TRANSPO Golden Notes

Mercantile Law
When amount paid by the insurance company (Ci-Co-Spec)

does not fully cover the injury or loss
NOTE: In case of international carriage in air
The aggrieved party shall be entitled to recover the transportation, (i) the Montreal Convention as
deficiency from the person causing the loss or injury ratified by the Philippines in 2015; (ii) the Warsaw
(NCC, Art. 2207). Convention (iii) Civil Aviation Authority Act, may be
applicable.
Instances where the right of subrogation does
not apply (RRL-No LoCo) If the goods are to be transported from the
Philippines to a foreign country, the law of the latter
1. Where the insured by his own act releases the country shall govern the transportation contract
wrongdoer or third party liable for loss or (CC, Art. 1753; NDC. v. CA, G.R. No. L-49407, August
damage from liability 19, 1988).
2. The insurer loses his rights against the
wrongdoer since the insurer can only be
subrogated to only such rights as the insured COMMON CARRIER
may have
3. Where the insurer pays the insured the value of
the loss without notifying the carrier who has Requisites for an entity to be classified as a
in good faith settled the insured claim for loss common carrier (1996, 1997, 2000, 2002 Bar)
4. Where the insurer pays the insured for a loss or (PecofaB-LAW-FP)
risk not covered by the policy
5. Life insurance 1. Must be a Person, corporation, firm or
6. For recovery of loss in excess of insurance association;
coverage 2. Engaged in the Business of carrying or
transporting passengers or goods or both;
NOTE: Since the insurer can be subrogated to only 3. The carriage or transport must either be by
such rights as the insured may have, should the Land, water or air;
insured, after receiving payment from the insurer, 4. The service is for a Fee; and
release the wrongdoer who caused the loss, the 5. The service is offered to the Public (Art. 1732,
insurer loses his rights against the latter. But in such NCC)
a case, the insurer will be entitled to recover from
the insured whatever it has paid to the latter, unless NOTE: A pipeline operator who carries oil and other
the release was made with the consent of the petroleum products through pipes/pipelines is a
insurer (Manila Mahogany Manufacturing Corp. v. common carrier. The law does not distinguish as to
CA, G.R. No. L-52756, October 12, 1987). the means by which transportation is carried out, as
long as it is by land, water, or air. Neither does the
law require that transportation be through a motor
TRANSPORTATION LAW vehicle (First Phil. Industrial Corp. v. CA, G.R. No.
125948, December 29, 1998).
Laws that govern contracts of transportation Q: The Pereñas were engaged in the business of
transporting students from their respective
Contracts of transportation, whether by land, sea, or residences in Parañaque City to Don Bosco in
air, [i] if within the Philippines; or [ii] if the Pasong Tamo, Makati City and back. They
transportation of goods be from a foreign country to employed Alfaro as driver of the van. The
the Philippines, shall be governed by the following Zarates contracted the Pereñas to transport
laws, arranged by order of application: their son, Aaron, to and from Don Bosco.
However, a train hit the rear end of the van
1. Provisions of the New Civil Code on Common driven by Alfaro, and the impact threw nine (9)
Carriers; students in the rear, including Aaron, out of the
2. Code of Commerce; and van. Aaron landed on the path of the train, which
3. Special laws such as Carriage of Goods by the dragged his body and severed his head,
Sea (COGSA); Salvage Law; Public Service Act; instantaneously killing him.
Land Transportation and Traffic Code; Tariff
and Customs Code; and Civil Aeronautics Act The Zarates commenced an action for damages
(Art. 1735 and 1766, NCC; American President against Alfaro, the Pereñas, PNR, and Alano. The
Lines, Ltd. v. Klepper, G.R. No. L-15671, November Zarates’ claim against the Pereñas was based on
29, 1960). breach of the contract of carriage and based on
UNIVERSITY OF SANTO TOMAS

121 FACULTY OF CIVIL LAW
Transportation Laws
quasi-delict under Article 2176, Civil Code ancillary activity (De Guzman v. CA, G.R. No.
against PNR. L-4782, December 22, 1988).
b. Art. 1732 also carefully avoids making any
The Pereñas argued that they exercised the distinction between a person or enterprise
diligence of a good father of the family in the offering transportation service on a regular
selection and supervision of Alfaro by making or scheduled basis and one offering suhc
sure that Alfaro had been issued a driver’s service on an occasional, episodic or
license and had not been involved in any unscheduled basis (Ibid.).
vehicular accident prior to the collision. c. Art. 1732 does not distinguish between a
carrier offering its services to the “general
Is the operation of a school bus service public,” and one who offers services or
considered as a private carrier? solicits its business only from a narrow
segment of the general population (Ibid.).
A: NO. The Pereñas, as the operators of a school bus d. A person or entity is a common carrier and
service, were: has the obligations of the common carrier
a) engaged in transporting passengers under the Civil Code even if he did not
generally as a business, not just as a secure a Certificate of Public Convenience
casual occupation; (Ibid.).
b) undertaking to carry passengers over e. The Civil Code makes no distinction as to
established roads by the method by the means of transporting, as long as it is by
which the business was conducted; and land, water or air (First Philippine Industrial
c) transporting students for a fee. Corporation v. CA, G.R. no. 125948,
December 29, 1998).
Despite catering to a limited clientèle, the Pereñas f. The Civil Code does not provide that the
operated as a common carrier because they held transportation should be by motor vehicle
themselves out as a ready transportation (Ibid.).
indiscriminately to the students of a particular g. A person or entity may be a common
school living within or near where they operated carrier even if he has no fixed and publicly
the service and for a fee (Sps. Pereña v. Sps. Zarate, known route, maintains no terminals, and
G.R. No. 157917, August 29, 2012). issues no tickets (Asia Lighterage and
Shipping, Inc. v. CA, G.R. No. 147246, August
Test for determining whether one is a common 19, 2003).
carrier (1996 Bar) h. A person or entity need not be engaged in
the business of public transportation for
The true test for a common carrier is not the the provisions of the Civil Code on common
quantity or extent of the business actually carriers to apply to them (Fabre, Jr. v. CA,
transacted, or the number and character of the G.R. No. 111127, July 26, 1996).
conveyances used in the activity, but whether the i. The carrier can also be a common carrier
undertaking is a part of the activity engaged in by even if the operator does not own the
the carrier that he has held out to the general public vehicle or vessel that he or she operates
as his business or occupation. The question must be (Cebu Salvage Corporation v. Philippine
determined by the character of the business actually Home Assurance Corp., G.R. No. 150403,
carried on by the carrier, not by any secret intention January 25, 2007).
or mental reservation it may entertain or assert (Aquino and Hernando, 2016)
when charged with the duties and obligations that
the law imposes (Sps. Pereña v. Sps. Zarate, supra). Q: Alejandro Camaling is engaged in buying
copra, charcoal, firewood, and used bottles and
The concept of common carriers contemplated in reselling them in Cebu City. He uses two (2)
under Article 1732 of the Civil Code and the fact that big Isuzu trucks for the purpose; however, he
the said concept corresponds to the concept of has no certificate of public convenience or
“public service” under the Public Service Act results franchise to do business as a common carrier.
in the application of the following rules or On the return trips to Alegria, he loads his trucks
principles: with various merchandise of other merchants in
Alegria and in the two neighboring
a. Art. 1732 makes no distinction between municipalities. He charges them freight rates
one whose principal business activity is the much lower than the regular rates. In one of the
carrying of persons or goods or both, and return trips, one cargo truck was loaded with
one who does such carrying only as an several boxes of sardines, owned by Pedro
Rabor. While passing the zigzag road between
UNIVERSITY OF SANTO TOMAS 122

2019 GOLDEN NOTES
Mercantile Law
Carcar and Barili, the truck was hijacked by general public or to a limited few (De Guzman v. CA,
three (3) armed men who took all the boxes of G.R. No. 47822, December 27, 1988).
sardines and kidnapped the driver and his
helper, releasing them only two (2) days later. Private carrier
Rabor sought to recover from Alejandro the A private carrier is one who, without making the
value of the sardines. The latter argued that he activity a vocation, or without holding himself or
is not a common carrier. If you were the judge, itself out to the public as ready to act for all who may
would you sustain the contention of Alejandro? desire his or its services, undertakes, by special
(1991 Bar) agreement in a particular instance only, to transport
goods or persons from one place to another either
A: NO. If I were the judge, I would rule that gratuitously or for hire (Sps Pereña v. Sps Zarate,
Alejandro is a common carrier. A person who offers supra).
his services to carry passengers or goods for a fee is
a common carrier, regardless of whether he has a A carrier which does not qualify under the
certificate of public convenience or not, whether it requisites of a common carrier is deemed a private
is his main business or is incidental to such carrier (National Steel Corporation v. CA, G.R. No.
business, whether it is scheduled or unscheduled 112287, December 12, 1997).
service, and whether he offers his services to the
Common carrier v.Private carrier (2002 Bar)
COMMON CARRIER PRIVATE CARRIER

To whom the Undertakes to carry passengers or goods Carriage is generally undertaken by special
carrier caters its for the public agreement and it does not hold itself out to
services carry goods for the general public
Civil Code Provisions on Common Carriers,
Public Service Act, and other special laws
Civil Code provisions on ordinary
Governing laws relating to transportation
contracts
(CICOCA-PSA-SPEC)
Degree of
Ordinary diligence or diligence of a good
Diligence Extraordinary diligence
father of the family
required
1. If the goods are lost, destroyed or
Presumption of deteriorated.
No presumption as to negligence
Negligence 2. In case of death of or injuries to
passengers
Whether subject
Subject to regulation by a regulatory NOT subject to regulation by a regulatory
to regulation or
agency agency
not
A common carrier cannot stipulate that it
Exemption from is exempt from liability for negligence of its A private carrier may validly enter into a
liability agents or employees. Such stipulation is stipulation exempting it from liability.
void as it is against public policy
DILIGENCE REQUIRED OF COMMON CARRIERS Reasons for the requirement of extraordinary

diligence:
The diligence required of common carriers is
extraordinary diligence (NCC, Art. 1733). 1. Because of the nature of the business of
common carrier which is public service; and
It is that extreme measure of care and caution which 2. For public policy consideration - the common
persons of unusual prudence and circumspection carriers are supposed to serve the public
use for securing and preserving their own property interest and therefore, they have to exercise
or rights. The law requires common carriers to extraordinary diligence (Martin, 1989).
render service with the greatest skill and utmost
foresight (Loadmasters Services v. Glodel Brokerage, Q: Why is the defense of due diligence in the
G.R. 179446, January 10, 2011). selection and supervision of an employee not
available to a common carrier? (2002 Bar)

Transportation Laws
A: The defense of due diligence in the selection and carrier at the place of
supervision of an employee is not available to a destination until the
common carrier because the degree of diligence consignee has been
required of a common carrier is not the diligence advised of the arrival of
of a good father of a family but extraordinary the goods and has been
diligence, i.e., diligence of the greatest skill and given a reasonable
utmost foresight. opportunity thereafter
to remove them or
Q: Are common carriers liable for injuries to otherwise dispose of
passengers even if they have observed ordinary them.
diligence and care? Explain. (2015 Bar)
The requirement to observe extraordinary diligence
A: YES, common carriers are liable to injuries to begins with the actual delivery of the goods for
passengers even if the carriers observed ordinary transportation, and not merely with the formal
diligence and care because the obligation imposed execution of a receipt or bill of lading; the issuance
upon them by law is to exercise extraordinary of a bill of lading is not necessary to complete
diligence. Common carriers are bound to carry the delivery and acceptance by the carrier (Compania
passengers safely as far as human care and foresight Maritima v. Insurance Co. of North America, G.R. No.
can provide, using the utmost diligence of very L-18965, October 30, 1964).
cautious persons with a due regard for all the
circumstances. Q: In cases where the cargoes are damaged when
it is being unloaded from the vessel, is the vessel
Exercise of extraordinary diligence in the owner relieved of its responsibility to observe
carriage of goods and transport of passengers extraordinary diligence from the moment the
cargoes were delivered to the arrastre
EXTRAORDINARY DILIGENCE operator?
Carriage of Goods Transport of
Passengers A: NO. Under the Civil Code, other pertinent laws
Commencement and jurisprudence, the extraordinary responsibility
Commences from the of common carriers lasts until the time the goods
Commences from the moment the person are actually or constructively delivered by the
time the goods are who purchases the carrier to the consignee or the person who has the
unconditionally placed ticket from the carrier right to receive. There is actual delivery in contracts
in the possession of and presents himself at the for the transport of goods when possession has
received by the carrier proper place and in a been turned over to the consignee or to his duly
for transportation proper manner to be authorized agent and a reasonable time is given him
transported to remove the goods. In this case, since the
Duration discharging of the containers had not yet been
1. GR: Continues until completed at the time the damage occurred, there
the goods are delivered, was still no delivery, actual or constructive, of the
actually or cargoes (Westwind Shipping Corp v. UCPB General
constructively, by the Insurance Co., G.R. No. 200289 November 25, 2013).
carrier to the consignee
or to the person who Q: X, while driving his Toyota Altis, tried to cross
has a right to receive the railway tract of PNR along Blumentritt
them, and even when Avenida Ext., Manila. The train, as it approached
Continues until the Blumentritt Avenida Ext., applied its horn as a
they are temporarily
passenger has been warning to all the vehicles that might be
unloaded or stored in
landed at the port of crossing the railway tract, but there was really
transit
destination and has nobody manning the crossing. X was listening to
left the vessel owner’s his lpod Touch, hence, he did not hear the sound
XPN:The shipper or
dock or premises of the horn of the train and so his car was hit by
owner had made use of
the right or stoppage in the train. As a result of the accident, X suffered
transit. some injuries and his car was totally destroyed
as a result of the impact. Is PNR liable? (2012
2. Continues even Bar)
during the time the
goods are stored in a A: NO. PNR is not liable because X should have
warehouse of the known that he was crossing a place designated as

2019 GOLDEN NOTES
Mercantile Law
crossing for train, and therefore should have been Q: Fil-Asia Air Flight 9I6 was on a scheduled
more careful. passenger flight from Manila when it crashed as
it landed at the Cagayan de Oro airport. The pilot
Causes of action for failure to observe diligence miscalculated the plane's approach and
required undershot the runway. Ten passengers died at
the crash scene.
PERSON WHO HAS BASIS OF CAUSE OF
CAUSE OF ACTION ACTION AGAINST THE One of them managed to leave the plane but was
COMMON CARRIER run over by an ambulance coming to the rescue.
Third person who Tort (extra-contractual Another was an airline employee who hitched a
suffered damages negligence) free ride to Cagayan de Oro and who was not in
Breach of the contract of the passenger manifest.
Shipper of the
carriage (Culpa
goods damaged The Civil Aeronautics Authority investigation
Contractual)
Heir/s of the showed that the co-pilot who had control of the
deceased plane's landing had less than the required flying
Breach of the contract of and landing time experience, and should not
passengers or the
carriage (Culpa have been in control of the plane at the time. He
passenger himself
Contractual) was allowed to fly as a co-pilot because of the
for the injuries
sustained by him scarcity of pilots - Philippine pilots have been
recruited by foreign airlines under vastly
CAUSE OF ACTION improved flying terms and wages so that newer
OF THE INJURED BASIS OF CAUSE OF and less trained pilots are being locally
PASSENGER OR HIS ACTION deployed. The main pilot, on the other hand, had
HEIRS, IF THE a very high level of blood alcohol at the time of
PASSENGER DIES: the crash.
Culpa criminal
You are part of the team that the victims hired to
If the driver is convicted handle the case for them as a group. In your case
and it turns out that he conference, the following questions came up:
is insolvent, the heirs/
passengers may run a. Explain the causes of action legally possible
Against the under the given facts against the airline and
after the employer of
negligent driver the pilots; whom will you specifically
the driver, pursuant to
the employer’s implead in these causes of action?
subsidiary liability b. How will you handle the cases of the
under Article 103, in passenger run over by the ambulance and
relation to Arts. 100 and the airline employee allowed to hitch a free
102, RPC. ride to Cagayan de Oro? (2013 Bar)
Tort
Against the carrier A:
and driver operating a. A complaint for breach of contract of carriage
the other vehicle at can be filed against Fil-Asia Air for failure to
fault exercise extraordinary diligence in
Culpa Contractual; transporting the passengers safely from their
Direct and primary point of embarkation to their destination (Art.
1755, NCC).
The liability of the
common carrier and his A complaint based on a quasi-delict can be filed
driver as well as the against the pilots because of their fault and
Against the common negligence (Art. 2176, NCC). Fil-Asia Air can be
operator of the other
carrier at fault included for negligence in the selection and
vehicle and his driver is
joint and several (J. supervision of the pilots (Art. 2180, NCC).
Dimaampao, citing Tiu v.
Arriesgado, G.R. No. A third cause of action may be a criminal
138060, September 1, prosecution for the reckless imprudence
2004). resulting in homicide against two pilots. The
airline will be subsidiary liable for the civil

Transportation Laws
liability, only after the pilots are convicted and lost, destroyed, or deteriorated, and that the
found to be insolvent. common carrier must prove that it exercised
extraordinary diligence in order to overcome the
b. It is the driver of the ambulance and his presumption, the plaintiff must still, before the
employer who should be held liable for burden is shifted to the defendant, prove that the
damages because a passenger was run over. subject shipment suffered actual shortage. This can
This is in accordance with Articles 2176 and only be done if the weight of the shipment at the
2180 of the Civil Code. There could also be a port of origin and its subsequent weight at the port
criminal prosecution for reckless imprudence of arrival have been proven by a preponderance of
resulting in homicide against the ambulance evidence, and it can be seen that the former weight
driver and his consequent civil liability. is considerably greater than the latter weight, taking
into consideration the exceptions provided in
Since the airline employee was being Article 1734 of the Civil Code (Asian Terminals, Inc.
transported gratuitously, Fil-Asia Air was not v. Simon Enterprises, Inc., G.R. No. 177116, February
required to exercise extraordinary diligence for 27, 2013).
his safety and only ordinary care (Lara v.
Valencia, G.R. No. L-9907, June 30, 1958). Q: Peter hailed a taxicab owned and operated by
Jimmy Cheng and driven by Hermie Cortez. On
LIABILITIES OF COMMON CARRIER the way to Malate, the taxicab collided with a
passenger jeepney, as a result of which Peter’s
Presumption of negligence in the carriage of left leg was fractured. Peter sued Jimmy for
goods (1997, 2001, 2008 Bar) damages, based on contract of carriage, and
Peter won. Jimmy wanted to challenge the
GR: There is a presumption of negligence if the decision before the SC on the ground that the
goods are lost, destroyed, or deteriorated. trial court erred in not making an express
finding as to whether or not Jimmy was
XPNs: (Dica-WA-COa-Ed) responsible for the collision and, hence, civilly
1. Natural disaster or calamity which is the liable to Peter. He went to see you for advice.
proximate cause of the loss (flood, storm, What will you tell him? Explain (1990 Bar).
earthquake, lightning);
2. Acts of public enemy in war, whether A: I will advise Jimmy to desist from challenging the
international or civil; decision. The action of Peter being based on culpa
3. Act of omission of the shipper or passenger; contractual, the carrier’s negligence is presumed
4. Character of the goods or defects in the packing upon the breach of contract. The burden of proof
or container; instead would lie on Jimmy to establish that despite
5. Order or act of competent public authority (Art. an exercise of utmost diligence, the collision could
1734, NCC); or not have been avoided.
6. Exercise of extraordinary diligence (Art. 1735,
NCC). Q: In a court case involving claims for damages
arising from death and injury of bus
Presumption of negligence in the transportation passengers, counsel for the bus operator filed a
of passengers (1990, 1994 Bar) demurrer to evidence arguing that the
complaint should be dismissed because the
In case of death of or injuries to passengers, plaintiffs did not submit any evidence that the
common carriers are presumed to have been at fault operator or its employees were negligent. If
or to have acted negligently (NCC, Art. 1756). you were the judge, would you dismiss the
However, such presumption may be refuted by complaint? (1997 Bar)
proving observance of extraordinary diligence as
prescribed by Article 1733 of the NCC. A: NO. In the carriage of passengers, the failure of
the common carrier to bring the passengers safely
Q: Is it important that the plaintiff still prove to their destination immediately raises the
that the subject shipment suffered actual presumption that such failure is attributable to the
shortage before the burden is shifted to the carrier‘s fault or negligence, the plaintiff need not
defendant common carrier to prove that it adduce proof of specific acts of negligence committed
exercised extraordinary diligence? by the carrier. It is for the carrier to rebut such
presumption.
A: YES. Though it is true that common carriers are
presumed to have been at fault or to have acted Presumption of negligence
negligently if the goods transported by them are

2019 GOLDEN NOTES
Mercantile Law
The court need not make an express finding of fault PAL from any liability (British Airways v. CA, G.R. No.
or negligence of common carriers, the law imposes 121824, January 29, 1998).
liability upon common carriers, as long as it shown
that: (Con-LoDID)
VIGILANCE OVER GOODS
1. There exist a contract between the passenger
or the shipper and the common carrier; and
2. That the loss, deterioration, injury or death EXEMPTING CAUSES
took place during the existence of the contract
(Air France v. Gillego, G.R. No. 165266, December Presumption on the loss, destruction, or
15, 2010). deterioration of goods
Effect of Acquittal GR: The common carrier is presumed to have been

at fault or to have acted negligently when the goods
The acquittal of the employee of the common carrier transported are lost, destroyed, or deteriorated
in the criminal case is immaterial to the case for (Art. 1735, NCC).
breach of contract (Heirs of Marcial K. Ochoa v. G&S
Transport Corp., G.R. Nos. 170071 and 170125, March XPNs: When the same is due to any of the following
9, 2011). causes only: (FA2 – C O)
Q: Vivian Martin was booked by PAL, which 1. Fortuitous events (flood, storm, earthquake,
acted as ticketing agent of Far East Airlines, for lightning, or other natural disaster or calamity).
a round trip flight on the latter’s aircraft, from Provided, the following conditions are present:
Manila–Hong Kong- Manila. The ticket was cut a. Natural disaster was the proximate and
by an employee of PAL. The ticket showed that only cause;
Vivian was scheduled to leave Manila at b. Carrier exercised due diligence to prevent
5:30p.m. Vivian arrived at NAIA an hour before or minimize loss before, during, and after
the time scheduled in her ticket, but was told her the occurrence of the natural disaster; and
flight had left at 12:10p.m. It turned out that the c. The common carrier has not negligently
ticket was inadvertently cut and wrongly incurred delay in transporting the goods
worded. PAL employees nevertheless scheduled (Art. 1739-1740, NCC).
her to fly two hours later aboard their plane. She
agreed and arrived in Hong Kong safely. The 2. Act of the public enemy in war, whether
aircraft used by Far East Airlines had an engine international or civil, provided:
trouble, and did not make it to HK but returned a. Act was the proximate and only cause; and
to Manila. Vivian sued both PAL and Far East. b. Carrier exercised due diligence to prevent
Could either or both airlines be held liable to or minimize loss before, during, and after
Vivian? Why? (2003 Bar) the act (Art. 1739-1740, NCC).
A: Only Far East Airline is liable. The instant 3. Act or omission of the shipper or owner of the
petition was based on breach of contract of carriage; goods, provided:
therefore, Vivian can only sue Far East Airlines a. If proximate and only cause – exempting
alone, and not PAL, since the latter was not a party b. If contributory negligence – mitigating
to the contract. However, this is not to say that PAL
is relieved from any liability due to any of its 4. The Character of the goods or defects in the
negligent acts. In China Air Lines, Ltd. v. CA, while packing or in the containers; provided, carrier
not exactly in point, however, illustrates the exercised due diligence to forestall or prevent
principle which governs this particular situation. In loss (Art 1742, NCC).
that case, the carrier (PAL), acting as an agent of
another carrier, was also liable for its own negligent NOTE: If the fact of improper packing is known
acts or omission in the performance of its duties. Far to the carrier or its servants, or apparent upon
East Airlines may also file a third-party complaint ordinary observation, but it accepts the goods
against PAL for the purpose of determining who was notwithstanding such condition, it is not
primarily at fault between them. It is but logical, fair, relieved from responsibility for loss or injury
and equitable to allow Far East Airlines to sue PAL resulting therefrom (Southern Lines Inc., v. CA,
for indemnification, if it is proven that the latter’s GR No. L-16629, January 31, 1962).
negligence was the proximate cause of Vivian’s
unfortunate experience, instead of totally absolving

Transportation Laws
5. Order or act of competent authority; provided, XPN: If the fire is caused by lightning or by other
the authority is with power to issue the order natural disaster or calamity. (Eastern Shipping Lines
(Art. 1743, NCC). v. IAC, G.R. No. L-69044, May 29, 1987)
NOTE: There must be an order or act of NOTE: In case that the goods have already been
competent public authority through which the deposited in the warehouse of the Bureau of
goods are seized or destroyed (Art. 1734, NCC). Customs and the goods were then destroyed by fire,
the carrier is not anymore liable. (Servando v.
If the officer acts without legal process, the Philippine Steam Navigation, G.R. No. L-36481-2,
common carrier will be held liable (Ganzon v. October 23, 1982)
CA, GR No. L-48757, May 30, 1988).
Typhoon as a fortuitous event
In all cases other than those enumerated above,
there is presumption of negligence even if there is GR: If all the elements of a natural disaster or
an agreement limiting the liability of the common calamity concur and there was no contributory
carrier in the vigilance over the goods. negligence or delay, the occurrence of a typhoon is
a fortuitous event. This holds true especially if the
FORTUITOUS EVENT vessel was seaworthy at the time it undertook that
fateful voyage and that it was confirmed with the
REQUIREMENT OF ABSENCE OF NEGLIGENCE Coast Guard that the weather condition would
permit safe travel of the vessel to its destination
Requisites of a fortuitous event (FEU-I) (PhilAm Gen. v. MGG Marine Services, Inc., G.R. No.
135645, March 8, 2002).
1. The common carrier must be Free from any
participation in or aggravation of the injury to The loss of cargoes due to the sinking of a seaworthy
the creditor. tugboat which was suddenly tossed by waves of
2. The Event must be such as to render it extraordinary height is due to a force majeure
impossible for the common carrier to fulfill his (PhilAm Gen. v. PKS Shipping Company, G.R. 149038,
obligation in a normal manner. April 9, 2003).
3. The event must be Unforeseen or unavoidable.
4. The cause of the breach of obligation must be XPN: If a vessel sank due to a typhoon, and there
Independent of the will of the common carrier was failure to ascertain the direction of the storm
(Real v. Belo, G.R. No. 146224, January 26, 2007). and the weather condition of the path they would be
traversing, it constitutes lack of foresight and
A mechanical defect is not fortuitous event minimum vigilance over its cargoes taking into
account the surrounding circumstances of the case.
Mechanical defects in the carrier are NOT Thus, the common carrier will still be liable (Arada
considered a caso fortuito that exempts the carrier v. CA, G.R. No. 98243, July 1, 1992).
from responsibility (Sweet Lines, Inc. v. CA, G.R. No.
L-46340, April 29, 1983). Where a vessel encountered stormy weather and
the coils of wire it was transporting became rusty
Tire blowout of a jeep is not a fortuitous event because rain entered the hatch of the vessel, the
where there exists a specific act of negligence by the damage was not due to a fortuitous event, because
carrier consisting of the fact that the jeepney was heavy rains are foreseeable and rain would not have
overloaded and speeding at the time of the incident entered the hatch if it was closed properly (Eastern
(Juntilla v. Fontanar, GR No. L-45637, May 31, 1985). Shipping Lines v. CA, G.R. No. 97412, July 12, 1994).
Defective brakes cannot be considered fortuitous in Q: On a clear weather, M/V Sundo, carrying
character (Vergara v. CA, G.R. No. 77679, September insured cargo, left the port of Manila bound for
30, 1987). Cebu. While at sea, the vessel encountered a
strong typhoon forcing the captain to steer the
Fire is not considered a natural disaster vessel to the nearest island where it stayed for
seven days. The vessel ran out of provisions for
GR: Fire arises almost invariably from some act of its passengers. Consequently, the vessel
man or by human means. It does not fall within the proceeded to Leyte to replenish its supplies.
category of an act of God.
Assuming that the cargo was damaged because
of such deviation, who between the insurance

2019 GOLDEN NOTES
Mercantile Law
company and the owner of the cargo bears the XPN: Where such thieves or robbers acted "with
loss? Explain. (2005 Bar) grave or irresistible threat, violence or force." The
common carrier is not liable for the value of the
A: The insurance company is liable. It is an instance undelivered merchandise which was lost because of
of a valid deviation because the strong typhoon is a an event that is beyond his control (De Guzman v. CA,
fortuitous event over which neither the master nor supra).
the owner has any control. Deviation is likewise
proper in order to avoid a peril. Common carriers Q: M. Dizon Trucking entered into hauling
are responsible for the loss, destruction, contract with Fairgoods Co. whereby the former
deterioration of the goods unless the same is due to bound itself to haul the latter’s 2000 sacks of
any of the causes provided by law – which includes, soya bean meal from Manila Port Area to
among others, is when there is flood, storm, Calamba, Laguna. To carry out faithfully its
earthquake, lightning, or other natural disaster or obligation, Dizon subcontracted with Enrico
calamities. Moreover, even in cases where a natural Reyes the delivery of 400 sacks of the soya bean
disaster is the proximate and only cause of the loss, meal. Aside from the driver, three male
a common carrier is still required to exercise due employees of Reyes rode on the truck with the
diligence to prevent or minimize loss before, during cargo. While the truck was on its way to Laguna,
and after the occurrence of the natural disaster, for two strangers suddenly stopped the truck and
it to be exempt from liability under the law for the hijacked the cargo. Investigation by the police
loss of the goods. Such deviation is just proper in its disclosed that one of the hijackers was armed
exercise of extraordinary diligence (The Philippine with a bladed weapon while the other was
American General Insurance Co., Inc. v. MCG Marine unarmed. For failure to deliver the 400 sacks,
Services, Inc. and Gaerland, G.R. No. 135645, March Fairgoods sued Dizon for damages. Dizon in turn
28, 2005). set up a third party complaint against Reyes
which the latter registered on the ground that
Q: Philip Mauricio shipped a box of cigarettes to the loss was due to force majeure. Did the
a dealer in Naga City through Bicol Bus Company hijacking constitute force majeure to exculpate
(BBC). When the bus reached Lucena City, the Reyes from any liability? (1995 Bar)
bus developed engine trouble. The driver
brought the bus to a repair shop in Lucena A: NO. The hijacking in this case cannot be
where he was informed by the mechanic that an considered as force majeure. Only one of the two
extensive repair was necessary, which would hijackers was armed with a bladed weapon. As
take at least 2 days. While the bus was in the against four male employees of Reyes, two (2)
repair shop, Typhoon Coring lashed Quezon hijackers, with only one of them being armed with a
Province. The cargoes inside the bus, including bladed weapon, cannot be considered force
Mauricio’s cigarettes, got wet and were totally majeure. In De Guzman vs. Court of Appeals, the
spoiled. Mauricio sued BBC for damage to his Supreme Court held that hijacking, not being
cargoes. Decide. (1987 Bar) included in the provisions of Article 1734, must be
dealt with under the provisions of Article 1735 and
A: BBC is liable for damages to the cargoes lost by thus, the common carrier is presumed to have been
Mauricio. A natural disaster would relieve liability if at fault or negligent. To exculpate the carrier from
it is the proximate and only cause of the damage. liability arising from hijacking, he must prove that
The carrier itself, in this case, had been negligent. the robbers or the hijackers acted with grave or
The presumption of negligence in culpa contractual irresistible threat, violence, or force (Bascos v. CA,
is not overcome by invoking the defense that there G.R. No. 101089, April 7, 1993)
has been engine trouble, for such defense does not
preclude its having been due to the fault of the When an airline company was not authorized to
common carrier. The fact that an extensive repair search passengers for firearms, the loss of the
work was necessary which, in fact, took 2 days to jewelry and cash of a passenger because of an
complete, somehow justifies an impression that the armed robbery committed by other passengers is a
engine trouble could have been detected, if not force majeure, for which the airline company is not
already known, well before the actual breakdown. liable (Quisumbing v. CA, G.R. No L-50076, September
14, 1990).
Common carrier’s liability for the acts of
strangers or criminals NOTE: With increased concern over airplane
hijacking and terrorism has come increased security
GR: A common carrier is liable even for acts of at the nation’s airports. Passengers attempting to
strangers like thieves or robbers. board an aircraft routinely pass through metal
detectors; their carry-on baggages as well as

Transportation Laws
checked luggage are routinely subjected to x-ray Delay in the delivery of goods
scans. Should these procedures suggest the
presence of suspicious objects, physical searches The carrier shall be liable for damages immediately
are conducted to determine what the objects and proximately resulting from such neglect of duty
are. There is little question that such searches are (Ibid; Art. 1170, NCC).
reasonable, given their minimal intrusiveness, the
gravity of the safety interests involved, and the In the absence of a special contract, a carrier is not
reduced privacy expectations associated with an insurer against delay in the transportation of
airline travel. Indeed, travelers are often notified goods. The effects of delay are as follows:
through airport public address systems, signs and
notices in their airline tickets that they are subject a. If the common carrier, without just cause,
to search and, if any prohibited materials or delays the transportation of the goods or
substances are found, such would be subject to changes the stipulated or usual route, the
seizure. These announcements place passengers on contract limiting the common carrier’s liability
notice that ordinary constitutional protections cannot be availed of in case of the loss,
against warrantless searches and seizures do not destruction, or deterioration of the goods (Art.
apply to routine airport procedures (People 1747, NCC).
v. Suzuki, G.R. No. 120670, October 23, 2003).
NOTE: An agreement limiting the common
Other invalid defenses carrier’s liability for delay on account of strikes
or riots is valid (Art. 1748, NCC).
Explosion. Damage to cargo from explosion of
another cargo is not ordinarily attributable to peril b. Excusable delay in carriage merely suspends
of the sea or accidents of navigation particularly and generally does not terminate the contract of
where it occurs after the vessel has ended its voyage carriage;
and is finally moored to unload. c. The carrier shall be made liable when vessel or
vehicle is unreasonably delayed;
Worms and Rats. Whenever the ship is damaged by d. Carrier remains duty bound to exercise
worms resulting in damage to the cargo, the carrier extraordinary diligence; and
cannot cite the same as an excuse. The same is true e. Natural disaster shall not free the carrier from
with respect to damage of the cargo by rats whether responsibility (Dimaampao & Dumlao-
the cargo was directly damaged by the rats or by the Escalante, 2014).
water let in through holes gnawed by rats in the ship
or her fixtures. However, where the delay in the transportation of
the remains of a deceased person was due to the
Water Damage. Damage by seawater is not a valid fault of the mortuary service, who erroneously
excuse where the water gains entrance through a switched the casket with that of another deceased
port that had been left open or insufficiently person, the airline company cannot be held liable
fastened on sailing. for damages because of the delay (Saludo v. CA,
supra).
Barratry. The ship owner cannot escape liability to
third persons if the cause of damage is barratry. It is Although the delivery of the suitcase of a passenger
an act committed by the master or crew of the ship was delayed by eleven days, an airline company
for some unlawful or fraudulent purpose, contrary cannot be held liable for moral damages, exemplary
to their duty to the owner. (Aquino and Hernando, damages, and attorney’s fees, where the airline
2016) company was not guilty of bad faith and exerted
efforts in tracing the suitcase (Philippine Air Lines v.
ABSENCE OF DELAY Miano, G.R. No. 106664, March 8, 1995).
Rules regarding the time of delivery of goods DUE DILIGENCE TO PREVENT OR LESSEN LOSS
and delay
To free the common carrier from liability in case
1. If there is an agreement as to time of delivery – of flood, storm or other natural disaster or an act
delivery must be within the time stipulated in of a public enemy
the contract or bill of lading.
2. If there is no agreement – delivery must be 1. The common carrier must exercise due
within a reasonable time (Saludo, Jr. v. CA, G.R. diligence to prevent or minimize loss
No. 95536, March 23, 1992). before, during, and after the occurrence
(NCC Art., 1739).

2019 GOLDEN NOTES
Mercantile Law
2. The natural disaster or the act of the public the building. It smashed a taxicab which at that
enemy is the proximate and only cause of time had gone off-road and onto the sidewalk in
the loss (NCC, Art. 1740). order to avoid the traffic. The taxicab
passengers died as a result.
NOTE: If the common carrier negligently incurs
delay in transporting the goods, a natural disaster a. If you were the counsel for Sonnel
shall not free such carrier from responsibility. Construction, how would you defend your
client? What would be your theory?
Loss due to character of the goods or the faulty b. Could the heirs hold the taxicab owner and
nature of its containers driver liable? Explain. (2008 Bar)
If the loss, destruction, or deterioration of the goods A:

was caused by the character of the goods, or the a. I shall raise the affirmative defense of
faulty nature of the packing or the containers, the contributory negligence. The proximate cause
common carrier must exercise due diligence to of death is the violation of the taxi driver of
forestall or lessen the loss. traffic rules and regulations when it drove off-
road to avoid heavy traffic. The lumber that fell
Q: Because of spillage of the rice during the trip from the building was only the immediatecause
from Davao to Manila due to the bad condition of ofdeath of the victims. Further, Sonnel
the sacks, there was a shortage in the rice Construction, exercised due diligence in the
delivered by the Provident Lines Inc. to the selection and supervision of its employees.
consignee XYZ Import and Export Corporation.
The carrier accepted the shipment, knowing b. YES. Both taxicab owner and driver may be held
that the sacks had holes and some had broken liable based on breach of contract of carriage
strings. When sued, Provident Lines, Inc. alleged and negligence in the selection and supervision
that the loss was caused by the spillage of the of employees for quasi-delict. The driver can be
rice on account of the defective condition of the held criminally liable for reckless imprudence
sacks, at the time it received the shipment, and resulting to homicide and for damages under
therefore, it cannot be held liable. Decide. Give quasi-delict as provided in Article 2180— an
reasons. (1978 Bar) employer may be held solidarily liable for the
negligent act of his employee. Hence, in this
A: The maritime carrier is liable. Where the fact of case, the taxicab owner is exempted from
improper packing is known to the carrier or its liability while the taxi cab driver is liable solely
servants, or apparent upon ordinary observations, and personally for criminal prosecution.
but the carrier accepts the goods notwithstanding
such conditions, it is not relieved of liability for loss Q: A and his classmates took a bus from UP to
or injury resulting therefrom (Southern Lines, Inc. v. Quiapo. On the way, another Quiapo-bound bus
CA, 4 SCRA 259). tries to overtake them. A and his classmates
dared the bus driver to run faster and race with
CONTRIBUTORY NEGLIGENCE the other bus. The driver takes their dare, to the
delight of A and his friends who cheered him. On
Contributory negligence is the failure of a person rounding the curve, the bus driver fails to slow
who has been exposed to injury by the fault or down and the bus turns turtle, resulting in the
negligence of another, to use such degree of care for death of A and injuries to the other passengers.
his safety and protection an ordinarily prudent man
would use under the circumstances (Martin, 1989, The bus carried the following sign: “Do not talk
citing Rakes v. Atlantic Gulf Co., G.R. No. 1719, to driver while bus is on motion, otherwise the
January 23, 1907). company will not assume liability for any
NOTE: Contributory negligence on the part of the accident.”
passenger does not justify the common carrier’s
exemption from liability (Martin, 1989). Explain briefly the extent of the liability, if any,
of the bus company, giving the legal provisions
Q: Nelson owned and controlled the Sonnel and principles involved. (1983 Bar)
Construction Company. Acting for the company,
Nelson contracted the construction of a building. A: The bus company is liable for damages to A’s
Without first installing a protective net atop the heirs and to all the injured passengers. Under the
sidewalks adjoining the construction site, the Civil Code, a common carrier is duty bound to
company proceeded with the construction exercise extraordinary diligence in carrying its
work. One day, a heavy piece of lumber fell from passengers through the negligence or willful acts of

Transportation Laws
its employees even if the latter have acted beyond When the carrier has thus accepted such delivery,
the scope of their authority or in violation of their the liability of the carrier commences eo instant
orders. This liability cannot be eliminated or limited (Saludo, Jr. v. CA, G.R. No. 95536, March 23, 1992,
by stipulation or by posting notices. Although it may citing 13 Am. Jur. 2d, Carriers, 763-764).
be argued that A was guilty of contributory
negligence, such an argument loses its force in the ACTUAL OR CONSTRUCTIVE DELIVERY
face of the driver’s recklessness in taking the dare.
And even if such argument would be accepted, at Party to whom delivery should be made
most it can only mitigate the amount of damages,
since the proximate cause of the accident was the It must be delivered, actually or constructively, to
driver’s willful and reckless act in running a race the consignee or to the person who has a right to
with the other bus. receive them (Art.1736, NCC).
Rule if there is contributory negligence on the Delivery of the cargo to the customs authorities is
part of the shipper not delivery to the consignee, or to the person who
has a right to receive them (Lu Do & Lu Ym Corp. vs.
If the shipper or owner merely contributed to the Binamira, G.R. No. L-9840, April 22, 1957).
loss, destruction, or deterioration of the goods, the
proximate cause thereof being the negligence of the Constructive delivery
common carrier, the latter shall be liable for
damages, which however, shall be equitably There is constructive delivery when delivery is
reduced (Art. 1741, NCC). effected not by actually transferring the possession
of thing to the vendee (in this case, the other party,
DURATION OF LIABILITY either the carrier or the consignee) but by legal
formalities or by symbolic tradition (Pineda, 2010).
The New Civil Code is explicit when it comes to the
duration of extraordinary responsibility with NOTE: Delivery of the cargo to the customs
respect to goods. Such responsibility lasts from the authorities is not delivery of the cargo to the
time the goods are unconditionally placed in the consignee, or to the person who has a right to
possession of, and received by the carrier for receive them", contemplated in Article 1736,
transportation. Until the same are delivered, because in such case the goods are still in the hands
actually or constructively, by the carrier to the of the Government and the owner cannot exercise
consignee, or to the person who was a right to dominion over them. However, the parties may
receive them (Art. 1736, NCC). agree to limit the liability of the carrier considering
that the goods have still to through the inspection of
The carrier’s responsibility terminates in any of the the customs authorities before they are actually
following cases: turned over to the consignee. It is a situation where
1. When the goods are delivered actually or the carrier losses control of the goods because of a
constructively by the carrier to the consignee or to custom regulation and it is unfair that it be made
the person who was a right to receive them (Art. responsible for what may happen during the
1736, NCC); interregnum. This stipulation is not contrary to
morals or public policy (Lu Do v. Binamira, G.R. No.
2. When the goods are temporarily unloaded or L-9840, April 22, 1957).
stored in transit by reason of the exercise of the
shipper or owner of his right of stoppage in transit; Misdelivery by a carrier who was chosen by the
buyer
3. When the consignee has been advised of the
arrival of the goods at the plce of destination and Misdelivery of the goods is attributable to the
has had reasonable opportunity to remove them or carrier and not to the seller. And, since the carrier
dispose of them from the warehouse of the carrier was chosen and authorized to make the delivery by
at the place of destination (Art. 1738, NCC). the buyer itself, the seller cannot be held
responsible for such misdelivery (Smith, Bell & Co.
DELIVERY OF GOODS TO COMMON CARRIER [Phils.] vs. Gimenez, G.R. No. L-17617, June 29, 1963).
The goods are deemed delivered to the carrier when TEMPORARY UNLOADING OR STORAGE
the goods are ready for and have been placed in the
exclusive possession, custody and control of the Right of stoppage in transitu
carrier for the purpose of their immediate
transportation and the carrier has accepted them.

2019 GOLDEN NOTES
Mercantile Law
It is the right exercised by the seller by stopping the b. Supported by a valuable consideration
delivery of the goods, in case of insolvency of the other than the service rendered by the
buyer or consignee, when such goods are already in common carrier, and
transit (NCC, Art. 1530). c. Reasonable, just and not contrary to public
policy.
The seller may exercise this right either: 2. An agreement limiting the common
1. By obtaining actual possession of the goods; or carrier's liability for delay on account of
2. By giving notice of his claim to the carrier or strikes or riots (Art. 1748, NCC).
other bailee in whose possession the goods are. 3. A stipulation that the common carrier's
liability is limited to the value of the goods
NOTE: Notice may be given either to the person appearing in the bill of lading, unless the
in actual possession of the goods or to his shipper or owner declares a greater value
principal. In the latter case, the notice, to be (Art. 1749, NCC; 1998, 2002 Bar).
effectual, must be given at such time and under 4. A contract fixing the sum that may be
such circumstances that the principal, by the recovered by the owner or shipper for the
exercise of reasonable diligence, may prevent a loss, destruction, or deterioration of the
delivery to the buyer (NCC, Art. 1532). goods (Art. 1750, NCC).
GR: The common carrier’s duty to observe NOTE: The contract limiting the common carrier's
extraordinary diligence in the vigilance over the liability cannot be availed of in case of loss,
goods remains in full force and effect even when they destruction, or deterioration of the goods, if the
are temporarily unloaded or stored in transit. common carrier, without just cause:
XPN: When the shipper or owner has made use of 1. delays the transportation of the goods; or
the right of stoppage in transit (Art. 1737, NCC). 2. changes the stipulated or usual route (Art.
1747, NCC).
The diligence required is merely ordinary diligence
because of the following: Even if there is an agreement limiting the liability of
the common carrier in the vigilance over the goods,
1. It is holding the goods in the capacity of an the common carrier is still disputably presumed to
ordinary bailee or warehouseman and not as a have been negligent in case of its loss, destruction or
carrier. deterioration (Art. 1752, NCC).
2. There is a change of contract from a contract of
carriage to a contract of deposit (Art. 1737, Annulment of a stipulation limiting the common
NCC). carrier’s liability by the shipper or owner
Obligation required of the common carrier in A stipulation limiting the common carrier’s liability
case of stoppage in transitu may be annulled by the shipper or owner if the
common carrier refused to carry the goods unless
When notice of stoppage in transitu is given by the the shipper or owner agreed to such stipulation
seller to the carrier, he must redeliver the goods to, (Art. 1746, NCC).
or according to the directions of, the seller. The
expenses of such delivery must be borne by the VOID STIPULATIONS
seller (Art. 1532, NCC).
NOTE: If the seller instructs to deliver it somewhere Void stipulations in a contract of carriage of
else, a new contract of carriage is formed and the goods (CR2UELED)
carrier must be paid accordingly.
1. That the common carrier need not observe any
STIPULATIONS LIMITING LIABILITY diligence in the Custody of the goods
2. That the goods are transported at the Risk of
Valid stipulations that a common carrier of the owner or shipper
goods may indicate in a contract in order to 3. That the common carrier’s liability for acts
escape liability committed by thieves, or of Robbers who do not
act with grave or irresistible threat, violence or
1. A stipulation limiting the liability of the force, is dispensed with or diminished
common carrier for the loss, destruction, or 4. Any similar stipulation that is Unreasonable,
deterioration of the goods to a degree less unjust and contrary to public policy
than extraordinary diligence, provided it be: 5. That the common carrier shall Exercise a
a. In writing, signed by the shipper or owner; degree of diligence less than that of a good

Transportation Laws
father of a family, or a man of ordinary must be in writing and signed by the shipper or
prudence in the vigilance over the movables owner of the goods, besides the other requirements
transported of the law (Shewaran v. PAL, G.R. No. L-20099, July 7,
6. That the common carrier will not be liable for 1966).
any Loss, destruction, or deterioration of the
goods Q: Martin Nove shipped an expensive video
7. That the common carrier shall not be equipment to a friend in Cebu. Martin had
responsible for the acts or omissions of his or bought the equipment from Hong Kong for U.S.
its Employees $5,000. The equipment was shipped through
8. That the common carrier is not responsible for M/S Lapu-Lapu under a bill of lading which
the loss, destruction or deterioration of goods contained the following provision in big bold
on account of the Defective condition of the car, letters: “The limit of the carrier’s liability for any
vehicle, ship, airplane or other equipment used loss or damage to cargo shall be P200 regardless
in the contract of carriage (Art. 1745, NCC). of the actual value of such cargo, whether
declared by shipper or otherwise.”
Q: Discuss whether the following stipulations in The cargo was totally damaged before reaching
a contract of carriage of a common carrier are Cebu. Martin Nove claimed for the value of his
valid: cargo ($5,000 or about P100,000) instead of just
P200 as per the limitation on the bill of lading.
1. A stipulation limiting the sum that may be Is there any legal basis for Nove’s claim?(1987
recovered by the shipper or owner to 90% Bar)
of the value of the goods in case of loss due
to theft. A: YES, there is legal basis for the claim of Martin
2. A stipulation that in the event of loss, Nove. The stipulation limiting the carrier’s liability
destruction, or deterioration of goods on up to a certain amount “regardless of the actual
account of the defective condition of the value of such cargo, whether declared by its shipper
vehicle used in the contract of carriage, the or otherwise,” is violative of the requirement of Art.
carrier’s liability is limited to the value of 1750 of Civil Code, which provides that stipulations
the goods appearing in the bill of lading limiting liability should be fairly and freely agreed
unless the shipper or owner declares a upon. A stipulation that denies to the shipper the
higher value (2002 Bar). right to declare the actual value of his cargoes and
to recover, in case of loss or damage, on the basis of
A: such stipulation would be invalid.
1. Invalid. Article 1745 provides that a
stipulation which dispenses or diminishes LIMITATION OF LIABILITY IN THE ABSENCE OF
the common carrier’s liability for acts DECLARATION OF GREATER VALUE
committed by thieves or robbers who do
not act with grave and irresistible force, GR: The liability of the common carrier shall not
threat or violence is unreasonable, unjust, exceed the stipulation in a contract of carriage, even
and contrary to public policy. if the loss or damage results from the carrier's
negligence (Eastern and Australian Shipping Co. v.
2. Valid. Article 1749 provides that a Great American Insurance Co., GR No. L-37604,
stipulation limiting the carrier’s liability to October 23, 1981).
the value of the goods appearing in the bill
of lading unless the shipper or owner XPN: Common carrier’s liability may be extended
declares a higher value, is binding. beyond the specified amount mentioned if the
shipper or owner of the goods:
LIMITATION OF LIABILITY TO FIXED AMOUNT 1. Declares a greater value and;
2. Pays corresponding freight (Art. 1749, NCC)
A contract fixing the sum that may be recovered for
the loss, destruction, and deterioration of goods is The liability of an airline company for lost baggage
binding provided that it is: is limited to the amount stated in the ticket unless
1. Just and reasonable under the circumstances; the passenger declared a higher valuation and paid
and additional fare (Pan American World Airways, Inc. v.
2. Has been fairly and freely agreed upon (Art. IAC, G.R. No. 70462, August 11, 1988).
1750, NCC).
Q: X took a plane from Manila bound for Davao
The liability of a common carrier may, by contract, via Cebu where there was a change of planes. X
be limited to a fixed amount, but the agreement arrived in Davao safely but to his dismay, his two

2019 GOLDEN NOTES
Mercantile Law
suitcases were left behind in Cebu. The airline boorishly (Pan American World Airways v. IAC, G.R.
company assured X that the suitcases would No. 68988, June 21, 1990).
come in the next flight but they never did. X
claimed P2,000.00 for the loss of both suitcases, In one case, the Court held that the cause of the loss
but the airline was willing to pay only P500.00 was the negligence of the carrier in not ensuring
because the airline ticket stipulated that unless that the doors of the baggage compartment of the
a higher value was declared, any claim for loss bus were securely fastened (Sarkies Tours
cannot exceed P250 for each piece of luggage. X Philippines, Inc. v. CA, G.R. No. 108897, October 2,
reasoned out that he did not sign the stipulation 1997).
and in fact had not even read it. X did not declare
a greater value despite the fact that the clerk had BAGGAGE IN POSSESSION OF PASSENGERS
called the attention to the stipulation in the
ticket. (1998 Bar) The rules in Articles 1998 and 2000 to 2003, NCC
concerning the responsibility of hotel-keepers for
A: X is bound by the stipulation written in the ticket necessary deposit shall be applicable.
because he consented to the terms and conditions
thereof from the moment he availed the services of 1. The common carrier shall be responsible for
the carrier. The fact that he did not sign the ticket shipper’s baggage as depositaries, provided
and he was not able to declare the true value of his that:
luggage is not a valid claim in order for the carrier a. notice was given to them, or to their
to pay for the value of the lost luggage. As a general employees, of the effects brought by
rule, the liability of the common carrier shall not the guests; and
exceed the stipulation in a contract of carriage even b. on the part of the shipper, they take the
if the loss or damage results from the carrier’s precautions which said common
negligence However, it is subject to an exception carriers or their substitutes advised
provided under Art. 1749 of NCC, as when the relative to the care and vigilance of
shipper or owner of the goods declares a greater their effects (Art. 1998, NCC).
value and pays corresponding freight. X, therefore is
only entitled to P500 for the two pieces of luggage 2. The responsibility shall include the loss of, or
lost (Eastern and Australian Shipping Co., v. Great injury to the personal property of the shipper
American Insurance Co., G.R. No. L-37604, October 23, caused by the employees of the common carrier
1981). as well as strangers; but not that which may
proceed from any force majeure (Art. 2000,
But when the goods being shipped are packed in NCC).
cartons placed in containers supplied by the carrier 3. The act of a thief or robber, who has entered the
and the number of cartons is disclosed in the carrier, is not deemed force majeure, unless it is
shipping documents, it is the number of cartons and done with the use of arms or through an
not of the containers that should be used in irresistible force (Art. 2001, NCC).
computing the liability of the carrier for the loss of 4. The common carrier is not liable for
the goods, as it is the cartons that constitute the compensation if the loss is due to the acts of the
packages (Eastern Shipping Lines, Inc. s. IAC, G.R. No. shipper, his family, or servants, or if the loss
L-71478, May 29, 1987). arises from the character of the things brought
into the carrier (Art. 2002, NCC).
LIABILITY FOR BAGGAGE OF PASSENGERS 5. The common carrier cannot free himself from
responsibility by posting notices to the effect
Baggage is any personal property carried by the that he is not liable for the articles brought by
passenger, either check-in or hand-carry (Sec. 2.1, the passenger. Any stipulation between the
Air Passenger Bill of Rights). common carrier and the shipper whereby the
responsibility of the former as set forth in
CHECKED-IN BAGGAGE Articles 1998 to 2001 is suppressed or
diminished shall be void (Art. 2003, NCC).
The provisions of Articles 1733 to 1753, NCC shall
apply (Art. 1754, NCC). Q: Pasahero, a paying passenger, boarded a
Victory Liner bus bound for Olongapo. He chose
An airline company is liable for moral damages a seat at the front near the bus driver. Pasahero
where it left behind the luggage of a passenger, and told the bus driver that he had valuable items in
its employees did not assist the passenger in his bag which was placed near his feet. Since he
locating his luggage but instead treated him had not slept for 24 hours, he requested the

Transportation Laws
driver to keep an eye on the bag should he doze Q: Wisconsin Transportation Co., Inc. (WTC)
off during the trip. owned and operated an inter-island de luxe bus
service plying the Manila-Batangas-Mindoro
While Pasahero was asleep, another passenger route. Three friends, namely: Aurelio, Jerome
took the bag away and alighted at Guagua, and Florencio rode on the same WTC bus from
Pampanga. Is Victory Liner liable to Pasahero? Manila bound for Mindoro. Aurelio purchased a
Explain. (1987 Bar) ticket for himself. Jerome, being a boyhood
friend of the bus driver, was allowed a free ride
A: YES. The responsibility of common carriers in the by agreeing to sit during the trip on a stool
case of loss or damage to hand-carried baggage is placed in the aisle. Florencio, already penniless
governed by the rule on necessary deposits. The after spending all of his money on beer the night
common carrier is thus liable for the loss of the before, just stole a ride in the bus by hiding in
personal property caused by its employees or by the on-board toilet of the bus.
strangers. In this case, the passenger told the driver
that he had valuable item placed beside the driver’s During the trip, the bus collided with another
seat. If the driver exercised due diligence, he could bus coming from the opposite direction. The
have prevented the loss of the bag. three friends all suffered serious physical
injuries.
SAFETY OF PASSENGERS What are WTC's liabilities, if any, in favor of

Aurelio, Jerome and Florencio? Explain your
answer. (2017 Bar)
A common carrier is bound to carry the passengers
safely as far as human care and foresight can A: As a common carrier, WTC is liable to Aurelio for
provide, using the utmost diligence of very cautious breach of contract of carriage, the latter being a
persons, with a due regard for all the circumstances passenger who purchased a ticket for himself. WTC
(Art. 1755, NCC). is also liable to Jerome for breach of contract of
carriage because he was a passenger although he
Who are not considered passengers (WAMU) was being transported gratuitously. However, WTC
has no liability in favor of Florencio for breach of
1. One who has boarded a Wrong vehicle, has been contract of carriage. A stowaway like Florencio, who
properly informed of such fact, and on alighting, secures passage by fraud, is not a passenger.
is injured by the carrier.
2. Invited guests and Accommodation passengers. NOTE: As accommodation passengers or invited
3. One who attempts to board a Moving vehicle, guests, defendant as owner and driver of the pick-
although he has a ticket, unless the attempt be up owes to them merely the duty to exercise
with the knowledge and consent of the carrier. reasonable care so that they may be transported
4. One who remains on a carrier for an safely to their destination. The rule is established by
Unreasonable length of time after he has been the weight of authority that the owner or operator
afforded every safe opportunity to alight. of an automobile owes the duty to an invited guest to
exercise reasonable care in its operation, and not
The carrier is thus NOT obliged to exercise unreasonably to expose him to danger and injury by
extraordinary diligence but only ordinary diligence increasing the hazard of travel (Articles 1755 and
in these instances. 1756, NCC, Lara v. Valencia, G.R. No. L-9907, June 30,
1958).
Assumption of risk on the part of passengers
VOID STIPULATIONS
Passengers must take such risks incident to the
mode of travel. The passenger must observe the Stipulations limiting the liability of common
diligence of a good father of a family to avoid injury carrier in case of injury or death
to himself (Art. 1761, NCC).
GR: The responsibility of a common carrier for the
Carriers are not insurers of any and all risks to safety of passengers cannot be dispensed with or
passengers and goods. It merely undertakes to lessened by stipulation, by posting of notices, by
perform certain duties to the public as the law statements on tickets, or otherwise (Art. 1757, NCC).
imposes, and holds itself liable for any breach
thereof (Pilapil v. CA, G.R. No. 52159, Dec. 22, 1989). XPN: When a passenger is carried gratuitously, a
stipulation limiting the common carrier’s liability
for negligence is valid (Art. 1758, NCC).

2019 GOLDEN NOTES
Mercantile Law
NOTE: The passenger must be carried gratuitously. A: The contention of CRI must fail. The duty of a
If it is only a reduction of fare, then any limitation common carrier to provide safety to its passengers
of the common carrier’s liability is not justified is not only during the course of the trip but for so
(2001, 2009 Bar). long as the passengers are within its premises and
where they ought to be in pursuance to the contract
XPN to the XPN: Notwithstanding the exception, of carriage. Furthermore, the common carrier will
common carriers will be liable nevertheless for still be liable even though its employees acted
willful acts or gross negligence. beyond the scope of their work (LRTA vs. Navidad,
G.R. No. 145804 February 6, 2003).
DURATION OF LIABILITY
Q: P, a sales girl in a flower shop at the Ayala
Observance of extraordinary diligence in Station of the MRT bought two (2) tokens or
transportation of goods commences from the tickets, one for her ride to work and another for
moment the person who purchases the ticket from her ride home. She got to her flower shop where
the carrier presents himself at the proper place and she usually worked. While P was attending to
in a proper manner to be transported, and continues her duties at the flower shop, two (2) crews of
until the passenger has been landed at the port of the MRT got into a fight near the flower shop,
destination and has left the vessel owner’s dock or causing injuries to P in the process. Can P sue the
premises. MRT for contractual breach as she was within
the MRT premises where she would shortly take
WAITING FOR CARRIER OR her ride home? (2011 Bar)
BOARDING OF CARRIER
A: NO, P had no intention to board an MRT train
A proper person whom the carrier would be bound coach when the incident occurred.
to accept who enters upon the carrier’s premises
such as a station, ticket office, or waiting room, with Carriage by sea
the intention of becoming a passenger, will
ordinarily be viewed as assuming the status of a The duty of the carrier commences as soon as a
passenger (LRTA v. Navidad, G.R. No. 145804, person with bona fide intention of taking passage
February 6, 2003, citing 10 Am. Jur. 30). places himself in the care of the carrier or its
employees and is accepted as passenger (Aquino
Trains and Hernando, 2016, citing 80 C.J.S. 1085).
The carrier is supposed to exercise extraordinary Land transportation

diligence although the passenger is still waiting for
a coach on the platform of the train station (LRTA v. The act of the driver in stopping their conveyances
Navidad, G.R. No. 145804, February 6, 2003). is a continuous offer to riders (continuing offer
rule). The passenger is deemed to be accepting the
However, there is no obligation on the part of a offer if he is already attempting to board the
street railway company to stop its cars to let on conveyances and the contract of carriage is
intending passengers at other points than those perfected from that point.
appointed for stoppage (De Prado v. Manila Electric
Co., G.R. No. 29462, March 7, 1929). It is the duty of common carriers of passengers,
including common carriers by railroad train,
Q: City Railways, Inc. (CRI) provides train streetcar, or motorbus, to stop their conveyances a
service, for a fee, to commuters from Manila to reasonable length of time in order to afford
Calamba, Laguna. Commuters are required to passengers an opportunity to board and enter, and
purchase tickets and then proceed to designated they are liable for injuries suffered by boarding
loading and unloading facilities to board the passengers resulting from the sudden starting up or
train. Ricardo Santos purchased the ticket for jerking of their conveyances while they are doing so
Calamba and entered the station. While waiting, (Dangwa vs. CA, G.R. No. 95582, October 7, 1991).
he had an altercation with the security guard of
CRI leading to a fistfight. Ricardo Santos fell on Q: A bus of GL Transit on its way to Davao
the railway just as a train was entering the stopped to enable a passenger to alight. At that
station. Ricardo Santos was run over by the moment, Santiago who had been waiting for a
train. He died. CRI contented that the mishap ride, boarded the bus. However, the bus driver
occurred before Ricardo Santos boarded the failed to notice Santiago who was still standing
train and that it was not guilty of negligence. on the bus platform, and stepped on the
Decide. (2008 Bar) accelerator. Because of the sudden motion,

Transportation Laws
Santiago slipped and fell down suffering serious includes a reasonable time to see after his baggage
injuries. Is GL Transit liable? (1996 Bar) and prepare for his departure (La Mallorca v. CA,
G.R. No. L-21486, May 14, 1966).
A: YES. Santiago may hold GL Transit liable for
breach of contract of carriage. It was the duty of the Carrier-passenger relationship continues until the
driver, when he stopped the bus, to do no act that passenger has been landed at the port of destination
would have the effect of increasing the peril to a and has left the vessel-owner’s premises. The
passenger such as Santiago while he was attempting victim’s presence in a vessel after one (1) hour from
to board the same. When a bus is not in motion there his disembarkation is not enough in order to
is no necessity for a person who wants to ride the absolve the carrier from liability in his death
same to signal his intention to board. A public utility (Aboitiz Shipping Corporation v. CA, G.R. No. 84458,
bus, once it stops, is in effect making continuous November 6, 1989).
offer to bus riders. It is the duty of common carriers
of passengers to stop heir conveyances while they Q: Robert De Alban and his family rode a bus
are doing so. Santiago, by stepping and standing on owned by Joeben Bus Company. Upon reaching
the platform of the bus is already considered as a their desired destination, they alighted from the
passenger and is entitled to all the rights and bus but Robert returned to get their baggage.
protection pertaining to a contract of carriage However, his youngest daughter followed him
(Dangwa Trans. Co. v. CA, G.R. No. 95582, October 7, without his knowledge. When he stepped into
1991). the bus again, the bus accelerated that resulting
to Robert’s daughter death. The bus ran over
When a Public Utility Vehicle is not in motion, it her. Is the bus company liable?
is not necessary for a person who wants to ride
the same to signal his intention to board A: YES. The relation of carrier and passenger does
not cease at the moment the passenger alights from
When the bus is not in motion, there is no necessity the carrier’s vehicle at a place selected by the carrier
for a person who wants to ride the same to signal his at the point of destination, but continues until the
intention to board. A public utility bus, once it stops, passenger has had a reasonable time or reasonable
is in effect making a continuous offer to bus riders. opportunity to leave the current premises (La
Hence, it becomes the duty of the driver and the Mallorca v. CA, GR L-20761, July 27 1966).
conductor, every time the bus stops, to do no act
that would have the effect of increasing the peril to LIABILITY FOR ACTS OF OTHERS
a passenger while he was attempting to board the
same. The premature acceleration of the bus in this EMPLOYEES
case was a breach of such duty.
Common carriers are liable for the acts of their
A person, by stepping and standing on the platform employees
of the bus, is already considered a passenger and is
entitled all the rights and protection pertaining to Common carriers are liable for the death of or
such a contractual relation. Hence, it has been held injuries to passengers through the negligence or
that the duty which the carrier owes to its patrons willful acts of the former’s employees, although
extends to persons boarding cars as well as to those such employees may have acted beyond the scope of
alighting therefrom (Dangwa Trans. Co. v. CA, supra). their authority or in violation of the orders of the
common carriers. The liability of the common
ARRIVAL AT DESTINATION carriers does not cease upon proof that they
exercised all the diligence of a good father of a
Liability for death or injury to passengers upon family in the selection and supervision of their
arrival at destination employees (NCC, Art. 1759).
Once created, the relationship will not ordinarily NOTE: By express provision of Article 1759, it is no
terminate until the passenger has, after reaching his defense that the employee acted beyond the scope
destination, safely alighted from the carrier's of his authority because the riding public is not
conveyance or had a reasonable opportunity to expected to inquire from time to time before they
leave the carrier's premises. All persons who board the carrier whether or not the driver or any
remain on the premises a reasonable time after other employee is authorized to drive the vehicle or
leaving the conveyance are to be deemed that said driver is acting within the scope of his
passengers, and what is a reasonable time or a authority and observing the existing rules and
reasonable delay within this rule is to be regulations required of him by management
determined from all the circumstances, and (Aquino and Hernando, 2016).

2019 GOLDEN NOTES
Mercantile Law
Q:At around 8:45 in the morning, A, after having Q: The AAA Bus Company picks up passengers
alighted from a passenger bus in front of along EDSA. X, the conductor, while on board the
Robinsons Galleria along the north-bound lane bus, drew his gun and randomly shot the
of EDSA, was hit and run over by a bus driven by passengers inside. As a result, Y, a passenger,
B, who was then employed by C Transport was shot and died instantly. Is AAA Bus
Company. A was immediately rushed to the Company liable? (2012 Bar)
hospital where she was pronounced dead on
arrival. By reason of the quasi-delict, who A: YES. The bus company is liable because common
should be held liable for the death of A? B, the carriers are liable for the negligence or willful act of
bus driver, C Transport Company, or both? its employees even though they acted beyond the
scope of their responsibility.
A: Both B and C Transport Company should be held
solidarily liable as joint tortfeasors. Under Article NOTE: Willful acts of the employees include theft. It
2180 of the New Civil Code, employers are liable for should be pointed out that the Code of Commerce
the damages caused by their employees acting expressly provides that the captain shall be civilly
within the scope of their assigned tasks. Once liable to the naviero and the latter to third persons
negligence on the part of the employee is for all thefts committed by the crew, reserving the
established, a presumption instantly arises that the right of action against the guilty party (Aquino and
employer was remiss in the selection and/or Hernando, 2016).
supervision of the negligent employee. It is
incumbent upon the employer to rebut this OTHER PASSESNGERS AND STRANGERS
presumption by presenting adequate and
convincing proof that it exercised the care and The registered owner of the vehicle may be held
diligence of a good father of a family in the selection liable for damages suffered by a third person in
and supervision of its employees. Failing to do this, the course of the operation of the vehicle
a common carrier cannot avoid liability for the
quasi-delict committed by its negligent employee. The registered owner of a public service vehicle is
The responsibility of two or more persons who are responsible for damages that may arise from
liable for a quasi-delict is solidary (R Transport consequences incident to its operation or that may
Corporation vs. Luisito G. Yu, G.R. No. 174161, be caused to any of the passengers therein (Gelisan
February 18, 2015). vs. Alday, G.R. No. L-30212, September 30, 1987).
NOTE: The carrier, unlike in suits for quasi-delict, Extent of liability of common carriers for acts of
may not escape liability by proving that it has co-passengers or strangers (1997, 2005 Bar)
exercised due diligence in the selection and
supervision of its employees (Art. 1759, NCC; see A common carrier is responsible for injuries
Cangco vs. Manila Railroad Co., supra; Prado vs. suffered by a passenger on account of the willful
Manila Electric Co., 51 Phil., 900) acts or negligence of other passengers or of
strangers, if the carrier’s employees through the
Liability of the common carrier as regard the exercise of the diligence of a good father of a family
acts of employees may not be limited by would have prevented or stopped the act or
stipulation omission (Art. 1763, NCC).
The common carrier’s responsibility cannot be Q: P rode a Sentinel Liner bus going to Baguio
eliminated or limited by stipulation, by the posting from Manila. At a stop-over in Tarlac, the bus
of notices, by statements on the tickets or otherwise driver, the conductor, and the passengers
(Art. 1760, NCC). disembarked for lunch. P decided, however, to
remain in the bus, the door of which was not
Rationale: The basis of the carrier's liability for locked. At this point, V, a vendor, sneaked into
assaults on passengers committed by its drivers the bus and offered P some refreshments. When
rests on the principle that it is the carrier's implied P rudely declined, V attacked him, resulting in P
duty to transport the passengers safely. As between suffering from bruises and contusions. Does he
the carrier and the passenger, the former must bear have cause to sue Sentinel Liner? (2011 Bar)
the risk of wrongful acts or negligence of the
carrier's employees against passengers, since it, and A: YES, since the carrier's crew did nothing to
not the passengers, has power to select and remove protect a passenger who remained in the bus during
them(Maranan vs. Perez, GR No. L-22272, June 26, the stop-over.
1967).

Transportation Laws
Q: In a jeepney, Angela, a passenger, was injured arrival. Can the common carrier, B, and C be
because of the flammable material brought by held liable for the death of A?
Antonette, another passenger. Antonette denied
her baggage to be inspected invoking her right A: NO. It is imperative for a party claiming against a
to privacy. common carrier to show that the injury or death of
the passenger/s arose from the negligence of the
a. Should the jeepney operator be held common carrier and/or its employees in providing
liable for damages? safe transport to its passengers.In this case, A’s
b. If it were an airline company involved, death was neither caused by any defect in the means
would your answer be the same? (1992 of transport or in the method of transporting, or the
Bar) negligent or willful acts of the bus driver or
conductor.Instead, the case involves the death of A
A: wholly caused by the surreptitious act of a co-
a. NO. The operator is not liable for damages. passenger, who after committing such crime,
In overland transportation, the common hurriedly alighted from the vehicle (G.V. Florida
carrier is not bound nor empowered to Transport, Inc. vs. Heirs of Romeo Battung, Jr.,
make an examination on the contents of represented by Romeo Battung, Sr.; G.R. No. 208802;
packages or bags, particularly those hand October 14, 2015).
carried by passengers (Nocum vs. Laguna
Tayabas Bus Company, G.R. No. L-23733, EXTENT OF LIABILITY FOR DAMAGES
October 31, 1969).
b. NO. The common carrier should be made Kinds of damages that may be recovered in case
liable. In case of air carriers, it is unlawful of death of a passenger (DeLo-MEAtIH)
to carry flammable materials in passenger
aircrafts, and airline companies may open 1. An indemnity for the death of the victim
and investigate suspicious packages and 2. An indemnity for loss of earning capacity of
cargoes pursuant to Republic Act No. 6235. the deceased
3. Moral damages
Q: Marites, a paying bus passenger, was hit 4. Exemplary damages
above her left eye by a stone hurled at the bus by
an unidentified bystander as the bus was NOTE: Carrier is not liable for exemplary
speeding through the National Highway. The bus damages where there is no proof that it acted in
owner’s personnel lost no time in bringing a wanton, fraudulent, reckless, oppressive or
Marites to the provincial hospital where she was malevolent manner.
confined and treated. Marites wants to sue the
bus company for damages and seeks your advice 5. Attorney's fees and expenses of litigation
whether she can legally hold the bus company 6. Interest in proper cases (Briñas v. People,
liable. What will you advise her? (1994 Bar) G.R. No. L-30309, Nov. 25, 1983)
7. Hospital and funeral expenses
A: I will advise Marites that she cannot legally hold
the bus company liable if the stone throwing was NOTE: In case of death, the plaintiff is entitled
entirely unforeseeable and the carrier exercised to the amount he spent during the wake and
utmost diligence. However, I will also inform her funeral of the deceased. However, it has been
that the burden is on the carrier to prove such ruled that expenses after the burial are not
exercise of due diligence. If she decides to file a case compensable (Victory Liner, Inc. v. Heirs of
in court, all that she will prove is that she was a Andres Malecdan, G.R. No. 154278).
passenger and she was inhured while on board the
bus. Damages in Personal Injury Cases
Q: A was seated at the first row behind the driver Personal injury and even death entitles claimant to
and slept during the ride. When the bus reached all medical expenses as well as other reasonable
the Philippine Carabao Center in Muñoz, Nueva expenses that he incurred to treat his or his
Ecija, the bus driver, B, stopped the bus and relative’s injuries. Medical expenses may even
alighted to check the tires. At this point, a man include the amount spent for plastic surgery of the
who was seated at the fourth row of the bus plaintiff or any procedure to restore the part of the
stood up, shot A at his head and then left with a body that was affected (Sps. Ong v. CA, G.R. No.
companion. The bus conductor, C, notified B of 117103, January 21, 1999).
the incident and thereafter, brought A to the
hospital but the latter was pronounced dead on Loss of earning capacity

2019 GOLDEN NOTES
Mercantile Law
The formula for the computation of unearned their medical and hospitalization expenses.
income is: Nonetheless, Judith and Joyce filed a complaint
against Eduardo and Rolando for breach of
1. Net Earning Capacity = Life Expectancy x contract of carriage caused by Rolando’s
(Gross annual income - Reasonable and reckless and negligent driving. As relief, they
necessary living expenses). prayed for moral and exemplary damages.
2. Life expectancy is determined in accordance Eduardo and Rolando refused to pay moral
with the formula: 2/3 x (80 – age of damages on the ground that there was neither
deceased at the time of death). (Heirs of proof nor allegation that they acted fraudulently
Ochoa vs. VS.G & S Transport Corporation, or in bad faith. Are Eduardo and Rolando liable
G.R. No. 170071, March 09, 2011) for moral damages?
When there is no showing that the living expenses A: NO. In an action for breach of contract, moral
constituted the smaller percentage of the gross damages may be recovered only when a) death of a
income, the Court fixes the living expenses at half of passenger results; or b) the carrier was guilty of
the gross income. fraud and bad faith even if death does not result. In
the case, Judith and Joyce impute negligence when
Moral damages the bus collided with another vehicle. While they
propounded on negligence, they did not discuss or
GR: Moral damages are not recoverable for breach impute fraud or bad faith, or such gross negligence
of contract of carriage, because such contract cannot which would amount to bad faith. There being
be considered included in the “analogous cases” neither allegation nor proof that respondents acted
used in Article 2219 of the NCC. Also, Art. 2176 of in fraud or in bad faith in performing their duties
the NCC, which is the provision on quasi-delict, arising from their contract of carriage, they are not
expressly excludes the cases where there is a “pre- liable for moral damages. Since moral damages
existing contractual relation between the parties” cannot be awarded, it follows that the award of
from recovering damages (Versoza v. Baytan, et al., exemplary damages is also not available, since this
G.R. L-14092, April 29, 1960). kind of damages may only be awarded in addition to
moral, temperate, liquidated, or compensatory
XPNs: (DeFraG) damages (Darnes v. Quiñones, G.R. No. 206468,
August 2, 2017, Del Castillo, J.).
1. Where the mishap results in the Death of the
passenger (Art. 1764, NCC); or Defenses available to a Common Carrer
2. Where it is proved that the common carrier (FECoLD)
was guilty of Fraud or bad faith, even if
death does not result (Art. 2220, NCC). 1. Exercise of extraordinary due diligence
3. Where the negligence of the carrier is so 2. Fortuitous event
Gross and reckless as to virtually amount to 3. Contributory negligence of passengers – it does
bad faith (PAL vs. CA et al., GR NO. 123238, not bar recovery of damages for death or injury
Sept. 22, 2008) if the proximate cause is the negligence of the
common carrier but the amount of damages
Although the relation of passenger and carrier is shall be equitably reduced (NCC, Art. 1762).
"contractual both in origin and nature" 4. Doctrine of Last Clear Chance
nevertheless, “the act that breaks the contract may 5. Due Diligence in the selection and supervision
be also a tort" when said act is done with gross of employees.
negligence or with bad faith (Air France v.
Carrascoso, G.R. No. L-21438, September 28, 1966). The diligence of the passenger may be
considered in determining liability in case of
NOTE: The current jurisprudential award for the injury
loss of life of a passenger is P100,0000 pesos by way
of moral damages (Victory Liner vs. Gammad; supra; The passenger must observe the diligence of a good
Heirs of Ochoa vs. VS.G & S Transport Corp., supra). father of a family or ordinary diligence to avoid
injury to himself (NCC, Art. 1761). This means that if
Q: Judith and Joyce were on board a passenger the proximate cause of the passenger’s injury is his
bus operated by Eduardo. The bus was driven at negligence, the common carrier is not liable.
a fast speed by the driver, Rolando, when it
crashed into a truck parked on the shoulder of DOCTRINE OF LAST CLEAR CHANCE
the Kennon Road. As a result, Judith and Joyce
suffered injuries. Eduardo and Rolando paid for

Transportation Laws
The doctrine of last clear chance provides that a. Negligence of the plaintiff is concurrent with that
where both parties are negligent but the negligent of the defendant (in pari delicto);
act of one is appreciably later in point of time than b. Party charged is required to act instantaneously;
that of the other, or where it is impossible to c. Injury cannot be avoided despite the application
determine whose fault or negligence brought about at all times of all the means to avoid the injury (after
the occurrence of the incident, the one who had the the peril is or should have been discovered), at least
last clear opportunity to avoid the impending harm in all instances where the previous negligence of the
but failed to do so, is chargeable with the party charged cannot be said to have contributed to
consequences arising therefrom. Stated differently, the injury at all. (O'Mally vs. Eagan, 77 ALR 582)
the rule is that the antecedent negligence of a
person does not preclude recovery of damages It goes without saying that the plaintiff himself was
caused by the supervening negligence of the latter, not free from fault, for he was guilty of antecedent
who had the last fair chance to prevent the negligence in planting himself in the wrong side of
impending harm by the exercise of due diligence. the road. But as we have already stated, the
defendant was also negligent; and in such case the
Q: B Traversing EDSA swerved then collision problem always is to discover which agent is
took place with B barely encroaching on C’s lane. immediately and directly responsible. It will be
Prior to and at the time of collision, C did not noted that the negligent acts of the two parties were
take any defensive maneuver to prevent the not contemporaneous, since the negligence of the
accident and minimize the impending damage to defendant succeeded the negligence of the plaintiff
life and property, which resulted in the collision by an appreciable interval. Under these
in the middle of the highway, where a vehicle circumstances, the law is that a person who has the
would normally be traversing. Is C liable for his last clear chance to avoid the impending harm and
lack of care in driving? fails to do so is chargeable with the consequences,
A: Yes. The collision was certainly foreseen and without reference to the prior negligence of the
avoidable but C took no measures to avoid it. Rather other party. (Picart vs. Smith, 37 Phil., 809)
than exhibit concern for the welfare of his
passengers and the driver of the oncoming vehicle, The last clear chance doctrine of the common law
who might have fallen asleep or suddenly fallen ill was imported into our jurisdiction by Picart vs.
at the wheel, C coldly and uncaringly stood his Smith but it is a matter for debate whether, or to
ground closed his eyes, and left everything to fate, what extent, it has found its way into the Civil Code
without due regard for the consequences. Such a of the Philippines. The historical function of that
suicidal mindset cannot be tolerated, for the grave doctrine in the common law was to mitigate the
danger it poses to the public and passengers harshness of another common law doctrine or
availing of petitioners' services. Where both parties rule—that of contributory negligence. The
are negligent but the negligent act of one is common law rule of contributory negligence
appreciably later in point of time than that of the prevented any recovery at all by a plaintiff who was
other, or where it is impossible to determine whose also negligent, even if the plaintiff’s negligence was
fault or negligence brought about the occurrence of relatively minor as compared with the wrongful act
the incident, the one who had the last clear or omission of the defendant. The common law
opportunity to avoid the impending harm but failed notion of last clear chance permitted courts to grant
to do so, is chargeable with the consequences recovery to a plaintiff who had also been negligent
arising therefrom. In this case C, clearly had the Last provided that the defendant had the last clear
Clear Chance, thus he is should be the one liable for chance to avoid the casualty and failed to do so.
having failed to avert the clearly imminent danger. Accordingly, it is difficult to see what role, if any, the
(Greenstar v Universal Robina G.R. No. 205090, common law last clear chance doctrine has to play
October 17, 2016) in a jurisdiction where the common law concept of
contributory negligence as an absolute bar to
The doctrine of “last clear chance” cannot apply recovery by the plaintiff, has itself been rejected, as
if the: (iCOIN) it has been in Article 2179 of the Civil Code of the
Philippines. (PHOENIX CONSTRUCTION, INC.
and CARBONEL Mar 10, 1987)
Options available to recover damages in case of death or injuries to persons, which resulted from a
collision
BASIS OF DEFENSE OF DUE

LIABILITY OF THE
CIVIL PLAINTIFF DEFENDANT DILIGENCE IN THE
EMPLOYER
LIABILITY SELECTION AND

2019 GOLDEN NOTES
Mercantile Law
(Damages) SUPERVISION OF
EMPLOYEE
Culpa contractual
Contract of Passenger Common Direct and Primary Not an available defense. (Art.
Carriage carrier 1759, NCC)
Culpa aquiliana
Direct and primary under This is a complete and proper
1. Driver; Art. 2180, NCC. defense. (Art. 2180, last par.,
1. Passenger; or 2. Owner or NCC)
Quasi-delict
2. Third person employer; NOTE: Action may
3. Both proceed independently of
the criminal action.
Culpa criminal
Subsidiary liability under The defense is not available.
Art. 103, RPC. The judgment in the criminal
action pronouncing the
NOTE: There must be a employee to be also civilly
judgment of conviction liable is conclusive on the
1. Passenger; or
Crime Driver against the negligent employer not only as to the
2. Third person
driver and a finding of actuality of that liability but
insolvency. aslo as to the amount. (Ozoa v.
Madula, 156 SCRA 779;
Philippine Rabbit Bus Lines,
Inc. v. People, 427 SCRA 456)
Distinctions between culpa contractual and culpa aquiliana
CULPA CONTRACTUAL CULPA -AQUILIANA

Source of Obligation Contract Quasi - Delict
No liability there being no privity Solidarily liable with the employer
Liability of Employee
of contract
Due diligence in the selection and Due diligence in the selection and
Availability of Defense supervision of the employee is not supervision of the employee is a
a defense defense
In What Capacity Liable Liable as a contracting party Liable as an employer

Transportation Laws
1. Negotiable – If issued to the bearer or to the
BILL OF LADING order of any person named in such bill.
2. Non-negotiable – If issued to a specific person
named in such bill.
It is a written acknowledgment of receipt of goods
and agreement to transport them to a specific place Q: X is a trader of school supplies in Calapan,
and to a named person or to his order (Unsworth Oriental Mindoro. To bring the school supplies
Transport International [Phils] vs. CA, G.R. No. to Calapan, it has to be transported by a vessel.
166520, 26 July 2010; 1992, 1998 Bar). Because there were so many passengers, the two
(2) boxes of school supplies were loaded but the
THREE-FOLD CHARACTER shipping company was not able to issue the Bill
of Lading. So, on board, the Ship Captain issued
instead a "shipping receipt" to X indicating the 2
1. As a receipt, it recites the date and place of
shipment, describes the goods as to quantity, boxes of school supplies being part of the cargo
of the vessel. Is there a contract of carriage?
weight, dimensions, identification marks and
condition, quality, and value.
A: It is possible to have a contract of carriage bill of
2. As a contract, it names the contracting parties,
which include the consignee, fixes the route, lading even without a bill of lading. The shipping
receipt would be sufficient. A bill of lading is not
destination, and freight rate or charges, and
indispensable. For as long as there is a meeting of
stipulates the rights and obligations assumed
by the parties (Phoenix Assurance Co., Ltd. vs. the minds of the parties, a contract of carriage exists
even in the absence of a bill of lading (Compania
United States Lines, G.R. No. L-24033, Feb. 22,
Maritima vs. Insurance Co. of NA, G.R. No. L-18965,
1968).
3. As a document of title, it regulates the relations October 30, 1964).
between a carrier and a holder of the same.
Technical jargons
(2015 Bar)
In the absence of a bill of lading, their respective 1. On Board –states that the goods have been
received on board the vessel which is to carry
claims may be determined by legal proofs that each
the goods and is issued when goods have been
of the contracting parties may present in conformity
with law. placed aboard a ship with every reasonable
expectation that the shipment is as good as on
its way.
Parties to a bill of lading
2. Received for Shipment Bill– states that the
goods have been received for shipment with or
1. Shipper
without specifying the vessel by which the
2. Carrier
goods are to be shipped and are issued
whenever conditions are not normal and that
NOTE: A consignee, although not a signatory to the
there is insufficiency of shipping space.
contract of carriage between the shipper and the
3. Clean – does not contain any notation
carrier, becomes a party to the contract by reason of
either: indicating defect in the goods.
4. Foul – contains a notation indicating a defect in
the goods.
a) The relationship of agency between the
consignee and the shipper/ consignor; 5. Spent – if the goods were already delivered but
the bill of lading was not returned.
b) The unequivocal acceptance of the bill of lading
6. Through- issued by a carrier who is obliged to
delivered to the consignee, with full knowledge
of its contents; or use the facilities of other carriers as well as his
own facilities for the purpose of transporting
c) Availment of the stipulation pour autrui, i.e.,
the goods from the city of the seller to the city
when the consignee, a third person, demands
of the buyer, which bill of lading is honored by
before the carrier the fulfillment of the
stipulation made by the consignor/shipper in the second and other interested carriers who do
not issue their own lading.
the consignee’s favor, specifically the delivery
7. Custody – the goods are already received by the
of the goods/cargoes shipped.
(MOF Company, Inc., v. Shin Yang Brokerage Corporation, carrier but the vessel indicated has not yet
arrived in the port.
G.R. No. 172822, December 18, 2009, Del Castillo, J.)
8. Port- the vessel indicated in the bill of lading
Two types of bill of lading that will transport the goods is already in the
port.

2019 GOLDEN NOTES
Mercantile Law
Q: A bill of lading indicated that the contract of 2. If negotiable – Action by the shipper may lie
carriage was under a "said to weigh" clause. against the carrier
What are the responsibilities of the shipper and
the carrier? XPN: Surrender of the bill of lading is not necessary:
A: This means that the shipper was solely 1. If the seller instructed the shipping
responsible for the loading of the container while company to deliver the cargoes to the
the carrier was oblivious to the contents of the buyer without requiring the
shipment. The arrastre operator was, like any presentation of the bill of lading;
ordinary depositary, duty-bound to take good care
of the goods received from the vessel and to turn the The shipping company is shall not be liable
same over to the party entitled to their for releasing the cargoes to the buyer
possession, subject to such qualifications as may (Macam vs. CA, G.R. No. 125524, August 25,
have validly been imposed in the contract between 1999)
the parties. The arrastre operator was not required
to verify the contents of the container received and 2. If surrender of the original bill of lading is
to compare them with those declared by the shipper not possible.
because, as earlier stated, the cargo was at the
shipper’s load and count (Asian Terminals Inc. vs. Acknowledgment of the delivery by signing
Simon Enterprises, Inc., G.R. No. 177116, February 27, the delivery receipt suffices to discharge
2013). the common carrier of its contractual
obligation (National Trucking and
DELIVERY OF GOODS Forwarding Corporation vs. Lorenzo
Shipping Corporation, G.R. No. 153563,
PERIOD OF DELIVERY February 27, 2005).
1. If period has been fixed – It must be made within REFUSAL OF CONSIGNEE TO TAKE DELIVERY
such time, failure to do so, the carrier shall pay
the indemnity stipulated in the bill of lading, Grounds for the refusal of a consignee to take
neither the shipper nor the consignee being delivery of the goods (PLD2)
entitled to anything else (Code of Commerce
[CC], Art. 370). 1. When a Part of the goods transported are
delivered and the consignee is able to prove
2. If no period of time fixed- thecarrier shall be that he cannot make use of the part without the
under the obligation to forward them with the others (CC, Art. 365);
first shipment of the same or similar 2. If the cargo consists of Liquids and they have
merchandise he may make to the point where leaked out, nothing remaining in the containers
he must deliver them, and should he not do so, but one-fourth (¼) of their contents, on account
the damages occasioned by the delay shall be of inherent defect of cargo (CC, Art. 687);
suffered by him (CC, Art. 358). 3. If the goods are Damaged and such damage
renders the goods useless for the particular
Determination of indemnity if the same is not purpose for which there are to be used (CC, Art.
stipulated 365);
4. When there is Delay on account of the fault of
If no indemnity has been stipulated and the delay the carrier (CC, Art. 371).
exceeds the time fixed in the bill of lading, the
carrier shall be liable for the damages which the In all cases, the shipper may exercise the right of
delay may have caused (CC, Art. 370). abandonment by notifying the carrier. Ownership
over damaged goods passes to the carrier and
DELIVERY WITHOUT SURRENDER OF carrier must pay shipper the market value of the
BILL OF LADING goods at point of destination.
GR: The surrender of the bill of lading is necessary PERIOD FOR FILING CLAIMS
upon delivery of the goods.If the carrier fails to
require such surrender: 1. If the damage is apparent – Immediately after
delivery; or
1. If non-negotiable – Action against the 2. If the damage is not apparent – within 24 hours
carrier does not lie from delivery (CC, Art. 366)

Transportation Laws
Claim for damages under Art. 366 of Code of goods or the date when the goods have been
Commerce delivered.
It applies in case of domestic transportation (inter- NOTE: The 1 year period of prescription is not
island) where there is damage to the goods applicable to misdelivery or conversion of goods.
transported.
The compliance with a requirement in the bill of
The filing of claim is a condition precedent for lading that the consignee must file a claim for loss or
recovery of damages. damage to the goods shipped within thirty days
from delivery is a condition precedent to the accrual
Requisites: of a right of action against the carrier (Philippine
American General Insurance Co. v. Sweet Lines, Inc.,
1. Consignment of goods through a common G.R. No. 87434, August 5, 1992).
carrier, by a consignor in one place to a
consignee in another place; and Q: Akiro of Tokyo, Japan sent various goods to
2. The delivery of the merchandise by the carrier his friend Juan in Cebu City, Philippines, through
to the consignee at the place of destination one of the vessels of Worth Well Shippers, Inc.,
(New Zealand Ins. Co., Ltd. vs. Choa Joy, G.R. No. an American corporation. En route to Cebu City,
L-7311, Sept. 30, 1955). the vessel had two stops, first in Hong Kong, and
second, in Manila. While travelling from Tokyo
Effect of paying the transportation charges in to Hong Kong, the goods were damaged. What
the filing of an action on account of damages to law will govern? (2013 Bar)
goods
A: D. Philippine Law
1. If paid before checking the goods – The right to
file a claim is not waived. Q: Assuming Philippine law to be applicable and
2. If paid after the goods were checked – The Juan fails to file a claim with the carrier, may he
right to file a claim is already waived (Southern still commence an action to recover damages
Lines, Inc. v. CA, G.R. No. L-16629, Jan. 31, 1962). with the court? (2013 Bar)
Doctrine of combined or connecting services A: B. Yes, provided he files the complaint within 10
years from delivery.
The carrier which delivered the goods to the
consignee shall assume the obligations, rights and Commencement of action if delivery was made
actions of those who preceded him in the to arrastre operator
conveyance of the goods.
Commencement of action should be computed from
The shipper or consignee should proceed against the time of delivery to the arrastre operator. To use
the one who executed the contract or against the as basis for computing the one year period, the
others who received the goods without reservation. delivery to the consignee would be unrealistic and
But even if there is reservation, they are not might generate confusion between the loss or
exempted from liabilities that they may have damage sustained by the goods while in the carrier’s
incurred by reason of their own acts (CC, Art. 373). custody and those occurring while in the arrastre
operator’s possession (Martin, 1989).
The carrier may then file a third-party complaint
against the one who is really responsible. The A claim against the arrastre operator must be filed
carrier is an indispensable party. But the shipper or within fifteen days from the delivery of goods
consignee may sue all of them as alternative (International Container Terminal Services, Inc. vs.
defendants. Prudential Guarantee and Assurance Company, Inc.
G.R. No. L-134514, December 8, 1999).
PERIOD FOR FILING ACTIONS
The filing of a provisional claim is substantial
1. For coastwise or carriage within the Philippines, compliance with the provision in the management
within 6 years if no bill of lading has been contract of the arrastre operator that a formal claim
issued or within 10 years if a bill of has been for the loss of goods must be filed within thirty days
issued. from the filing of the entry (Metro Port Service Inc.
2. For international carriage from foreign port to vs. IAC, G.R. No. 66253, August 31, 1992).
the Philippines, within 1 year from delivery of

2019 GOLDEN NOTES
Mercantile Law
equips, and mans the vessel. The charterer is the
MARITIME COMMERCE owner pro hac vice (2004 Bar).
As owner pro hac vice of the vessel, the charterer

Agents of maritime commerce assumes the rights and liabilities of the owner to
third parties who deal with the vessel, it is the
1. Ship-owners and ship agents charterer and its agent who are liable for the wages
2. Captains and masters of the vessel of seamen hired by the master of the vessel, as the
3. Officers and Crews of the vessel master of the vessel is acting in behalf of the
4. Supercargoes (Sundiang, Sr. & Aquino, 2011) charterer (Litonjua Shipping Co., Inc. vs. National
Seamen Board, G.R. No. L-51910, August 10, 1989,
Ship owner of a vessel 1991 Bar).
The person in possession, management, control The charterer is considered the owner of the vessel
over the vessel, and the right to direct her for the voyage or service stipulated. The charterer,
navigation. While in their possession, the ship not the owner of the vessel, is liable for vessel’s
owners also receive freight earned and paid. expenses, including seaman’s wages.
Ship agent CONTRACT OF AFFREIGHTMENT
The person entrusted with provisioning or The owner of the vessel leases a part or all of its
representing the vessel in the port in which it may space to haul goods for others. It can either be:
be found. Hence, whether acting as agent of the
owner of the vessel or as agent of the charterer, he 1. Time charter; or
will be considered as the ship agent and may be held 2. Voyage/ trip charter.
liable as such, as long as he is the one that provisions
or represents the vessel (Macondray & Co., Inc. v. NOTE: A written contract of affreightmentmay be
Provident Insurance Corp, G.R. No. 154305, Dec. 9, amended by oral agreement and since in such a case
2004). the terms of the contract shall be those embodied in
the bill of lading, no demurrage charges can be
Supercargoes collected where this was not stipulated in the bill of
lading (Market Developers, Inc. vs. IAC, G.R. No. L-
Persons especially employed by the owner of a 47978, September 8, 1989).
cargo to take charge of and sell to the best advantage
merchandise which has been shipped, and to Time charter
purchase returning cargoes and to receive freight,
as he may be authorized. A vessel is chartered for a particular time or
duration. While the ship owner still retains
CHARTER PARTIES possession and control of the vessel, the charterer
has the right to use all vessel’s facilities. The
Charter party contract charterer may likewise designate vessel’s
destination.
A charter party is a contract by which an entire ship,
or some principal part thereof, is let by the owner to Voyage/ trip charter
another person for a specified time or use in
consideration of the payment of freight (Caltex vs. Vessel is chartered for a carriage of goods from one
Sulpicio Lines, G.R. No. 131166, September. 30, 1999). or more ports of loading to one or more ports of
unloading.
Classes of charter party
A voyage charter is a contract wherein the ship was
1. Bareboat or demise leased for a single voyage for the conveyance of
2. Contract of affreightment goods, in consideration of the payment of freight. An
a. Time charter owner who retains possession of the ship remains
b. Voyage charter liable as carrier and must answer for loss or non-
delivery of the goods received for transportation
BAREBOAT / DEMISE CHARTER (Cebu Salvage Corp. vs. Philippine Home Assurance
Corp., G.R. No. 150403, Jan. 25, 2007).
The ship owner gives possession of the entire vessel
to the charterer. In turn, the charterer supplies,

Transportation Laws
Bareboat or demise charter party vs. Contract of b. SAle by the owner of the vessel before
affreightment loading by the charterer.
BAREBOAT/DEMISE CONTRACT OF 3. Due to fortuitous event: (WEB-Pro-N)

CHARTER CONTRACT AFFREIGHTMENT a. War – there is a governmental prohibition
Ship owner remains of commercial intercourse, intended to
Negligence of the bring about an entire cessation for the time
liable and carrier must
charterer gives rise to being of all trade whatever.
answer for any breach
its liability to others. b. Embargo – A proclamation or order of
of duty.
Charterer is not State, usually issued in times of war or
Charterer is regarded threatened hostilities, prohibiting the
regarded as owner.
as owner pro hac vice. departure of ships or goods from some or
Ship owner retains
Ship owner all the ports of such State until further
ownership over the
temporarily order; or
vessel (Coastwise
relinquishes c. Blockade – A sort of circumvallation
Lighterage vs. CA, G.R.
possession and around a place by which all foreign
No. 114167, July 12,
ownership of the connection and correspondence is, as far as
1995).
vessel. human power can effect it, to be cut off.
d. PROhibition to receive cargo at port of
Q: For the transportation of its cargo from the destination.
Port of Manila to the Port of Kobe, Japan, Osawa e. Inability of the vessel to Navigate (CC, Art.
&Co., c hartered bareboat M/V Ilog of Karagatan 640)
Corporation. M/V Ilog met a sea accident
resulting in the loss of the cargo and the death Q: What is a “Jason clause” in a charter party?
of some of the seamen manning the vessel. Who (2015 Bar)
should bear the loss of the cargo and the death
of the seamen? Why? A: The Jason clause derives its name from The Jason
225 US 32 (1912) decided by the US Supreme Court
A: Osawa & Co. should bear the loss because it under the Harter Act. By the Jason clause, a
chartered bareboat M/V Ilog which, in effect, gave shipowner (provided he had exercised due
it exclusive control over the vessel. In a demise, in diligence to make the ship seaworthy and properly
contrast to other charters, the charterer is manned, equipped and supplied) could claim a
considered the owner pro hac vice. The charterer is general average contribution from cargo, even
accordingly liable in personam for all liabilities where the damage was caused by faulty navigation
arising out of the operation of the vessel; he is of the vessel, provided that the bill of lading
responsible for the actions of the master and crew excluded liability for such faults.
(Litonjua Shipping Company, Inc. v. National
Seamen Board and Gregorio P. Candongo, G.R. No. LIABILITY OF SHIPOWNERS AND SHIPPING
51910, August 10, 1989). AGENTS
Instances when a charter party may be Three-fold character of the Captain (GVG)
rescinded
1. General agent of the ship owner
1. At the request of the charterer by: (FARER) 2. Vessel’s technical director
a. Failure to place vessel at charterer’s 3. Government representative of the flag he
disposal navigates under
b. Abandoning the charter and paying half the
price Inherent powers of the Ship Captain (A2-C3-D)
c. Return the vessel due to pirates, enemies,
and bad weather 1. To Appoint or make contracts with the crew in
d. Error in tonnage or flag the ship agent’s absence, and to propose said
e. Arrival at port for Repairs - if repairs take crew, should said agent be present; but the ship
less than 30 days, pay full freightage; if agent may not employ any member against the
more than, freightage in proportion to the captain's express refusal
distance covered. 2. To Command the crew and direct the vessel to
2. At the request of the ship owner: (Sa-Te) the port of its destination, in accordance with
a. If extra lay days TErminate without the the instructions he may have received from the
cargo being placed alongside vessel; and ship agent
3. To impose Correctional punishment:

2019 GOLDEN NOTES
Mercantile Law
a. Upon those who fail to comply with orders; 1. Damages suffered by the vessel and its cargo by
or reason of want of skill or negligence on his part;
b. Those wanting in discipline 2. Thefts committed by the crew, reserving his
right of action against the guilty parties;
4. To make Contracts for the charter of the vessel 3. Losses, fines, and confiscations imposed on
in the absence of the ship agent or of its account of violation of customs, police, health,
consignee and navigation laws and regulations;
5. To Adopt all proper measures to keep the vessel 4. Losses and damages caused by mutinies on
well supplied and equipped, purchasing all that board the vessel or by reason of faults
may be necessary for the purpose, provided committed by the crew in the service and
there is no time to request instruction from the defense of the same, if he does not prove that he
ship agent made timely use of all his authority to prevent
6. To make Disposition, in similar urgent cases or avoid them;
while on a voyage, the repairs on the hull and 5. Those caused by the misuse of the powers;
engines of the vessel and in its rigging and 6. For those arising by reason of his going out of
equipment, which are absolutely necessary to his course or taking a course which he should
enable it to continue and finish its voyage (Code not have taken without sufficient cause, in the
of Commerce, Art. 610). opinion of the officers of the vessel, at a meeting
with the shippers or supercargoes who may be
Obligations of the Captain on board. No exceptions whatsoever shall
exempt him from this obligation;
1. Inventory of equipment 7. For those arising by reason of his voluntarily
2. Keep a copy of Code of Commerce on board entering a port other than that of his
3. Have a log book, freight book, accounting book destination, outside of the cases or without the
4. Conduct a marine survey of vessel before formalities referred to in Article 612; and
loading 8. For those arising by reason of non-observance
5. Remain on board while loading of the provisions contained in the regulations
6. Demand pilot on departure and on arrival at on situation of lights and maneuvers for the
each port purpose of preventing collisions (CC, Art. 618).
7. Be on deck when sighting land
8. Arrivals under stress: to file marine protest in Ship owner/agent is not liable for the obligations
24 hours contracted by the captain if the latter exceeds his
9. Record bottomry loan with Bureau of Customs powers and privileges inherent in his position of
10. Keep papers and properties of crew members those which may have been conferred upon him by
who might die the former. However, if the amount claimed were
11. Conduct himself according to the instructions of used for the benefit of the vessel, the ship owner or
the ship agent ship agent is liable.
12. Report to ship agent on arrival
13. Observe rules on the situation of lights and Q: X chartered the ship of Y to transport his logs
maneuvers to prevent collisions from Zamboanga to Manila. In the course of their
14. Remain on board until the last hope to save the voyage, the ship met a storm and had to dock in
vessel is lost and to abide by the decision of the Cebu for 3 days. Z, the captain of the ship,
majority whether to abandon or not borrowed P20,000 from X on the pretext that he
15. In case of shipwreck: file marine protest, within would need the money for the repair of the ship.
24 hours Z misappropriated the money and converted it
16. Comply with rules and regulation on navigation to his own benefit. What is the liability of Y, if
(CC, Art. 612). any? (1989 Bar)
Failure of the Ship Captain to ascertain beforehand A: A ship-owner would only be liable for contracts
direction of reported storm and weather conditions made by the captain (a) when duly authorized or (b)
along his route constitutes negligent lack of even when unauthorized, for ship repairs, or for
foresight (Alejandro Arada vs. CA and SMC, G.R. No. equipping or provisioning the vessel when the
98243, July 1, 1992). proceeds are invested therein. Since the loan by the
captain from X does not fall under any of the
LIABILITY FOR THE ACTS OF THE CAPTAIN foregoing cases, the amount borrowed shall be
considered a personal liability of Z, the captain, and
Cases where the ship owner/agent shall be Y, the ship-owner, cannot thus be held liable.
liable to the damages caused by the captain

Transportation Laws
Q: Under a charter party, XXO Trading Company C. The defense of exercise of the diligence of a good
shipped sugar to Coca-Cola Company through father of a family will lie in case of tort but not in
SS Negros Shipping Corp., insured by Capitol case of contract. In the latter, such defense is not
Insurance Company. The cargo arrived but with available because the contract was to carry the
shortages. Coca-Cola demanded from Capitol goods safely and unless loss is due to caso fortuito
Insurance Co. P500.000 in settlement for XXO or force majeure, there is a breach of contract. The
Trading. The MM Regional Trial Court, where due diligence of the shipowner is against his
the civil suit was filed, "absolved the insurance employee, the master.
company, declaring that under the Code of
Commerce, the shipping agent is civilly liable Civil liabilities of ship owners and agents
for damages in favor of third persons due to the
conduct of the carrier's captain, and the 1. Damages suffered by a 3rd person for tort
stipulation in the charter party exempting the committed by the captain;
owner from liability is not against public policy. 2. Contracts entered for provisioning and repair of
Coca-Cola appealed. Will its appeal prosper? vessel;
Reason briefly. (2004 Bar) 3. Indemnities in favor of 3rd persons arising from
the conduct of the captain from the care of
A: NO. The appeal of Coca-Cola will not prosper. goods;
Under Article 587 of the Code of Commerce, the 4. Damages in case of collision due to fault or
shipping agent is civilly liable for damages in favor negligence or want of skill of the captain; and
of third persons due to the conduct of the carrier's 5. Damages for the acts of the captain.
captain, and the shipping agent can exempt himself
therefrom only by abandoning the vessel with all his Instances when the captain and crew members
equipment and the freight he may have earned may rescind their contractual employment
during the voyage. On the other hand, assuming
there is bareboat charter, the stipulation in the 1. War
charter party exempting the owner from liability is 2. Outbreak of disease
not against public policy because the public at large 3. New owner of vessel
is not involved (Home Insurance Co. vs. American 4. Change of Destination (CC, Art. 647)
Steamship Agencies, Inc., G.R. No. L-25599, April 4,
1968). Powers, functions, and liabilities of ship agents
(ID)
Q: While docking his vessel, “Taurus”, the
master, thru negligence, damaged the wharf and 1. Indemnity for expenses incurred for ship’s
the merchandise loaded on the deck. The owner benefit.
of the wharf and the damaged merchandise sued 2. Discharge of captain and/or crew members
the owner of the vessel and the master of the The following are the rules observed by the ship
vessel for the damage. agent:
A. What is the basis of the liability of the owner a. Captain and/or crew member’s contract
of the vessel with respect to the damage to the not for a definite period or voyage:
wharf? i. Before vessel sets out to sea: Ship agent
B. With respect to the damage to the at his discretion may discharge the
merchandise? captain and members of the crew.
C. Does the defense of exercise of diligence of a Ship agent must pay captain and/or
good father of a family lie? crew members salaries earned
Reason. according to their contracts, and
without any indemnity whatsoever,
A: unless there is an expressed
A. The basis of the liability of the shipowner with agreement;
respect to the damaged wharf is tort. There was ii. During voyage: Captain and/or crew
damage due to negligence without any preexisting member shall receive salary until
contractual relations between the parties. return to the port where contract was
B. The basis of the liability with respect to the made. Article 637 of the Code of
merchandise on deck is the contract of carriage. Commerce enumerates the just
There was a breach of contract because the goods causes for discharge.
were not carried safely to their destination due to
the negligence of the master.

2019 GOLDEN NOTES
Mercantile Law
b. Where captain and members of the crew’s insurance proceeds. The ship owner’s or agent’s
contracts with ship agent be for a definite liability is merely co-extensive with his interest in
period or voyage: the vessel, such that a total loss of the vessel results
i. Captain and/or crew members may in the liability’s extinction. The vessel’s total
not be discharged until after the destruction extinguishes maritime liens because
fulfillment of their contracts, except by there is no longer any res to which they can attach
reason of insubordination in serious (Monarch Insurance vs. CA, G.R. No. 92735, June 8,
matters, robbery, theft, habitual 2000).
drunkenness, or damage caused to the
vessel or to its cargo through malice By necessary implication, the ship agent’s or ship
or manifest or proven negligence (CC, owner’s liability is confined to that which he is
Art. 605). entitled as of right to abandon—the vessel with all
ii. If the captain should be the vessel’s her equipment and the freight it may have earned
co-owner, he may not be discharged during the voyage and to the insurance thereof, if
unless ship agent returns his amount any (Yango vs. Laserna, 73 Phil. 330, 1941).
of interest therein. In the absence of
agreement between the parties, Rationale of the doctrine: The Real and
interest shall be appraised by experts Hypothecary nature of Maritime Law
appointed in the manner established
by civil procedure. To offset against innumerable hazards and perils in
sea voyage and to encourage ship building and
Exception to the rule maritime commerce. By abandonment, the ship
owner and ship agent exempt themselves from
The captain shall not be liable for the loss or injury liability, thus, avoiding the possibility of risking his
to persons or cargo if the loss or the injury is based whole fortune in the business.
on the following causes:
Person/s who can invoke the limited liability
1. Force majeure rule
2. Obligations contracted for the vessel’s benefit,
except when the captain expressly agrees to be 1. Ship owner; and
liable. 2. Shipping agent.
A captain may not have himself substituted in the He is (they are) the very person(s) whom the
absence of consent from the ship agent, and should Limited Liability Rule has been conceived to protect
he do so he shall be liable for all the acts of the (Philippine Trigon Shipyard Corp., et al. v.
substitute (CC, Art. 615). Concepcion, et al., G.R. No. 160088, July 13, 2011).
Q: T, the captain of MV Don Alan, while asleep in Cases in which the Doctrine of Limited Liability
his cabin, dreamt of an Intensity 8.0 earthquake is allowed (1994, 2004 Bar) (SOLE)
along the path of his ship. On waking up, he
immediately ordered the ship to return to port. 1. Civil liability of the Ship agent or ship owner for
True enough, the earthquake and tsunami the indemnities in favor of third persons (CC,
struck three days later and his ship was saved. Art. 587);
Was the deviation proper? (2011 Bar) 2. Civil liability of the co-Owners of the vessel for
the results of the acts of the captain (CC, Art.
A: No, because no reasonable ground for avoiding a 590);
peril existed at the time of the deviation. 3. If the vessel and her cargo be totally Lost, by
reason of capture or shipwreck, all the rights
LIMITED LIABILITY RULE shall be extinguished, both as regards the right
of the crew to demand wages and the right of
Doctrine of limited liability (1991, 1994, 1997, the ship agent to recover the advances made
2000, 2008 Bar) (CC, Art. 643);
4. Extinction of civil liability incurred by the ship
Also called the “no vessel, no liability doctrine”, it owner or agent in cases of maritime collisions
provides that liability of ship owner is limited to (CC, Art. 837)
ship owner’s interest over the vessel. Consequently,
in case of loss, the ship owner’s liability is also Stipulations which may be inserted in the bill of
extinguished. Limited liability likewise extends to lading to limit liability and their effects:
ship’s appurtenances, equipment, freightage, and

Transportation Laws
1. No liability - The carrier will not be liable at all empire? What principle of maritime law is
for the negligent acts of its crew and employees. applicable? Explain.
This is void for being contrary to public policy. b. Assume the vessel was not seaworthy as in
2. Limited liability - regardless of the value of fact its hull had leaked, causing flooding in
the cargo, the maximum liability of the carrier the vessel, will your answer be the same?
will be, for example, P500. This is also void for Explain.
being public policy. c. Assume the facts in question (b). Can the
3. Qualified Liability - this is the only stipulation heirs of the three (3) crew members who
in a bill of lading which can validly limit liability. perished recover from CSC? Explain fully.
NOTE: Under Qualified Liability, carrier fixes a (2008 Bar)
maximum kiability in the event the shipper
does not declare any value or a value up to a A:
certain amount. Should a shipper declare a a. NO. The principle of limited liability will apply
higher value, and wiulling to pay higher because the exclusively real and hypothecary
freightage, the carrier shall accordingly be nature of maritime law operates to limit the
liable for greater damage. In effect, carrier liability of the ship owner to the value of the
becomes an insurer for higher insurance. vessel, earned freightage and proceeds of the
insurance, if any “No vessel, No liability,”
EXCEPTIONS TO THE LIMITED LIABILITY RULE expresses in a nutshell the limited liability rule
(Monarch Insurance v. CA, G.R No. 92735, June 8,
Instances where Doctrine of Limited Liability 2000). The total destruction of the vessel
shall not apply extinguishes maritime lien as there is no longer
any res to which it can attach. In this case, the
1. Repairs and provisioning of the vessel before ship was seaworthy. It exercised extraordinary
the loss of the vessel (CC, Art. 586) diligence when it changed its course to avoid
2. Insurance proceeds. If the vessel is insured, the the typhoon but unfortunately, it was hit by
proceeds will go to the persons entitled to claim huge waves and sank. Since the vessel sank at
from the ship owner (Vasquez v. CA, G.R. No. L- no fault by CSC, it cannot be held liable by virtue
42926, Sept. 13, 1985) of “No vessel, no liability rule.”
3. Claims of the crew under the Workmen’s b. NO. While as a rule, a ship owner’s liability is
Compensation Act limited to the value of the vessel, the same rule
4. When the ship owner is guilty of fault or has no application when the carrier failed to
negligence overcome the presumption of negligence. Such
5. When the vessel is not abandoned presumption is only rebutted when the carrier
6. When vessel is not seaworthy establishes that the vessel is seaworthy. The
vessel is this case is not seaworthy, thus,
Q: On October 30, 2007, M/V Pacific, a Philippine doctrine of limited liability is inapplicable.
registered vessel owned by Cebu Shipping c. YES. The heirs of the 3 crew members who
Company (CSC), sank on her voyage from Hong perished can recover. This is because the heirs
Kong to Manila. Empire Assurance Company may file a claim under the Workmen’s
(Empire) is the insurer of the lost cargoes Compensation Claims. The Limited Liability
loaded on board the vessel which were Rule does not apply.
consigned to Debenhams’ company. After it
indemnified Debenhams, Empire as subrogee Q: A cargo ship of X Shipping, Co. ran aground off
filed an action for damages against CSC. the coast of Cebu during a storm and lost all its
cargo amounting to Php50 Million. The ship
a. Assume that the vessel was seaworthy. itself suffered damages estimated at Php80
Before departing, the vessel was advised by Million.
the Japanese Meteorological Center that it
was safe to travel to its destination. But The cargo owners filed a suit against X Shipping
while at sea, the vessel received a report of a but it invoked the doctrine of limited liability
typhoon moving within its general path. To since its vessel suffered an Php80 Million
avoid the typhoon, the vessel changed its damage, more than the collective value of all lost
course. However, it was still at the fringe of cargo. Is X Shipping correct? (2011 Bar)
the typhoon when it was repeatedly hit by
huge waves, foundered and eventually sank. A: NO, since X Shipping neither incurred a total loss
The captain and the crew were saved except nor abandoned its ship.
three (3) who perished. Is CSC liable to

2019 GOLDEN NOTES
Mercantile Law
Q: CARDIAC shipped 165,200 bags of cement GENERAL AND PARTICULAR AVERAGES
from China Port to Manila Port to HEINDRICH,
the consignee. The shipment was insured by the Averages
insurers FGU AND PIONEER. When the shipment
arrived, it was inspected by the consignee and All extraordinary or accidental expenses which may
ACENAV, the agent of CARDIAc and it was found be incurred during the voyage for the preservation
that 43,905 bags were on a bad condition. The of the vessel or cargo or both. Average may either be
shipper was not able to collect from the shipper general or particular
and charterer so it proceeded to the insurers
who paid the claim. FGU AND PIONEER General average vs. Particular average
INSURANCE CO., who subrogated the consignee
HIENDRICH, filed a claim against the charterer GENERAL AVERAGE PARTICULAR
and ACENAV who is a mere agent of CARDIAC AVERAGE
The trial court dismissed the complaint but on Damages or expenses Damages or expenses
appeal, the appellate court reversed the deliberately caused in caused to the vessel or
decision and held ACENAV liable for 30% of the order to save the vessel, cargo that did not inure
claim of the respondents. its cargo, or both from to the common benefit
real and known risk and borne by
Is the appellate court correct? respective owners
Both the ship and cargo No common danger to
A: NO, Article 586 of the Code of Commerce are subject to the same both the vessel and the
provides: danger cargo
There is a deliberate Expenses and damages
x x x sacrifice of part of the are not deliberately
By ship agent is understood the person entrusted with vessel, cargo, or both made
the provisioning of a vessel, or who represents her in Damage or expenses Did not inure to
the port in which she may be found. incurred to the vessel, common benefit and
its cargo, or both, profit of all persons
Records show that the obligation of ACENAV was redounded to the interested in the vessel
limited to informing the consignee HEINDRICH of benefit of the respective and her cargo
the arrival of the vessel in order for the latter to owners
immediately take possession of the goods. No All those who have Only the owner of the
evidence was offered to establish that ACENAV had benefited shall satisfy goods benefiting from
a hand in the provisioning of the vessel or that it the average the damage shall bear
represented the carrier, its charterers, or the vessel the expense of average
at any time during the unloading of the goods.
Clearly, ACENAV's participation was simply to Persons liable for the amount of loss
assume responsibility over the cargo when they
were unloaded from the vessel. Hence, no reversible In general average: All persons having an interest in
error was committed by the courts a quo in holding the vessel and cargo therein at the time of the
that ACENAV was not a ship agent within the occurrence of the average shall contribute (Art. 812,
meaning and context of Article 586 of the Code of CC).
Commerce, but a mere agent of CARDIA, the shipper.
(ACE NAVIGATION CO., INC. v FGU INSURANCE In particular average: The owner of the things which
CORPORATION and PIONEER INSURANCE AND gave rise to the expenses or suffered the damage
SURETY CORPORATION G.R. No. 171591, June 25, shall bear the simple or particular averages (Art.
2012) 810, CC).
ACCIDENTS AND DAMAGES IN MARITIME Requisites of general average (CD-PS)
COMMERCE
1. Common danger present;
Accidents in maritime commerce (CASA) 2. Deliberate sacrifice of part of the vessel or
cargo;
1. Collision 3. Successful saving of vessel and/or cargo; and
2. Averages 4. Proper procedure and legal steps.
3. Shipwreck a. Assembly to be called by captain of all the
4. Arrival under stress cargo owners and other officers of the
vessel
b. Deliberation

Transportation Laws
c. Resolution of the captain Jettison (2000, 2009 Bar)
d. Entry of resolution in the logbook
e. Delivery of the minutes of the meeting to Act of throwing overboard part of a vessel’s cargo or
the maritime judicial authority of the first hull in hopes of saving a ship from sinking.
port of arrival within 24 hours from arrival;
f. Ratification by captain under oath Goods jettisoned for the common safety, shall not
(Dimaampao & Dumlao-Escalante, 2014) pay freight; but its latter amount (freight lost) shall
be considered as general average, computing the
Goods not covered by general average even if same in proportion to the distance covered when
not sacrificed they were jettisoned (Art. 660, Code of Commerce).
1. Goods not recorded in the books or records of Q: Distinguish between overseas and inter-
the vessel (Art. 855[2], CC) island trade regarding reimbursement and
2. Fuel for the vessel if there is more than payment of general averages on jettisoned deck
sufficient fuel for the voyage (Rule IX, York- cargo.
Antwerp Rule)
A:
Q. Global Transport Services, Inc (GTSI) 1. In case of overseas trade, the York-Antwerp
operates a fleet of cargo vessels plying Rules prohibit the loading of cargo on deck. In
interisland routes. One of its vessels, MV Donna case such cargo is jettisoned, the owner will not
Juana, left the port of Manila for Cebu laden with, be entitled to reimbursement in view of the
among other goods, 10,000 television sets violation. If the cargo were saved, the owner
consigned to Romualdo, a TV retailer in Cebu. must contribute to general average.
2. In case of interisland trade, the York-Antwerp
When the vessel was about 10 nautical miles Rules allow deck cargo. If the cargo loaded on
away from Manila, the ship captain heard on the deck is jettisoned as a result of which the vessel
radio that a typhoon which, as announced by was saved, the cargo owner is entitled to
PAG-ASA, was on its way out of the country, had reimbursement. If the cargo is saved, the cargo
suddenly veered back into Philippine territory. owner must contribute to the general average.
The captain realized that MV Dona Juana would
traverse the storm’s path, but decided to Reason: In interisland trade, voyages are usually
proceed with the voyage. True enough, the short and there are intervening islands and the seas
vessel sailed into the storm. The captain are generally not rough. In overseas trade, the
ordered the jettison of the 10,000 television vessel is exposed for many days to the peril of the
sets, along with some other cargo, in order to sea, making deck cargo is dangerous to navigation.
lighten the vessel and make it easier to steer the
vessel out of the path of the typhoon. Eventually, COLLISION
the vessel, with its crew intact, arrived safely in
Cebu. (2009 bar) Collision is impact of two moving vessels. It is an
impact or sudden contact of a vessel with another
a) Will you characterize the jettison of whether both are in motion or one stationary
Romualdo’s TV sets as an average? If so, what (Aquino and Hernando, 2016).
kind of an average, and why? If not, why not?
Allision is impact between a moving vessel and a
b) Against whom does Romualdo have a stationary one.
cause of action for indemnity of his lost TV sets?
Explain. Error in extremis isthe sudden movement made by
a faultless vessel during the third zone of collision
A: with another vessel which is at fault under the
a. The jettison of Romualdo’s TV sets resulted in a second zone. Even if sudden movement is wrong, no
general average loss, which entitles him responsibility will fall on the faultless vessel.
compensation or indemnification from the ship
owner and the owners of the cargoes saved by the Rules governing liabilities of parties in case of
jettison. collision
b. Romualdo has a cause of action for his lost TV sets
against the ship owner and the owners of the 1. One vessel at fault – The ship owner of such
cargoes saved by the jettison. The jettison of the TV vessel shall be liable for all resulting damages.
sets resulted in a general average loss, entitling 2. Both vessels at fault – Each vessel shall suffer
Romualdo to indemnity for the lost TV sets. their respective losses but as regards the

2019 GOLDEN NOTES
Mercantile Law
owners of the cargoes, both vessels shall be If the collision is imputable to both vessels, each one
jointly and severally liable (1991, 1995, 1998 shall suffer her own damage, and both shall be
Bar). solidarily liable for the damages occasioned to their
3. Vessel at fault not known – Each vessel shall cargoes (CC, Art. 827).
suffer its own losses and both shall be solidarily
liable for loses or damages on the cargo Protest in collision (2007 Bar)
(Doctrine of Inscrutable Fault).
The action for recovery of damages arising from
Doctrine of inscrutable fault (1995, 1997 collisions cannot be admitted if a protest or
Bar) declaration is not presented within twenty-four
hours before the competent authority of the point
Under this doctrine, where fault is established where the collision took place, or that of the first
but it cannot be determined which of the two port of arrival of the vessel, if in Philippine territory,
vessels were at fault, both shall be deemed to and to the Filipino consul if it occurred in a foreign
have been at fault. country (Art. 835, CC).
4. Fortuitous event – Each shall bear its own Failure to make a protest is not an impediment to
damage (1995 Bar). the maintenance of a civil action based on quasi-
5. Third vessel at fault – The third vessel shall be delict.
liable for losses and damages sustained.
Instances when a protest is required (AS-HM)
Zones of time in the collision of vessel
1. Arrival under stress (CC, Art. 612 [8]);
1. First zone – all time up to the moment when risk 2. Shipwreck (CC, Arts. 601 [15], 843);
of collision begins. 3. If the vessel has gone through a Hurricane or
where the captain believes that the cargo has
One vessel is a privileged vessel and the other is suffered damages or averages (CC, Art. 642);
a vessel required to take action to avoid and
collision. 4. Maritime collision (CC, Art. 835)
2. Second zone – time between moment when risk Persons who can file a maritime protest
of collision begins and moment it becomes
practically a certainty. 1. In case of maritime collision, the passenger or
other persons interested who may be on board
In this zone, the conduct of the vessels is the vessel or who were in a condition who can
primordial. It is in this zone that vessels must make known their wishes (CC, Arts. 835-836) or
observe nautical rules, unless a departure the captain himself (Verzosa and Ruiz vs. Lim,
therefrom becomes necessary to avoid G.R. No. 20145, Nov. 15, 1923).
imminent danger. The vessel which does not
make such strict observance is liable. 2. The captain in cases of:
a. Arrival under stress
3. Third Zone – time when collision is certain and b. Shipwreck; or
up to the time of impact. c. If the vessel has gone through a hurricane
or where the captain believes that the cargo
An error at this point no longer bears any has suffered damages or averages.
consequence. Even if a collision which resulted
in the damage to the cargoes of a vessel was due Q: Two vessels figured in a collision resulting in
to the fault of the other vessel, the ship owner is considerable loss of cargo. The damaged vessels
still liable where the vessel did not exercise due were safely conducted to a port. Kim, a
diligence to avoid collision (Maritime Company passenger and Ruby, a shipper who suffered
of the Philippines vs. CA, G.R. No 47004, March 8, damage to his cargo, did not file maritime
1989). protest. Can Kim and Ruby successfully
maintain an action to recover losses and
A vessel is guilty of negligence even if it correctly damages arising from the collision? (2007 Bar)
navigated to the right to avoid the collision where it
did not make such maneuver at an early stage and A: Ruby, the shipper can successfully maintain an
allowed the two vessels to come to close quarters action to recover losses and damages arising from
(Mecenas vs. CA, G.R. No. 88052, December 14, 1989). the collision notwithstanding his failure to file a
maritime protest since the filing thereof is required

Transportation Laws
only on the part of Kim, who, being a passenger of APPLICATION
the vessel at the time of the collision, was expected
to know the circumstances of the collision. Kim’s It will only be applied in terms of loss or damage of
failure to file a maritime protest will therefore goods transported to and from Philippine ports in
prevent him from successfully maintaining an foreign trade.
action to recover his losses and damages (CC, Art
836). It may also apply to domestic trade when there is a
paramount clause in the contract. Paramount
Shipwreck Clause is a stipulation or clause either on the bill of
lading or charter party stipulating the laws that the
The loss of the vessel at sea as a consequence of its parties agreed to be used of that particular
grounding, or running against an object in sea or on transport. In the event that there will be a breach,
the coast. If the wreck was due to malice, negligence, the parties shall follow the law stipulated in the
or lack of skill of the captain, the owner of the vessel paramount clause (Martin, 1989).
may demand indemnity from said captain.
The Carriage of Goods by Sea Act applies up to the
Person who shall bear the losses in shipwreck final port of destination even if the transshipment
was made on an inter-island vessel (Sea Land
GR: The loss of a ship and her cargo shall fall upon Service Inc. vs. IAC, G.R. No. 75118, August 31, 1987).
their respective owners (CC, Art. 840).
Cases covered under the COGSA
XPN: The ship agent or the shippers may demand
indemnity from the captain for the damage caused It applies only in case of non-delivery or damage,
to the vessel or to the cargo by the accident. and not to misdelivery or conversion of goods (Ang
vs. American Steamship Agencies, Inc., G.R. No. L-
1. The wreck was due to malice, negligence, or 22491, Jan. 27, 1967).
lack of skill of the captain; or
2. The vessel put to sea was insufficiently repaired Also, the deterioration of goods due to delay in their
and equipped (Art. 841, CC). transportation is not covered by Sec. 6 of COGSA
(Mitsui O.S.K. Lines Ltd. vs. CA, G.R. No. 119571, March
Arrival under stress 11, 1998).
It is the arrival of a vessel at the nearest and most Q: The goods imported from the United States
convenient port, if during the voyage the vessel were unloaded by the carrier in Manila. While in
cannot continue the trip to the port of destination the custody of the arrastre operator, part of the
on account of: shipment worth P1,000 was lost. Does the case
involve admiralty and maritime commerce so
1. Lack of provisions; that the action for short delivery has to be files
2. Well-founded fear of seizure, privateers or in the Court of First Instance regardless of the
pirates; or amount? Reasons. (2013 Bar)
3. Any accident of the sea disabling it to navigate
(art. 819, cc). A: NO. The matter does not involve admiralty or
maritime commerce which relate only to incidents
NOTE: In arrival under stress, the captain must file occurring during the sea voyage.
a protest which is merely a disclaimer for the ship
owner not to be liable. NOTICE OF LOSS AND DAMAGES
Instances when arrival under stress is unlawful Notice of claim

(LR-DM)
1. If the damage is not apparent – within three (3)
1. Lack of provisions is due to negligence to carry days from delivery; or
according to usage and customs 2. If the damage is apparent – immediately.
2. Risk of enemy not well known of manifest
3. Defect of vessel is due to improper repair; or NOTE: The period is not mandatory. However, the
4. Malice, negligence, lack of foresight or skill of prescriptive period of one year from delivery for
captain (Art. 820, CC). the filing of the case is a condition precedent or
mandatory.
CARRAIGE OF GOODS BY SEA ACTS (COGSA)

2019 GOLDEN NOTES
Mercantile Law
Failure to file notice of loss does not bar an action Transshipment – is the act of taking out cargo out
against the carrier if the action was filed within one of one ship and laoding it in another, or the transfer
year (Belgian Overseas Chartering & Shipping N.V. vs. of goods from the vessel stipulated in the contract of
Philippine First Insurance Company, Inc, G.R. No. affreightment to another vessel before the place of
143133, June 5, 2002). There is no consequence on destination named in the contract has been reached.
the right to bring suit if no notice is filed unlike
under the Code of Commerce. It only gives rise to a Instances when the one-year period applies
presumption that the goods are delivered in the (AFLS)
same condition as they are shipped.
1. Amendment of pleadings for suing the wrong
There is also no consequence if the transportation party
charges and expenses are paid unlike under the 2. Filing of third party complaint
Code of Commerce. 3. Loss or damage to cargo, excluding delay or
misdelivery
Q. RC imported computer motherboards from 4. Subrogation (Art 2207, NCC)
the USA and had them shipped to Manila aboard
an oceangoing cargo ship owned by BC Shipping NOTE: Art. 1155 of the Civil Code, providing that the
Company. When the cargo arrived at the Manila prescription of actions is interrupted by the making
seaport and delivered to RC, the crate appeared of an extrajudicial written demand by the creditor,
intact; but upon inspection of the contents, RC is not applicable to actions brought under the
discovered that the items inside had all been COGSA.Written claims do not toll the running of the
badly damaged. He did not file any notice of one-year prescriptive period under the COGSA since
damage or anything with anyone, least of all matters affecting the transportation of goods by sea
with BC Shipping Company. What he did was to must be decided as soon as possible (Dole
proceed directly to your office to consult you Philippines, Inc. vs. Maritime Company of the
about whether he should have given a notice of Philippines, G.R. No. L-61352, February 27, 1987).
damage and how long a time he had to initiate a
suit under the provisions of the COGSA. What The one-year prescriptive period within which to
would your advise be? (2000 Bar) file a case against the carrier also applies to a claim
filed by an insurer who stands as a subrogee to the
A. My advice would be that RC should give notice of insured. Also, whether the insurer files a third party
the damage sustained by the cargo within 3 days complaint or maintains an independent action is of
and that he has to file the suit to recover the damage no moment (Filipino Merchants Insurance Co., Inc. vs.
sustained by the cargo within 1 year from the date Alejandro, G.R. No. L-54140, Oct. 14, 1986).
of the delivery of the cargo to him. NOTE: The ruling in the above-cited case should
apply only to suits against the carrier filed either by
PERIOD OF PRESCRIPTION the shipper, the consignee or the insurer, not to
suits by the insured against the insurer. The basis of
The suit for loss or damage should be brought within the insurer’s liability is the insurance contract and
one year from: such claim prescribes in 10 years, in accordance
with Art. 1144 of the Civil Code (Mayer Steel Pipe
1. Delivery of the goods, in case of damage; or Corporation vs. CA, G.R. No. 124050, June 19, 1997).
2. The date when the goods should have been
delivered, in case of loss. The prescriptive period for an action against a
broker is ten years and not one year under the
The one-year period is computed from the delivery COGSA, since the broker is not a carrier, charterer or
of goods to the operator and not to the consignee. holder of the bill of lading (Reyma Brokerage Inc. vs.
Philippine Home Assurance Corporation, G.R. No.
The parties may agree to extend the one-year period 93464, October 7, 1991).
to file a case under the Carriage of Goods by Sea
(Universal Shipping Lines, Inc. vs. Intermediate The one year period in COGSA is interrupted:
Appellate Court, G.R. No. 74125, July 31, 1990).
1. When an action is filed in court; or
The term carriage of goods in the COGSA covers the 2. When there is an agreement between the parties
period from the time the goods are loaded to the to extend it.
vessel to the time they are discharged therefrom.
Persons who can give notice to, and bring suit
NOTE: Delivery to another vessel is not the delivery against the carrier (SCA)
contemplated if it constitures transschipment.

Transportation Laws
1. The Shipper Prescriptive period in case of misdelivery and
2. The Consignee; or conversion of goods
3. Any legal holder of the bill of lading like the
indorsee, subrogee, or the insurer of the goods 1. If there is a written contract – 10 years (NCC,
(Kuy vs. Everett Steamship Corporation, G.R. No. Art. 1144)
L-5554, May 27, 1953). 2. Oral contract – 6 years (NCC, Art. 1145)
3. For quasi-delict – 4 years (NCC, Art. 1146)
Q: On December 1, 2010, Kore A Corporation
shipped from South Korea to LT Corporation in LIMITATION OF LIABILITY
Manila some 300,000 sheets of high-grade
special steel. The shipment was insured against Amount of the carrier’s liability under the
all risk by NA Insurance (NA). The carrying COGSA
vessel arrived at the Port of Manila on January
10, 2011. When the shipment was discharged, it 1. The liability limit is set at $500 per package or
was noted that 25,000 sheets were damaged and customary freight unless the nature and value
in bad order. The entire shipment was turned of such goods is declared by the shipper.
over to the custody of ATI, the arrastre operator, 2. Shipper and carrier may agree on another
on January 21, 2011 for storage and maximum amount, but not more than amount of
safekeeping, pending its withdrawal by the damage actually sustained.
consignee’s authorized customs broker, RVM.
On January 26 and 29, 2011, the subject NOTE: When the packages are shipped in a
shipment was withdrawn by RVM from the container supplied by carrier and the number of
custody of ATI. such units is stated in the bill of lading, each unit,
and not the container, constitute the “package.”
On January 29, 2011, prior to the withdrawal of
the last batch of the shipment, a joint inspection Instances where there is no liability under
of the cargo was conducted per the Request for COGSA (FDUD)
bad Order Survey (RBO) dated January 28, 2011.
The examination report showed that 30,000 1. If the nature or value of goods knowingly and
sheets of steel were damaged and in bad order. fraudulently misstated by shipper
NA Insurance paid LT Corporation the amount of 2. If damage resulted from Dangerous nature of
P30 M for the 30,000 sheets that were damaged, shipment loaded without consent of carrier
as shown in the Subrogation Receipt dated 3. If Unseaworthiness not due to negligence
January 13, 2013. Thereafter, NA Insurance 4. If Deviation was to save life or property at sea.
demanded reparation against ATI for the goods
damaged in its custody, in the amount of P5 M. Q: Clause 18 of the bill of lading provides that the
ATI alleged that the COGSA applies in this case owner should not be liable for loss or damage of
since the goods were shipped from a foreign cargo unless written notice thereof was given to
port to the Philippines. the carrier within 30 days after receipt of the
goods. However, Section 3 of the COGSA
NA Insurance claims that the COGSA does not provides that even if a notice of loss or damage
apply, since ATI is not a shipper or carrier. Who is not given, "that fact shall not affect or
is correct? (2014 Bar) prejudice the right of the shipper to bring suit
within one year after the delivery of the goods."
A: NA Insurance is correct. ATI should be ordered Which of these two provisions should prevail?
to pay NA Insurance notwithstanding the lapse of
the one year prescriptive period for filing a suit A: Section 3 will prevail. Sec. 3 of the COGSA
under the COGSA. The term “carriage of goods” provides that any clause, covenant, or agreement in
under Section 1 in COGSA, covers the period from a contract of carriage relieving the carrier or the
the time when the goods are loaded to the time ship from liability for loss or damage to or in
when they are discharged from the ship infer that connection with the goods or lessening such liability
the period of time when the goods have been otherwise than as provided, shall be null and void
discharged from the ship and given to the custody of and of no effect (E. E. Elser, Inc. vs. CA, G.R. No. L-6517,
the arrastre operator is not covered by the COGSA. November 29, 1954).
The COGSA does not mention that an arrastre
operator may invoke the prescriptive period of one
year; hence, it does not cover the arrastre operator. THE WARSAW CONVENTION

2019 GOLDEN NOTES
Mercantile Law
The Warsaw Convention for Unification of Certain 1. Within the territories of two High Contracting
Rules Relating to International Carriage by Air (WC) Parties; or
provides for rules applicable to international 2. Within the territory of a single High Contracting
transportation by air. The Philippines is one of the Party, if there is an agreed stopping place within
signatories to the Warsaw Convention (Santos III vs. a territory subject to the sovereignty,
Northwest Orient Airlines, G.R. No. 101538, June 23, suzerainty, mandate or authority of another
1992). Hence, this has the force and effect of law in Power, even though that Power is not a party to
the Philippines (Cathay Pacific Airways, Ltd. vs. CA, the Convention (WC, Art. 1[2]).
G.R. No. 60501, March 5, 1993).
High Contracting Parties are the signatories to the
Montreal Convention Warsaw Convention and those which subsequently
adhered to it (Mapa vs. CA, G.R. No. 122308, July 8,
On 10 August 2015, the Philippine Senate ratified the 1997).
Convention for the Unification of Certain Rules for
International Carriage by Air, Montreal, 28 May Q: How should carriage performed by several
1999. successive air carriers be treated under Warsaw
With the Montreal Convention, airline liability Convention?
caps have been increased substantially such that a
passenger is entitled to claim damages up A: A carriage to be performed by several successive
to $170,000.00 even without proof of negligence or air carriers is deemed, for the purposes of Warsaw
fault by the airline. Furthermore, in excess of this Convention to be one undivided carriage, if it has
amount, the burden of proof is on the shoulders of been regarded by the parties as a single operation,
the carrier to show that it was not negligent. whether it had been agreed upon under the form of
a single contract or of a series of contracts (WC, Art.
1. Passenger death or bodily injury – no financial 1 [3]).
limits, however, the carrier shall not be liable
for damages exceeding 100,000 Special Such carriage does not lose its international
Drawing Rights (Approximately EUR 123,000) character merely because one contract or a series of
if it proves that it was not negligent or at fault contracts is to be performed entirely within a
or such damages is solely attributable to the territory subject to the sovereignty, suzerainty,
negligence or fault of third parties. The air mandate or authority of same High Contracting
carrier may make an advance payment to meet Party (Ibid).
the immediate economic needs of the person
entitled to claim compensation. Documents of carriage issued under the Warsaw
Convention
2. Destruction, loss of, or damage or delay to
baggage – 1,000 Special Drawing Rights The following are the documents of carriage:
(approximately EUR 1,230) per passenger. 1. Passenger Ticket
2. Luggage Ticket
3. Damage caused by delay in the carriage by air of 3. Air Consignment note
passengers– 4,150 Special Drawing Rights.
(approximately EUR 5,100) Function of the air consignment note
APPLICABILITY It is prima facie evidence of:

1. The conclusion of the contract
The Warsaw Convention applies to all international 2. Receipt of the goods
carriage of persons, luggage or goods performed by 3. Conditions of carriage (WC, Art. 11 [1])
aircraft for reward. It applies equally to gratuitous
carriage by aircraft performed by an air transport Right to dispose by consignor
undertaking (WC, Art. 1[1]).
The consignor may exercise its right to dispose of
International carriage the goods by:
Any carriage in which, according to the contract 1. Withdrawing them at the aerodrome of
made by the parties, the place of departure and the departure or destination, or
place of destination, whether or not there be a break 2. Stopping them in the course of the journey on
in the carriage or a transshipment, are situated any landing, or
either: 3. Calling for them to be delivered at the place of
destination or in the course of the journey to a

Transportation Laws
person other than the consignee named in the GR: The carrier shall be liable for 250,000 francs for
air consignment note, or each passenger.
4. Requiring them to be returned to the
aerodrome of departure (WC, Art. 12). XPN: By special contract, the carrier and the
passenger may agree to a higher limit of liability
In the exercise of this right, the carrier or other (Art. 22, WC).
consignors must not be prejudiced. For the carrier
to obey the orders for disposition, the carrier must A passenger of an airline is bound by the terms of a
require the production of the part of the air passenger ticket declaring that the limitations of
consignment note delivered to the consignor (Ibid). liability zet forth in the Warsaw Convention in case
of loss, damage or destruction to a registered
Right to dispose ceases as soon as the consignee, on luggage of the passenger. The Warsaw Convention
arrival of the goods at the place of destination, governs the availment of the liabitlity limitations
require the carrier to hand over to him the air where the baggebe checked is combined with or
consignment note and to deliver the goods to him, incorporated in the passesnger ticket. (Pan-am v
on payment of charge due and on complying with Rapadas. 209 scra 67)
the conditions of carriage set out in the air
consignment note (WC, Art. 13). LIABILITY FOR CHECKED BAGGAGE
Where the supervisor of the consignee signed the GR: Two hundred and fifty (250) francs per
delivery receipt for the goods shipped, the kilogram,
consignee cannot sue the shipping company for
non-delivery of the goods (Republic vs. Lorenzo XPN: The passenger or consignor has made, at the
Shipping Corporation, G.R. No. 153563, Februry 7, time when the package was handed over to the
2005). carrier, a special declaration of interest in delivery
at destination and has paid a supplementary sum if
Liabilities under the Warsaw Convention the case so requires (Ibid.).
The carrier is liable under the following instances: LIABILITY FOR HANDCARRIED BAGGAGE
1. Damage sustained in the event of the death Five thousand (5,000) francs per passenger (Ibid.).
or wounding of a passenger taking place on
board the aircraft or in the course of any of NOTE: The above figures have been amended by the
the operations of embarking or Guatemala Protocol, viz:
disembarking;
2. Loss or damage to any check baggage or 1. Carriage of persons – One hundred thousand
goods sustained during the transport by dollars ($100, 000)
air; 2. Checked-in articles – One thousand dollars
3. Delay in the transport by air of passengers, ($1,000)
baggage or goods. 3. Hand-carried baggage - One thousand dollars
($1,000)
Thelist is not exclusive.
According to Dean Eduardo Abella, the Guatemala
Venue in the filing of an action for violation of a Protocol has not yet been ratified, so either of the
contract of international carriage two currencies is still correct.
An action for damage must be brought at the option Defenses against limit of liability
of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court: The limit of liability is not applicable in case of:
1. Of the domicile of the carrier or 1. Willful misconduct;

2. Of his principal place of business, or 2. Gross negligence;
3. Where the ticket was purchased, or 3. Absence of baggage check;
4. At the place of destination (WC, Art. 28 [1]). 4. If there was waiver on the part of the carrier;
and
LIMITATION OF LIABILITY (1993 Bar) 5. If the carrier is estopped from invoking the
provision on limit of liability (Aquino and
LIABILITY TO PASSENGERS Hernando, 2016)

2019 GOLDEN NOTES
Mercantile Law
Carrier is not entitled to the foregoing limit if the Warsaw Convention, where the passenger
damage is caused by willful misconduct or default immediately made a demand upon the airline
on its part (WC, Art. 25). Where the loss of the company and the action was delayed because of the
baggage of a passenger was due to the fault or evasion of the airline company (United Air Lines, Inc.
recklessness of an airline company, the limitation v. CA, G.R. No. 124110, April 20, 2001).
on the liability of airline companies under the
Warsaw Convention is not applicable (Alitalia v. IAC, Where an airline company failed to deliver the
G.R. No. 71929, December 4, 1990). baggage of a passenger on time, a passenger may
maintain an action for damages under the Civil Code
Stipulation relieving the carrier from or limiting even if he did not file a claim with the airline
its liability is not valid company within fourteen days as required by the
Warsaw Convention, for he may still sue under the
Any provision tending to relieve the carrier of Civil Code (Luna v. CA, G.R. No. 100374-75, November
liability or to fix a lower limit than that which is laid 27, 1992).
down in this Convention shall be null and void but
the nullity of such provision does not involve the WILLFUL MISCONDUCT
nullity of the whole contract (WC, Art. 23).
Carrier is not entitled to the limitation of liability if
Notice of Claim the damage is caused by willful misconduct or
default on its part (WC, Art. 25). The definition of
Under the Warsaw Convention, complaint must be "willful misconduct" depends in some measure on
filed within the following period: which court is deciding the issue. Some common
factors that courts will consider are:
1. Three days from receipt of baggage;
2. Seven days from receipt of goods; or 1. Knowledge that an action will probably result in
3. Fourteen days, in case of delay, counted from the injury or damage
time the baggage was placed at the disposal of the 2. Reckless disregard of the consequences of an
passenger (Aquino and Hernando, 2016). action, or
3. Deliberately failing to discharge a duty related
Prescriptive period to safety.
Claim for damages must be brought within two NOTE: Courts may also consider other factors.
years reckoned [a] from the date of arrival at the
destination; or [b] from the date on which the The failure of the carrier to deliver the passenger’s
aircraft ought to have arrived; or [c] from the date luggage at the designated time and place does not
on which the carriage stopped, otherwise, right to ipso facto constitute willful misconduct.There must
damages shall be extinguished. be a showing that the acts complained of were
impelled by an intention to violate the law, or were
Despite the express mandate that an action for in persistent disregard of one's rights. It must be
damages should be filed within 2 years from the evidenced by a flagrantly or shamefully wrong or
arrival at the place of destination, such rule shall improper conduct. (Luna vs. CA, GR No. 100374-75,
not be applied where delaying tactics were November 27, 1992.
employed by airline itself in a case where a
passenger wishes to settle his complaint out-of- The act of the carrier in guessing which luggage
court but the airline gave him the runaround, contained the firearm constitutes willful
answering the passenger’s letters but not giving in misconduct.The guessing of which luggage
to his demands, hence, giving the passenger no time contained the firearms amounted to willful
to institute the complaint within the reglementary misconduct under Section 25(1) of the Warsaw
period (United Airlines vs. Uy, G.R. No. 127768, Nov. Convention. (Northwest Airlines vs. CA, GR No.
19, 1999). 120334, January 20, 1998)
A claim covered by the Warsaw Convention can no The allegation of willful misconduct resulting in a
longer be recovered under local law, if the statute of tort is insufficient to exclude the case from the realm
limitations of two years has already lapsed (PAL. v. of Warsaw Convention.A cause of action based on
Savillo, G.R. No. 149547, July 4, 2008). tort did not bring the case outside the sphere of the
Warsaw Convention. (Lhuiller vs. British Airways, GR
However, the action filed by a passenger of an No. 171092, March 15, 2010)
airline company for loss of his luggage is not barred
by the two-year prescriptive period under the

The Corporation Code
NOTE: There is no willful misconduct if the airplane incorporation law or charter or by means of general
was lost without a trace. In such case, no willful corporation law.
misconduct can be proved because if the airplane is
lost without a trace, there is no proof of the act or XPN: For corporations by prescription, such
omission or the proximate cause of the accident. authority is not necessary (De Leon, 2010).
(Wyman and Barlett v. Pan American Airways, Inc.,
CCH 1 AVI 1093 (1943) NOTE: A corporation by prescription is one which
has exercised powers for an indefinite period
without interference on the part of the sovereign
power and which by fiction of law, is given the status
THE CORPORATION CODE (CC)
of a corporation (De Leon, 2010).
The creation of a corporation is by operation of

law
CORPORATION
NOTE: The Philippine jurisprudence adopted the
Concession or fiat theory, which states that a
(Note: Those which are affected by the Revised corporation is conceived as an artificial person
Corporation Code is not included in the 2019 Bar owing existence through creation by a foreign
Syllabus. The reader must be guided accordingly.) power. Further, a corporation has without any
existence until it has received the imprimatur of the
DEFINITION State acting according to law, through the SEC
(Tayag v. Benguet Consolidated, Inc., GR No. L-23145,
A corporation is an artificial being created by November 29, 1968).
operation of law, having the right of succession and
the powers, attributes and properties expressly Q: Since February 8, 1935, the legislature has
authorized by law or incident to its existence (CC, not passed even a single law creating a private
Sec. 2). corporation. What provision of the constitution
precludes the passage of such law? (2008 Bar)
ATTRIBUTES OF A CORPORATION
A: Article XII, Section 16 of the 1987 Constitution
[ALS– PAPI] provides that Congress shall not, except by general
law, provide for the formation, organization, or
1. It is an Artificial being regulation of private corporations. Government-
2. It is created by operation of Law owned and controlled corporations may be created
3. It enjoys the right of Succession or established by special charters in the interest of
4. It has the Powers, Attributes and Properties the common good and subject to the test of
expressly authorized by law or Incident to its economic viability.
existence.
Private corporations owned or controlled by the
1. Artificial Personality government can only be created by special law often
referred to as “Charters”.
A corporation is a legal or juridical person with a
personality separate and apart from individual Q: A corporation was created by a special law.
stockholders or members and from any other legal Later, the law creating it was declared invalid.
entity into which it may be connected or related. May such corporation claim to be a de facto
corporation?
2. Corporation as a Creation of Law or By
Operation of Law A: NO. A private corporation may be created only
under the Corporation Code. Only public
No corporation can exist without the consent or corporations may be created under a special law.
grant of the sovereign, and that the power to create Where a private corporation is created under a
corporations is one of the attributes of sovereignty. special law, there is no attempt at a valid
Corporations cannot come into existence by mere incorporation and it cannot claim a de facto status.
agreement of the parties (De Leon, 2010).
Q: A Special Audit Team from COA audited the
GR: A legislative grant or authority is required for accounts of Leyte Metropolitan Water District
the creation of a corporation, either by a special (LMWD). Subsequently, LMWD and received a
requested for payment of auditing fees from

2019 GOLDEN NOTES

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Mercantile Law

When amount paid by the insurance company (Ci-Co-Spec)

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 122

Common carrier v.Private carrier (2002 Bar)

COMMON CARRIER PRIVATE CARRIER

DILIGENCE REQUIRED OF COMMON CARRIERS Reasons for the requirement of extraordinary

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 124

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 126

Effect of Acquittal GR: The common carrier is presumed to have been

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 128

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 130

If the loss, destruction, or deterioration of the goods A:

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 132

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 134

UNIVERSITY OF SANTO TOMAS

SAFETY OF PASSENGERS What are WTC's liabilities, if any, in favor of

UNIVERSITY OF SANTO TOMAS 136

The carrier is supposed to exercise extraordinary Land transportation

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 138

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 140

UNIVERSITY OF SANTO TOMAS

BASIS OF DEFENSE OF DUE

UNIVERSITY OF SANTO TOMAS 142

Distinctions between culpa contractual and culpa aquiliana

CULPA CONTRACTUAL CULPA -AQUILIANA

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 144

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 146

As owner pro hac vice of the vessel, the charterer

Ship agent CONTRACT OF AFFREIGHTMENT

UNIVERSITY OF SANTO TOMAS

BAREBOAT/DEMISE CONTRACT OF 3. Due to fortuitous event: (WEB-Pro-N)

UNIVERSITY OF SANTO TOMAS 148

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 150

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 152

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 154

UNIVERSITY OF SANTO TOMAS

Instances when arrival under stress is unlawful Notice of claim

UNIVERSITY OF SANTO TOMAS 156

UNIVERSITY OF SANTO TOMAS

UNIVERSITY OF SANTO TOMAS 158

APPLICABILITY It is prima facie evidence of:

UNIVERSITY OF SANTO TOMAS

1. Of the domicile of the carrier or 1. Willful misconduct;

UNIVERSITY OF SANTO TOMAS 160

UNIVERSITY OF SANTO TOMAS