binding Effect
2.1. Sea-Land Services, Inc. vs Intermediate Appellate Court
3. Three-fold Character: Bill of Lading as Contract
3.1. Boilerplate Contract; Contract of Adhesion
3.2. Actionable Document
3.2.1. Philippine American General Insurance vs Sweet Lines, Inc.
3.3. Documentary Evidence
3.3.1 Parole Evidence
3.3.2. Best Evidence Rule
3.3.3. Admissibility of Electronic B/L
3.4. Character of B/L when there is charterparty
3.4.1. National Union Fire Insurance Company of Pittsburg vs
Stolt-Nielsen Philippines Inc.
3.4.2. Cebu Salvage Corporation vs Philippine Home Assurance
Corporation
4. Three-fold Character: Bill of Lading as Receipt
4.1 Containerization system
4.2 “Said to Contain” (United States Lines vs Commissioner of
Customs)
4.3 “Receipt Only for the Number of Package Shown Above (Reyma
Brokerage, Inc. vs Philippine Home Assurance Corporation)
4.4 “Shipper’s Weight, Load & Count” (Asian Terminals vs Simon
Enterprise)
4.5 “Apparent Good Order and Condition; RLTLA Clause
4.6. Claused B/L
5. Three-Fold Character: Bill of Lading as Document of Title
5.1. Negotiability; Civil Code Provisions
5.1.1. Effect of Marking B/L as “Non-negotiable”
5.2. How Negotiated
5.2.1. Bearer B/L
5.2.2. Order B/L
5.3. Effect of Negotiation
6. Transportation and Delivery of Cargo Subject of Bill of Lading
6.1. International Commerical Terms
6.1.1. FAS
6.1.2. FOB
6.1.3. CFR
6.1.4. CIR
6.2. Period of Delivery
6.3. Delivery Without Surrender of Original B/L; Letter of Indemnity
6.4. Refusal of Consignee to Accept Delivery
6.4.1. Keng Hua Paper Products Co. Inc vs Court of Appeals
7. Notice of Claim and Prescriptive Period
7.1. Overland Transportation of Goods and Coastwise Shipping
7.1.1. When to File a Claim with Carrier
7.1.2. Extinctive Prescriptive Period
7.1.2.1. Roldan vs Lim Ponzo & Co
7.1.2.2. Phil American General Insurance vs Sweet Lines
7.1.2.3. Aboitiz Shipping Corporation vs Insurance Company of North
America
7.1.2.4. UCPB General Co vs Aboitiz Shipping Corporation
7.2. International Carriage of Goods by Sea
7.2.3 DOLE Philippiens vs Maritime Co
7.2.2. Maritime Agencies & Services, Inc vs CA
7.3. Compare with Air Transportation (Air Waybill)
7.3.1. Domestic Carriage
7.3.2. International Carriage per Warsaw Convention
C. CARRIAGE OF GOODS BY SEA ACT (COGSA)
1. History
It was originally passed by the Congress of the United States on April
19,1936 as Public Act No. 521. The United States Congress gave the
Philippine Commonwealth the option to decide whether or not to adopt
the Act. The said law was later adopted on October 1936 through
Commonwealth Act No. 65. It was explained in said Commonwealth
Act that COGSA “contains advanced legislation, which is in
consonance with modern maritime rules and practices of great
shipping countries of the world.”
2. Governing Law (Commonwealth Act No. 65)
2.1. Extent of Applicability
Applicable to International Shipping to the Philippines. When the New
Civil Code took effect on August 30, 1950, the said Code become the
primary law on carriage of goods by sea. Among its provision on
common carriers is Article 1753 which provides that “the law of the
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
country to which the goods are to be transported shall govern the Respondentia – loan secured by the owner of the cargo payable upon
liability of the common carrier for their loss, destruction or deterioration” safe arrival of cargo at destination. The shipowner, ship agent or
captian cannot secure this loan
Thus, the New Civil Code is the primary law on goods that are being
transported from a foreign port to the Philippines. Nevertheless, the 1.2. Distinguished from Simple Loan
COGSA remains to be suppletory law for such type of transportation – ORDINARY LOAN LOAN ON BOTTOMRY AND
international shipping. RESPONDENTIA
Usury law if applicable Usury law is inapplicable
The term “goods” includes goods, wares, merchandise, and articles of Right to recover from debtor is Right to recover is extinguished if
every kind whatsoever. “Goods” does not include live animals and not extinguished if thing put up as the thing put up as security is lost
cargo which by the contract of carriage is stated as being carried on security is lost or destroyed or destroyed
deck and is so carried.
1.3. Parties
2.2.COGSA Carrier (Blue Water vs Brown Water)
1.4. Form; Bottomry Bond
2.3. Tackle to Tackle Rule 1. Public Instrument
For such ocean shipment COGSA applies “tackle-to-tackle”, meaning 2. Policy signed by the contracting parties and the broker taking part
that it only applies from the time the goods are loaded on board the therein
vessel until the time they are discharged, although the parties to the 3. Private Instrument (Art 720, CC)
contract of carriage are free to extend COGSA shoreward by contract
1.5. Consequences of Loss
2.4. Ang vs American Steamship If the effects of the loans be lost due to an accident of the sea during
2.5. American Insurance Company vs Compania Maritima the time, and on the occasion of the voyage which has been
designated in the contract and it is proven that the cargo was on board,
3. Notice of Claim and Prescriptive Period to File Actions per then the lender loses the right to institute the action which would
COGSA pertained to him as such.
3.1. Distinguished from Overland Transport and Coastwise
Shipping The lender, however, retains such right of action if the loss was caused
International carriage from foreign port to the Philippines (COGSA) by the inherent defect of the thing, or through the fault or malice of the
a) when to file claim with carrier – not a condition precedent borrower, or through barratry on the part of the captain, or if it was
1. upon discharge of goods, if the damage is apparent, claim should be caused by damages suffered by the vessel as a consequence of being
filed immediately engaged in a contraband, or if it arose from having loaded the goods
2. if damage is not apparent, claim should be filed within 3 days from on a vessel different from that designated in the contract, unless in this
delivery latter instance, the change was made due to force majeure.
b) when to file court case – prescriptive period:
1. within a period of 1 years form discharge CHAPTER VII – OTHER MARITIME CONTRACTS
1. Definition of Maritime Contract
Coastwise or within the Philippines – 1.1. Distinguished from Non-maritime Contract
a) when to file a claim with carrier – condition precedent 1.1.1. Importance of Distinction
Under Art 366 of the Code of Commerce, if goods arrived in damaged 1.1.1.1. Jurisdiction; Exception – Executory Contracts
condition claim must be filed by the shipper within the following period 1.1.1.2. Maritime Lien; Exception – Ship Mortgage
otherwise recovery is barred: 1.1.2. Examples of Non-Maritime Contracts
1. Immediately if damage is apparent or 1.1.2.1. Shipbuilding Contract (People’s Ferry Co vs Beers)
2. Within 24 hours from delivery if damage is not apparent 1.1.2.2. Ship Mortgage
b) when to file a case in court – prescriptive period 1.1.2.3 Sale of Vessel (Vessel Purchase and Sale Agreement)
1. within 6 years, if no bill of lading has been issued; 1.1.2.4. Ship Agency
2. within 10 years, if a bill of lading has been issued 1.1.2.5. Ship Management Agreement
3.2. Insurance Company of North America vs Asian Terminals 1.1.2.6. Executory or Preliminary Contracts
3.3. Asian Termianls Inc vs Philam Insurance Co., Inc., 1.2. Mixed Contracts; How Treated
1.2.1. Norfolk Southern Railway Co. vs James N. Kirby Pty Ltd
4. Limitation of Liability; package Limitation Rule
4.1 Meaning of Package 2. Marine Insurance (Sec 101-168, Insurance Code)
4.2. Package vs Container 2.1. Types
4.3. Philippine Charter Insurance Corporation vs Neptune Orient 2.1.1. Hull and Machinery
Lines/Overseas Agency Services, Inc 4.4. Fair Opportunity 2.1.2. Protection & Indemnity
Doctrine 2.1.3. Cargo

5. COGSA Immunities and Defenses 3. Repair Contract (BIMCO REPAIRCON)

3.1. Charterer’s Liability for Repairs
6. Common Commercial Clauses in Bills of Lading 3.2. Exception to Limited Liability Rule
6.1. Benefits of Insurance Clause 3.3. Ship Repairer’s Right to Sub-contract Repair Works
6.2. Liberty and Deviation Clause 3.4. Repairs as Extraodinary Expense Giving Rise to General
6.3. Clause Paramount Average Claim Owner’s Access to Workshop
6.4. Himalaya Clause 3.5. Ship Repairer’s Lien
6.5. RETLA Clause 3.6. Insurance
3.7. Ownership of Scrap Materials Removed from Vessel
CHAPTER VI – MARITIME CONTRACTS: LOAN ON BOTTOMRY
AND RESPONDENTIA (Arts 719 – 736) 4. Bunker Supply (BIMCO Standard Bunker Contract)
1. Definitions and Concepts 4.1. Buyer’s Responsibility to Nominate Specific Fuel Grade “Fit
1.1. Bottomry vs Respondentia for Use by the Vessel
Bottomry – loan secured by the shipowner or ship agent guaranteed by
the vessel itself and payable only upon arrival of vessel at destination.
This can also be secured by the captain outside the residence of the
shipowner or ship agent.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Chapter VIII - MARITIME RISKS: AVERAGES (Arts. 806 - 818, Code of Commerce)

1. Average in General

Article 806 of the Code of Commerce provides that the following shall be considered averages:
All extraordinary or accidental expenses which may be incurred during the voyage in order to preserve the vessel, the cargo,or both.
Any damages or deteriorations which the vessel my suffer from the time it puts to sea from port of departure until it casts anchor in the port of
destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of
their consignment
There are TWO (2) types of averages: (1) general or gross average and (2) simple or particular average

2. Simple Average

Simple or particular average

2.1. Definition

All expenses and damages caused to the vessel or to her cargo which have not inured to the common benefit and profit all the persons interested in the
vessel and her cargo. If the damage caused is not considered as general average, the same can be considered particular average.

2.2. By Whom Borne

Since simple average do not inure to the common benefit, the owner of the goods that suffered the damage bears the loss. Article 810 provides that “the
owner of the goods which gave rise to the expense or suffered the damage shall bear the simple average.” Simple average is consistent with the legal
maxim RES PERIT DOMINO. However, under Article 732, if the vessel or goods are hypothecated by a loan on bottomry or respondentia, the lender
shall also bear the loss in proportion to his interest.

2.3. Examples of Simple Average

Article 809 lists down examples of simple or particular average.

Article 809. As a general rule, simple or particular averages shall include all the expenses and damages caused to the vessel or to her cargo which have
not inured to the common benefit and profit of all the persons interested in the vessel and her cargo, and especially the following:
The losses suffered by the cargo from, the time of its embarkation until it is unloaded, either on account of inherent defect of the goods or by
reason of an accident of the sea or force majeure, and the expenses incurred to avoid and repair the same.
The losses and expenses suffered by the vessel in its hull, rigging, arms, and equipment,for the same causes and reasons, from the time it
puts to sea from the port of departure until it anchors and lands in the port of destination.
The losses suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine ordinance allow it.
The wages and victuals of the crew when the vessel is detained or embargoed by legitimate order or force majeure, if the charter has been
contracted for a fixed sum for the voyage.
The necessary expenses on arrival at a port, in order to make repairs or secure provisions.
The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to
meet any other need of the vessel, against which the proper amount shall be charged.
The victuals and wages of the crew while the vessel is in quarantine.
The loss inflicted upon the vessel or cargo by reason of an impact or collision with another, if it is accidental and unavoidable.

If the accident should occur through the fault or negligence of the captain, the latter shall be liable
for all the losses caused.

Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or of the crew, without prejudice to the right of the owner
to recover the corresponding indemnity from the captain, the vessel, and the freightage.

3. General Average

General or gross average

3.1 Definition and Requisites

All the damages and expenses which are deliberately caused in order to save the vessel, its cargo or both at the same time, from real and unknown
risks.

Requisites:
There must be a common danger
That for the common safety part of the vessel or of the cargo or both is sacrificed deliberately
That from the expenses or damages caused follows the successful saving of the vessel and cargo
That the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority

3.2. Examples of General Average

Casualty Type of sacrifice or expenditure

Stranding Damage to vessel and machinery through efforts to refloat
Loss of or damage to cargo through jettison or forced discharge
Cost of discharging, storing and reloading any cargo so discharge
Port of refuge expenses
Fire Damage to ship or cargo due to efforts to extinguish the fire
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Port of refuge expenses
Shifting of cargo in heavy weather Jettison of cargo
Port of refuge expenses
Heavy weather, collision, machinery, breakdown, or other accident involving damage Port of refuge expenses
to ship and resort to or detention at a port

3.2.1. Jettison

The act of throwing overboard from a vessel part of the cargo, in case of extreme danger, to lighten the ship. The same name is also given to the thing
or things so cast out. A carrier by water may, when in case of extreme peril it is necessary for the safety of the ship or cargo, throw overboard, or
otherwise sacrifice, any or all of the cargo or appurtenances of the ship. Throwing property overboard for such purpose is called "jettison," and the loss
incurred thereby is called a “general average loss”.

3.2.2. Voluntary Standing

Rule V - Voluntary Stranding (York-Antwerp Rules 1994)

When a ship is intentionally run on shore for the common safety, whether or not she might have been driven on shore, the
consequent loss or damage to the property involved in the common maritime adventure shall be allowed in general average.

3.2.3. Scuttling

The deliberate sinking of a ship in order to collect the insurance money.

3.3. By Whom Borne

Gross or general average shall be borne by those who benefited from the sacrifice. These include the shipowner and the owners of the cargoes that
were saved. Contribution may also be imposed on the insurers of the vessel or cargoes that were saved as well as lenders on bottomry or respondentia.
(Article 812)

3.3.1. Shippers, Cosignee and Owner of Goods

(source: http://www.fta.co.uk/policy_and_compliance/sea/long_guide/general_average.html)

In the event of accident, danger, damage or disaster before or after commencement of the voyage, resulting from any cause whatsoever, whether due to
negligence or not, for which or for the consequences of which, the carrier is not responsible , by statute, contract or otherwise,
the goods, shippers, consignees or owners of the goods shall contribute with the carrier in general average to the payment of any sacrifices,
losses or expenses of a general average nature that may be made or incurred, and shall pay salvage and special charges incurred in respect
of the goods.
If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if such salving ship or ships belonged to strangers.
Such deposit as the carrier or his agent may deem sufficient to cover the estimated contribution of the goods, and any salvage and special
charges thereon shall, if required be made by the goods, shippers, consignees or owners of the goods to the carrier before delivery

3.3.2. Insurers

Article 859 of the Code of Commerce provides that the insurers of the vessel of the freightage and of the cargo shall be obliged to pay for the
indemnification of the gross average, insofar as is required of each one of the objects respectively.
Sections 164 and 165 of the Insurance Code of the Philippines provides that the insurer is liable for any general average in proportion to the contribution
attaching to his policy value where the said value is less than the contributing value of the thing insured.

3.3.3. Lenders on Bottomry and Respondentia

Article 732 of the Code of Commerce provides that lenders on bottomry or respondentia shall suffer, in proportion to their respective interest, the general
average which may take place in the goods on which the loan is made.

3.4. Who is Entitled to Indemnity

The owner of the goods which were sacrificed is entitled to receive the general average contribution. However, the following goods even if sacrificed are
not covered:
goods carried on deck unless the rule, special law or customs of the place allow the same
goods that are not recorded in the books or records of the vessel
fuel for the vessel if there is more than sufficient fuel for the voyage

3.4.1. Magsaysay Inc. vs Agan (GR No. L-6393)

Facts: The S S “San Antonio” vessel (plaintiff) with general cargo for different ship owners left Manila and was bound for Basco, Batanes, vis Aparri,
Cagayan. It reached Aparri, had a stopover, and as it would proceed to Basco but still in port, it accidentally ran aground at the mouth of the Cagayan
River. Plaintiff have it refloated by the Luzon Stevedoring Co.. The vessel returned to Manila to refuel and then proceeded to Basco, where the cargoes
were delivered to their respective owners or consignees, who, with the exception of defendant, made a deposit or signed a bond to answer for their
contribution to the average. Thus, the plaintiff brought an action to make defendant pay his contribution. Defendant denies liability. The lower court
decided against the defendant, thus the appeal.
Issue: WoN the expenses incurred in floating a vessel so stranded should be considered general average and shared by the cargo owners.
Held: NO. The expenses should not be considered as general average.
The said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article does mention “expenses
caused in order to float a vessel,” but it specifically refers to “a vessel intentionally stranded for the purpose of saving it.” In the present case, the
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
stranding was not intentional.
The expenses also lack the requisites of general average. First, the expenses sought to be recovered from defendant were not incurred to save vessel
and cargo from a common danger. The vessel ran aground in fine weather inside the port at the mouth of a river, a place described as “very shallow”.
There was no imminent danger. It is, of course, conceivable that, if left indefinitely at the mercy of the elements, they would run the risk of being
destroyed. But as stated at the above quotation, “this last requirement excludes measures undertaken against a distant peril.” What does appear from
the testimony of plaintiff’s manager is that the vessel had to be salvaged in order to enable it “to proceed to its port of destination.” But as was said in the
case just cited it is the safety of the property, and not of the voyage, which constitutes the true foundation of the general average. Second, the cargo
could, without need of expensive salvage operation, have been unloaded by the owners if they had been required to do so. Third, the sacrifice was for
the benefit of the vessel and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expenses. And fourth,
the procedure was not followed.

3.4.2. Where Carrier at Fault or Negligent

Common carriers cannot limit their liability for injury or loss of goods when such injury or loss was caused by its own negligence. The law on average
under the Code of Commerce cannot be applied in determining liability where there is negligence. Hence, the issue of negligence must first be
addressed before the proper provision of the Code of Commerce on the extent of liability may apply.

3.4.2.1. National Development Company vs Court of Appeals (GR No L-49407)

FACTS: In accordance with a memorandum agreement entered into between defendants NDC and MCP, NDC appointed MCP as its agent to manage
and operate Dona Nati vessel for and in its behalf and account. E. Philipp Corporation loaded on board the vessel 1200 bales of American raw cotton
consigned to the order of Manila Banking Corporation, Manila and the People’s Bank and Trust Company acting for and in behalf of the Pan Asiatic
Commercial Company, Inc., whorepresents Riverside Mills Corporatio; also loaded on the same vessel were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil. En route to
Manila the vessel figured in a collision with a Japanese vessel as a result of which 550 bales of aforesaid cargo of American raw cotton as well as the
cargo of Kyokuto Boekui, Kaisa, Ltd were lost and/or destroyed. Development Insurance & Surety Corp. paid the insurance and filed an action for
recovery of money against NDC and MCP

ISSUES:
1. Which laws govern loss or destruction of goods due to collision of vessels outside Philippine waters;
2. What is the extent of liability as well as the rules of prescription provided thereunder

HELD:
1. “[T]he 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” (Art. 1753).Since the goods in question are transported from San Francisco, California and Tokyo, Japanto the Philippines and that they
were lost or due to a collision which was found to have been caused by the negligence or fault of both captains of the colliding vessels the laws of the
Philippines will apply.
Art 1735: in all other than those mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the extraordinary diligence required by law
collision – not one of those enumerated under Art. 1734; hence, carrier is presumed to beat fault or to have acted negligently
2. Art. 826 of the Code of Commerce: 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
Art. 827, ditto: 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
Art 826 to 839, ditto: the shipowner or carrier is not exempt from liability for damages arising from collision due to the fault or negligence of the captain;
primary liability is imposed
on
the shipowner or carrier in because of the accepted doctrine that the shipmaster or captain is merely the representative of the owner who
has the actual or constructive control over the conduct of the voyage
both the owner (NDC) and agent (MPC) of the offending vessel are liable for the damage done where both are impleaded; that in case of collision, both
the owner and the agent are civilly—jointly and severally— responsible for the acts of the captain since the obligation which is the subject of the action
had its origin in a tortious act and did not arise from contract

3.4.2.2. (New) Jason Clause

In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether
due to negligence or not, for which, or for the consequence of which, the Carrier is not responsible, by statute, contract or otherwise, the goods,
Shippers, Consignees or owners of the goods shall contribute with the Carrier in general average to the payment of any sacrifices, losses or expenses of
a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the goods.

If a salving ship is owned or operated by the Carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers. Such
deposit as the Carrier or his agents may deem sufficient to cover the estimated contribution of the goods and any salvage and special charges thereon
shall, if required, be made by the goods, Shippers, Consignees or owners of the goods to the Carrier before delivery.

3.5. Proof and Liquidation of Average

There shall be no general average contribution if the procedure prescribed under the Code of Commerce is not complied with.Articles 846 to 869 of the
Code of Commerce provides the rules with respect to proof and liquidation.

Article 846. Those interested in the proof and liquidation of averages may mutually agree and bind themselves at any time with regard to the liability,
liquidation, and payment thereof.
In the absence of agreements, the following rules shall be observed:
The proof of the average shall take place in the port where the repairs are made, should any be necessary, or in the port of unloading.
The liquidation shall be made in the port of unloading, it if is a Philippine port.
If the average occurred outside of the jurisdictional waters of the Philippines, or the cargo has been sold in a foreign port by reason of an
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
arrival under stress, the liquidation shall be made in the port of arrival.
If the average has occurred near the port of destination, so that said port can be made, the proceedings mentioned in Rules 1 and 2 shall be
held there.

Article 847
Article 849
Article 850
Article 851
Article 852
Article 853
Article 854
Article 855
Article 856
Article 857
Article 858
Article 859
Article 860
Article 861
Article 862
Article 863
Article 864
Article 865
Article 866
Article 867
Article 868
Article 869

3.5.1. Standard Oil vs Castelo (GR L-13695)

STANDARD OIL COMPANY OF NEW YORK vs. MANUEL LOPEZ CASTELO

FACTS:
By contract of charter, Manuel Lopez Castelo, as owner, let the small interisland steamer Batangueño for the term of one year to Jose Lim Chumbuque
for use in the conveying of cargo between certain ports of the Philippine Islands. In this contract it was stipulated that the officers and crew of the
Batangueño should be supplied by the owner, and that the charterer should have no other control over the captain, pilot, and engineers than to specify
the voyages that they should make and to require the owner to discipline or relieve them as soon as possible in case they should fail to perform the
duties respectively assigned to them.
While the boat was being thus used by the charterer in the interisland trade, the standard Oil Company delivered to the agent of the boat in Manila a
quantity of petroleum to be conveyed to the port of Casiguran, in the Province of Sorsogon. For this consignment a bill of lading of the usual form was
delivered, with the stipulation that freight should be paid at the destination. Said bill of lading contained no provision with respect to the storage of the
petroleum, but it was in fact placed upon the deck of the ship and not in the hold.
While the boat was on her way to the port mentioned, and off the western coast of Sorsogon, a violent typhoon passed over that region, and while the
storm was at its height the captain was compelled for the safety of all to jettison the entire consignment of petroleum consisting of two hundred cases.
When the storm abated the ship made port, and thirteen cases of the petroleum were recovered, but the remainder was wholly lost.
To recover the value of the petroleum thus jettisoned but not recovered, the present action was instituted by the Standard Oil Company against the
owner of the ship in the Court of First Instance of Manila, where judgment was rendered in favor of the plaintiff. From this judgment the defendant
appealed.
From what has been said it is evident that the loss of this petroleum is a general and not a special average, with the result that the plaintiff is entitled to
recover in some way and from somebody an amount bearing such proportion to its total loss as the value of both the ship and the saved cargo bears to
the value of the ship and entire cargo before the jettison was effected.
ISSUE:
Who is the person, or persons, who are liable to make good this loss, and what are the conditions under which the action can be maintained?

HELD:
That the owner of the ship is a person to whom the plaintiff in this case may immediately look for reimbursement to the extent above stated is deducible
not only from the general doctrines of admiralty jurisprudence but from the provisions of the Code of Commerce applicable to the case. It is universally
recognized that the captain is primarily the representative of the owner; and article 586 of the Code of Commerce expressly declares that both the owner
of the vessel and the naviero, or charterer, shall be civil liable for the acts of the master.
In this connection, it may be noted that there is a discrepancy between the meaning of naviero, in articles 586 of the Code of Commerce, where the word
is used in contradistinction to the term "owner of the vessel" (propietario), and in article 587 where it is used alone, and apparently in a sense broad
enough to include the owner.
Fundamentally the word "naviero" must be understood to refer to the person undertaking the voyage, who in one case may be the owner and in another
the charterer. But this is not vital to the present discussion. The real point to which we direct attention is that, by the express provision of the Code, the
owner of the vessel is civilly liable for the acts of the captain; and he can only escape from this civil liability by abandoning his property in the ship and
any freight that he may have earned on the voyage (arts. 587, 588, Code of Comm.).
In considering the question now before us it is important to remember that the owner of the ship ordinarily has vastly more capital embarked upon a
voyage than has any individual shipper of cargo. Moreover, the owner of the ship, in the person of the captain, has complete and exclusive control of the
crew and of the navigation of the ship, as well as of the disposition of the cargo at the end of the voyage. It is therefore proper that any person whose
property may have been cast overboard by order of the captain should have a right of action directly against the ship's owner for the breach of any duty
which the law may have imposed on the captain with respect to such cargo. To adopt the interpretation of the law for which the appellant contends would
place the shipowner in a position to escape all responsibility for a general average of this character by means of the delinquency of his own captain. This
cannot be permitted. The evident intention of the Code, taken in all of its provisions, is to place the primary liability upon the person who has actual
control over the conduct of the voyage and who has most capital embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse,
as it is very easy to do, from other individuals who have been drawn into the venture as shippers.
Accordingly, modifying the judgment appealed from to this extent, we affirm the same, with costs. So ordered.
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3.6. Enforcement of Contribution

The claim for contribution will not prosper if the formalities prescribed under Articles 813 and 814 are not complied with. The formalities are:
There must be resolution of the captain, adopted after a deliberation with the other officers of the vessel and after hearing all persons
interested in the cargoes. if the latter disagree, the decision of the captain should prevail but they shall register their objections.
The resolution must be entered in the logbook, stating the reasons and motives for the dissent, and the irresistible and urgent causes if he
acted in his own accord. It must be signed, in the first case, by all persons present in the hearing. In the second case, by the captain and all
the officers of the vessel. The minutes must also contain a detail of all the goods jettisoned and those injuries caused to those on board.

3.6.1. Carrier’s Lien

If the consignor or consignee failed to pay the consideration for the transportation of the goods, the carrier may exercise his lien in accordance with
Article 375 of the Code of Commerce.

Article 375. The goods transported shall be especially bound to answer for the cost of transportation and for the expenses and fees incurred for
them during their conveyance and until the moment of their delivery.
This special right shall prescribe eight days after the delivery has been made, and once prescribed, the carrier shall have no other action than that
corresponding to him as an ordinary creditor.

4. 2004 York-Antwerp Rules on Average (Basic)

In the adjustment of general average the following Rules shall apply to the exclusion of any Law and Practice inconsistent therewith. Except as provided
by the Rule Paramount and the numbered Rules, general average shall be adjusted according to the lettered Rules.

Rule A
There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the
common safety for the purpose of preserving from peril the property involved in a common maritime adventure. General average sacrifices and
expenditures shall be borne by the different contributing interests on the basis hereinafter provided.

Rule B
There is a common maritime adventure when one or more vessels are towing or pushing another vessel or vessels, provided that they are all involved in
commercial activities and not in a salvage operation. When measures are taken to preserve the vessels and their cargoes, if any, from a common peril,
these Rules shall apply. A vessel is not in common peril with another vessel or vessels if by simply disconnecting from the other vessel or vessels she is
in safety; but if the disconnection is itself a general average act the common maritime adventure continues.

Rule C
Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average. In no case
shall there be any allowance in general average for losses, damages or expenses incurred in respect of damage to the environment or in consequence
of the escape or release of pollutant substances from the property involved in the common maritime adventure. Demurrage, loss of market, and any loss
or damage sustained or expense incurred by reason of delay, whether on the voyage or subsequently, and any indirect loss whatsoever, shall not be
allowed as general average.

Rule D
Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to
the fault of one of the parties to the adventure, but this shall not prejudice any remedies or defences which may be open against or to that party in
respect of such fault.

Rule E
The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average. All
parties claiming in general average shall give notice in writing to the average adjuster of the loss or expense in respect of which they claim contribution
within 12 months of the date of the termination of the common maritime adventure.

Failing such notification, or if within 12 months of a request for the same any of the parties shall fail to supply evidence in support of a
notified claim, or particulars of value in respect of a contributory interest, the average adjuster shall be at liberty to estimate the extent of the allowance
or the contributory value on the basis of the information available to him, which estimate may be challenged only on the ground that it is manifestly
incorrect.

Rule F
Any additional expense incurred in place of another expense, which would have been allowable as general average shall be deemed to be general
average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.

Rule G
General average shall be adjusted as regards both loss and contribution upon the basis of values at the time and place when and where the adventure
ends. This rule shall not affect the determination of the place at which the average statement is to be made up. When a ship is at any port or place in
circumstances which would give rise to an allowance in general average under the provisions of Rules X and XI, and the cargo or part thereof is
forwarded to destination by other means, rights and liabilities in general average shall, subject to cargo interests being notified if practicable, rema in as
nearly as possible the same as they would have been in the absence of such forwarding, as if the adventure had continued in the original ship for so
long as justifiable under the contract of affreightment and the applicable law. The proportion attaching to cargo of the allowances made in general
average by reason of applying the third paragraph of this Rule shall not exceed the cost which would have been borne by the owners of cargo if the
cargo had been forwarded at their expense.

4.1. Rule Paramount

In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Comment: The burden of proof therefore lies on the party claiming in general average to prove that both the general average act and the amount of any
allowance are reasonable. It is suggested that in applying this rule there can be no absolute standard of "reasonableness" and that a situation must be
judged on the particular facts prevailing at the time and place of the incident.

4.2. Jettison of Cargo

RULE I

No jettison of cargo shall be allowed as general average, unless such cargo is carried in accordance with the recognised custom of the trade.

4.3. Extinguishing Fire on Shipboard

RULE III

Damage done to a ship and cargo, or either of them, by water or otherwise, including damage by beaching or scuttling a burning ship, in extinguishing a
fire on board the ship, shall be allowed as general average; except that no allowance shall be made for damage by smoke however caused or by heat of
the fire.

4.4. Cutting Away Wreck

RULE IV

Loss or damage sustained by cutting away wreck or parts of the ship which have been previously carried away or are effectively lost by accident shall
not be allowed as general average.

4.5. Damage to Machinery

RULE VII

Damage caused to any machinery and boilers of a ship which is ashore and in a position of peril,
in endeavouring to refloat, shall be allowed in general average when shown to have arisen from an actual intention to float the ship for the common
safety at the risk of such damage; but where a ship is afloat no loss or damage caused by working the propelling machinery and boilers shall in any
circumstances be allowed as general average.

4.6. Lightening Expenses

RULE VIII

When a ship is ashore and cargo and ship's fuel and stores or any of them are discharged as a general average act, the extra cost of lightening, lighter
hire and reshipping (if incurred), and any loss or damage to the property involved in the common maritime adventure in consequence thereof, shall be
allowed as general average.

4.7. Loss of Freight

RULE XV

Loss of freight arising from damage to or loss of cargo shall be allowed as general average, either when caused by a general average act, or when the
damage to or loss of cargo is so allowed. Deduction shall be made from the amount of gross freight lost, of the charges which the owner thereof would
have incurred to earn such freight, but has, in consequence of the sacrifice, not incurred.

4.8. Port of Refuge Expenses

RULE X

(a) (i) When a ship shall have entered a port or place of refuge or shall have returned to her port or place of loading in consequence of accident, sacrifice
or other extraordinary circumstances which render that necessary for the common safety, the expenses of entering such port or place shall be allowed
as general average; and when she shall have sailed thence with her original cargo, or a part of it, the corresponding expenses of leaving such port or
place consequent upon such entry or return shall likewise be allowed as general average.
(ii) When a ship is at any port or place of refuge and is necessarily removed to another port or place of refuge because repairs cannot be carried out in
the first port or place, the provisions of this Rule shall be applied to the second port or place of refuge as if it were a port or place of refuge and the cost
of such removal including temporary repairs and towage shall be allowed as general average. The provisions of Rule XI shall be applied to the
prolongation of the voyage occasioned by such removal.
(b) (i) The cost of handling on board or discharging cargo, fuel or stores whether at a port or place of loading, call or refuge, shall be allowed as general
average, when the handling or discharge was necessary for the common safety or to enable damage to the ship caused by sacrifice or accident to be
repaired, if the repairs were necessary for the safe prosecution of the voyage, except in cases where the damage to the ship is discovered at a port or
place of loading or call without any accident or other extraordinary circumstances connected with such damage having taken place during the voyage.
(ii) The cost of handling on board or discharging cargo, fuel or stores shall not be allowable as general average when incurred solely for the purpose of
restowage due to shifting during the voyage, unless such restowage is necessary for the common safety.
(c) Whenever the cost of handling or discharging cargo, fuel or stores is allowable as general average, the costs of storage, including insurance if
reasonably incurred, reloading and stowing of such cargo, fuel or stores shall likewise be allowed as general average. The provisions of Rule XI shall be
applied to the extra period of detention occasioned by such reloading or restowing. But when the ship is condemned or does not proceed on her original
voyage, storage expenses shall be allowed as general average only up to the date of the ship's condemnation or of the abandonment of the voyage or
up to the date of completion of discharge of cargo if the condemnation or abandonment takes place before that date

4.9. Cargo, Ship’s Materials and Stores Used for Fuel

 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
RULE IX

Cargo, ship's materials and stores, or any of them, necessarily used for fuel for the common safety at a time of peril shall be allowed as general average,
but when such an allowance is made for the cost of ship's materials and stores the general average shall be credited with the estimated cost of the fuel
which would otherwise have been consumed in prosecuting the intended voyage.

4.10. Time Bar for GA Contribution

RULE XXIII

(a) Subject always to any mandatory rule on time limitation contained in any applicable law:
(i) Any rights to general average contribution, including any rights to claim under general average bonds and guarantees, shall be extinguished unless
an action is brought by the party claiming such contribution within a period of one year after the date upon which the general average adjustment was
issued. However, in no case shall such an action be brought after six years from the date of the termination of the common maritime adventure.
(ii) These periods may be extended if the parties so agree after the termination of the common maritime adventure.
(b) This Rule shall not apply as between the parties to the general average and their respective insurers.

Chapter IX

TYPES OF COLLISIONS
a. Fortuitous Collisions

ARTICLE 830. If a vessel should collide with another by reason of an accident or through force majeure, each vessel and her cargo shall be liable for
their own damage.

ARTICLE 832. If, by reason of a storm or other cause of force majeure, a vessel which is properly anchored and moored should collide with those in her
immediate vicinity, causing them damage, the injury occasioned shall be looked upon as particular average to the vessel run into.

*Allusion is the violent striking of a with something that is stationary. Hence what is referred to in Article 832 is an allusion. However the Code of
Commerce does not make any distinction between allusion and collision.

b. Culpable Collisions
ARTICLE 826. If a vessel should collide with another through the fault, negligence, or lack of skill of the captain, sailing mate, or any other member of
the complement, the owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal

ARTICLE 827. If both vessels may be blamed for the collision, each one shall be liable for his own damages, and both shall be jointly responsible
for the losses and damages suffered by their cargoes.

RULES ON LIABILITY
a.If one vessel at fault – Art.826: the owner of the vessel at fault shall indemnify the other, after an EXPERT APPRAISAL

b.If Both Vessels at fault– Art 827: they shall bear their own loss. They shall be liable to third person jointly and separately.

c.If party at fault cannot be determined–same liability as if both vessels were at fault. (Art 828) This is also known as the Doctrine of Inscrutable fault.

d. Standby Rule- A master of a ship is required if he can do so without serious danger to himself, after a collision, to render assistance to the other ship,
its crew and its passengers and, where possible, to inform the other ship of the name of his own ship, its port of registry and the nearest port at which it
will call. (Art 98 Paragraph 1, Subpar. C, United Nations Convention on the Law of the Sea)

e.Doctrine Negligence per se- is the legal doctrine whereby an act is considered negligent because it violates a statute (or regulation).
the plaintiff usually must show that:
1. the defendant violated the statute,
[1]
2. the statute provides for a criminal penalty (i.e., fines or imprisonment) but not by civil penalties,
3. the act caused the kind of harm the statute was designed to prevent, and
4. the plaintiff was a member of the statute's protected class.

A Urrutia & Co vs Baco River Plantation Co.

ZONES IN COLLISION
In collisions between vessels there exist three divisions of time, or zones;

The first division covers all the time up to the moment when the risk of collision may be said to have begun. Within this zone no rule is applicable
because none is necessary. Each vessel is free to direct its course as it deems best without reference to the movements of the other vessel.
The second division covers the time between the moment when the risk of collision begins and the moment when it has become a practical certainty.

The third division covers the time between the moment when collision has become a practical certainty and the moment of actual contact.(A Urrutia)

ERROR IN EXTREMIS
This rule that vessels may each assume that the other will obey the law is one of the most important in the law of collision. Were it otherwise and were
vessels required to take all sorts of measures to keep out the way, when they are not in each other's way, navigation would be impossible. . . . There is,
however, one important qualification which must be borne in mind. It is that a steamer must not approach so near a sailing vessel, and on such a course
as to alarm a man of ordinary skill and prudence. If the man on the sailing vessel makes an improper manuever, he is not responsible. It is what is called
an "error in extremis."

1972 International Regulations for Preventing Collisions at Sea

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1.The 1972 Convention was designed to update and replace the Collision Regulations of 1960 which were adopted at the same time as the 1960
SOLAS Convention.

2. One of the most important innovations in the 1972 COLREGs was the recognition given to traffic separation schemes - Rule 10 gives guidance in
determining safe speed, the risk of collision and the conduct of vessels operating in or near traffic separation schemes.

3. The first such traffic separation scheme was established in the Dover Strait in 1967. It was operated on a voluntary basis at first but in 1971 the IMO
Assembly adopted a resolution stating that that observance of all traffic separation schemes be made mandatory - and the COLREGs make this
obligation clear.

RULE 1 Application

(a) These Rules shall apply to all vessels upon the high seas and in all waters connected therewith navigable by seagoing vessels.

(b) Nothing in these Rules shall interfere with the operation of special rules made by an appropriate authority for roadsteads, harbors, rivers, lakes or
inland waterways connected with the high seas and navigable by seagoing vessels. Such special rules shall conform as closely as possible to these
Rules.

RULE 2 Responsibility

*General Precautionary Rule

(a) Nothing in these Rules shall exonerate any vessel, or the owner, master or crew thereof, from the consequences of any neglect to comply with these
Rules or of the neglect of any precaution which may be required by the ordinary practice of seamen, or by the special circumstances of the case.

*Special Circumstance Rule/ Rule of Savui Quei Peut

(b) In construing and complying with these Rules due regard shall be had to all dangers of navigation and collision and to any special circumstances,
including the limitations of the vessels involved, which may make a departure from these Rules necessary to avoid immediate danger.

RULE 3 General Definitions

For the purpose of these Rules, except where the context otherwise requires:

(a) The word “vessel” includes every description of water craft, including nondisplacement craft, WIG craft and seaplanes, used or capable of being used
as a means of transportation on water.

(b) The term “power-driven vessel” means any vessel propelled by machinery.

(c) The term “sailing vessel” means any vessel under sail provided that propelling machinery, if fitted, is not being used.

(d) The term “vessel engaged in fishing” means any vessel fishing with nets, lines, trawls or other fishing apparatus which restrict maneuverability, but
does not include a vessel fishing with trolling lines or other fishing apparatus which do not restrict maneuverability.

(e) The word “seaplane” includes any aircraft designed to maneuver on the water.

(f) The term “vessel not under command” means a vessel which through some exceptional circumstance is unable to maneuver as required by these
Rules and is therefore unable to keep out of the way of another vessel.

(g) The term “vessel restricted in her ability to maneuver” means a vessel which from the nature of her work is restricted in her ability to maneuver as
required by these Rules and is therefore unable to keep out of the way of another vessel. The term “vessels restricted in their ability to maneuver” shall
include but not be limited to:
(i) a vessel engaged in laying, servicing or picking up a navigation mark, submarine cable or pipeline;
(ii) a vessel engaged in dredging, surveying or underwater operations;
(iii) a vessel engaged in replenishment or transferring persons, provisions or cargo while underway;
(iv) a vessel engaged in the launching or recovery of aircraft; (v) a vessel engaged in mineclearance operations;
(vi) a vessel engaged in a towing operation such as severely restricts the towing vessel and her tow in their ability to deviate from their course.

(h) The term “vessel constrained by her draft” means a power-driven vessel which, because of her draft in relation to the available depth and width of
navigable water is severely restricted in her ability to deviate from the course she is following.

6.5 Lookout (Rule 5) ; Safe Speed Rule (Rule 6)

Rule 5 - Lookout
Every vessel shall at all times maintain a proper look-out by sight and hearing as well as by all available means appropriate in the
prevailing circumstances and conditions so as to make a full appraisal of the situation and of the risk of collision.

Rule 6 - Safe Speed

Every vessel shall at all times proceed at a safe speed so that she can take proper and effective action to avoid collision and be
stopped within a distance appropriate to the prevailing circumstances and conditions. In determining a safe speed the following
factors shall be among those taken into account:
(a) By all vessels:
(i) The state of visibility;
(ii) The traffic density including concentrations of fishing vessels or any other vessels;
(iii) The manageability of the vessel with special reference to stopping distance and turning ability in the prevailing conditions;
(iv) At night, the presence of background light such as from shore lights or from back scatter from her own lights;
(v) The state of wind, sea and current, and the proximity of navigational hazards;
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
(vi) The draft in relation to the available depth of water.

(b) Additionally, by vessels with operational radar:

(i) The characteristics, efficiency and limitations of the radar equipment;
(ii) Any constraints imposed by the radar range scale in use;
(iii) The effect on radar detection of the sea state, weather and other sources of interference;
(iv) The possibility that small vessels, ice and other floating objects may not be detected by radar at an adequate range;
(v) The number, location and movement of vessels detected by radar;
(vi) The more exact assessment of the visibility that may be possible when radar is used to determine the range of vessels or other
objects in the vicinity.

6.5.1 SMITH BELL AND COMPANY VS. COURT OF APPEALS GR. NO. 56294, May 20, 1991

6.6 Risk of Collision (Rule 7) ; Close- Quarter Situation

Risk of Collision (Rule 7)

(a) Every vessel shall use all available means appropriate to the prevailing circumstances and conditions to determine if risk of collision exists.
If there is any doubt such risk shall be deemed to exist.

(b) Proper use shall be made of radar equipment if fitted and operational, including long-range scanning to obtain early warning of risk of
collision and radar plotting or equivalent systematic observation of detected objects.

(c) Assumptions shall not be made on the basis of scanty information, especially scanty radar information.

(d) In determining if risk of collision exists the following considerations shall be among those taken into account:
(i) Such risk shall be deemed to exist if the compass bearing of an approaching vessel does not appreciably change.
(ii) Such risk may sometimes exist even when an appreciable bearing change is evident, particularly when approaching a very large
vessel or a tow or when approaching a vessel at close range.

Close-Quarter Situation

The most important group of rules are the steering and sailing rules, which lay down the procedure to be followed when ships approach each
other and there is a danger of collision. These situations are called close-quarters situtaions. If, for example, two ships are approaching each
other head on, both must alter course to starboard (or to the right) so that they pass each other port side to port side. Where a vessel is on the
starboard hand of another, and steering a crossing course which may result in a collision, she has the right of way and should maintain her
course and speed, the other vessel giving way to her. Where a vessel is on the port hand (side) of another, and her course, if she maintains it,
may result in a collision, she is the giving way vessel and must alter course to avoid the other. But any ship overtaking another, i.e.,
approaching at any angle from two points (22.5°) abaft the beam on either side, must keep clear. When a vessel has the duty of giving way to
another under the rules, she normally does so by altering course to pass astern of the other, and should make a clear and significant alteration
of course in plenty of time to indicate to the other vessel that she is taking the appropriate action.

6.7 Action to Avoid Collision (Rule 8)

(a) Any action taken to avoid collision shall be taken in accordance with Rules 4-19 and shall if the circumstances of the case admit, be
positive, made in ample time and with due regard to the observance of good seamanship.

(b) Any alteration of course and/or speed to avoid collision shall, if the circumstances of the case admit, be large enough to be readily
apparent to another vessel observing visually or by radar; a succession of small alterations of course and/or speed should be avoided.

(c) If there is sufficient sea room, alteration of course alone may be the most effective action to avoid a close-quarters situation provided that it
is made in good time, is substantial and does not result in another close-quarters situation.

(d) Action taken to avoid collision with another vessel shall be such as to result in passing at a safe distance. The effectiveness of the action
shall be carefully checked until the other vessel is finally past and clear.

(e) If necessary to avoid collision or allow more time to assess the situation, a vessel may slacken her speed or take all way off by stopping or
reversing her means of propulsion.

(f) (i) A vessel which, by any of these Rules, is required not to impede the passage or safe passage of another vessel shall, when required by
the circumstances of the case, take early action to allow sufficient sea room for the safe passage of the other vessel.

(ii) A vessel required not to impede the passage or safe passage of another vessel is not relieved of this obligation if approaching the other
vessel so as to involve risk of collision and shall, when taking action, have full regard to the action which may be required by Rules 4-19.

(iii) A vessel, the passage of which is not to be impeded remains fully obliged to comply with Rules 4-19 when the two vessels are
approaching one another so as to involve risk of collision.

6.7.1 Stop and Back Rule (e)

(e) If necessary to avoid collision or allow more time to assess the situation, a vessel may slacken her speed or take all way off by stopping or
reversing her means of propulsion.

6.8 Narrow Channels (Rule 9)

(a) (i) A vessel proceeding along the course of a narrow channel or fairway shall keep as near to the outer limit of the channel
or fairway which lies on her starboard side as is safe and practicable.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)

International Inland
(ii) Notwithstanding Rule 9(a)(i) and Rule 14(a), a power-driven vessel operating in
narrow channel or fairway on the Great Lakes, Western Rivers, or waters specified
by the Secretary, and proceeding downbound with a following current shall have the
right-of-way over an upbound vessel, shall propose the manner and place of
passage, and shall initiate the maneuvering signals prescribed by Rule 34(a)(i), as
appropriate. The vessel proceeding upbound against the current shall hold as
necessary to permit safe passing.
(b) A vessel of less than 20 meters in length or a sailing vessel shall not impede the passage of a vessel [ which | that ] can
safely navigate only within a narrow channel or fairway.

(c) A vessel engaged in fishing shall not impede the passage of any other vessel navigating within a narrow channel or
fairway.

(d) A vessel shall not cross a narrow channel or fairway if such crossing impedes the passage of a vessel which can safely
navigate only within such channel or fairway. The latter vessel may use the [ sound | danger ] signal prescribed in Rule 34(d) if
in doubt as to the intention of the crossing vessel.
(e)
International Inland
(i) In a narrow channel or fairway when overtaking can
(i) In a narrow channel or fairway when overtaking, the power-
take place only if the vessel to be overtaken has to take
driven vessel intending to overtake another power-driven
action to permit safe passing, the vessel intending to
vessel shall indicate her intention by sounding the appropriate
overtake shall indicate her intention by sounding the
signal prescribed in Rule 34(c) and take steps to permit safe
appropriate signal prescribed in Rule 34(c)(i). The
passing. The power-driven vessel being overtaken, if in
vessel to be overtaken shall, if in agreement, sound the
agreement, shall sound the same signal and may, if specifically
appropriate signal prescribed in Rule 34(c)(ii) and take
agreed to, take steps to permit safe passing. If in doubt, she
steps to permit safe passing. If in doubt she may sound
shall sound the danger signal prescribed in Rule 34(d).
the signals prescribed in Rule 34(d).
(ii) This rule does not relieve the overtaking vessel of her obligation under Rule 13.
(f) A vessel nearing a bend or an area of a narrow channel or fairway where other vessels may be obscured by an intervening
obstruction shall navigate with particular alertness and caution and shall sound the appropriate signal prescribed in Rule
34(e).
(g) Any vessel shall, if the circumstances of the case admit, avoid anchoring in a narrow channel.

6.8.1 Narrow Channel rule (a)

(a) (i) A vessel proceeding along the course of a narrow channel or fairway shall keep as near to the outer limit of the channel or fairway which
lies on her starboard side as is safe and practicable.

6.8.2 Sharp Bends and Obstructions on the narrow Channel (f)

(f) A vessel nearing a bend or an area of a narrow channel or fairway where other vessels may be obscured by an intervening obstruction shall
navigate with particular alertness and caution and shall sound the appropriate signal prescribed in Rule 34(e).

6.8.3Anchoring in Channels (g)

(g) Any vessel shall, if the circumstances of the case admit, avoid anchoring in a narrow channel.

6.8.3.1 When Vessel Lawfully Anchored; Presumption vs. Moving Vessel (Res Ipsa Loquitor)

6.8.4 Descending Vessel Has Right of Way

6.8.4.1 Manila vs. Atlantic, Gulf and Pacific Company

6.8.4.2 Verzosa vs. Lim

6.9 Traffic Separation Scheme (Rule 10(b),(c),(e),(g),(h),(i)(j))

(b) A vessel using a traffic separation scheme shall:

(i) Proceed in the appropriate traffic lane in the general direction of traffic flow for that lane.
(ii) So far as is practicable keep clear of a traffic separation line or separation zone.
(iii) Normally join or leave a traffic lane at the termination of the lane, but when joining or leaving from either side shall do so at as small an
angle to the general direction of traffic flow as practicable.

(c) A vessel, shall so far as practicable, avoid crossing traffic lanes but if obliged to do so shall cross on a heading as nearly as practicable at right
angles to the general direction of traffic flow.

(e) A vessel, other than a crossing vessel or a vessel joining or leaving a lane shall not normally enter a separation zone or cross a separation line
except:
(i) in cases of emergency to avoid immediate danger;
(ii) to engage in fishing within a separation zone.

(g) A vessel shall so far as practicable avoid anchoring in a traffic separation scheme or in areas near its terminations.

(h) A vessel not using a traffic separating scheme shall avoid it by as wide a margin as is practicable.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
(i) A vessel engaged in fishing shall not impede the passage of any vessel following a traffic lane.

(j) A vessel of less than 20 meters in length or a sailing vessel shall not impede the safe passage of a power-driven vessel following a traffic lane.

6.10 Overtaking (Rule 13)

a) Notwithstanding anything contained in the Rules 4-18, any vessel overtaking any other shall keep out of the way of the vessel being
overtaken.

(b) A vessel shall be deemed to be overtaking when coming up with a another vessel from a direction more than 22.5 degrees abaft her beam,
that is, in such a position with reference to the vessel she is overtaking, that at night she would be able to see only the sternlight of that vessel
but neither of her sidelights.

(c) When a vessel is in any doubt as to whether she is overtaking another, she shall assume that this is the case and act accordingly.

(d) Any subsequent alteration of the bearing between the two vessels shall not make the overtaking vessel a crossing vessel within the
meaning of these Rules or relieve her of the duty of keeping clear of the overtaken vessel until she is finally past and clear.

6.11 Head-on Situation (Rule14)

(a) [ Unless otherwise agreed ] when two power-driven vessels are meeting on reciprocal or nearly reciprocal courses so as to involve risk of
collision each shall alter her course to starboard so that each shall pass on the port side of the other.

(b) Such a situation shall be deemed to exist when a vessel sees the other ahead or nearly ahead and by night she could see the masthead
lights of the other in a line or nearly in a line and/or both sidelights and by day she observes the corresponding aspect of the other vessel.

(c) When a vessel is in any doubt as to whether such a situation exists she shall assume that it does exist and act accordingly.

6.11.1 Port-helm Rule/Right Rudder Rule

(a); Gov. of the Phil. Islands vs. Phil. Steamship Co.

6.12 Crossing Rule (Rule 15)

(a) When two power-driven vessels are crossing so as to involve risk of collision, the vessel which has the other on her own starboard side
shall keep out of the way and shall, if the circumstances of the case admit, avoid crossing ahead of the other vessel.

6.13 Give-way Vessel (a.k.a Burdened Vessel) (Rule 16)

Every vessel which is directed to keep out of the way of another vessel shall, so far as possible, take early and substantial action to keep well clear.

6.14 Stand-on Vessel (a.k.a Privileged Vessel) (Rule 17)

(a) (i) Where one of two vessels is to keep out of the way, the other shall keep her course and speed.
(ii) The latter vessel may, however, take action to avoid collision by her maneuver alone, as soon as it becomes apparent to her that the
vessel required to keep out of the way is not taking appropriate action in compliance with these Rules.

(b) When, from any cause, the vessel required to keep her course and speed finds herself so close that collision cannot be avoided by the action of the
give-way vessel alone, she shall take such action as will best aid to avoid collision.

(c) A power-driven vessel which takes action in a crossing situation in accordance with Rule 17(a)(ii) to avoid collision with another power-driven vessel
shall, if the circumstances of the case admit, not alter course to port for a vessel on her own port side.

(d) This Rule does not relieve the give-way vessel of her obligation to keep out of the way.

6.15 Responsibility between Vessels (Rule 18)

 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Except where Rules 9, 10, and 13 otherwise require:

(a) A power-driven vessel underway shall keep out of the way of:
(i) a vessel not under command;
(ii) a vessel restricted in her ability to maneuver;
(iii) a vessel engaged in fishing;
(iv) a sailing vessel.
(b) A sailing vessel underway shall keep out of the way of:
(i) a vessel not under command;
(ii) a vessel restricted in her ability to maneuver;
(iii) a vessel engaged in fishing.
(c) A vessel engaged in fishing when underway shall, so far as possible, keep
out of the way of:
(i) a vessel not under command;
(ii) a vessel restricted in her ability to maneuver.

international Inland

(d) (i) Any vessel other than a vessel not under command or a
vessel restricted in her ability to maneuver shall, if the
circumstances of the case admit, avoid impeding the safe
passage of a vessel constrained by her draft, exhibiting the
signals in Rule 28.

(ii) A vessel constrained by her draft shall navigate with

particular caution having full regard to her special condition.

(e) A seaplane on the water shall, in general, keep well clear of all vessels and avoid impeding their navigation. In circumstances,
however, where risk of collision exists, she shall comply with Rules 4-19.

(f) (i) A WIG craft shall, when taking off, landing and in flight near the surface, keep well clear of all other vessels and avoid impeding
their navigation;

(ii) a WIG craft operating on the water surface shall comply with Rules 4-19 as a power-driven vessel.

6.15.1 Pecking Order of Privilege

7. Marine Protest
a. “Marine Protest” is a declaration on oath by the master, of the circumstances attending the damage or loss of his vessel, intended to show that the
loss accrued by the perils of the sea, and conducting with the protestation against any liability of the owner to the freighters. It’s used and design is to
authenticate the facts and circumstances of a loss to the insurer and all concerned.

b. As the maritime safety agency, the Philippine Coast Guard has expanded its meaning and requires the same for the purpose of official record of the
maritime incident, and in determining whether the merchant marine officers and personnel should be declared of any liability, further investigate or
proceed against by competent authority.

c. Marine protest shall be the primary evidence in the investigation of accident involving the vessel by a HEARING OFFICER, a BOARD OF INQUIRY
or any investigation. However, its absence shall not preclude the conduct of an investigation as deemed necessary by any Coast Guard officer on
official duty

d. The protest shall be submitted to the Coast Guard Station Commander of the area where the accident or any incident has occurred or of the
first immediate port of call.

7.1 Form

7.2 Importance/Purpose
To prescribe the standard content and format of Marine protest to be filed by the Master of the ship in accordance with Regulation XIX/3,
Chapter XIX of the 1997 PMMR to ensure competence and pertinence of details incorporated in the protest in order to facilitate administrative
inquiry or appropriate disposition by competent authority

7.3 Instances;When Required

A. Marine protest shall be submitted under following circumstances:

a. Actual physical damage to property exceeding one thousand pesos;
b Material damage affecting seaworthiness or efficiency of a vessel;
c. Stranding, grounding or sinking of the vessel or fire on board;
d. Loss of life;
e. Injuring causing any persons to remain incapacitated for a period in excess of seventy (70) hours, except injury to harbor workers not resulting
from vessel equipment casualty;
f. Any deviation from her course or delay beyond the control of the master.
g. Any serious breach of charter party terms if committed by any party other than the ship’s crew as refusal to load, unduly delaying of loading,
loading improper cargo, refusal to pay discharge fees, refusal to accept bill of lading in form signed by the master.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
h. Failure of consignee to take deliver of cargoes or fails to discharge cargo thereof or pay freight in accordance with charter party bill of llading
terms.
i. Arrival of vessel under stress; and
j. To provide additional information relevant to the incident or circumstances, which may give rise or may have given rise to suspicion on the negligence
or incompetence of the master or crew
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)

Marine Protest Cases:

UNITED STATES(plaintiff) vs SMITH BELL & COMPANY(defendant)

FACTS:
This was an action by the plaintiff against the defendant, brought in the Court of First Instance of the city of Manila, to recover the sum of $1,600, United
States currency, for damages occasioned to the Navy boat. Near the mouth of the Pasig River, by a collision with a casco that was then and there being
towed by the launch Alexandra. The launch Alexandra is the property of the defendant.

Smith Bell & Co. claims that plaintiff could recover in the action, relying on Art.835 of the Code of Commerce.

Solicitor General, representing plaintiff United States, claimed that this provision of the Commercial Code did not apply to it.

RULING:

Article 835 of the Code of Commerce. requiring protest to be made and presented to the proper authority within twenty-four hours after the collision, or
after the arrival of the injured boat in port, is a prerequisite to the bringing of an action for damages. By having failed to comply with this provisions of the
Commercial Code it cannot maintain this action for damages.||

“The action for the recovery of loss and damages arising from collisions can not be admitted if a sworn statement or declaration is not presented within
twenty-four hours to competent authority of the point where the collision took place, or that of the first port of arrival of the vessel."
(Article 835 of the Code of Commerce)

It applies to all persons engaged in traffic upon the waters of the Philippine Archipelago; that the defendant has as much right to insist upon compliance
with this provision of the code where the damages were done to a boat operated by the Government as if such boat had been operated by a private
individual or company.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
LOPEZ VS DURUELO
FACTS:
Augusto Lopez wanted to embark on the interisland steamer “San Jacinto”, to go to Iloilo. San Jacinto was anchored, some half a mile distant from the
port. Thus Lopez engaged the services of Albino Jison, the owner of the motorboat “Jison”. Jison was engaged in conveying passengers and luggage
back and forth from the landing, to boats at anchor.
It is alleged that the Jison, was grossly overladen, having aboard fourteen passengers, while its capacity was only for eight or nine. As the motor boat
approached the San Jacinto in a perfectly quiet sea, it came too near to the stern of the ship. As the propeller of the ship had not yet ceased to turn, the
blades of the propeller struck the motor boat and sank it at once.
As the Jison sank, the plaintiff was thrown into the water against the propeller, and the revolving blades inflicted various injuries upon him. As a
consequence of these injuries the plaintiff was kept in bed in a hospital in the City of Manila for about 8 months. Lopez claims that the approach of the
Jison to this dangerous proximity with the propeller of the San Jacinto was due to the fault, negligence and lack of skill of Juan Duruelo, as patron of the
Jison.
Lopez filed an action for damages.
Defendant filed a motion to dismiss the complaint by way of demurrer on the ground that the complaint does not allege that a protest had been
presented by the plaintiff, within twenty-four hours after the occurrence, to the competent authority at the port where the accident occured. It is
accordingly insisted that, under article 835 of the Code of Commerce, the plaintiff has shown no cause of action.
ISSUES:
Whether or not a protest is required in this case for there to be a cause of action.
RULING:
No. Protest is not required because Art. 835 only covers vessels and the term vessel does not cover a boat not engaged in maritime commerce such as
the Jison.
The word "vessel" (Spanish "buque," "nave"), used in the section referred to was not intended to include all ships, craft or floating structures of every
kind without limitation, and the provisions of that section should not be held to include minor craft engaged only in river and bay traffic. Vessels
which are licensed to engage in maritime commerce, or commerce by sea, whether in foreign or coastwise trade, are no doubt regulated by Book III of
the Code of Commerce. Other vessels of a minor nature not engaged in maritime commerce, such as river boats and those carrying passengers from
ship to shore, must be governed, as to their liability to passengers, by the provisions of the Civil Code or other appropriate special provisions of law.
But even if said provision had been considered applicable to the case in hand, a fair interpretation of the allegations of the complaint
indicates, we think, that the injuries suffered by the plaintiff in this case were of such a nature as to excuse protest; for, under article 836, it is
provided that want to protest cannot prejudice a person not in a condition to make known his wishes. An individual who has suffered to be in a hospital
for may months, cannot be supposed to have in a condition to make protest within twenty-four hours of such occurrence.

CHAPTER X – MARITIME RISKS: DEVIATION

1. Geographic Deviation; Concept

When a ship intentionally changes her route or remains in port without just cause, the ship's new route or delay is called a deviation. Unless
the contract permitted otherwise, in either case there is a breach of contract by the party responsible for the deviation.

2. “Legal” (Code of Commerce); “Reasonable” (COGSA); “Proper” (Insurance Code)

“Legal”
ARTICLE 820. The arrival under stress shall not be considered legal in the following cases:
1. If the lack of provisions should arise from the failure to take the necessary provisions for the voyage, according to usage
and custom, or if they should have been rendered useless or lost through bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based on positive and
justifiable facts.
3. If the injury to the vessel should have been caused by reason of her not being repaired, rigged, equipped, and arranged
in a convenient manner for the voyage, or by reason of some erroneous order of the captain.
4. Whenever malice, negligence, want of foresight, or lack of skill on the part of the captain is the reason for the act causing
the damage.
“Reasonable”
SECTION 4. (4) Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be an
infringement or breach of this Act or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom:
Provided, however, That if the deviation is for the purpose of loading or unloading cargo or passengers it shall, prima facie, be regarded as
unreasonable.
“Proper”
SECTION 126.A deviation is proper:
(a)When caused by circumstances over which neither the master nor the owner of the ship has any control;
(b)When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against;
(c)When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or
(d)When made in good faith, for the purpose of saving human life or relieving another vessel in distress.

3. Consequences of Illegal, Unreasonable or Improper Deviation

3.1. Arrival Under Stress (Aribada)
It’s the arrival of a vessel at the nearest and most convenient port which was decided upon after determining that there is well-
founded fear of seizure, privaters, or pirates or by reason of any accident sea disabling it to navigate
3.1.1. Code of Commerce provisions (Arts. 819-825)
ARTICLE 819. If the captain during the navigation should believe that the vessel can not continue the voyage to the port
of destination on account of the lack of provisions, well founded fear of seizure, privateers or pirates, or by reason of any
accident of the sea disabling her to navigate, he shall assemble the officers and shall call the persons interested in the
cargo who may be present, and who may attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reasons should be considered well founded, it shall be decided to make the nearest and
most convenient port drafting and entering in the log book the proper minutes, which shall be signed by all.
The captain shall have the deciding vote and the persons interested in the cargo may make the objections and protests
they may deem proper, which shall be entered in the minutes in order that they may make use thereof in the manner they
may consider advisable.
**REPAIRS**
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
ARTICLE 822. If in order to make repairs to the vessel or because there should be danger of the cargo suffering damage
it should be necessary to unload, the captain must request authorization of the judge or court of competent jurisdiction to
lighten the vessel, and do so with the knowledge of the person interested or representative of the cargo, should there be
one.
*
In a foreign port, it shall be the duty of the Spanish consul, where there is one, to give the authorization.
In the first case, the expenses shall be defrayed by the ship agent or owner, and in the second, they shall be for the
account of the owners of the merchandise, for whose benefit the act took place.
If the unloading should take place for both reasons, the expenses shall be defrayed in proportion to the value of the vessel
and that of the cargo.
3.1.2. Grounds; When Illegal
Art. 820 identifies the different cases of unlawful arrival under stress for which liability is imposed on the ship owner and
ship agent.
ARTICLE 820. The arrival under stress shall not be considered legal in the following cases:
5. If the lack of provisions should arise from the failure to take the necessary provisions for the voyage,
according to usage and custom, or if they should have been rendered useless or lost through bad
stowage or negligence in their care.
6. If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based on
positive and justifiable facts.
7. If the injury to the vessel should have been caused by reason of her not being repaired, rigged,
equipped, and arranged in a convenient manner for the voyage, or by reason of some erroneous
order of the captain.
8. Whenever malice, negligence, want of foresight, or lack of skill on the part of the captain is the reason
for the act causing the damage.
3.1.3. Procedure
3.1.4. Effects: Expenses; Custody of Cargo; Liability of Captain
EXPENSES (Art. 821, Code of Commerce):
If arrival under stress is proper, ship owner and the ship agent will only be liable for the expenses for the same arrival
If ship owner and the ship agent are liable for the same expenses, they are solidarily liable for damages caused to the
cargoes
ARTICLE 821. The expenses caused by the arrival under stress shall always be for the account of the shipowner or agent,
but the latter shall not be liable for the damage which may be caused the shippers by reason of the arrival under stress,
provided the latter is legitimate.
Otherwise, the shipowner or agent and the captain shall be jointly liable.
CUSTODY OF CARGO (Art. 823 & 824, Code of Commerce)
ARTICLE 823. The care and preservation of the cargo which has been unloaded shall be in charge of the captain, who
shall be responsible for the same, except in cases of force majeure.
ARTICLE 824. If the entire cargo or part thereof should appear to be damaged, or there should be imminent danger of its
being damaged, the captain may request of the judge or court of competent jurisdiction or the consul, in a proper case, the
sale of all or of part of the former, and the person taking cognizance of the matter shall authorize it after an examination
and declaration of experts, advertisements, and other formalities required by the case and an entry in the book, in
accordance with the provisions of Article 624.
The captain shall, in a proper case, justify the legality of the procedure, under the penalty of answering to the shipper for
the price the merchandise would have brought if it should have arrived at the port of its destination in good condition.
LIABILITY OF CAPTAIN (Art. 825, Code of Commerce)
ARTICLE 825. The captain shall answer for the damages caused by his delay, if the reason for the arrival under stress
having ceased, he should not continue the voyage.
If the reason for said arrival should have been the fear of enemies, privateers, or pirates, before sailing, a discussion and
resolution of a meeting of the officers of the vessel and persons interested in the cargo who may be present shall take
place, in accordance with the provisions contained in Article 819.
3.2. Stipulation Limiting Liability (Art 1747, Civil Code)
ARTICLE 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual
route, the contract limiting the common carrier’s liability cannot be availed of in case of the loss, destruction, or deterioration of the
goods.
3.3. Voyage Insured (Secs. 123-128, Insurance Code)
SECTION 123. When the voyage contemplated by a marine insurance policy is described by the places of beginning and ending,
the voyage insured is one which conforms to the course of sailing fixed by mercantile usage between those places.
SECTION 124.If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that
way between the places specified, which to a master of ordinary skill and discretion, would mean the most natural, direct and
advantageous.
SECTION 125.Deviation is a departure from the course of the voyage insured, mentioned in the last two (2) sections, or an
unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage.
SECTION 126.A deviation is proper:
(a)When caused by circumstances over which neither the master nor the owner of the ship has any control;
(b)When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against;
(c)When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or
(d)When made in good faith, for the purpose of saving human life or relieving another vessel in distress.
SECTION 127.Every deviation not specified in the last section is improper.
SECTION 128.An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation.
3.4. Liability of Cargo Loss or Damage (Sec. 4(4), COGSA)
SECTION 4. (4) Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be
deemed to be an infringement or breach of this Act or of the contract of carriage, and the carrier shall not be liable for any loss or
damage resulting therefrom: Provided, however, That if the deviation is for the purpose of loading or unloading cargo or passengers
it shall, prima facie, be regarded as unreasonable.
4. Liberty and Deviation Clause; Validity
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A deviation will not be considered a breach of the contract of carriage if it is considered reasonable. For e.g: A deviation to save or attempt to
save life or property at sea is considered reasonable, whereas deviating for the purpose of crew change is not reasonable.

CHAPTER X – SHIPWRECK AND STRANDING

1. Definitions; Shipwreck vs. Stranding
SHIPWRECK
Demolition/shattering of a vessel caused by her driving ashore or on rocks and shoals in the midseas, or by the violence of winds and waves
in tempests.

STRANDING
The running of a ship or other vessel on shore; it is either accidental or voluntary.

It is of great consequence to define accurately what shall be deemed a stranding, but this is no easy matter. In one case a ship having run on
some wooden piles, four feet under water, erected in Wisbeach river, about nine yards from shore, which were placed there to keep up the
banks of the river, and having remained on these piles until they were cut away, was considered by Lord Kenyon to have been stranded. In
another case, a ship arrived in the river Thames, and, upon coming up to the Pool, which was full of vessels, one brig ran foul of her bow, and
another of her stern, in consequence of which she was driven aground, and continued in that situation an hour, during which period several
other vessels ran foul of her; this, Lord Kenyon told the jury, that unskilled as he was in nautical affairs, he thought he could safely pronounce
to be no stranding.

1.1 Kinds of Losses (Secs. 129 – 134, Insurance Code)

SECTION 129. A loss may be either total or partial.
SECTION 130. Every loss which is not total is partial.
SECTION 131. A total loss may be either actual or constructive.
SECTION 132. An actual total loss is caused by:
(a) total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken up;
(c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or
(d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured.
SECTION 133. A constructive total loss is one which gives to a person insured a right to abandon, under Section 141.
SECTION 134. An actual loss may be presumed from the continued absence of a ship without being heard of. The length of time which is
sufficient to raise this presumption depends on the circumstances of the case.
2. Code of Commerce Provisions
ARTICLE 844. A captain who may have taken on board the goods saved from the wreck shall continue his course to the port of destination,
and on arrival shall deposit the same, with judicial intervention, at the disposal of their legitimate owners.
In case of changing his course, should he be able to unload them at the port to which they were consigned, the captain may make said port if
the shippers or supercargoes present consent thereto, as well as the officers and passengers of the vessel; but he can not do so, even with
said consent, in time of war or when the port is difficult to make and dangerous.
All the expenses of this arrival shall be defrayed by the owners of the cargo, as well as the payment of the freight, which, taking into
consideration the circumstances of the case, are fixed by agreement or by a judicial decision.
ARTICLE 845. If there should not be on the vessel any person interested in the cargo to pay the expenses and freight corresponding to the
salvage, the judge or court of competent jurisdiction may order the sale of the part necessary to cover the same. This shall also be done when
its preservation is dangerous, or when in the period of one year it should not have been possible to ascertain who are its legitimate owners.
In both cases the proceedings regarding publicity and formalities prescribed in Article 579 shall be observed, and the net proceeds of the sale
shall be deposited in a safe place, in the judgment of the judge or court, in order to be turned over to the legitimate owners thereof.
2.1 Burden of Loss
ARTICLE 840. The losses and deteriorations suffered by a vessel and her cargo by reason of shipwreck or stranding shall be individually
for the account of the owners, the part of the wreck which may be saved belonging to them in the same proportion.
2.2 Liability of Captain for Barratry, Negligence or Lack of Skill
ARTICLE 841. If the wreck or stranding should arise through the malice, negligence, or lack of skill of the captain, or because the vessel
put to sea insufficiently repaired and prepared, the owner or the freighters may demand indemnity of the captain for the damages caused
to the vessel or cargo by the accident, in accordance with the provisions contained in Articles 610, 612, 614, and 621.
2.3 Salvor’s Lien
ARTICLE 842. The goods saved from the wreck shall be specially liable for the payment of the expenses of the respective salvage, and
the amount thereof must be paid by the owners of the former before they are delivered to them, and with preference to any other
obligation, if the merchandise should be sold.

2.4 Duty of Ships in Convoy

ARTICLE 843. If several vessels navigate under convoy, and any of them should be wrecked, the cargo saved shall be distributed
among the rest in the proportion to the amount each one can receive.
If any captain should refuse, without sufficient cause, to receive what may correspond to him, the captain of the wrecked vessel shall
enter a protest against him before two sea officials of the losses and damages resulting therefrom, ratifying the complaint within twenty-
four hours after arrival at the first port, and including it in the proceedings he must institute in accordance with the provisions contained in
Article 612.
Should it not be possible to transfer to the other vessels the entire cargo of the one wrecked, the goods of the highest value and smallest
volume shall be saved first, the designation thereof being made by the captain, in concurrence with the officers of his vessel.

3. Liability of Ship Owner for Wreck Removal

3.1 See MARINA Circular no. 01-09 (04 February 2009)
Under the General Provisions of the above circular it states that, “The ships covered by International Group of P&I Clubs are deemed in
compliance with this Circular provided the liabilities arising from wreck removal and oil pollution are included.”
SPECIFIC PROVISIONS
1. The adequate marine insurance shall cover the following:
a. Liabilities arising from wreck removal
b. Liabilities arising from pollution
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2. Non-coverage of any of the above mentioned liabilities shall be construed as non-compliance of this Circular and shall subject the
concerned persons, corporations, partnerships, corporations and entities to appropriate penalties as provided herein.
3. The following shall be added to the adequate marine insurance in the second phase of the program:
c. Loss of life, illness and personal injury (passenger/third parties/Seamen)
d. Liabilities arising from collisions
e. Liabilities arising from damage to fixed and floating objects/facilities
f. Liabilities to cargo (loss, shortage and damage) *
4. The non-motorized ships, however, shall be covered only from liabilities arising from wreck removal except those that are utilized to
carry petroleum products/petroleum by-products or other cargoes, which may cause pollution.
5. The concerned persons, corporations, partnerships, cooperatives and entities shall submit to the MARINA copy of the mandatory
insurance cover within five (5) days from date of renewal.
6. Shipowners who will comply with this circular by 20 February 2009, shall be given a one-time discount equivalent to five percent
(5%) of the tonnage fee due for the year computed using the rates for first quarter payments.
7. The MARINA shall publish, through an advisory, a list of P&I-compliant companies/vessels as of 20 February 2009, and another list
after the (90)-day grace period.
4. Liability of Ship owner for Damages Caused by Wreck
4.1 If Wreck is Derelict
DERELICT a ship/cargo which is abandoned and deserted at sea by those who were in charge of it without any hope of recovering it
(sine spe recuperandi), or without any intention of returning to it (sine animo revertendi).

4.2 Owner’s Spes Recuperandi

4.3 If Owner Transfers Interest in the Wreck
5. Safekeeping of Salvaged Wreck as Necessary Deposit (Art. 1996 and 2168, Civil Code)
Art. 1996. A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or other similar events.
Art. 2168. When during a fire, flood, storm, or other calamity, property is saved from destruction by another person without the knowledge of
the owner, the latter is bound to pay the former just compensation.

Chapter XI – Other Maritime Risks; Oil Pollution

R.A. No. 9483 Oil Pollution Act of 2007

1. Polluter Pays Principle

In environmental law, the polluter pays principle is enacted to make the party responsible for producing pollution responsible for paying for
the damage done to the natural environment.
The polluter pays principle is followed insofar as a person responsible for pollution is required to clean the polluted water within a reasonable
period and at his own expense”. Hence, this principle gives two choices to the polluters; either decrease and preferably eliminate the pollution or abide
the expenses required to eradicate it. One of the main objectives of the PPP is to compel the initiators of pollution comply with the gauges required to
guarantee that the ecosystem is in an adequate shape. Also, another objective is to shun unbalances of international trade or unjust benefits on rivalry
between the countries. Thus, the PPP has been connected with the principle of ‘proportionality’.

2. Oil Pollution Damage; Definition

"Oil" any persistent hydrocarbon mineral Oil such as:
a. crude Oil,
b. fuel Oil,
c. heavy diesel Oil, and
d. lubricating Oil,
whether carried on board a Ship as cargo or in bunkers of such a Ship;

"Pollution Damage":
a. Loss or damage caused outside the Ship by contamination resulting from the escape or discharge of Oil from the Ship, wherever such escape
or discharge may occur: Provided, That compensation for impairment of the environment other than loss of profit from such impairment shall
be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken; and
b. The costs of preventive measures and further loss or damage caused by preventive measure;

3. Ships Covered
"Ship" means any sea-going vessel and sea-home craft of any type whatsoever constructed or adapted for the carriage of Oil in bulk as cargo: Provided
That a Ship capable of carrying Oil and other cargoes shall be regarded as a Ship only when it is actually carrying Oil in bulk as cargo and during any
voyage following such carriage unless it is proved that it has no residues of such carriage of Oil in bulk aboard.

4. Incorporation of the 1992 Civil Liability Convention and 1992 Fund Convention (See No. 2)
Sec 4. The 1992 Civil Liability Convention and 1992 Fund Convention and their subsequent amendments shall form part of the law of the Republic of the
Philippines

5. Scope of Application
Sec 5. This law shall apply exclusively to Pollution Damage caused in Philippine territory, including its territorial sea and its exclusive economic zone,
and to preventive measures, wherever taken, to prevent or minimize such damage.

6. Principle of Strict Liability

SEC. 6. Liability on Pollution Damage. - The Owner of the Ship at the time of an Incident, or where the Incident consists of a series of occurrences, at
the time of the first such occurrence, shall be liable for any Pollution Damage caused by the Ship as a result of the Incident. Such damages shall include,
but not limited to:
a. Reasonable expenses actually incurred in clean-up operations at sea or on shore;
b. Reasonable expenses of Preventive Measures and further loss or damage caused by preventive measures;
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c. Consequential loss or loss of earnings suffered by Owners or users of property contaminated or damaged as a direct result of an Incident;
d. Pure economic loss or loss of earnings sustained by persons although the property contaminated or damaged as a direct result of an Incident
does not belong to them;
e. Damage to human health or loss of life as a direct result of the Incident, including expenses for rehabilitation and recuperation: Provided, That
costs of studies or diagnoses to determine the long-term damage shall also be included; and
f. Environmental damages and other reasonable measures of environmental restoration.

7. Exempting Circumstances
SEC. 7. Exempting Circumstances. - No liability as stated in the immediately preceding section shall attach to the Owner or his insurer if he proves that
the damage:
a. Resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character;
b. Was wholly caused by an act or omission done with intent to cause damage by third party; and
c. Was wholly caused by the negligence or other wrongful act of the government or other enforcement agencies responsible for the maintenance
of lights or other navigational aids in the exercise of that function.
If the Owner proves that the Pollution Damage resulted wholly or partially either from an act or omission done with intent to cause damage by the person
who suffered the damage or from the negligence of that person, the Owner may be exonerated wholly or partially from his liability to such person.

8. Persons Against whom claim. Cannot be made; Owner’s recourse

SEC. 8. Persons Exempted from Claims for Compensation for Pollution Damage. - No claim for compensation Pollution Damage under this Act may be
made against:
a. The servants or agents of the Owner or the members of the crew;
b. The pilot or any other person who, without being a member of the crew, performs services for the Ship;
c. Any charterer, howsoever described, including a bareboat charterer, manager or operator of the Ship;
d. Any person performing salvage operations with the consent of the Owner or on the instructions of a competent public authority;
e. Any person taking Preventive Measures; and
f. All servants or agents of persons mentioned in paragraphs (c), (d) and (e) hereof, unless the damage resulted from their personal act or
omission, committed with the intent to cause such damage, or committed recklessly and with knowledge that such damage would probably
result: Provided, That nothing in this Act shall prejudice any right of recourse of the Owner against third parties.

9. Solidary Liability where damage not reasonably separable

SEC. 9. Joint and Several Liability. - When an Incident involving two or more Ships occurs and Pollution Damage results therefrom, the Owners of all the
Ships concerned, unless exonerated under Section 7 hereof, shall be jointly and severally liable for all such damage which is not reasonably separable,
without prejudice, however, to the right of recourse of any of such Owners to proceed against each other or third parties.

10. Strict but limited: Limitation of Liability

a. Not Exceeding 5,000 Units of Tonnage – up to SDR 4,510,000
b. Above 5,000 Units of Tonnage – up to SDR 89,770,000

SEC. 10. Limitation of Liability. - The Owner shall be entitled to limit his liability under this Act with respect to a particular Incident to a total amount
calculated as follows:
c. Three million (3,000,000) units of account for a Ship not exceeding five thousand (5,000) units of tonnage;
d. For a Ship with a tonnage in excess thereof, for each unit of tonnage, four hundred twenty (420) units of account for each unit in addition to the
amount mentioned in paragraph (a): Provided, however, That this aggregate amount shall not, in any event, exceeds 59.7 million units of
account:
Provided, further, That the limit of liability of the Owner as aforementioned shall be subject to adjustment according to subsequent amendments to
the 1992 Civil Liability Convention.
The limited liability, under this Section may not be availed of by the Owner if it has been established that such Pollution Damage resulted from
his personal act or omission, committed with intent to cause such damage, or committed recklessly and with knowledge that such damage would
probably result.
The "unit of account" referred to in this Section is the Special Drawing Right (SDR) as defined by the International Monetary Fund as set forth
in the 1992 Civil Liability Convention. The said amount shall be converted into national currency on the basis of the value of the currency by reference to
the SDR on the date that the fund is constituted under Section 11 of this Act.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. SDRs are
allocated to member countries in proportion to their IMF quotas. The SDR also serves as the unit of account of the IMF and some other international
organizations. Its value is based on a basket of key international currencies.

11. Exception
SEC. 11. Constitution of a fund. - For the purpose of availing himself of the benefit of limitation provided for under Section 10 of this Act following the
occurrence of a particular Incident, the Owner shall be required to constitute a fund for the total sum representing the limit of his liability with the Maritime
Industry Authority (MARINA) to cover Incidents causing Pollution Damage: Provided That any claim for compensation from Pollution Damage shall be
brought directly to the Regional Trial Courts (RTC).

12. Limitation Fund

a. How Constituted; Who may constitute?

The fund can be constituted by depositing the sum or by producing a bank guarantee or other financial guarantee acceptable under existing laws and
considered to be adequate by the Department of Transportation and Communications (DOTC).

b. How distributed
c. Distinguish from International Oil Pollution Compensation (IOPC) Fund

SEC. 15. Contributions to the International Oil Pollution Compensation (IOPC) Fund. - Any person who has received more than one hundred fifty
thousand (150,000) tons of contributing Oil in a calendar year in all ports or terminal installations in the Philippines through carriage by sea, shall pay
contributions to the International Oil Pollution Compensation (IOPC) Fund in accordance with the provisions of the 1992 Fund Convention.

A person shall be deemed to have received contributing Oil, for contribution purposes, if he received the same:
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a. From another country; or
b. From another port or terminal installation within the Philippines, notwithstanding that it had already been previously received by him.
Where the quantity of contributing Oil received by any person in the Philippines in a calendar year, when aggregated with the quantity of
contributing Oil received in the Philippines in that year by its subsidiary or affiliate corporation, exceeds one hundred fifty thousand (150,000) tons, said
person, including its subsidiaries, shall pay contributions in respect of the actual quantity received by each, notwithstanding that the actual quantity
received by each did not exceed one hundred f a y thousand (150,000) tons.

13. Jurisdiction
SEC. 14. Enforcement. - Ship carrying more than two thousand (2,000) tons of Oil in bulk as cargo shall not be allowed entry into Philippine territory or
its exclusive economic zone without a valid certificate of insurance or financial security for Pollution Damage required by this Act.
For this purpose, the PPA or any other port authorities shall deny port services to said Ship without such certificate.
If any such Ship is found within the said territory or zone without such certificate, said Ship shall be prevented from loading or unloading its
cargo until it is able to produce the appropriate insurance or financial security duly certified by the State of its registry if such country is a convention-
member State, otherwise, issued or certified by the MARINA or any convention-member State.
The Owner and master of the Ship referred to in the immediately preceding paragraph shall be jointly and severally liable to the fines set forth
in this Act. Such Ship shall be prevented from leaving unless the appropriate fines shall have been paid to the full satisfaction of the MARINA.
The PCG shall conduct inspections of certificates of Ships entering the territory of the Philippines, or, in the case of Ships registered in the
Philippines voyaging within the said territory: Provided That such inspections shall not cause undue delay to the Ships.

a. Constitution of Limitation Fund

b. Action for Pollution Compensation
*In the form of Fines and Penalty - monetary

14. Compulsory Insurance or Other Financial Security; How enforced

SEC. 12. Maintenance of Compulsory Insurance or Other Financial Security. - AU Owners shall be required annually by the MARINA to maintain
insurance or other financial security for Pollution Damage…

15. Action for Pollution Compensation

SEC. 17. Action for Compensation. - An action for compensation on account of Pollution Damage resulting from the Incident which occurred in the
territory may be brought before the RTC against the following persons:
a. Owner of the polluting Ship; or
b. Insurer or other person providing financial security of the said Owner’s liability for pollution.
For this purpose, foreign corporation, partnership, association or individual, whether or not licensed to transact business in the Philippines by any
appropriate government agencies, providing such insurance or financial security for Pollution Damage shall be considered transacting or doing business
in the Philippines and shall be subject to the jurisdiction of the regular judicial courts of the country.
Such action shall be filed within three years of the date on which the damage occurred, but not later than six years of the date of the Incident.
The PCG shall investigate, motu proprio or through compensation or violation of this Act, and shall forthwith file appropriate action with the
RTC.
It shall likewise provide the complainant necessary technical evidence or any assistance, whether or not testimonial or documentary, insofar as the claim
for compensation or violation of this Act is concerned.
Filing of the action under this section shall only require payment of filing fees equivalent to ten percentum (10%) of the regular rates established
therefore by the Supreme Court of the Philippines. However, indigent plaintiff shall be exempt from payment of docket and other lawful fees, and of
transcripts of stenographic notes which the court may order to be furnished him. The amount of the docket and other lawful fees which the indigent was
exempted from paying shall be a lien on any judgment rendered in the case favorable to the indigent, unless the court otherwise provides.

c. Defendants
d. Prescriptive period
16. Settlement of Claims; Two Tiers of Compensation

1992 International Convention on Civil Liability for Oil Pollution Damage

1. Suppletory to Oil Pollution Act of 2007

The International Convention on Civil Liability for Oil Pollution Damage, 1969, renewed in 1992 and often referred to as the CLC Convention, is an
international maritime treaty that was adopted to ensure that adequate compensation would be available where oil pollution damage was caused by
maritime casualties involving oil tankers (i.e. ships that carry oil as cargo)

2. Right of Subrogation
If before the fund is distributed the owner or any of his servants or agents or any person providing him insurance or other financial security has as a
result of the incident in question, paid compensation for pollution damage, such person shall, up to the amount he has paid, acquire by subrogation the
rights which the person so compensated would have enjoyed under this Convention.

3. General Average vis-à-vis other claims against limitation fund

4. Effects of Constitution of Fund

For the purpose of availing himself of the benefit of limitation provided for in paragraph 1 of this Article, the owner shall constitute a fund for the total
sum representing the limit of his liability with the Court or other competent authority of any one of the Contracting States in which action is brought, under
Article IX or, if no action is brought, with any Court or other competent authority in any one of the Contracting States in which an action can be brought
under Article IX.
The fund can be constituted either by depositing the sum or by producing a bank guarantee or other guarantee, acceptable under the legislation of
the Contracting state where the fund is constituted, and considered to be adequate by the Court or other competent authority.
The fund shall be distributed among the claimants in proportion to the amounts of their established claims.

5. Difference where insurer is defendant in action for compensation

Any claim for compensation for pollution damage may be brought directly against the insurer or other person providing financial security for the
owner‘s liability for pollution damage. In such case the defendant may, even if the owner is not entitled to limit his liability according to Article V,
paragraph 2, avail himself of the limits of liability prescribed in Article V, paragraph 1. He may further avail himself of the defenses (other than the
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
bankruptcy or winding up of the owner) which the owner himself would have been entitled to invoke. Furthermore, the defendant may avail himself of the
defense that the pollution damage resulted from the willful misconduct of the owner himself, but the defendant shall not avail himself of any other
defense which he might have been entitled to invoke in proceedings brought by the owner against him. The defendant shall in any event have the right
to require the owner to be joined in the proceedings.

Marine Pollution Decree

1. P.D. 979 Marine Pollution Decree of 1976; August 18, 1976

Section 4. Prohibited Acts. Except in cases of emergency imperiling life or property, or unavoidable accident, collision, or stranding or in any cases
which constitute danger to human life or property or a real threat to vessels, aircraft, platforms, or other man-made structure, or if damping appears to be
the only way of averting the threat and if there is probability that the damage consequent upon such dumping will be lees than would otherwise occur,
and except as otherwise permitted by regulations prescribed by the National Pollution Control Commission or the Philippine Coast Guard, it shall be
unlawful for any person to
a. discharge, dump or suffer, permit the discharge of oil, noxious gaseous and liquid substances and other harmful substances from or out of any
ship, vessel, barge, or any other floating craft, or other man-made structures at sea, by any method, means or manner, into or upon the
territorial and inland navigable waters of the Philippines;
b. throw, discharge or deposit, dump, or cause suffer or procure to be thrown, discharged, or deposited either from or out of any ship, barge, or
other floating craft of vessel of any kind, or from the shore, wharf, manufacturing establishment, or mill of any kind, any refuse matter of any
kind or description whatever other than that flowing from streets and sewers and passing therefrom in a liquid state into tributary of any
navigable water from which the same shall float or be washed into such navigable water; and
c. deposit or cause, suffer or procure to be deposited material of any kind in any place on the bank of any navigable water or on the bank of any
tributary of any navigable water, where the same shall be liable to be washed into such navigable water, either by ordinary or high tides, or by
storms or floods, or otherwise, whereby navigation shall or may be impeded or obstructed or increased the level of pollution of such water.

Section 6. Enforcement and Implementation. The Philippine Coast Guard shall have the primary responsibility of enforcing the laws, rules and
regulations governing marine pollution. However, it shall be the joint responsibility of the Philippine Coast Guard and the National Pollution Control
Commission to coordinate and cooperate with each other in the enforcement of the provisions of this decree and its implementing rules and regulations,
and may call upon any other government office, instrumentality or agency to extend every assistance in this respect.

2. P.D. 600 Marine Pollution Decree of 1974; December 9, 1974

Section 7. Responsibility and Liability on Oil Spills. Any ship, tank vessel, tank barge or any other watercraft which accidentally or otherwise
discharged oil or oily mixture on waters subject to the jurisdiction of the Philippines, the person in charge of the vessel shall immediately notify the
Philippine Coast Guard, giving particulars of the name of the ship and company, location of spill, type of oil spilled, and quantity. In addition, the weather,
tide, sea conditions and cause of spill shall be reported. Any person in charge of a vessel who fails to notify the Coast Guard of any oil or oily mixture
discharged from his vessel is liable to a fine of P10,000 or imprisonment of not more than six months but not less than 30 days. The owner or operator of
a vessel or facility which discharged the oil or oily mixture may be liable to pay for any clean-up costs.

Mandatory Insurance to Cover Liability for Pollution

A. MARINA Circular 01-09 (2009)

RULES GOVERNING THE MANDATORY MARINE INSURANCE TO COVER LEGAL LIABILITIES ARISING OUT OF ANY MARITIME RELATED
ACCIDENTS
* Liability involving Pollution related cases brought about by Wreck removal, Oil Spills, or other substances.

B. RA 9295 Domestic Shipping Development Act of 2004

COMPULSORY INSURANCE COVERAGE
SEC. 14. Compulsory Insurance Coverage for Passenger and Cargo. - To meet its financial responsibility for any liability which a domestic ship operator
may incur for any breach of the contract of carriage, every domestic ship operator shall be required to submit annually the following;
(1) Adequate insurance coverage for each passenger in an amount to be computer in accordance with existing laws, rules and regulations,
and the total amount of such coverage shall be equivalent to the total number of passenger accommodations being offered by the vessel;
(2) Adequate insurance coverage for cargo in an amount to be computed in accordance with existing laws, rules and regulations, and the total
amount of such coverage shall be equivalent to the total cargo capacity being offered by the vessel; and
(3) If a domestic ship operator should offer both passenger and cargo service, then the total insurance coverage shall be in the total sum
equivalent to that stipulated in paragraphs (1) and (2) of this section. Provided, That if a domestic ship operator should operate more than one
(1) vessels, the amount of insurance coverage required under this section, for purposes of providing financial capacity, shall be the amount
equivalent to the total number of passenger accommodations, or total cargo capacity, or both, of the largest operating vessel which the
domestic ship operator may have: Provided, further, That the total insurance coverage which may be required of any domestic ship operator
shall not exceed the value of such vessel: Provided, finally, that adequate insurance coverage shall be obtained from any duly licensed
insurance company or international protection and indemnity association.

SEC. 15. Other Insurance Coverage. - the MARINA shall have the power to require every ship operator to obtain such other compulsory insurance
coverage necessary to adequately cover claims for damages.

Contractual Provisions Governing Liability for Oil Pollution

1. Oil Pollution Indemnity Clause in Charterparty

As indicated in RA9483 Oil Pollution Act of 2007, Chapter II Strict Liability for Oil Pollution Damage:
SEC. 8. Persons Exempted from Claims for Compensation for Pollution Damage. - No claim for compensation Pollution Damage under this Act may be
made against:
a. The servants or agents of the Owner or the members of the crew;
b. The pilot or any other person who, without being a member of the crew, performs services for the Ship;
c. Any charterer, howsoever described, including a bareboat charterer, manager or operator of the Ship;
d. Any person performing salvage operations with the consent of the Owner or on the instructions of a competent public authority;
e. Any person taking Preventive Measures; and
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
f. All servants or agents of persons mentioned in paragraphs (c), (d) and (e) hereof, unless the damage resulted from their personal act or
omission, committed with the intent to cause such damage, or committed recklessly and with knowledge that such damage would probably
result: Provided, That nothing in this Act shall prejudice any right of recourse of the Owner against third parties.

2. Safety and Environment Clause in Bunker Contract

3. Liability for Abatement of Pollution in Towage Contract

PART III - CIVIL AVIATION LAW

CHAPTER I - AIR TRANSPORTATION

1. Civil Aviation, in general

“Aeronautics or aviation” refers to the science and art of flight. “Civil aviation” refers to the operation of any civil aircraft for the purpose of general
aviation operations, aerial work or commercial air transport operations.

“Aircraft” refers to any machine that derive support in the atmosphere from the reactions of the air other than the reactions of the air against the earth’s
surface. The term “aircraft”, when used in the Civil Aviation Act of 2008 or in regulations issued under the same Act, shall refer to civil aircraft only, and
will not include State or public aircraft.

2. Governing Laws
2.1. Civil Code
2.2. Civil Aviation Authority (RA No. 9497, 2008)
2.3. Civil Aeronautics Act (RA No. 776, 1952)1
2.4. Warsaw Convention and Other Treaties Governing Civil Aviation

3. Regulatory Perspectives (Kuwait Airways Corporation vs. Philippine Airlines, G.R. No. 156087)

Airline companies in the Philippines are subject to different regulatory perspectives.

There is no doubt that Philippine Airlines forebears under several regulatory perspectives.
First, its authority to operate air services in the Philippines derives from its legislative franchise and is accordingly bound by
whatever limitations that are presently in place or may be subsequently incorporated in its franchise.
Second, Philippine Airlines is subject to the other laws of the Philippines, including R.A. No. 776, which grants regulatory power
to the CAB over the economic aspect of air transportation.
Third, there is a very significant public interest in state regulation of air travel in view of considerations of public safety, domestic
and international commerce, as well as the fact that air travel necessitates steady traversal of international boundaries, the
amity between nations.
At the same time, especially since Philippine Airlines was already under private ownership at the time the CMU was entered into, we
cannot presume that any and all commitments made by the Philippine government are unilaterally binding on the carrier even if this comes
at the expense of diplomatic embarrassment. While it may have been, prior to the privatization of Philippine Airlines, that the Philippine
Government had the authority to bind the airline in its capacity as owner of the airline, under the post-privatization era, however, whatever
authority of the Philippine Government to bind Philippine Airlines can only come in its capacity as regulator
As with all regulatory subjects of the government, infringement of property rights can only avail with due process of law. Legislative
regulation of public utilities must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or
appropriating private property without due process of law, nor of confiscating or appropriating private property without just compensation,
nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise. The power to regulate is
subject to these constitutional limits.

3.1. CAB Authority to Order Termination of Commercial Agreements

The government through the Civil Aeronautics Board has the indispensable authority to compel local air carrier to comply with government determined
policies, even at the expense of economic rights. The airline industry is a sector where government abjuration is least desired. Hence, the CAB has
ample power under its organizing charter, to compel an airline, in proper cases, to terminate whatever commercial agreements the carrier may have.
Section 10 of RA 776 grants to the CAB the “general supervision and regulation of, and jurisdiction and control over, air carriers as well as their property,
property rights, equipment, facilities and franchise”, and this power correlates to Section 4(c) of the same law, which mandates that the Board of CAB
consider in the exercise of its functions “the regulation of air transportation in such manner as to recognize and preserve the inherent advantages of,
assure the highest degree of safety in, and foster sound economic condition in, such transportation, and to improve the relations between, and
coordinate transportation by air carriers.

4. Philippine Aircraft
[Republic Act No. 9497 or the Civil Aviation Authority Act of 2008 (CAAA)]

SEC 3 (xx) "Philippine aircraft" means an aircraft registered in the Philippines in accordance with the requirements of this Act.

5. Registration of Philippine Aircraft

“Philippine aircraft” means an aircraft registered in the Philippines in accordance with the requirements of the Civil Aviation Authority Act of 2008. This is
consistent with Article 17 Chapter III of the Chicago Convention which provides that “aircraft have the nationality of the State in which they are
registered”. The Chicago Convention likewise provides that every aircraft engaged in international air navigation shall bear its appropriate nationality and
registration marks.

The Chicago Convention provides that “an aircraft cannot be validly registered in more than one State, but its registration may be changed from one
State to another.”

Aircraft registration is made in accordance with the following provisions of the Civil Aviation Authority Act of 2008:
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
SEC. 43. Establishment of Registry. - The Authority shall:
(a) Establish and maintain a system for the national registration of aircraft in the Philippines;
(b) Establish and maintain a system for the registration of liens, mortgages or other interests in aircraft or aircraft engines; and
(c) Have sole authority to register aircraft and liens, mortgages or other interests in aircraft or aircraft engines.
SEC. 44. Eligibility for Registration. - Except as otherwise provided in the Constitution and existing treaty or treaties, no aircraft shall be eligible for
registration unless it is owned by or leased to a citizen or citizens of the Philippines or corporations or associations organized under the laws of the
Philippines at least sixty per centum(60%) of whose capital is owned by Filipino citizens. That, under such rules and regulations to be promulgated by
the Board, foreign-owned or registered aircraft may be registered if utilized by members of aero clubs organized for recreation, sport or the development
of flying skills as a prerequisite to any aeronautical activities of such clubs within the Philippine airspace. (R.A. 776, P.D. 1278, E.O. 546, and B.P. 504)
Such certificate shall be conclusive evidence of nationality for international purposes, but not in any proceeding under the laws of the Republic of the
Philippines.
The certificate of registration is conclusive evidence of ownership, except in a proceeding where such ownership is, or may be, at issue.

SEC. 45. Application for Aircraft Registration. - Applications for certificate of registration shall be made in writing, signed and sworn to by the owner or
lessee of any aircraft or aircraft engine eligible for registration. The application shall also state: (a) the date and place of filing; (b) the specification,
construction and technical description of the aircraft or aircraft engine; and (c) such other information as may be required by the Authority in such
manner and form as the Authority may prescribe by regulation.

SEC. 46. Issuance of Certificate of Registration. - Should the Director General, upon considering the application for registration, find the aircraft or
aircraft engine eligible for registration, such aircraft shall be registered under the provisions of this Act and the owner thereof shall be issued a certificate
of registration.

SEC. 47. Nationality. - An aircraft shall acquire Philippine nationality when registered pursuant to this Act.

SEC. 48. Revocation. - Any certificate of registration may be revoked by the Authority for any cause which renders the aircraft ineligible for registration.

SEC. 54. Previously Unrecorded Ownership. - Applications for the issuance or renewal of an airworthiness certificate for aircraft whose ownership has
not been recorded as provided in this Act shall contain such information with respect to the ownership of the aircraft as the Director General shall deem
necessary to show who have property interests in such aircraft and the nature and extent of such interest.

The State of Registry refers to the State on whose register the aircraft is entered. Hence, an aircraft is a Philippine National if the same is registered with
the Civil Aviation Authority of the Philippines. The Certificate of Registration issued by the Civil Aviation Authority of the Philippines shall be deemed
conclusive evidence of nationality for international purposes. The Certificate of Registration shall be carried aboard the aircraft in all the operations.

The registry of aircraft and any transfer, lien, mortgage or other interests in aircraft or aircraft engines is maintained by the CAAP. The CAAP is given the
sole authority to register aircraft and liens, mortgages or other interests in aircraft or aircraft engines.

An aircraft shall be eligible for registration if the following requirements are present:

1. The aircraft it is owned by or leased to a citizen or citizens of the Philippines or corporations or associations organized under the laws of the
Philippines at least 60% of whose capital is owned by Filipino citizens; and
2. The aircraft is not registered under the laws of any foreign country

Exceptionally, foreign-owned or registered aircraft may be registered if utilized by members of aero clubs organized for recreations, sport or the
development of flying skills as a prerequisite to any aeronautical activities of such clubs within the Philippine airspace.

No aircraft can be operated in the Philippines unless it displays nationality and registration marks. Permanent marking of aircraft nationality and
registration shall be painted on the aircraft or affixed by other means ensuring a similar degree of permanence. The nationality mark of the Philippine
registered aircraft is “RP”.

The certificate of registration is conclusive evidence of ownership, except in a proceeding where such ownership is, or may be, at issue.

6. Persons Involved in Air Transportation

6.1. Air Carrier or Operator

A person who undertakes, whether directly or indirectly, or by lease or any other arrangements, to engage in air transportation services or air commerce.

6.1.1 Philippine

“Philippine air carrier” - an air carrier who is a citizen of the Philippines

6.1.2. Foreign

“Foreign air carrier or foreign air operator” - any operator, not being a Philippine air operator, which undertakes, whether directly or indirectly or by lease
or any other arrangement, to engage in commercial air transport operations within borders or airspace of the Philippines, whether on a scheduled or
chartered basis.

6.2. Airman

Any individual who engages, as the person in command or as pilot, mechanic. aeronautical engineer, flight radio operator or member of the crew, in the
navigation of aircraft while under way and any individual who is directly in charge of inspection, maintenance, overhauling, or repair of aircraft, aircraft
engine, propellers or appliances and individual who serves in the capacity of aircraft dispatcher or air traffic control operator.

6.3. General Sales Agent

 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)

A person, who, pursuant to an authority from an airline, by itself or through an agent, sells or offers for sale any air transportation or negotiates for or
holds himself by solicitation, advertisement, or otherwise as one who sells. provides, furnishes, contracts or arranges for, such air transportation.

6.4. Cargo Sales Agent

Any person who does no directly operate and aircraft for the purpose of engaging in air transportation or air commerce and who, as principal or agent,
sells or offers for sale any transportation of cargo or negotiates for or holds himself by solicitation, advertisement, or otherwise as one who sells.
provides, furnishes, contracts or arranges for, such air transportation of cargo.

6.5. Air Freight Forwarder

Any indirect air carrier which, in the ordinary and usual course of its undertaking, assembles and consolidates or provides for assembling and
consolidating such property and performs or provides for the performance of break-bulking and distributing operations with respect to consolidated
shipments, and is responsible for the transportation of property from the point of receipt to the point of destination and utilizes for the whole or any part of
such transportation the services of a direct air-carrier.

6.6. Off-Line Carrier

Any foreign air carrier not certificated by the Board, but who maintains office or who has designated or appointed agents or employees in the Philippines,
who sells or offers for sale any air transportation in behalf of said foreign air carrier and/or other, or negotiate for, or holds itself out by solicitation,
advertisement, or otherwise sells, provides, furnishes, contracts, or arranges for such transportation.

6..7. Air Taxi Operator

An air carrier utilizing small aircraft for charter trip and/r individual service transportation within the territory of the Republic of the Philippines with proper
certification and permit from the CAB.

7. Charter Flight (CAB Economic Regulation No. 2); Kinds

Charter flight or charter trip means air transportation performed by an air carrier where the entire capacity if one or more aircraft, or less than the entire
capacity of an aircraft, has been engaged for the movement of persons and their personnel baggage or or the movement of property on a time, mileage
or trip basis.

1. By a person for his own use

2. By a representative of a group for the use of such group
3. By an airfreight forwarder holding a currently effective permit

7.1. On-route

Refers to service performed by an air carrier between points between which said carrier is authorized to provide service pursuant to its certificate of
public convenience and necessity of foreign air carrier permit.

7.2. Off-route

Any charter that is not On-route.

7.3. Pro-rata

A charter the cost of which is divided among the passengers transported.

7.4. Single Entity

A charter the cost of which is borne by the charterer and not by the individual passengers, directly or indirectly.

7.5. Mixed

A charter the cost of which is borne, or pursuant to a contract may be borne, partly by the charter participants and partly by the charterer.

CHAPTER II - DUTIES OF AIR CARRIERS

1. Extraordinary Diligence

Due diligence in air transportation includes the obligation to make sure that the aircraft is airworthy, that the vessel has a competent captain and crew,
and that the captain and his crew exercised extraordinary diligence in operating the aircraft.

Extraordinary diligence likewise requires the carrier to provide competent and well trained crew. This duty is therefore not complied with if the pilot had
been inflicted with a tumor for a long time.

The carrier is likewise deemed to have failed to exercise extraordinary diligence if the plane did not take the designated route and the tragic crash could
have been avoided had it taken said designated route.

1.1. Yrasuegui vs PAL, supra

Facts: Petitioner was a former international flight steward of PAL, herein respondent. Petitioner was dismissed because of his failure to adhere to the
weight standards of the airline company. Petitioner claims that he was illegally dismissed.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Issue: Whether or not petitioner was discriminated against when he was dismissed.

Held: Petition denied. To make his claim more believable, petitioner invokes the equal protection clause guaranty of the Constitution. However, in the
absence of governmental interference, the liberties guaranteed by the Constitution cannot be invoked. Put differently, the Bill of Rights is not meant to be
invoked against acts of private individuals. Indeed, the US Supreme Court, in interpreting the 14th Amendment, which is the source of our equal
protection guarantee, is consistent in saying that the equal protection erects no shield against private conduct, however discriminatory or wrongful.
Private actions, no matter how egregious, cannot violate the equal protection guarantee.
1.2. PAL vs Court of Appeals, G.R. No. L-46558
FACTS:
• December 1950, he complained to PAL through its authorized official about the slow reaction and poor judgment of Captain Bustamante.
Notwithstanding said complaint, defendant allowed the pilot to continue flying.
• January 8, 1951: Jesus V. Samson flew as co-pilot on a regular flight from Manila to Legaspi with stops at Daet, Camarines Norte and
Camarines Sur, with Captain Bustamante as commanding pilot of a PAL C-47 plane
• on attempting to land the plane at Daet airport, Captain Bustamante due to his very slow reaction and poor judgment overshot the airfield and
as a result, notwithstanding the diligent efforts of the Samson to avert an accident, the airplane crashlanded beyond the runway; that the jolt
caused the head of the plaintiff to hit and break through the thick front windshield of the airplane causing him severe brain concussion, wounds
and abrasions on the forehead with intense pain
• instead of expert and proper medical treatment called for by the nature and severity of his injuries, PAL simply referred him to a company
physician, a general medical practitioner, who limited the treatment to the exterior injuries without examining the severe brain concussion
• several days after the accident, PAL called back the Samson to active duty as co-pilot, and was never given any examination
• he had been having periodic dizzy spells and had been suffering from general debility and nervousness
• December 21, 1953: he was discharged due to his physical disability CFI: PAL to pay the Samson
• P1988,000.00 as unearned income or damages
• P50,000.00 for moral damages
• P20,000.00 as attorney’s fees
• P5,000.00 as expenses of litigation
• CA: modified entitled to the legal rate of interest n unearned income

ISSUE: W/N PAL was negligent and was liable

HELD: YES. affirmed with slight modification in that the correct amount of compensatory damages is P204,000.00
• Even the doctors presented by PAL admit vital facts about the brain injury. Dr. Bernardo and Dr. Reyes admits that due to the incident, the
plaintiff continuously complained of his fainting spells, dizziness and headache everytime he flew as a co-pilot and everytime he went to the
clinic no less than 25 times
• We also find the imputation of gross negligence by respondent court to PAL for having allowed Capt. Delfin Bustamante to fly on that fateful
day of the accident on January 8, 1951 to be correct
• Bustamante was sick. He admittedly had tumor of the nasopharynx (nose)
• The fact that the complaint was not in writing does not detract anything from the seriousness thereof, considering that a miscalculation would
not only cause the death of the crew but also of the passengers.
• One month prior to the crash-landing, when the pilot was preparing to land in Daet, plaintiff warned him that they were not in the vicinity of
Daet but above the town of Ligao. The plane hit outside the airstrip. In another instance, the pilot would hit the Mayon Volcano had not
Samson warned him.
• At least, the law presumes the employer negligent imposing upon it the burden of proving that it exercised the diligence of a good father of a
family in the supervision of its employees.
• PAL would want to tie Samson to the report he signed about the crash-landing. The report was prepared by his pilot and because the latter
pleaded that he had a family too and would have nowhere to go if he lost his job, Samson’s compassion would not upturn the truth about the
crash-landing

1.3. Vda. De Abeto vs PAL, G.R. No. L-28692

FACTS:
1. Judge Quirico Abato boarded the Philippine Airline' PI-C133 plane at the Mandurriao Airport, Iloilo City for Manila
2. The plane did not reach its destination and there was news that the plane went missing.
3. After 3 weeks, it was ascertained that the plane crashed at Mt. Baco, Province of Mindoro.
4. All the passengers have been killed including Judge Quirico Abeto
5. Condrada Vda. de Abeto , the wife of the deceased, was appointed administratrix of the estate of Judge Abeto.
6. Condrada, together with her children filed a complaint for damages against Philippine Airlines for the death of Judge Abeto.
7. Philippine Airlines, on the other hand, contends that the plane crash was das due to a fortuitous event.
8. The trial court ruled in favor of Abeto and her children.

DEFENSES:
• Plane Crash was beyond the control of the pilot.
• The plane was airworthy for the purpose of conveying passengers across the country as shown by the certificate of airworthiness issued by
the Civil Aeronautics Administration.
• There was navigational error but no negligence or malfeasance on the part of the pilot.
• The plane had undergone pre-flight checks, thorough checks, terminating checks and after-maintenance checks.
• The deviation from its prescribed route was due to bad weather condition.

ISSUE:
• Is Philippine Airlines liable for violation of its contract of carriage?

RULING: Yes

The Civic Code, as the law governing the liability of common carriers, is clear and explicit:
• Art. 1773 - binds common carriers from the nature of their business and by reason of public policy to observe extraordinary in vigilance for the
safety of the passengers transported by them according to all the circumstances of each case.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
• Art. 1755 - a common carrier is required to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of every cautious persons, with due regard for all the circumstances.
• Art. 1756 - in case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently,
unless proved that they observed extra ordinary diligence.
• Art. 1757 - the responsibility of a common carrier for the safety of passengers cannot be dispensed with or lessened by stipulation, by posting
of notices, by statements on tickets, or otherwise,

PAL is liable for the death of Judge Abeto:

• The plane did not take the designated route which was Iloilo-Romblon-Manila or "Amber I", if it had taken this route, then the crash would have
not happened.
• This was even supported by the statements of Ramon Peroza (Administrative assistant of Philippine Air Lines Inc.)and Cesar Mijares
(Assistant Director of the Civil Aeronautics Administration)
• The weather during that time was clear and the pilot was supposed to cross airway "Amber I"' instead he made a straight flight to Manila in
violation of air traffic rules.
Since there’s no satisfactory explanation by PAL with regard to the accident, then the presumption is it is at fault.

2. Airworthiness (Sec 3(z), Civil Aviation Authority Act)

Airworthiness is an important requirement in transportation by air. Like vessels, aircrafts that are used by common carriers must also be fit to transport
goods and passengers. The aircraft must be in such a condition that it must be able to withstand the rigors of the flight.

Section 3 of the Civil Aeronautics Act of 2008 explains that “airworthiness” means that an aircraft, its engines, propellers, and other components and
accessories, are of proper design and construction, and are safe for air navigation purposes, such design and construction being consistent with
accepted engineering practice and in accordance with aerodynamic laws and aircraft science.

Under the Civil Aeronautics Regulation, the registered owner or operator of an aircraft is responsible for maintaining that aircraft in an airworthy
condition, including compliance with all airworthiness directives.

3. Vigilance Over Goods and Baggage

The failure of the carriers to exercise due diligence in a number of cases consists in their failure to take care of the baggage of the carrier’s passengers.
In the cases where the carriers are made liable, the baggages of their passengers are either damaged or transported to another place, or are delayed or
are otherwise lost altogether.

3.1. Cathay Pacific Airways, Ltd. vs. Court of Appeals, 207 SCRA 100 (1992)
-wrong citation. Can’t find it. PAL ata yung case. Pero Cathay nakalagay. So NVM? HAHAHA
*ibang citation to ah! Pero Cathay pa din naman.
FACTS:
Respondent Alcantara was a first class passenger of a Cathay Pacific flight to Jakarta to attend a business conference with the Director General of
Trade of Indonesia. Upon his arrival in Jakarta, he discovered that his luggage was missing. He was informed that his luggage was left behind in
Hongkong and was offered $20.00 as "inconvenience money" to buy his immediate personal needs. He had to seek postponement of his pre-arranged
conference. And when his luggage finally reached Jakarta after a day, it was required to be picked up by an official of the Philippine Embassy.

The trial court ordered Cathay to pay. The CA affirmed but increased the award of damages. SC affirmed but modified the award of damages.

Cathay argues that the one-day delay was not made in bad faith because it had a mechanical trouble wherein all pieces of luggage on board the first
aircraft bound for Jakarta were unloaded and transferred to the second aircraft which departed an hour and a half later. Cathay also argues that he was
not treated rudely and arrogantly by its employees. Also, that the CA erred in failing to apply the Warsaw Convention on the liability of a carrier to its
passengers.

ISSUE: W/N Cathay breached its contract of carriage with Alcantara and acted in bad faith?

YES. Cathay failed to deliver his luggage at the designated place and time, it being the obligation of a common carrier to carry its passengers and their
luggage safely to their destination, which includes the duty not to delay their transportation. It was not even aware that the luggage was left behind until
its attention was called by the Hongkong Customs authorities. It also refused to deliver the luggage at his hotel and required him to pick it up with an
official of the Philippine Embassy
The Cathay employees were also discourteous, rude, and insulting. He was simply advised to buy anything he wanted with only $20.00 which was
certainly not enough to purchase comfortable clothing appropriate for an executive conference. Cathay’s agents only replied, "What can we do, the
baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific."

Moral and exemplary damages are proper where in breaching the contract of carriage bad faith or fraud is shown. In the absence of fraud or bad faith,
liability is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably
foreseen.

Further, Cathay contends that the extent of its liability should be limited absolutely to that set forth in the Warsaw Convention. The said treaty does not
operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent
of that liability. The Warsaw Convention declares the carrier liable for damages in the enumerated cases and under certain limitations. However, it must
not be construed to preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for
damages for violating the rights of its passengers under the contract of carriage, especially if wilfull misconduct on the part of the carrier's employees is
found or established, as in this case.

3.2. Saludo vs. Court of Appeals, G.R. No. 95536, March 23, 1992
Facts:
Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski and Son Funeral Home of Chicago, made the necessary
preparations and arrangements for the shipment of the remains from Chicago to the Philippines. Pomierski brought the remains to Continental Mortuary
Air Services (CMAS) at the Chicago Airport which made the necessary arrangements such as flights, transfers, etc. CMAS booked the shipment with
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
PAL thru the carrier’s agent Air Care International. PAL Airway Bill Ordinary was issued wherein the requested routing was from Chicago to San
Francisco on board Trans World Airline (TWA) and from San Francisco to Manila on board PAL.

Salvacion (one of the petitioners), upon arrival at San Francisco, went to the TWA to inquire about her mother’s remains. But she was told they did not
know anything about it. She then called Pomierski that her mother’s remains were not at the West Coast terminal. Pomierski immediately called CMAS
which informed that the remains were on a plane to Mexico City, that there were two bodies at the terminal, and somehow they were switched. CMAS
called and told Pomierski that they were sending the remains back to California via Texas.

Petitioners filed a complaint against TWA and PAL fir the misshipment and delay in the delay of the cargo containing the remains of the late Crispina
Saludo. Petitioners alleged that private respondents received the casketed remains of Crispina on October 26, 1976, as evidenced by the issuance of
PAL Airway Bill by Air Care and from said date, private respondents were charged with the responsibility to exercise extraordinary diligence so much so
that the alleged switching of the caskets on October 27, 1976, or one day after the private respondents received the cargo, the latter must necessarily be
liable.

Issues:
Whether or not there was delivery of the cargo upon mere issuance of the airway bill
Whether or not the delay in the delivery of the casketed remains of petitioners’ mother was due to the fault of respondent airline companies

Held:
NO to both, but TWA was held to pay petitioners nominal damages of P40,000 for its violation of the degree of diligence required by law to be exercised
by every common carrier
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but
not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that the carrier has
received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods
in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt
alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence.
In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving
San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on
October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on October 27, 1976. Actually, it
was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer
Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are
delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the
shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by
the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in
the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where
such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti.
Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously commences
upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage.
Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the
carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.
As already demonstrated, the facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather,
as earlier explained, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on October 28, 1976 and it
was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby, private respondents
cannot be held liable.
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination within
a reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has made an express contract to transport and
deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may have arisen. This
result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from performing it without any
default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract creates a duty or charge upon himself,
he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might have provided against it by contract.
Whether or not there has been such an undertaking on the part of the carrier to be determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of contracts.
Echoing the findings of the trial court, the respondent court correctly declared that —
In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: "The carrier does not
obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby authorized to deviate from the route
of the shipment without any liability therefor", our Supreme Court ruled that common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation.
Said rights and obligations are created by a specific contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific contract had been entered into between them and the defendant airline
companies.
And this special contract for prompt delivery should call the attention of the carrier to the circumstances surrounding the case and the
approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such contract entered into in
the instant case.”
A common carrier undertaking to transport property has the implicit duty to carry and deliver it within reasonable time, absent any particular stipulation
regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages immediately and
proximately resulting from such neglect of duty. As found by the trial court, the delay in the delivery of the remains of Crispina Saludo, undeniable and
regrettable as it was, cannot be attributed to the fault, negligence or malice of private respondents, a conclusion concurred in by respondent court and
which we are not inclined to disturb.

4. Special Duties to Passengers

 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
Airline companies are sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more
accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of
rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of
carriage do not merely contract for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. A contract to
transport passengers is quite different in kind and degree from any other contractual relation, and generated a relation attended with public duty. The
operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of passengers.
Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics in revenue.

4.1. PAL vs. Lopez, G.R. No. 156654 (Nov 20, 2008)

4.2. Cathay Pacific Airways vs Sps. Vasquez, G.R. No. 150843 (Mar 14, 2003)
FACTS: In respondents’ return flight to Manila from Hongkong, they were deprived of their original seats in Business Class with their companions
because of overbooking. Since respondents were privileged members, their seats were upgraded to First Class. Respondents refused but eventually
persuaded to accept it. Upon return to Manila, they demanded that they be indemnified in the amount of P1million for the “humiliation and
embarrassment” caused by its employees. Petitioner’s Country Manager failed to respond. Respondents instituted action for damages. The RTC ruled in
favor of respondents. The Court of Appeals affirmed the RTC decision with modification in the award of damages.
ISSUE: Whether or not the petitioners (1) breached the contract of carriage, (2) acted with fraud and (3) were liable for damages.
RULING:
(1) YES. Although respondents have the priority of upgrading their seats, such priority may be waived, as what respondents did. It should have not been
imposed on them over their vehement objection.
(2) NO. There was no evident bad faith or fraud in upgrade of seat neither on overbooking of flight as it is within 10% tolerance.
(3) YES. Nominal damages (Art. 2221, NCC) were awarded in the amount of P5,000.00. Moral damages (Art.2220, NCC) and attorney’s fees were set
aside and deleted from the Court of Appeals’ ruling.

4.3. United Airlines Inc. vs Court of Appeals, G.R. No. 124110 (Apr 20, 2001)
FACTS: Aniceto Fontanilla bought from United Airlines, through the Philippine Travel Bureau in Manila, three “Visit the U.S.A.” tickets from himself, his
wife and his minor son, Mychal, to visit the cities of Washington DC, Chicago and Los Angeles. All All flights had been confirmed previously by United
Airlines. Having used the first coupon to DC and while at the Washington Dulles Airport, Aniceto changed their itinerary, paid the penalty for rewriting
their tickets and was issued tickets with corresponding boarding passes with the words: “Check-in-required.” They were then set to leave but were
denied boarding because the flight was overbooked.

The CA ruled that private respondents’ failure to comply with the check-in requirement will not defeat his claim as the denied boarding rules were not
complied with applying the laws of the USA, relying on the Code of Federal Regulation Part on Oversales of the USA.
ISSUE: WON the CA is correct in applying the laws of USA.

HELD: No. According to the doctrine of “lex loci contractus”, the law of the place where a contract is made or entered into governs with respect to its
nature and validity, obligation and interpretation shall govern. This has been said to be the rule even though the place where the contract was made is
different from the place where it is to be performed. Hence, the court should apply the law of the place where the airline ticket was issued, where the
passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline. Therefore, although, the contract of
carriage was to be performed in the United States, the tickets were purchased through petitioner’s agent in Manila. It is true that the tickets were
"rewritten" in D.C., however, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila.

4.4. Cathay Pacific Airways vs Reyes, G.R. No. 185891 (Jun 26, 2013)
Moral damages, in breaches of contract, is in order upon a showing that the defendant acted fraudulently or in bad faith
Nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindication or recognizing
that right, not for indemnifying the plaintiff for any loss suffered.

FACTS: Wilfredo Reyes made a travel reservation with Sampaguita Travel for his family’s trip to Adelaide, Australia scheduled from April 12, 1997 to
May 4, 1997. Upon cooking and confirmation of their flight schedule, Wilfredo paid for the airfare and was issued four Cathay Pacific round-trip airplane
tickets for Manila-Hong Kong-Adelaide-Hong Kong-Manila.

One week before they were scheduled to fly back home, Wilfredo reconfirmed his family’s return flight with the Cathay Pacific office in Adelaide, they
were advised that the reservation was “still okay as scheduled”. On the day of their scheduled departure from Adelaide, Wilfredo and his family arrived at
the airport on time. When the airport check-in opened, Wilfredo was informed by a staff from Cathay Pacific that the Reyeses did not have confirmed
reservations, and only Sixta’s flight booking was confirmed. Nevertheless, they were allowed to board the flight to Hong Kong due to adamant pleas from
Wilfredo. When they arrived in Hong Kong, they were again informed the same problem. Unfortunately this time, the Reyeses were not allowed to board
because the flight to Manila was fully booked. Only Sixta was allowed to proceed to Manila from Hong Kong. On the following day, the Reyeses were
finally allowed to board the next flight bound for Manila.

Upon arriving in the Philippines, Wilfredo went Sampaguita Travel to report the incident. He was informed by Sampaguita Travel that it was actually
Cathay Pacific which cancelled their bookings.

ISSUE:
Was there a breached its contract of carriage with the REYES and are the reyes entitled for damages?
Can Sampaguita travel be aslo held liable for damages due to its negligence?

HELD: Yes, Cathay Pacific breached its contract of carriage with the Reyeses when it disallowed them to board the plane in Hong Kong going to Manila
on the date reflected on their tickets. Thus, Cathay Pacific opened itself to claims for compensatory, actual, moral and exemplary damages, attorney’s
fees and costs of suit.

The Reyeses entered into a contract of carriage with Cathay Pacific. As far as respondents are concerned, they were holding valid and confirmed
airplane tickets. The ticket in itself is a valid written contract of carriage whereby for a consideration, Cathay Pacific undertook to carry respondents in its
airplane for a round-trip flight from Manila to Adelaide, Australia and then back to Manila. In fact, Wilfredo called Cathay Pacific office in Adelaide one
week before his return flight to re-confirm his booking. He was even assured by a staff of Cathay Pacific that he does not need to reconfirm his booking.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
With regards to Sampaguita Travel, the contractual relation between them and the Reyeses is a contract of services. The object of the contract is
arranging and facilitating the latter’s booking and ticketing. It was even Sampaguita Travel which issued the tickets. Since the contract between the
Reyeses and Sampaguita Travel is an ordinary one for services, the standard of care required of respondent is that of good father of a family under
Article 1173 of the Civil Code

There was indeed failure on the part of Sampaguita Travel to exercise due diligence in performing its obligations under the contract of services. It was
established by Cathay Pacific, through the generation of the Passenger Name Records (PNR), that Sampaguita Travel made two fictitious bookings for
Juanita and Michael.

Under Article 2220 of the Civil Code of the Philippines, an award of moral damages, in breaches of contract, is in order upon a showing that the
defendant acted fraudulently or in bad faith. What the law considers as bad faith which may furnish the ground for an award of moral damages would be
faith in securing the contract and in the execution thereof, as well as in enforcement of its terms, or any other kind of deceit. In the same vein, to warrant
the award of exemplary damage, defendant must have acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.

What may be attributed to Cathay Pacific is negligence concerning the lapses in their process of confirming passenger bookings and reservation, done
through travel agencies. But this negligence is not so gross as to amount to bad faith. Cathay Pacific was not motivated by malice or bad faith in not
allowing respondents to board on their return flight to Manila. It is evident and was in fact proven by Cathay Pacific that its refusal to honor the return
flight bookings of respondents was due to the cancellation of one booking and the two other bookings were not reflected on its computerized booking
system.

Likewise, Sampaguita Travel cannot be held liable for moral damages. True, Sampaguita Travel was negligent in the conduct of its booking and ticketing
which resulted in the cancellation of flights. But its actions were not proven to have been tainted with malice or bad faith. Under these circumstances,
respondents are not entitled to moral and exemplary damages. With respect to attorney’s fees, we uphold the appellate court’s finding on lack of factual
and legal justification to award attorney’s fees

Under Article 2221 of the Civil Code, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the
purpose of vindication or recognizing that right, not for indemnifying the plaintiff for any loss suffered.

The amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained by respondents considering the concept
and purpose of such damages. The amount of nominal damages to be awarded may also depend on certain special reasons extant in the case. The
amount of such damages is addressed to the sound discretion of the court and taking into account the relevant circumstance, such as the failure of
some respondents to board the flight on schedule and the slight breach in the legal obligations of the airline company to comply with the terms of the
contract, the airplane ticket and of the travel agency to make the correct bookings.

Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the bookings which led to the erroneous cancellation of respondent’s
bookings. Their negligence is the proximate cause of the technical injury sustained by respondents. Therefore, they have become joint tortfeasors,
whose responsibility for quasi-delict, under Article 2194 of the Civil Code, is solidary.

5. Duty to Inspect Cargo and Baggage

Aircraft companies which operate as public utilities or operators of aircraft which are for hire are authorized to open and investigate suspicious packages
and cargoes in the presence of the owner or shipper, or his authorized representatives if present; in order to help the authorities in the enforcement of
the provisions of RA 6235. If the owner, shipper or his representative refuses to have the same opened and inspected, the airline or air carrier is
authorized to refuse the loading thereof.

CHAPTER III - CONVENTIONS RELATING TO CIVIL AVIATION

1. Warsaw Convention as Amended

Warsaw convention applies to international air carriage. It has the force and effect of law in the Philippines and applies to all international transportation
of persons, baggage or goods performed by an aircraft gratuitously or for hire. As stated in the Preamble of the Convention, one of the objectives is “to
regulate in a uniform manner the conditions of international transportation by air.”

1.1. Authoritative Language

The French text is the only authoritative text of the Warsaw Convention.

1.2. Applicability
Article 1, WC
1. This Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward. It applies equally to gratuitous
carriage by aircraft performed by an air transport undertaking.

1.2.1. Transportation by Air

The period during which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or in the case of landing outside
an airport, in any place whatsoever (Sec 18, b, Warsaw Convention)
a) it does not cover any transportation by land, by sea, or by river performed outside an airport
b) if transportation takes place in the performance of a contract for transportation by air, for the purpose of loading, delivery, or transshipment,
any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the transportation by air
(Sec 18, c, WC)

1.2.2. International Carriage

Article 1, WC
2. For the purposes of this Convention, the expression international carriage means any carriage in which, according to the agreement between the
parties, the place of departure and the place of destination, whether or not there be a break in the carriage of a transshipment, are situated within the
territories of two High Contracting Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within the territory
of another State, even if that State is not a High Contracting Party. Carriage between two points within the territory of a single high Contracting Party
without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)

1.2.3. Gratuitous Carriage “Performed By Air Transport Undertaking”

Article 1, WC
1. This Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward. It applies equally to gratuitous
carriage by aircraft performed by an air transport undertaking.

1.2.4. Successive Air Carriers; Single Operation Clause

Article 1(3) of the Warsaw Convention states:

A carriage to be performed by several successive air carriers is deemed, for the purposes of this Convention, to be one undivided carriage, if it has been
regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts, and it does
not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the
sovereignty, suzerainty, mandate or authority of the same High Contracting Party.

1.2.5. Combined Carriage

Chapter IV - Provisions Relating to Combined Carriage
Article 31
1. In the case of combined carriage performed partly by air and partly by any other mode of carriage, the provisions of this Convention apply only to the
carriage by air, provided that the carriage by air falls within the terms of Article 1.
2. Nothing in this Convention shall prevent the parties in the case of combined carriage from inserting in the document of air carriage conditions relating
to other modes of carriage, provided that the provisions of this Convention are observed as regards the carriage by air.
1.3. Documents of Carriage
SECTION 1 – Passenger Ticket
SECTION 2 – Baggage Check
SECTION 3 – Documentation Relating to Cargo

1.3.1. Passenger Ticket

Article 3
1. For the carriage of passengers the carrier must deliver a passenger ticket which shall contain the following particulars:
a. the place and date of issue;
b. the place of departure and of destination;
c. the agreed stopping places, provided that the carrier may reserve the right to alter the stopping places in case of necessity,
and that if he exercises that right, the alteration shall not have the effect of depriving the carriage of its international character;
d. the name and address of the carrier or carriers;
e. a statement that the carriage is subject to the rules relating to liability established by this Convention.

2. The absence, irregularity or loss of the passenger ticket does not affect the existence or the validity of the contract of carriage, which shall none the
less be subject to the rules of this Convention. Nevertheless, if the carrier accepts a passenger without a passenger ticket having been delivered he shall
not be entitled to avail himself of those provisions of this Convention which exclude or limit his liability.

1.3.2. Baggage Check

Article 4

1. For the transportation of baggage, other than small personal objects of which the passenger takes charge himself, the carrier must
deliver a luggage ticket.
2. The baggage check shall be made out in duplicate, one part for the passenger and the other part for the carrier.
3. The baggage check shall contain the following particulars:
a. the place and date of issue;
b. the place of departure and of destination;
c. the name and address of the carrier or carriers;
d. the number of the passenger ticket;
e. a statement that delivery of the luggage will be made to the bearer of the luggage ticket;
f. the number and weight of the packages;
g. the amount of the value declared in accordance with Article 22(2);
h. a statement that the carriage is subject to the rules relating to liability established by this Convention.
4. The absence, irregularity or loss of the luggage ticket does not affect the existence or the validity of the contract of carriage, which shall none
the less be subject to the rules of this Convention. Nevertheless, if the carrier accepts luggage without a luggage ticket having been delivered, or
if the luggage ticket does not contain the particulars set out at (d), (f) and (h) above, the carrier shall not be entitled to avail himself of those
provisions of the Convention which exclude or limit his liability.

1.3.3. Air Waybill

Article 5
1. Every carrier of goods has the right to require the consignor to make out and hand over to him a document called an "air consignment note";
every consignor has the right to require the carrier to accept this document.
2. The absence, irregularity or loss of this document does not affect the existence or the validity of the contract of carriage which shall, subject to
the provisions of Article 9, be none the less governed by the rules of this Convention.

Article 6
1. The air consignment note shall be made out by the consignor in three original parts and be handed over with the goods.
2. The first part shall be marked "for the carrier," and shall be signed by the consignor. The second part shall be marked "for the consignee"; it
shall be signed by the consignor and by the carrier and shall accompany the goods. The third part shall be signed by the carrier and handed by
him to the consignor after the goods have been accepted.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
3. The carrier shall sign on acceptance of the goods.
4. The signature of the carrier may be stamped; that of the consignor may be printed or stamped.
5. If, at the request of the consignor, the carrier makes out the air consignment note, he shall be deemed, subject to proof to the contrary, to have
done so on behalf of the consignor.

Article 7
The carrier of goods has the right to require the consignor to make out separate consignment notes when there is more than one package.

Article 8
The air consignment note shall contain the following particulars:
● the place and date of its execution;
● the place of departure and of destination;
● the agreed stopping places, provided that the carrier may reserve the right to alter the stopping places in case of necessity, and that if
he exercises that right the alteration shall not have the effect of depriving the carriage of its international character;
● the name and address of the consignor;
● the name and address of the first carrier;
● the name and address of the consignee, if the case so requires;
● the nature of the goods;
● the number of the packages, the method of packing and the particular marks or numbers upon them;
● the weight, the quantity and the volume or dimensions of the goods;
● the apparent condition of the goods and of the packing;
● the freight, if it has been agreed upon, the date and place of payment, and the person who is to pay it;
● if the goods are sent for payment on delivery, the price of the goods, and, if the case so requires, the amount of the expenses incurred;
● the amount of the value declared in accordance with Article 22 (2);
● the number of parts of the air consignment note;
● the documents handed to the carrier to accompany the air consignment note;
● the time fixed for the completion of the carriage and a brief note of the route to be followed, if these matters have been agreed upon;
● a statement that the carriage is subject to the rules relating to liability established by this Convention.
Article 9
If the carrier accepts goods without an air consignment note having been made out, or if the air consignment note does not contain all the
particulars set out in Article 8(a) to (i) inclusive and (q), the carrier shall not be entitled to avail himself of the provisions of this Convention which
exclude or limit his liability.
Article 10
1. The consignor is responsible for the correctness of the particulars and statements relating to the goods which he inserts in the air consignment
note.
2. The consignor will be liable for all damage suffered by the carrier or any other person by reason of the irregularity, incorrectness or
incompleteness of the said particulars and statements.
Article 11
1. The air consignment note is prima facie evidence of the conclusion of the contract, of the receipt of the goods and of the conditions of carriage.
2. The statements in the air consignment note relating to the weight, dimensions and packing of the goods, as well as those relating to the
number of packages, are prima facie evidence of the facts stated; those relating to the quantity, volume and condition of the goods do not
constitute evidence against the carrier except so far as they both have been, and are stated in the air consignment note to have been, checked by
him in the presence of the consignor, or relate to the apparent condition of the goods.
Article 12
1. Subject to his liability to carry out all his obligations under the contract of carriage, the consignor has the right to dispose of the goods by
withdrawing them at the aerodrome of departure or destination, or by stopping them in the course of the journey on any landing, or by calling for
them to be delivered at the place of destination or in the course of the journey to a person other than the consignee named in the air consignment
note, or by requiring them to be returned to the aerodrome of departure. He must not exercise this right of disposition in such a way as to
prejudice the carrier or other consignors and he must repay any expenses occasioned by the exercise of this right.
2. If it is impossible to carry out the orders of the consignor the carrier must so inform him forthwith.
3. If the carrier obeys the orders of the consignor for the disposition of the goods without requiring the production of the part of the air
consignment note delivered to the latter, he will be liable, without prejudice to his right of recovery from the consignor, for any damage which may
be caused thereby to any person who is lawfully in possession of that part of the air consignment note.
4. The right conferred on the consignor ceases at the moment when that of the consignee begins in accordance with Article 13. Nevertheless, if
the consignee declines to accept the consignment note or the goods, or if he cannot be communicated with, the consignor resumes his right of
disposition.
Article 13
1. Except in the circumstances set out in the preceding Article, the consignee is entitled, on arrival of the goods at the place of destination, to
require the carrier to hand over to him the air consignment note and to deliver the goods to him, on payment of the charges due and on complying
with the conditions of carriage set out in the air consignment note.
2. Unless it is otherwise agreed, it is the duty of the carrier to give notice to the consignee as soon as the goods arrive.
3. If the carrier admits the loss of the goods, or if the goods have not arrived at the expiration of seven days after the date on which they ought to
have arrived, the consignee is entitled to put into force against the carrier the rights which flow from the contract of carriage.
Article 14
The consignor and the consignee can respectively enforce all the rights given them by Articles 12 and 13, each in his own name, whether he is
acting in his own interest or in the interest of another, provided that he carries out the obligations imposed by the contract.
Article 15
1. Articles 12, 13 and 14 do not affect either the relations of the consignor or the consignee with each other or the mutual relations of third parties
whose rights are derived either from the consignor or from the consignee.
2. The provisions of Articles 12, 13 and 14 can only be varied by express provision in the air consignment note.
Article 16
1. The consignor must furnish such information and attach to the air consignment note such documents as are necessary to meet the formalities
of customs, octroi or police before the goods can be delivered to the consignee. The consignor is liable to the carrier for any damage occasioned
by the absence, insufficiency or irregularity of any such information or documents, unless the damage is due to the fault of the carrier or his
agents.
2. The carrier is under no obligation to enquire into the correctness or sufficiency of such information or documents
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)

1.4. Liability of Air Carrier for Damages (Ex Contractu and Ex Delictu)

The carrier is liable if the passenger’s injury was inflicted:

1. On board the aircraft
2. In the course of any of the operations of embarking
3. In the course of disembarking
4. When there was or because of delay

With respect to baggage or goods that are checked in, the carrier is liable if damage occurred during air transportation or when there is delay.

1.5. Limits of Liability

The liability for injuries to passengers is 250,000 francs. However, by special contract, the carrier and the passenger may agree to a higher limit of
liability.

With respect to registered baggage and cargoes, the limit of liability of 250 francs per kg. If the passenger or consignor has made, at the time when the
package was handed over to the carrier, a special declaration of interest in delivery at destination and has a paid a supplementary sum if the case so
requires, the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that sum is greater than the actual value to the
consignor at delivery.

In determining the amount to which the carrier’s liability, only the total weight of the package or packages concerned shall be considered except when
the value of other packages covered by the same baggage check or the same air way bill are affected, the total weight of such other package, or
packages shall also be taken into consideration in determining the limit of liability.

With respect to objects which the passenger takes charge himself, the limit of liability is 5,000 francs per passenger.

1.5.1. Cargo
1.5.2. Passenger
Article 17
The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the
accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.
1.5.3. Checked-in Baggage
Art 22
2. In the carriage of registered luggage and of goods, the liability of the carrier is limited to a sum of 250 francs per kilogram, unless the consignor has
made, at the time when the package was handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary sum if
the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is greater than
the actual value to the consignor at delivery.
1.5.4. Hand-carried Baggage
Art 22
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5,000 francs per passenger.
1.6. Consequence of Willful Misconduct on the Limits of Liability
Article 25
1. The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as, in accordance with the law of the Court seised of the case, is considered to be equivalent to wilful
misconduct.
2. Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused as aforesaid by any agent of the carrier acting
within the scope of his employment.
1.7. Action for Damages; Notice of Complaint; Prescriptive Period
Article 28
1. An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the Court
having jurisdiction where the carrier is ordinarily resident, or has his principal place of business, or has an establishment by which the contract has been
made or before the Court having jurisdiction at the place of destination.
2. Questions of procedure shall be governed by the law of the Court seised of the case.
Article 29
1. The right to damages shall be extinguished if an action is not brought within two years, reckoned from the date of arrival at the destination, or from the
date on which the aircraft ought to have arrived, or from the date on which the carriage stopped.
2. The method of calculating the period of limitation shall be determined by the law of the Court seised of the case.
1.7.1. Rules on Successive Carriers
Article 30
1. In the case of carriage to be performed by various successive carriers and falling within the definition set out in the third paragraph of Article 1, each
carrier who accepts passengers, luggage or goods is subjected to the rules set out in this Convention, and is deemed to be one of the contracting parties
to the contract of carriage in so far as the contract deals with that part of the carriage which is performed under his supervision.
2. In the case of carriage of this nature, the passenger or his representative can take action only against the carrier who performed the carriage during
which the accident or the delay occurred, save in the case where, by express agreement, the first carrier has assumed liability for the whole journey.
3. As regards luggage or goods, the passenger or consignor will have a right of action against the first carrier, and the passenger or consignee who is
entitled to delivery will have a right of action against the last carrier, and further, each may take action against the carrier who performed the carriage
during which the destruction, loss, damage or delay took place. These carriers will be jointly and severally liable to the passenger or to the consignor or
consignee.
1.7.2. Venue of Suit

Article 28(1) of the Warsaw Convention.

The plaintiff may bring the action for damages before:

1. The court where the carrier is domiciled
2. The court where the carrier has its principal place of business
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
3. The court where the carrier has an establishment by which the contract has been made
4. The court of the place of destination

1.8. Jurisprudence on Liabilities of Airline Carriers

1.8.1. PAL vs Court of Appeals G.R. No. 82619 (Sept 15, 1993)
1.8.2. Zalamea vs CA (Nov 18, 1993)
FACTS:
Spouses Cesar and Suthira Zalamea, and their daughter, Liana Zalamea, purchased three (3) airline tickets from the Manila agent of respondent
TransWorld Airlines, Inc. (TWA) for a flight from New York to Los Angeles on June 6, 1984. The tickets of the spouses were
purchased at a discount of 75% while that of their daughter was a full fare ticket. All three tickets represented confirmed reservations.

While in New York, on June 4, 1984, the spouses Zalamea and their daughter received a notice of reconfirmation of their reservations for said flight. On
the appointed date, however, the spouses Zalamea and their daughter checked in at 10:00 am, an hour earlier than the scheduled flight at 11:00 am but
were placed on the wait-list because the number of passengers who checked in before tem had already taken all the seats available on the flight.

Out of the 42 names on the wait-list, the first 22 names were eventually allowed to board the flight to Los Angeles, including Cesar Zalamea. The two
others, on the other hand, being ranked lower than 22, were not able to fly. As it were, those holding full-fare ticket were given first priority among the
wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter,
who presented the discounted tickets were denied boarding. Even in the next TWA flight to Los Angeles, Mrs. Zalamea and her daughter, could not be
accommodated because it was full booked. Thus, they were constrained to book in another flight and purchased two tickets from American Airlines.

Upon their arrival in the Philippines, the spouses Zalamea filed an action for damages based on breach of contract of air carriage before the RTC of
Makati which rendered a decision in their favor ordering the TWA to pay the price of the tickets bought from American Airlines together with moral
damages and attorney’s fees. On appeal, the CA held that moral damages are recoverable in a damage suit predicated upon a breach of contract of
carriage only where there is fraud or bad faith. It further stated that since it is a matter of record that overbooking of flights is a common and accepted
practice of airlines in the United States and is specifically allowed under the Code of Federal Regulations by the Civil Aeronautics Board, neither fraud
nor bad faith could be imputed on TWA.

ISSUE:
Whether or not the CA erred in accepting the finding that overbooking is specifically allowed by the US Code of Federal Regulations and in holding that
there was no fraud or bad faith on the part of TWA ?

HELD:
The CA was in error. There was fraud or bad faith on the part of TWA when it did not allow Mrs. Zalamea and her daughter to board their flight for Los
Angeles in spite of confirmed tickets. The US law or regulation allegedly authorizing overbooking has never been proved.

1.) Foreign laws do not prove themselves nor can the court take judicial notice of them. Like any other fact, they must be alleged and proved. Written law
may be evidenced by an official publication thereof or by a copy attested by the officers having legal custody of the record, or by his deputy and
accompanied with a certificate that such officer has custody. The certificate may be made by a secretary of an embassy or legation, consul-general,
consul, vice-consul, or consular agent or by any officer in the foreign service of the Phil. stationed in the foreign country in which the record is kept and
authenticated by the seal of his office. Here, TWA relied solely on the testimony of its customer service agent in her deposition that the Code of Federal
Regulations of the Civil Aeronautic Board allows overbooking. Aside from said statement, no official publication of said code was presented as evidence.
Thus, the CA’s finding that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in fact.

"That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight for Los Angeles in spite of
confirmed tickets cannot be disputed. The U.S. law or regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove
themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged and proved. Written law may be evidenced by an
official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied with a certificate
that such officer has custody. The certificate may be made by a secretary of an embassy or legation, consul general, consul, vice-consul, or consular
agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal
of his office.
Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her deposition dated January 27, 1986 that the
Code of Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside from said statement, no official publication of said code was
presented as evidence. Thus, respondent court's finding that overbooking is specifically allowed by the US Code of Federal Regulations has no basis in
fact."

"Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in accordance with the principle of lex
loci contractus which require that the law of the place where the airline ticket was issued should be applied by the court where the passengers are
residents and nationals of the forum and the ticket is issued in such State by the defendant airline. Since the tickets were sold and issued in the
Philippines, the applicable law in this case would be Philippine law."

Other Issues:

2.) Even if the claimed US Code of Federal Regulations does exist, the same is not applicable to the case at bar in accordance with the principle of lex
loci contractus which requires that the law of the place where the airline ticket was issued should be applied by the court where the passengers are
residents and nationals of the forum and the ticket is issued in such State by the airline.

3.) Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an award of moral damages.
Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for
check in. for the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an award of moral
damages. This is so, for a contract of carriage generates a relation attended with public duty --- a duty to provide public service and convenience to its
passengers which must be paramount to self-interest or enrichment. Even on the assumption that overbooking is allowed, TWA is still guilty of bad faith
in not informing its passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there was overbooking.
Moreover, TWA was also guilty of not informing its passengers of its alleged policy of giving less priority to discounted tickets. Evidently, TWA placed
self-interest over the rights of the spouses Zalamea and their daughter under their contract of carriage. Such conscious disregard make respondent
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
TWA liable for moral damages, and to deter breach of contracts by TWA in similar fashion in the future, the SC adjudged TWA liable for exemplary
damages, as well.

1.8.3. Singson vs CA G.R. No. 119995 (Nov 18, 1997)

FACTS:
Petitioner CARLOS SINGSON and his cousin Crescentino Tiongson bought from respondent Cathay Pacific Airways two (2) open-dated, identically
routed, round trip plane tickets (Manila to LA and vice versa). Each ticket consisted of six (6) flight coupons, each would be detached at the start of each
leg of the trip.

Singson failed to obtain a booking in LA for their to Manila; apparently, the coupon corresponding to the 5th leg of the trip was missing and instead the
3rd was still attached. It was not until few days later that the defendant finally was able to arrange for his return to Manila.

Singson commenced an action for damages based on breach of contract of carriage against CATHAY before the Regional Trial Court.

CATHAY alleged that there was no contract of carriage yet existing such that CATHAY’s refusal to immediately book him could not be construed as
breach of contract of carriage.

The trial court rendered a decision in favor of petitioner herein holding that CATHAY was guilty of gross negligence amounting to malice and bad faith for
which it was adjudged to pay petitioner P20,000.00 for actual damages with interest at the legal rate of twelve percent (12%) per annum from 26 August
1988 when the complaint was filed until fully paid, P500,000.00 for moral damages, P400,000.00 for exemplary damages, P100,000.00 for attorney’s
fees, and, to pay the costs.

On appeal by CATHAY, the Court of Appeals reversed the trial court’s finding that there was gross negligence amounting to bad faith or fraud and,
accordingly, modified its judgment by deleting the awards for moral and exemplary damages, and the attorney’s fees as well.

ISSUES:
1.) whether a breach of contract was committed by CATHAY when it failed to confirm the booking of petitioner.
2.) whether the carrier was liable not only for actual damages but also for moral and exemplary damages, and attorney’s fees.

HELD:
1.) Yes. x x x the round trip ticket issued by the carrier to the passenger was in itself a complete written contract by and between the carrier and the
passenger. It had all the elements of a complete written contract, to wit: (a) the consent of the contracting parties manifested by the fact that the
passenger agreed to be transported by the carrier to and from Los Angeles via San Francisco and Hong Kong back to the Philippines, and the carrier’s
acceptance to bring him to his destination and then back home; (b) cause or consideration, which was the fare paid by the passenger as stated in his
ticket; and, (c) object, which was the transportation of the passenger from the place of departure to the place of destination and back, which are also
stated in his ticket. In fact, the contract of carriage in the instant case was already partially executed as the carrier complied with its obligation to
transport the passenger to his destination, i.e., Los Angeles. , x x x the loss of the coupon was attributable to the negligence of CATHAY’s agents and
was the proximate cause of the non-confirmation of petitioner's return flight.

2.) Yes. x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the
mishap results in the death of a passenger, or where the carrier is guilty of fraud or bad faith, there are situations where the negligence of the carrier is
so gross and reckless as to virtually amount to bad faith, in which case, the passenger likewise becomes entitled to recover moral damages.

x x x these circumstances reflect the carrier’s utter lack of care and sensitivity to the needs of its passengers, clearly constitutive of gross negligence,
recklessness and wanton disregard of the rights of the latter, acts evidently indistinguishable or no different from fraud, malice and bad faith. As the rule
now stands, where in breaching the contract of carriage the defendant airline is shown to have acted fraudulently, with malice or in bad faith, the award
of moral and exemplary damages, in addition to actual damages, is proper.

However, the P500,000.00 moral damages and P400,000.00 exemplary damages awarded by the trial court have to be reduced. The well-entrenched
principle is that the grant of moral damages depends upon the discretion of the court based on the circumstances of each case. This discretion is limited
by the principle that the "amount awarded should not be palpably and scandalously excessive" as to indicate that it was the result of prejudice or
corruption on the part of the trial court. Damages are not intended to enrich the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason of the defendant's culpable action. There is no hard-and-fast rule in the
determination of what would be a fair amount of moral damages since each case must be governed by its own peculiar facts.

In the instant case, the injury suffered by petitioner is not so serious or extensive as to warrant an award amounting to P900,000.00. The assessment of
P200,000.00 as moral damages and P50,000.00 as exemplary damages in his favor is, in our view, reasonable and realistic.

On the issue of actual damages, we agree with the Court of Appeals that the amount of P20,000.00 granted by the trial court to petitioner should not be
disturbed.

As regards attorney's fees, they may be awarded when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest. It was therefore erroneous for the Court of Appeals to delete the award made by the trial court; consequently, petitioner
should be awarded attorney's fees and the amount of P25,000.00, instead of P100,000.00 earlier awarded, may be considered rational, fair and
reasonable.

1.8.4. Lufthansa German Airlines vs CA G.R. No 836122 (Nov 4, 1994)

Facts: On September 17, 1984, Lufthansa, through SGV, issued ticket for Antiporda's confirmed flights to Malawi, Africa. Thus, on September 25, 1984,
Antiporda took the Lufthansa flight to Singapore from where he proceeded to Bombay on board the same airline. He arrived in Bombay as scheduled
and waited at the transit area of the airport for his connecting flight to Nairobi which was, per schedule given him by Lufthansa, to leave Bombay in the
morning of September 26, 1984. Finding no representative of Lufthansa waiting for him at the gate, Antiporda was able to get in touch with Lufthansa,
through the help of Air India. Ten minutes later, Gerard Matias, Lufthansa's traffic officer, arrived, asked for Antiporda's ticket and told him to just sit
down and wait. Matias returned with one Leslie Benent, duty officer of Lufthansa, who informed Antiporda that his seat in Air Kenya Flight 203 to Nairobi
had been given to a very important person of Bombay who was attending a religious function in Nairobi. Antiporda protested, stressing that he had an
important professional engagement in Blantyre, Malawi. He requested that the situation be remedied but Air Kenya Flight 203 left for Nairobi without him
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
on board. Stranded in Bombay, Antiporda was booked for Nairobi via Addis Ababa only on September 27, 1984. He finally arrived in Blantyre at 9:00
o'clock in the evening of September 28, 1984, days late for his appointment with people from the institution he was to work with in Malawi.

Antiporda's counsel wrote the general manager of Lufthansa in Manila demanding damages for the airline's malicious, wanton, disregard of the contract
of carriage. Apparently getting no positive action from Lufthansa, he filed with the Regional Trial Court of Quezon City a complaint against Lufthansa
which the trial court in its decision favored Antiporda.

Lufthansa elevated the case to the Court of Appeals arguing that it cannot be held liable for the acts committed by Air Kenya on the basis of that they
merely acted as a ticket-issuing agent in behalf of Air Kenya; consequently the contract of carriage entered into is between respondent Antiporda and Air
Kenya, to the exclusion of petitioner Lufthansa; under sections (1) and (2) Article 30 of the Warsaw Convention, an airline carrier is liable only to
untoward occurrences on its own line.

The Court of Appeals affirmed the decision on the trial court. Failing to obtain a favorable decision, Lufthansa filed this petition for review on certiorari.
Hence this petition.

Issue: Whether or not Lufthansa is liable for damages in the case at bar.

Held: In light of the stipulations expressly specified in the ticket defining the true nature of its contract of carriage with Antiporda, Lufthansa cannot claim
that its liability thereon ceased at Bombay Airport and thence, shifted to the various carriers that assumed the actual task of transporting said private
respondent. We, therefore, reject Lufthansa's theory that from the time another carrier was engaged to transport Antiporda on another segment of his
trip, it merely acted as a ticket-issuing agent in behalf of said carrier. In the very nature of their contract, Lufthansa is clearly the principal in the contract
of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. The
issuance of a confirmed Lufthansa ticket in favor of Antiporda covering his entire five-leg trip abroad successive carriers concretely attests to this. This
also serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air Kenya would honor his ticket; assure him of a space
therein and transport him on a particular segment of his trip.

1.8.5. KLM Royal Dutch Airlines vs CA G.R. No L-31150 (Jul 22, 1975)
Facts: Spouses Mendoza approached Mr. Reyes, the branch manager of Philippine Travel Bureau, for consultation about a world tour which they were
intending to make with their daughter and niece. Three segments of the trip, the longest, was via KLM. Respondents decided that one of the routes they
will take was a Barcelona-Lourdes route with knowledge that only one airline, Aer Lingus, served it. Reyes made the necessary reservations. To this,
KLM secured seat reservations for the Mendoza’s and their companions from the carriers which would ferry them throughout their trip, which the
exception of Aer Lingus. When the Mendoza’s left the Philippines, they were issued KLM tickets for the entire trip. However, their coupon for Aer Lingus
was marked “on request”.

When they were in Germany, they went to the KLM office and obtained a confirmation from Aer Lingus. At the airport in Barcelona, the Mendozas and
their companions checked in for their flight to Lourdes. However, although their daughter and niece were allowed to take the flight, the spouses
Mendozas were off loaded on orders of the Aer Lingus manager, who brusquely shoved them aside and shouted at them. So the spouses Mendozas
took a train ride to Lourdes instead.

Thus, they filed a complaint for damages against KLM for breach of contract of carriage. The trial court decided in favor of the Mendozas. On appeal, the
CA affirmed the decision. Hence, KLM brings this petition to the Supreme Court. KLM cites Art 30 of the Warsaw Convention, which states: the
passenger or his representatives can take action only against the carrier who performed the transportation during which the accident or delay occurred.
Also, KLM avers that the front cover of each ticket reads: that liability of the carrier for damages shall be limited to occurrences on its own line.

Issue: Whether or not KLM is liable for breach of contract of carriage?

Held: The applicability of Art. 30 of the Warsaw Convention cannot be sustained. The article presupposes the occurrence of delay or accident. What is
manifest here is that the Aer Lingus refused to transport the spouses Mendozas to their planned and contracted destination.

As the airline which issued the tickets, KLM was chargeable with the duty and responsibility of specifically informing the spouses of the conditions
prescribed in their tickets or to ascertain that the spouses read them before they accepted their passage tickets.

The Supreme Court held that KLM cannot be merely assumed as a ticket-issuing agent for other airlines and limit its liability to untoward occurrences on
its own line.

The court found, that the passage tickets provide that the carriage to be performed therein by several successive carriers is to be regarded as a “single
operation”.

1.8.6. Federal Express Corporation vs American Home Assurance Company G.R. No 150094 (Aug 18, 2004)
FACTS: shipper SMITHKLINE USA delivered to carrier Burlington Air Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a
shipment of 109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company in Makati City. The shipment
was covered by Burlington Airway Bill No. 11263825 with the words, ‘REFRIGERATE WHEN NOT IN TRANSIT’ and ‘PERISHABLE’ stamp marked on
its face. That same day, Burlington insured the cargoes with American Home Assurance Company (AHAC). The following day, Burlington turned over
the custody of said cargoes to FEDEX which transported the same to Manila.
The shipments arrived in Manila and was immediately stored at [Cargohaus Inc.’s] warehouse. Prior to the arrival of the cargoes, FEDEX informed
GETC Cargo International Corporation, the customs broker hired by the consignee to facilitate the release of its cargoes from the Bureau of Customs, of
the impending arrival of its client’s cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed custom’s broker who was assigned by GETC, found out, while he was about to
cause the release of the said cargoes, that the same [were] stored only in a room with 2 air conditioners running, to cool the place instead of a
refrigerator. DIONEDA, upon instructions from GETC, did not proceed with the withdrawal of the vaccines and instead, samples of the same were taken
and brought to the Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE for examination wherein it was
discovered that the ‘ELISA reading of vaccinates sera are below the positive reference serum.’
As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment and, declaring ‘total loss’ for the
unusable shipment, filed a claim with AHAC through its representative in the Philippines, the Philam Insurance Co., Inc. (PHILAM) which recompensed
SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an action for damages against the FEDEX imputing negligence on either or both
of them in the handling of the cargo.
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Trial ensued and ultimately concluded with the FEDEX being held solidarily liable for the loss. Aggrieved, petitioner appealed to the CA. The appellate
court ruled in favor of PHILAM and held that the shipping Receipts were a prima facie proof that the goods had indeed been delivered to the carrier in
good condition.

ISSUE: Is FEDEX liable for damage to or loss of the insured goods

HELD: petition granted. Assailed decision reversed insofar as it pertains to FEDEX

Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that respondents’ claim and right of action are already
barred. Indeed, this fact has never been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
“6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently describing the goods
concerned, the approximate date of the damage or loss, and the details of the claim, is presented by shipper or consignee to an office of Burlington
within (14) days from the date the goods are placed at the disposal of the person entitled to delivery, or in the case of total loss (including non-delivery)
unless presented within (120) days from the date of issue of the [Airway Bill]. xxx
Relevantly, petitioner’s airway bill states:
“12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen (14) days from receipt of the
goods; xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest,
within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods. xx
(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times
aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part.” xxx
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of a right
of action against a carrier for loss of or damage to the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to
do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it
does not constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are (1) to
inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the
nature and extent of the injury. “This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and
easily investigated so as to safeguard itself from false and fraudulent claims.
NOTES: as to proper payee:
The Certificate specifies that loss of or damage to the insured cargo is “payable to order x x x upon surrender of this Certificate.” Such wording conveys
the right of collecting on any such damage or loss, as fully as if the property were covered by a special policy in the name of the holder itself. At the
back of the Certificate appears the signature of the representative of Burlington. This document has thus been duly indorsed in blank and is deemed a
bearer instrument.
Since the Certificate was in the possession of Smithkline, the latter had the right of collecting or of being indemnified for loss of or damage to the insured
shipment, as fully as if the property were covered by a special policy in the name of the holder. Hence, being the holder of the Certificate and having an
insurable interest in the goods, Smithkline was the proper payee of the insurance proceeds.
Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt in favor of respondents. The latter were thus
authorized “to file claims and begin suit against any such carrier, vessel, person, corporation or government.” Undeniably, the consignee had a legal
right to receive the goods in the same condition it was delivered for transport to petitioner. If that right was violated, the consignee would have a cause
of action against the person responsible therefor.

1.8.7. Lhuillier vs British Airways G.R. No. 171092 (Mar 15, 2010)
FACTS: On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint for damages against respondent British Airways before the Regional Trial
Court (RTC) of Makati City. The tortuous conduct by the flight attendants of said Airways, which prompted petitioner to file a case for damages, allegedly
transpired when petitioner boarded respondent’s flight 548 from London, United Kingdom to Rome, Italy. On May 30, 2005, respondent, by way of
special appearance through counsel, filed a Motion to Dismiss on grounds of lack of jurisdiction over the case and over the person of the respondent.
Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the
Warsaw Convention, Article 28(1) of which provides:
“An action for damages must be brought at the option of the plaintiff, either before the court of domicile of the carrier or his principal place of business, or
where he has a place of business through which the contract has been made, or before the court of the place of destination.”

ISSUE: Whether or not Philippines, a signatory to the Warsaw Convention, should adhere to the provision of the Warsaw Convention in the
determination of its jurisdiction with respect to a case for damages involving a tortuous conduct committed by an airline personnel while in an
international carrier against a Filipino citizen.

HELD: Yes. It is settled that the Warsaw Convention has the force and effect of law in this country.
In Santos III v. Northwest Orient Airlines, 210 SCRA 256 (1992), we held that: The Republic of the Philippines is a party to the Convention for the
Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13,
1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was
signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became
applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our
formal adherence thereto, “to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of
the Philippines and the citizens thereof.”
The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this
country.

1.8.8. Philippine Airlines, Inc vs Savillo, G.R. No. 149547 (Jul 4, 200*)
Facts:
• Savillo was a judge of the RTC of Iloilo
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
• He was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament in Jakarta Indonesia.
• So, in order to take part in such event, he purchased a ticket from PAL with the following itinerary: Manila-Singapore-Jakarta-Singapore-
Manila.
• PAL would take them from Manila to Signapore, while Singapore Airlines would take them from Singapore to Jakarta.
• When they arrived in Singapore, Singapore Airlines rejected the tickets of Savillo because they were not endorsed by PAL. It was explained
that if Singapore Airlines honoured the tickets without PALS’ endorsement, PAL would not pay Singapore Airlines for their passage.
• Savillo demanded compensation from both PAL and Singapore Airlines, but his efforts were futile. He then sued PAL after 3 years, demanding
moral damages.
• PAL , in its MTD, claimed that the cause of action has already prescribed invoking the Warsaw Convention (providing for a 2 year prescriptive
period). Both RTC and CA ruled against PAL.
Issues:
What is the applicable law, the Civil Code or the Warsaw Convention? Has the action prescribed?
Held:
The Civil Code is applicable. Therefore the action has not yet prescribed for the prescription period is 4 years.
If cause of action claims moral damages, not covered by Warsaw Convention. Article 19 of the Warsaw Convention provides for liability on the part
of a carrier for “damages occasioned by delay in the transportation by air of passengers, baggage or goods. Article 24 excludes other remedies by
further providing that “(1) in the cases covered by articles 18 and 19, any action for damages, however founded, can only be brought subject to the
conditions and limits set out in this convention.” Therefore, a claim covered by the Warsaw Convention can no longer be recovered under local law, if the
statue of limitations of two years has elapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw Convention does not
“exclusively regulate” the relationship between passenger and carrier on an international flight.
In U.S. v. Uy, this Court distinguished between the (1) damage to the passenger’s baggage and (2) humiliation he suffered at the hands of the airline’s
employees. The First cause of action was covered by the Warsaw Convention which prescribes in two years, while the second was covered by the
provisions of the Civil Code on torts, which prescribes in four years.
In Mahaney v. Air France (US case), the court therein ruled that if the plaintiff were to claim damages based solely on the delay she experienced- for
instance, the costs of renting a van, which she had to arrange on her own as a consequence of the delay the complaint would be barred by the two–year
statute of limitations. However, where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue or unreasonable preference or
disadvantage, an act punishable under the US law, then the plaintiff may claim purely nominal compensatory damages for humiliation and hurt feelings,
which are not provided for by the Warsaw Convention.
In the Petition at bar, Savillo’s Complaint alleged that both PAL and Singapore Airlines were guilty of gross negligence, which resulted in his being
subjected to “humiliation, embarrassment, mental anguish, serious anxiety, fear and distress” therefore this case is not covered by the Warsaw
Convention.
When the negligence happened before the performance of the contract of carriage, not covered by the Warsaw Convention. Also, this case is
comparable to Lathigra v. British Airways. In that case, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days before
departure and failing to inform the latter that the flight had already been discontinued is not among the acts covered by the Warsaw Convention, since
the alleged negligence did not occur during the performance of the contract of carriage but, rather, days before the scheduled flight.
In the case at hand, Singapore Airlines barred Savillo from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of
private respondent and his companions, despite PAL’s assurances to Savillo that Singapore Airlines had already confirmed their passage. While this fact
still needs to heard and established by adequate proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention,
since the purported negligence on the party of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight.
Thus, the present action cannot be dismissed based on the Statue of Limitations provided under Article 29 of the Warsaw Convention.

1.8.9. Air France vs Gillego, G.R. No. 165266 (Dec 15, 2010)

1.8.10. Northwest Airlines, Inc vs Cuenca G.R. No. L-22425 (Aug 31, 1965)
1.8.11. Alitalia vs IAC G.R. No. 71929 (Dec 4, 1990)
1.8.12. Pan American vs IAC G.R. No. L-70462 (Aug 11, 1998)
1.8.13. China Airlines vs Chiok G.R. No. 152122 (Jul 30, 2003)
1.8.14. Santos III vs Northwest Airlines G.R. No. 101538 (Jun 23, 1992)
1.8.15. United Airlines vs Uy G.R. No. 127768 (Nov 19, 1999)

2. Chicago Convention

2.1. Sovereignty over the Airspace

Article 1. The contracting States recognize that every State has complete and exclusive sovereignty over the airspace above its territory.

2.2. Bilateral/Multilateral Air Services Agreements

2.3. Freedoms of the Air

PART IV - PUBLIC UTILITIES

CHAPTER I - PUBLIC SERVICE REGULATIONS

1. Public Interest Doctrine

1.1. Munn vs Illinois 94 US 113 (1877)
1.2. Luzon Stevedoring Co. vs PSC. G.R. No. L-5458 (Sept 16, 1953)

2. Public Utilities vs Public Service

Public Utility - a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity,
gas, water, transportation, telephone or telegraph service. It implies public use and service.

(AS DEFINIED UNDER CA 146/PUBLIC SERVICE ACT) Public Service - includes every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
without fixed route and whether 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 railways, marine repair shop, [warehouse] wharf
or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power water supply and power, petroleum, sewerage
system, wire or wireless communications system, wire or wireless broadcasting stations and other similar public services: Provided, however, That a
person engaged in agriculture, not otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a special contract
whereby said motor vehicle is offered for hire or compensation to a third party or third parties engaged in agriculture, not itself or themselves a public
service, for operation by the latter for a limited time and for a specific purpose directly connected with the cultivation of his or their farm, the
transportation, 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.

3. Who Determines Whether Enterprise is Public Utility?

3.1. JG Summit Holdings Inc. vs Court of Appeals G.R. No. 124293 (Sept 24, 2003)

4. Constitutional Provisions (Art XII)

Section 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount
of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all,
especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that
make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall
protect Filipino enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises,
including corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden the base of their ownership.

Section 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups,
including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises,
subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.

Section 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 must be citizens of the Philippines.

Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms
prescribed by it, temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest.

Section 18. 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.

Section 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed.

Section 22. Acts which circumvent or negate any of the provisions of this Article shall be considered inimical to the national interest and subject to
criminal and civil sanctions, as may be provided by law.

5. Ownership vs Operation of Public Utilities (Tatad vs Garcia, supra)

6. Basis of Regulation: Police Power (Republic vs MERALCO, G.R. No. 141314, Nov 15, 2002)

7. Policies of Liberalization and Deregulation

7.1. Deregulation of Domestic Shipping Industry (Section 8 and 11, RA No 9295, Domestic Shipping Development Act of 2004)
7.2. Liberalization of Domestic and International Civil Aviation (Executive Order No. 219, Jan 3, 1995)

8. Regulation of Rates

The regulation of public utilities includes the regulation of rates that they are charging the public. This aspect of regulation is in line with the policy of the
State to protect the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered.

Under Section 16(c) of the Public Service Act, the Public Service Commission has the power to:

To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation, mileage, kilometrage, and
other special rates which shall be imposed observed and followed thereafter by any public service: Provided, That the Commission may, in its discretion,
approve rates proposed by public services provisionally and without necessity of any hearing; but it shall call a hearing thereon within thirty days,
thereafter, upon publication and notice to the concerns operating in the territory affected: Provided, further, That in case the public service equipment of
an operator is used principally or secondarily for the promotion of a private business, the net profits of said private business shall be considered in
relation with the public service of such operator for the purpose of fixing the rates.

8.1. Non-delegation (KMU vs Garcia, G.R. No. 115831, Dec 23, 1984)

The power to fix the rates of public utilities is a power that has been delegated to the regulatory administrative agencies. As such, it cannot be further
delegated by the said administrative agencies.
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8.2. Non-discrimination

The law prohibits any common carrier from making or giving any unnecessary or unreasonable preference or advantage to any particular person,
company, firm, corporation or locality, or any particular kind of traffic, or to subject any particular person, company, firm, corporation, or locality, or any
particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever.

8.3. Standard in Fixing Rates

The only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just.
What is a just and reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent
judgment. They must not be too low nor too high. In determining whether the rate is confiscatory, it is essential also to consider the given situation,
requirements and opportunities of the utility.

8.4. Methods in Fixing Rates

9. Authority to Operate Public Utility

The power to authorize and control the operation of a public utility is admittedly a prerogative of the legislature. it is up to the Congress whether it will
delegate the power to authorize the operation of public utilities to administrative agencies

9.1. Franchise, Certificate of Public Convenience (CPC) and Certificate of Public Convenience and Necessity (CPCN) (PAL vs Civil
Aeronautics Board, G.R. No. 119528, Mar 26, 1997)

Franchise - A grant or privilege from the sovereign power

CPC - A form of regulation through the administrative agencies; does not require prior issuance of municipal franchise
CPCN - Requires prior issuance of municipal franchise

9.2. CPC; Issuance; Issuing Agency

Sections governing CPC:

Section 15. With the exception of those enumerated in the preceding section, no public service shall operate in the Philippines without possessing a
valid and subsisting certificate from the Public Service Commission known as "certificate of public convenience," or "certificate of public convenience and
necessity," as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a
proper and suitable manner.

The Commission may prescribe as a condition for the issuance of the certificate provided in the preceding paragraph that the service can be acquired by
the Republic of the Philippines or any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable depreciation; and
likewise, that the certificate shall be valid only for a definite period of time; and that the violation of any of these conditions shall produce the immediate
cancellation of the certificate without the necessity of any express action on the part of the Commission.

In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other circumstances affecting its value
in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or amendment of certificates actually in force and to those which may hereafter be issued, to permit
to modify itineraries and time schedules of public services, and to authorizations to renew and increase equipment and properties.

Section 16. Proceedings of the Commission, upon notice and hearing. - The Commission shall have power, upon proper notice and hearing in
accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary :

(a) To issue certificates which shall be known as certificates of public convenience, authorizing the operation of public service within the Philippines
whenever the Commission finds that the operation of the public service proposed and the authorization to do business will promote the public interest in
a proper and suitable manner. Provided, That thereafter, certificates of public convenience and certificates of public convenience and necessity will be
granted only to citizens of the Philippines or of the United States or to corporations, co-partnerships, associations or joint-stock companies constituted
and organized under the laws of the Philippines; Provided, That sixty per centum of the stock or paid-up capital of any such corporations, co-partnership,
association or joint-stock company must belong entirely to citizens of the Philippines or of the United States: Provided, further, That no such certificates
shall be issued for a period of more than fifty years.

Section governing CPCN:

Section 16 (b). To approve, subject to constitutional limitations any franchise or privilege granted under the provisions of Act No. Six Hundred and Sixty-
seven, as amended by Act No. One Thousand and twenty-two, by any political subdivision of the Philippines when, in the judgment of the Commission,
such franchise or privilege will properly conserve the public interests, and the Commission shall in so approving impose such conditions as to
construction, equipment, maintenance, service, or operation as the public interests and convenience may reasonably require, and to issue certificates of
public convenience and necessity when such is required or provided by any law or franchise.

9.2.1. Nature of CPC

A CPC may or may not be considered property depending on the perspective or viewpoint. A certificate is a mere privilege that is always subject to
regulation of the State. Insofar as the State is concerned a CPC constitutes neither a franchise nor a contract, confers no property right, and is a mere
license or privilege.

A common carrier who holds such certificate does not acquire a property right. CPC does not confer upon the holder any proprietary right or interest or
franchise in the public highways. It is granted with many strings attached. New and additional burdens, alterations of the certificate and even revocation
thereof are reserved to the State.

9.2.2. When CPC is not Required

 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)

Section 14. The following are exempted from the provisions of the preceding section:
(a) Warehouses;
(b) Vehicles drawn by animals and bancas moved by oar or sail, and tugboats and lighters;
(c) Airships within the Philippines except as regards the fixing of their maximum rates on freight and passengers;
(d) Radio companies except with respect to the fixing of rates;
(e) Public services owned or operated by any instrumentality of the National Government or by any government-owned or controlled corporation, except
with respect to the fixing of rates. (As amended by Com. Act 454, RA No. 2031, and RA No. 2677 )

9.2.3. Transfer of CPC

The law requires the approval of the Public Service Commission in order that a franchise or privilege pertaining thereto, may be sold or leased without
infringing the certificate issued to the grantee. the law further requires a public hearing with notice to all interested parties in order that the commission
may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is
detrimental to public interest. If the proport covered by the franchise is transferred, or leased to another without obtaining the requisite approval, the
transfer is not binding against PSC and in the contemplation of the law, the grantee continues to be responsible under the franchise in relation to the
Commission and to the public. The Registered Owner Rule applies if the transfer of the franchise was not approved by the regulating agency.

9.2.4. Revocation of CPC

Under Section 16(n) of PSA, the PSC had the power to:
To suspend or revoke any certificate issued under the provisions of this Act whenever the holder thereof has violated or willfully and contumaciously
refused to comply with any order rule or regulation of the Commission or any provision of this Act: Provided, That the Commission, for good cause, may
prior to the hearing suspend for a period not to exceed thirty days any certificate or the exercise of any right or authority issued or granted under this Act
by order of the Commission, whenever such step shall in the judgment of the Commission be necessary to avoid serious and irreparable damage or
inconvenience to the public or to private interests.

Comment: The revocation of the CPC is not justified if there is no showing of willful and contumacious violation of the law and rules.

10. Observance of Due Process

The PSC and its successor regulatory agencies are required to accord parties before them their right to administrative due process; this includes the
right to give the parties concerned notice and hearing.

10.1. Vda de Lat vs PSC G.R. No. L-34978 (Feb 26, 1988)
10.2. Cogeo-Cubao Operators & Drivers Ass. vs CA G.R. No. 100727 (Mar 18, 1992)
10.3. San Pablo vs Pantranco South Express, Inc. G.No. L-61461 (Aug 21, 1987)
10.4. Manzanal vs Ausejo 164 SCRA 36

CHAPTER II - ADMINISTRATIVE AGENCIES INVOLVED IN TRANSPORT SECTOR

1. Department of Transportation and Communication (DOTC)

1.1. Powers and Functions

EO 135-A

Sec. 5. Powers and Functions. To accomplish its mandate, the Department shall have the following powers and functions:
(a) Formulate and recommend national policies and guidelines for the preparation and implementation of integrated and comprehensive
transportation and communications systems at the national, regional and local levels;
(b) Establish and administer comprehensive and integrated programs for transportation and communications, and for this purpose, may call on
any agency, corporation, or organization, whether public or private, whose development programs include transportation and communications as an
integral part thereof, to participate and assist in the preparation and implementation of such program;
(c) Assess, review and provide direction to transportation and communication research and development programs of the government in
coordination with other institutions concerned;
(d) Administer and enforce all laws, rules and regulations in the field of transportation and communications;
(e) Coordinate with the Department of Public Works and Highways in the design, location, development, rehabilitation, improvement, construction,
maintenance and repair of all infrastructure projects and facilities of the Department. However, government corporate entities attached to the
Department shall be authorized to undertake specialized telecommunications, ports, airports and railways projects and facilities as directed by the
President of the Philippines or as provided by law;
(f) Establish, operate and maintain a nationwide postal system that shall include mail processing, delivery services, and money order services
and promote the art of philately;
(g) Issue certificates of public convenience for the operation of public land and rail transportation utilities and services;
(h) Accredit foreign aircraft manufacturers and/or international organizations for aircraft certification in accordance with established procedures
and standards;
(i) Establish and prescribe rules and regulations for identification of routes, zones and/or areas of operations of particular operators of public land
services;
(j) Establish and prescribe rules and regulations for the establishment, operation and maintenance of such telecommunications facilities in areas
not adequately served by the private sector in order to render such domestic and overseas services that are necessary with due consideration for
advances in technology;
(k) Establish and prescribe rules and regulations for the operation and maintenance of a nationwide postal system that shall include mail
processing, delivery services, money order services and promotion of philately;
(l) Establish and prescribe rules and regulations for issuance of certificates of public convenience for public land transportation utilities, such as
motor vehicles, trimobiles and railways;
(m) Establish and prescribe rules and regulations for the inspection and registration of air and land transportation facilities, such as motor vehicles,
trimobiles, railways and aircrafts;
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
(n) Establish and prescribe rules and regulations for the issuance of licenses to qualified motor vehicle drivers, conductors, and airmen;
(o) Establish and prescribe the corresponding rules and regulations for the enforcement of laws governing land transportation, air transportation
and postal services, including the penalties for violations thereof, and for the deputation of appropriate law enforcement agencies in pursuance thereof;
(p) Determine, fix and/or prescribe charges and/or rates pertinent to the operation of public air and land transportation utility facilities and services,
except such rates and/or charges as may be prescribed by the Civil Aeronautics Board under its charter, and, in cases where charges or rates are
established by international bodies or associations of which the Philippines is a participating member or by bodies or associations recognized by the
Philippine government as the proper arbiter of such charges or rates;
(q) Establish and prescribe the rules, regulations, procedures and standards for the accreditation of driving schools;
(r) Administer and operate the Civil Aviation Training Center (CATC) and the National Telecommunications Training Institute (NTTI); and
(s) Perform such other powers and functions as may be prescribed by law, or as may be necessary, incidental, or proper to its mandate or as may
be assigned from time to time by the President of the Republic of the Philippines."

1.2. Authority to Issue CPC for Public Rail Transport

2. Land Transportation Franchising and Regulatory Board (LTFRB)

2.1. Powers and Duties

EO 202

Sec. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. The Board shall have the following powers and
functions:
a. To prescribe and regulate routes of service, economically viable capacities and zones or areas of operation of public land transportation
services provided by motorized vehicles in accordance with the public land transportation development plans and programs approved by the Department
of Transportation and Communications;
b. To issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land
transportation services provided by motorized vehicles, and to prescribe the appropriate terms and conditions therefor;
c. To determine, prescribe and approve and periodically review and adjust, reasonable fares, rates and other related charges, relative to the
operation of public land transportation services provided by motorized vehicles;
d. To issue preliminary or permanent injunction, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the
pertinent provisions of the Rules of Court shall apply;
e. To punish for contempt of the Board, both direct and indirect, in accordance with the pertinent provisions of, and the penalties prescribed by,
the Rules of Court;
f. To issue subpoena and subpoena duces tecum and summon witnesses to appear in any proceedings of the Board, to administer oaths and
affirmations;
g. To conduct investigations and hearings of complaints for violation of the public service laws on land transportation and of the Board's rules
and regulations, orders, decisions and/or rulings and to impose fines and/or penalties for such violations;
h. To review motu proprio the decisions/actions of the Regional Franchising and Regulatory Office herein created;
i. To promulgate rules and regulations governing proceedings before the Board and the Regional Franchising and Regulatory Office: Provided,
That except with respect to paragraphs d, e, f and g hereof, the rules of procedure and evidence prevailing in the courts of laws should not be controlling
and it is the spirit and intention of said rules that the Board and the Regional Franchising and Regulatory Offices shall use every and all reasonable
means to ascertain facts in its case speedily and objectively and without regard to technicalities of law and procedures, all in the interest of due process;
j. To fix, impose and collect, and periodically review and adjust, reasonable fees and other related charges for services rendered;
k. To formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public utilities, standards of
measurements and/or design, and rules and regulations requiring operators of any public land transportation service to equip, install and provide in their
utilities and in their stations such devices, equipment facilities and operating procedures and techniques as may promote safety, protection, comfort and
convenience to persons and property in their charges as well as the safety of persons and property within their areas of operations;
l. To coordinate and cooperate with other government agencies and entities concerned with any aspect involving public land transportation
services with the end in view of effecting continuing improvement of such services; and
m. To perform such other functions and duties as may be provided by law, or as may be necessary, or proper or incidental to the purposes and
objectives of this Executive Order

2.2. Carriers and Covered

3. Land Transportation Office (LTO)

3.1. Powers and Duties

LTO shall control as far as they apply, the registration and operation of motor vehicles and the licensing of owners, dealers, conductors, driver and
similar matters.

It has the following powers:

1. Inspection and regulation of motor vehicles
2. Issuance of license and permits
3. Enforcement of land transportation rules and regulations
4. Adjudication of traffic case

3.2. Distinguished from LTFRB

4. Civil Aeronautics Board (CAB)

The agency charged with the power to regulate the economic aspects of air transportation in the Philippines. It shall have the general supervision and
jurisdiction over air carriers a well as their properties, property rights, equipment and franchise. It is mandated to regulate, promote, and develop the
economic aspect of air transportation in the Philippines and ensure that existing CAB policies are adopted to the present and future air commerce of the
Philippines. In addition, CAB has supervision, jurisdiction and control over air carrier, general sales agents, cargo sales agents, and airfreight forwarders.

4.1. Policies
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)

RA 776

Section 4. Declaration of policies. - In the exercise and per-formance of its powers and duties under this Act, the Civil Aeronautics Board and the Civil
Aeronautics Administrator shall consider the following, among other things, as being in the public interest, and in accordance with the public
convenience and necessity:
1. The development and utilization of the air potential of the Philippines.
2. The encouragement and development of an air transportation system properly adapted to the present and future of foreign and domestic
commerce of the Philippines, of the Postal Service, and of the National Defense;
3. The regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the highest degree of
safety in, and foster sound economic condition in, such transportation, and to improve the relations between, and coordinate transportation by,
air carriers;
4. The promotion of adequate, economical and efficient service by air carriers at reasonable charges, without unjust discriminations, undue
preferences or advantages, or unfair or destructive competitive practices;
5. Competition between air carriers to the extent necessary to assure the sound development of an air transportation system properly adapted to
the need of the foreign and domestic commerce of the Philippines, of the Postal Service, and of the National Defense;
6. To promote safety of flight in air commerce in the Philippines; and
7. The encouragement and development of civil aeronautics
4.2. Powers and Duties

1. Licensing of domestic and international airlines, the latter with the approval of the President
2. Regulation of fares and rates for the carriage of persons and property
3. Enforcement of the economic provisions of RA 776
4. Authorization of navigation of foreign aircraft in the Philippines
5. Participation in the negotiation of air agreements covering exchange of air rights
6. Approval or disapproval of mergers, consolidations, interlocking relationship and inter-airline agreements
7. Regulation of air accounting practices and development of air carrier reporting system
8. Maintenance of public record of tariffs, schedules and other materials required to be filed by air carriers
9. Assure protection of the public by requiring the performance if safe and adequate air service, eliminating rate discrimination, unfair competition
and deceptive practices in air transportation
10. Suggest corrective measures to improve safety in air commerce
11. Review, reverse, modify or affirm on appeal the administrative decision or order of the Assistance Secretary of Air Transportation on matters
pertaining to:
a. grounding of airmen and aircraft
b. revocation of any certificate or denial by the assistant secretary of issuance of any certificate
c. imposition of civil penalty or fine by the assistant secretary in connection with violation of any provisions of RA 776
12. Determine whether to impose, remit, mitigate, increase or compromise the civil penalties imposed by the Assistant Secretary for Air
Transportation

5. Civil Aviation Authority of the Philippines (CAAP)

5.1. Distinguished from CAB

6. Maritime Industry Authority (MARINA)

6.1. Powers and Duties

RA 9295 Section 10

(1) Register vessels;

(2) Issue certificates of public convenience or any extensions or amendments thereto, authorizing the operation of all kinds. Classes and types of
vessels in domestic shipping: Provided, That no such certificate shall be valid for a period of more than twenty-five (25) years;
(3) Modify, suspend or revoke at any time upon notice and hearing, any certificate, license or accreditation it may have issued to any domestic ship
operator;
(4) Establish and prescribe routes, zones or areas of operations of domestic ship operators;
(5) Require any domestic ship operator to provide shipping services to any coastal area, island or region in the country where such services are
necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires;
(6) Set safety standards for vessels in accordance with applicable conventions and regulations;
(7) Require all domestic ship operators to comply with operational and safety standards for vessels set by applicable conventions and regulations,
maintain its vessels in safe and serviceable conditions, meet the standards of safety of life at sea and safe manning requirements, and furnish safe,
adequate, efficient, reliable and proper service at all times;
(8) Inspect all vessels to ensure and enforce compliance with safety standards and other regulations;
(9) Ensure that all domestic ship operators shall have the financial capacity to provide and sustain safe, reliable, efficient and economic passenger or
cargo service, or both;
(10) Determine the impact which any new service shall have to the locality it will serve;
(11) Adopt and enforce such rules and regulations which will ensure compliance by every domestic ship operator with required safety standards and
other rules and regulations on vessel safety;
(12) Adopt such rules and regulations which ensure the reasonable stability of passengers and freight rates and, if necessary, to intervene in order to
protect public interest;
(13) Hear and adjudicate any complaint made in writing involving any violation of this law or the rules and regulations of the Authority;
(14) Impose such fines and penalties on, including the revocations of licenses of any domestic ship operator who shall fail to maintain its vessels in safe
and serviceable condition, or who shall violate or fail to comply with safety regulations;
(15) Investigate any complaint made in writing against any domestic ship operator, or any shipper, or any group of shippers regarding any matter
involving violations of the provisions of this Act;
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
(16) Upon notice and hearing, impose such fines, suspend or revoke certificates of public convenience or other license issued, or otherwise penalize any
ship operator, shipper or group of shippers found violating the provisions of this Act; and
(17) Issue such rules and regulations necessary to implement the provisions of this Act: Provided, That such rules and regulations cannot change or in
any way amend or be contrary to the intent and purposes of this Act.

7. Philippine Coast Guard (PCG)

7.1. Objectives and Powers

RA 9993 Section 3

The PCG shall have the following powers and functions:

(a) To enforce regulations in accordance with all relevant maritime international conventions, treaties or instruments and national laws for the promotion
of safety of life property at sea within the maritime jurisdiction of the Philippines and conduct port state control implementation;
(b) To inspections on all merchant ships and vessels, including but shall not be limited to inspections prior to departure, to ensure and enforce
compliance with safety standards, rules and regulations;
(c) To detain, stop or prevent a ship or vessel which does not comply with safety standards, rules and regulations from sailing or leaving port;
(d) To conduct emergency readiness evaluation on merchant marine vessels;
(e) Subject to the approval of the Secretary of the DOTC, to issue and enforce rules and regulation for the promotion of safety and life and property at
sea on all maritime-related activities;
(f) To coordinate, develop, establish, maintain and operate aids to navigation, vessel traffic system, maritime communications and search and rescue
facilities within the maritime jurisdiction of the Philippines;
(g) To remove, destroy or low to port, sunken or floating hazards to navigation, including illegal fish and vessels, at or close to sea lanes which may
cause hazards to the marine environment;
(h) To issue permits for the salvage of vessels and to supervise all marine salvage operations, as well as prescribe and enforce rules and regulations
governing the same;
(i) To render aid to persons and vessels in distress and conduct search rescue in marine accidents within the maritime jurisdiction of the Philippines,
including the high seas, in accordance with applicable international conventions. In the performance of this function, the PCG may enlist the services of
other government agencies and the merchant marine fleet;
(j) To investigate the inquire into the causes of all maritime accidents involving death, casualties and damage to properties;
lawphil.net
(l) To assist in the enforcement of laws on fisheries, immigration, tariff and customs, forestry, firearms and explosives, human trafficking, dangerous
drugs and controlled chemicals, transnational crimes and other applicable laws within the maritime jurisdiction of the Philippines;
(m) To board and inspect all types of merchant ships and watercrafts in the performance of this functions;
(n) To enforce laws and promulgated and administer rules and regulations for the protection of marine environment and resources from offshore sources
or pollution within the maritime jurisdiction of the Philippines;
(o) To develop oil spill response, containment and recovery capabilities against ship-based pollution;
(p) To grant, within the capabilities and consistent with its mandate, requests for assistance of other government agencies in the performance of their
functions;
(q) To organize, train and supervise the PCG Auxiliary (PCGA) for the purpose of assisting the PCG in carrying out its mandated functions; and
(r) To perform such other functions that may be necessary in the attainment of the objectives of this Act.

7.2. Delineation of Functions (vs Marina, PPA and Philippine Navy)

PAGE 684 AQUINO BOOK (PAGOD NA KO MAGTYPE HAHAHAHAHA)

8. Philippine Ports Authority (PPA)

8.1. Scope of Authority

8.2. Powers and Duties

PD 857

Section 6. Corporate Powers and Duties

(a) The corporate duties of the Authority shall be:
i. To formulate in coordination with the National Economic and Development Authority a comprehensive and practicable Port Development plan for the
State and to program its implementation, renew and update the same annually in coordination with other national agencies.
ii. To supervise, control, regulate, construct, maintain, operate, and provide such facilities or services as are necessary in the ports vested in, or
belonging to the Authority.
iii. To prescribe rules and regulations, procedures, and guidelines governing the establishment, construction, maintenance, and operation of all other
ports, including private ports in the country.
iv. To license, control, regulate, supervise any construction or structure within any Port District.
v. To provide services (whether on its own, by contract, or otherwise) within the Port Districts and the approaches thereof, including but not limited to
berthing, towing, mooring, moving, slipping, or docking any vessel;
loading or discharging any vessel;
sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.
vi. To exercise control of or administer any foreshore rights or leases which may be vested in the Authority from time to time.
vii. To coordinate with the Bureau of Lands or any other government agency or corporation, in the development of any foreshore area.
viii. To control, regulate, and supervise pilotage and the conduct of pilots in any Port District.
ix. To provide or assist in the provision of training programs and training facilities for its staff or staff of port operators and users for the efficient discharge
of its functions, duties, and responsibilities.
x. To perform such acts or provide such services as may be deemed proper or necessary to carry out and implement the provisions of this Decree.
(b) The corporate powers of the Authority shall be as follows:
i. To succeed in its corporate name.
ii. To sue and be sued in such corporate name.
 TRANSPORTATION LAW | ROSIT, JASMINE ANN A. 2C (FINALS)
iii. To adopt, alter, and use a corporate seal which shall be judicially noticed.
iv. To adopt, amend, or repeal its by-laws.
v. To create or alter its own organization or any Port Management Unit, and staff such an organization or Port Management Unit with appropriate and
qualified personnel in accordance with what may be deemed proper or necessary to achieve the objectives of the Authority.
vi. To make or enter of any kind or nature to enable it to discharge its functions under this Decree.
vii. To acquire, purchase, own, lease, mortgage, sell, or otherwise dispose of any land, port facility, wharf, quay, or property of any kind, whether
movable or immovable.
viii. To exercise the right of eminent domain, by expropriating the land or areas surrounding the Port of harbor, which in the opinion of the Authority, are
vital or necessary for the total development of the Port District.
ix. To levy dues, rates, or charges for the use of the premises, works, appliances, facilities, or for services provided by or belonging to the Authority, or
any other organization concerned with port operations.
x. To reclaim, excavate, enclose, or raise any part of the lands vested in the Authority.
xi. To dredge or provide dredging services, within a Port District of elsewhere.
xii. To acquire any undertaking affording or intending to afford facilities for the loading and discharging or warehousing of goods in the Port Districts.
xiii. To supply water or bunkers for ships.
xiv. To obtain insurance for or require the insurance of any property, movable or immovable, belonging to the Authority and/or goods in the custody of
the Authority.
xv. To do all such other things and to transfer all such business directly or indirectly necessary, incidental or conducive to the attainment of the purposes
of the Authority.
xvi. Generally, to exercise all the powers of a corporation under the Corporation Law insofar as they are not inconsistent with the provisions of this
Decree.

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