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Common Carriers When does the duty to exercise extraordinary diligence commence and

cease with respect to transport of passengers?

Common Carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or
goods or both, by land water air, for compensation, offering their service
The duty of the common carrier commence from the moment the person
to the public.
who purchases the ticket from the carrier presents himself at the proper
Elements of a common carrier: place and in a proper manner to be transported. The relation of carrier
and passenger continues until the passenger has been landed at the
a. persons' corporations, firms or associations
port of destination and has left the vessel owner's dock or premises.
b. engaged in the businessof carrying or Once created, the relationship will not ordinarily terminate until the
transportingpassengers, goods or both passenger has, after reaching his destination, safely alighted from the
c. means of carriage is by land, water or air carrier's conveyance or had a reasonable opportunity to leave the
carrier's premises. (Aboitiz Shipping Corp. v. CA, G.R. No. 84458, Nov.
d. the carrying of passengers , goods or both is for 6, 1989)
e. the service is offered to the public without distinction.
What is the liability with regard to moral damages in a breach contract of
-Engaged in the business is deemed to cover operations whether General Rule: Moral damages are not recoverable for breach of
regular or scheduled, occasional, episodic or unscheduled. contract of carriage in view of Art. 2219-‐20 of the Civil Code.
- One is a common carrier even if he has no fixed and publicly known
route, maintains no terminals and issues no ticket.
- The true test of whether the character of the use is whether the public
may enjoy it by right or by permission. Note that the contract of 1. Where the mishap results in the death of the passenger
transportation is a consensual contract. Hence, a common carrier 2. Where it is proved that the common carrier was guilty of fraud or bad
engages in a continuous offer. If you flag a common carrier down, the faith, even if death does not result.
contract becomes perfected and is consistent with the idea that entering
What is the liability with regard to moral damages in a breach contract of
with a contract with the common carrier is a matter of right and not
permission. You would know when the carrier you are going to flag
down is a common carrier because it should hold itself out principally
as such.
General Rule: Moral damages are not recoverable for breach of
- Recovery from a contract of private carriage, requires a contract, that contract of carriage in view of Art. 2219-‐20 of the Civil Code.
there was negligence, and that the goods are lost. On the other hand,
recovery from a contract with a common carrier, only requires the
contract and that the goods were lost. This is so because of the Exceptions:
presumption of negligence. 1. Where the mishap results in the death of the passenger
- Regardless of whether the object are goods or passengers,a common 2. Where it is proved that the common carrier was guilty of fraud or bad
carrier mus observe extra-ordinary diligence.
faith, even if death does not result.
- If loss, destruction or deterioration of the goods occurs or death or Is a common carrier liable for the acts of strangers or criminals?
physical injuries is suffered by a passenger, there is a presumption of
negligence that arises. The presumption may only be overcome by a
showing that the required degree of diligence has been observed or that Yes. A common carrier is liable even for acts of strangers like
Article 1735 applies in the case of goods. In case of passengers, only thieves or robbers.
the former.
- The following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy: Exception: where such thieves or robbers acted "with grave or
irresistible threat, violence or force." The common carrier is not liable for
a. that the common carrier shall not be responsible for the acts the value of the undelivered merchandise which was lost because of an
or omissions of its or his employees event that is beyond his control. (De Guzman v. CA, G.R. No. L-47822,
b. that the common carrier's liability for acts committed by Dec. 22, 1988)
thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished.
What are the rules regarding the time of delivery of goods and delay?
c. that the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the 1. If there is an agreement as to time of delivery – delivery must be
defective condition of the car, vehicle, ship, airplane or other within the time stipulated in the contract or bill of lading
equipment used in the contract of carriage. 2. If there is no agreement – delivery must be within a reasonable time.
Transportation Defined (Saludo, Jr. v. CA, G.R. No. 95536, Mar. 23, 1992)
Generally Speaking, it has been referred to as the movement of goods
or persons from one place to another, by carrier. As a contract, it is one If there is delay in the delivery of goods, what is the liability of the
whereby a person, natural or juridical, obligates himself to transport carrier?
persons, goods or both, from one place to another, by land, water or air,
for a price or compensation. The carrier shall be liable for damages immediately and proximately
resulting from such neglect of duty. (Saludo, Jr. v. CA, GR No. 95536,
Mar. 23, 1992)
What are common carriers?
1. Must be a Person, corporation, firm or association What is the rule if there is contributory negligence on the part of the
2. Must be engaged in the Business of carrying or transporting shipper?
passengers or goods or both General Rule:
3. The carriage or transport must either be by Land, water or air If the shipper or owner merely contributed to the loss, destruction or
4. The service is for Compensation deterioration of the goods, the proximate cause thereof being the
negligence of the common carrier, the latter shall be liable for damages,
5. The service is offered to the Public. which however, shall be equitably reduced. (Art. 1741)
When does liability of the common carrier commence in connection to In a collision case and allision cases, the parties are liable for their own
the transfer of goods? damages.
It begins with the actual delivery of the goods for transportation, and not
merely with the formal execution of a receipt or bill of lading; the
issuance of a bill of lading is not necessary to complete delivery and To whom should delivery be made?
acceptance. (Compania Maritima v. Insurance Co. of North America,
G.R. No. L-18965, Oct. 30, 1964)
It must be delivered, actually or constructively, to the consignee or to passengers, has power to select and remove them. (Maranan v. Perez,
the person who has a right to receive them. Note: Delivery of the cargo G.R. No. L-‐ 22272, June 26, 1967)
to the customs authorities is not delivery to the consignee, or to the
person who has a right to receive them. (Lu Do & Lu Ym Corp. v.
Binamira, G.R. No. L-9840, Apr. 22, 1957) Nocum v. Laguna Tayabas Bus Company, G.R. No. L-23733, Oct. 31,
No. The operator is not liable for damages. In overland
Could a common carrier be held liable for the loss of a valuable item
transportation, the common carrier is not bound nor empowered to
stolen by other passenger when the victim told the driver that he has
make an examination on the contents of packages or bags,
valuable item?
particularly those handcarried by passengers. (Nocum v. Laguna
Yes. Ordinarily, the common carrier is not liable for acts of other Tayabas Bus Company, G.R. No. L-23733, Oct. 31, 1969)
passengers. But the common carrier cannot relieve itself from liability if
the common carrier’s employees could have prevented the act or
omission by exercising due diligence. In this case, the passenger asked Pilapil v. CA, G.R. No. 52159, Dec. 22, 1989
the driver to keep an eye on the bag which was placed beside the A passenger was injured because a bystander outside the bus hurled a
driver’s seat. If the driver exercised due diligence, he could have stone. Is the bus company liable?
prevented the loss of the bag. (1997 Bar Question)

No. There is no showing that any such incident previously happened so

When a Public Utility Vehicle is not in motion, is there a necessity for a as to impose an obligation on the part of the personnel of the bus
person who wants to ride the same to signal his intention to board? company to warn the passengers and to take the necessary precaution.
No. When the bus is not in motion there is no necessity for a person Such hurling of a stone constitutes fortuitous event in this case. The bus
who wants to ride the same to signal his intention to board. A public company is not an insurer of the absolute safety of its passengers.
utility bus, once it stops, is in effect making a continuous offer to bus (Pilapil v. CA, G.R. No. 52159, Dec. 22, 1989) (1994 Bar Question)
riders. Hence, it becomes the duty of the driver and the conductor,
every time the bus stops, to do no act that would have the effect of
increasing the peril to a passenger while he was attempting to board the Injury While Trying to Board the Vehicle
same. The premature acceleration of the bus in this case was a breach May a common carrier be held liable to a passenger who was injured
of such duty. (Dangwa vs. CA, G.R. No. 95582, October 7, 1991) and eventually died while trying to board the vehicle?

If the bus started moving slowly when the passenger is boarding the Yes. It is the duty of common carriers of passengers to afford
same, is the passenger negligent? passengers an opportunity to board and enter, and they are liable for
No. Further, even assuming that the bus was moving, the act of the injuries suffered by boarding passengers resulting from the sudden
victim in boarding the same cannot be considered negligent under the starting up or jerking of their conveyances while they are doing so. The
circumstances. As clearly explained in the testimony of the aforestated victim, by stepping and standing on the platform of the bus, is already
witness for petitioners, Virginia Abalos, the bus had "just started" and considered a passenger and is entitled all the rights and protection
"was still in slow motion" at the point where the victim had boarded and pertaining to such a contractual relation. (Dangwa Transportation Co.,
was on its platform. (Dangwa vs. CA, G.R. No. 95582, October 7, 1991) Inc. v. CA, G.R. No. 95582, Oct. 7, 1991)

Is a person mere stepping on the platform of a bus already considered a Is the victim’s presence in a vessel after 1 hour from his disembarkation
passenger? was no longer reasonable and he consequently ceased to be a
Yes. The person, by stepping and standing on the platform of the
bus, is already considered a passenger and is entitled all the rights
and protection pertaining to such a contractual relation. Hence, it No. Carrier-‐passenger relationship continues until the passenger has
has been held that the duty which the carrier owes to its patrons been landed at the port of destination and has left the vessel-‐owner’s
extends to persons boarding cars as well as to those alighting premises (Aboitiz Shipping Corporation vs. CA, GR No. 84458,
therefrom (Dangwa vs. CA, G.R. No. 95582, October 7, 1991). November 6, 1989)

Robert De Alban and his family rode a bus owned by Joeben Bus What is assumption of risk on the part of passengers?
Company. Upon reaching their desired destination, they alighted from
the bus but Robert returned to get their baggage. However, his Passengers must take such risks incident to the mode of travel.
youngest daughter followed him without his knowledge. When he Note: Carriers are not insurers of any and all risks to passengers
stepped into the bus again, the bus accelerated that resulting to and goods. It merely undertakes to perform certain duties to the
Robert’s daughter death. The bus ran over her. Is the bus company public as the law imposes, and holds itself liable for any breach
liable? thereof. (Pilapil v. CA, G.R. No. 52159, Dec. 22, 1989)

Yes. The relation of carrier and passenger does not cease at the Is a carrier liable to its passengers for damages caused by mechanical
moment the passenger alights from the carrier’s vehicle at a place defects of equipments or appliances installed in the carrier?
selected by the carrier at the point of destination, but continues until the Yes, whenever it appears that the defect would have been discovered
passenger has had a reasonable time or reasonable opportunity to by the carrier if it had exercised the degree of care which under the
leave the current premises (La Mallorca vs. CA, GR L-20761, 27 July circumstances was incumbent upon it, with regard to inspection and
1966). application of the necessary tests. The manufacturer is considered as
being in law the agent or servant of the carrier, as far as regards the
work of constructing the appliance. The good repute of the manufacturer
Are common carriers liable for acts of its employees? will not relieve the carrier from liability. The rationale of the carrier's
Common carriers are liable for the death of or injuries to passengers liability is the fact that the passenger has neither choice nor control over
through the negligence or willful acts of the former’s employees, the carrier in the selection and use of the equipment and appliances in
although such employees may have acted beyond the scope of their use by the carrier. Having no privity whatever with the manufacturer or
authority or in violation of the orders of the common carriers. The liability vendor of the defective equipment, the passenger has no remedy
of the common carriers does not cease upon proof that they exercised against him, while the carrier usually has. It is but logical, therefore, that
all the diligence of a good father of a family in the selection and the carrier, while not in insurer of the safety of his passengers, should
supervision of their employees. (Art. 1759) nevertheless be held to answer for the flaws of his equipment if such
flaws were at all discoverable. (Necesito v. Paras, G.R. No. L-10605,
June 30, 1958)
What is the rationale behind this principle?
The basis of the carrier's liability for assaults on passengers committed
May the registered owner of the vehicle be held liable for damages
by its drivers rests on the principle that it is the carrier's implied duty to
suffered by a third person in the course of the operation of the vehicle?
transport the passenger safely. As between the carrier and the
passenger, the former must bear the risk of wrongful acts or negligence Yes. The registered owner of a public service vehicle is responsible for
of the carrier's employees against passengers, since it, and not the damages that may arise from consequences incident to its operation or
that may be caused to any of the passengers therein (Gelisan v. Alday, 8. Arrivals under stress: to file marine protest in 24 hours
G.R. No. L-30212, Sept 30, 1987). Also, the liability of the registered
9. Record bottomry loan with Bureau of Customs
owner of a public service vehicle for damages arising from the tortious
acts of the driver is primary, direct, and joint and several or solidary with 10. Keep papers and properties of crew members who might die
the driver. (Philtranco Service Enterprises, Inc. v. CA, G.R. No. 120553) 11. Conduct himself according to the instuctions of the ship agent
12. Report to ship agent on arrival
What is a bill of lading? 13. Observe rules on the situation of lights and maneuvers to prevent
It is a written acknowledgement of receipt of goods and agreement collisions
to transport them to a specific place and to a named person or to 14. Remain on board until the last hope to save the vessel is lost and to
his order. abide by the decision of the majority whether to abandon or not
What are the requisites before claim for damages under Art. 366 may 15. In case of shipwreck: file marine protest, within 24 hours
be demanded?
16. Comply with rules and regulation on navigation. (Art. 612)
In what cases shall the ship owner/agent be liable to the damages
1. Consignment of goods through a common carrier, by a consignor in caused by the captain?
one place to a consignee in another place; and
1. Damages suffered by the vessel and its cargo by reason of want of
skill or negligence on his part
2. The delivery of the merchandise by the carrier to the consignee at the 2. Thefts committed by the crew, reserving his right of action against the
place of destination (New Zealand Ins. Co., Ltd. v. Choa Joy, G.R. No. guilty parties;
L- 7311, Sept. 30, 1955).
3. Losses, fines, and confiscations imposed an account of violation of
What are the requisites before claim for damages under Art. 366 may customs, police, health, and navigation laws and regulations;
be demanded?
4. Losses and damages caused by mutinies on board the vessel or by
reason of faults committed by the crew in the service and defense of the
1. Consignment of goods through a common carrier, by a consignor in same, if he does not prove that he made timely use of all his authority to
one place to a consignee in another place; and prevent or avoid them;
5. Those caused by the misuse of the powers;
2. The delivery of the merchandise by the carrier to the consignee at the 6. For those arising by reason of his going out of his course or taking a
place of destination (New Zealand Ins. Co., Ltd. v. Choa Joy, G.R. No. course which he should not have taken without sufficient cause, in the
L- 7311, Sept. 30, 1955). opinion of the officers of the vessel, at a meeting with the shippers or
supercargoes who may be on board. No exceptions whatsoever shall
What is a voyage charter?
exempt him from this obligation;
A voyage charter is a contract wherein the ship was leased for a single
7. For those arising by reason of his voluntarily entering a port other
voyage for the conveyance of goods, in consideration of the payment of
than that of his destination, outside of the cases or without the
freight. The shipowner retains the possession, command and navigation
formalities referred to in Article 612; and
of the ship, the charterer merely having use of the space in the vessel in
return for his payment of freight. An owner who retains possession of 8. For those arising by reason of non-observance of the provisions
the ship remains liable as carrier and must answer for loss or non- contained in the regulations on situation of lights and maneuvers for the
delivery of the goods received for transportation. (Cebu Salvage Corp. purpose of preventing collisions (Art. 618).
vs. Philippine Home Assurance Corp., G.R. No. 150403, Jan. 25, 2007)
What is the three-fold character of the captain? Note: Ship owner/agent is not liable for the obligations contracted by the
captain if the latter exceeds his powers and privileges inherent in his
1. General agent of the ship owner position of those which may have been conferred upon him by the
2. Vessel’s technical director former. However, if the amount claimed were used for the benefit of the
3. Government representative of the flag he navigates under vessel, the ship owner or ship agent is liable.
What are the inherent powers of the ship captain? In what causes shall the captain be not liable for loss or injury to
persons or cargo?
1. To appoint or make contracts with the crew in the ship agent’s 1. Force majeure
absence, and to propose said crew, should said agent be present; but 2. Obligations contracted for the vessel’s benefit, except when the
the ship agent may not employ any member against the captain's captain expressly agrees to be liable.
express refusal
1. Force majeure
2. To command the crew and direct the vessel to the port of its
destination, in accordance with the instructions he may have received 2. Obligations contracted for the vessel’s benefit, except when the
from the ship agent captain expressly agrees to be liable.
3. To impose correctional punishment: a. Upon those who fail to comply What are the civil liabilities of ship owners and agents?
with orders; or b. Those wanting in discipline 1. Damages suffered by a 3rd person for tort committed by the captain;
4. To make contracts for the charter of the vessel in the absence of the 2. Contracts entered for provisioning and repair of vessel;
ship agent or of its consignee
3. Indemnities in favor of 3rd persons arising from the conduct of the
5. To adopt all proper measures to keep the vessel well supplied and captain from the care of goods; and
equipped, purchasing all that may be necessary for the purpose,
provided there is no time to request instruction from the ship agent 4. Damages in case of collision due to fault or negligence or want of skill
of the captain.
6. To order, in similar urgent cases while on a voyage, the repairs on
the hull and engines of the vessel and in its rigging and equipment, What is the Doctrine of Limited Liability?
which are absolutely necessary to enable it to continue and finish its
voyage. (Art. 610)
Also called the “no vessel, no liability doctrine,” it provides that liability of
ship owner is limited to ship owner’s interest over the vessel.
What are the obligations of the captain? Consequently, in case of loss, the ship owner’s liability is also
extinguished. Limited liability likewise extends to ship’s appurtenances,
1. Inventory of equipment equipment, freightage, and insurance proceeds. The ship owner’s or
2. Keep a copy of Code of Commerce on board agent’s liability is merely co-extensive with his interest in the vessel,
such that a total loss of the vessel results in the liability’s extinction. The
3. Have a log book, freight book, accounting book 4. Conduct a marine vessel’s total destruction extinguishes maritime liens because there is
survey of vessel before loading no longer any res to which they can attach. (Monarch Insurance v. CA,
5. Remain on board while loading G.R. No. 92735, June 8, 2000)
6. Demand pilot on departure and on arrival at each port
7. Be on deck when sighting land What are the exceptions to the doctrine of limited liability?
When is a protest required?
1. Repairs and provisioning of the vessel before the loss of the vessel; A: 1. Arrival under stress; (Art. 612 [8])
(Art. 586)
2. Shipwreck; (Arts. 601 [15], 843)
2. Insurance proceeds. If the vessel is insured, the proceeds will go to
3. If the vessel has gone through a hurricane or where the captain
the persons entitled to claim from the shipowner; (Vasquez v. CA, G.R.
believes that the cargo has suffered damages or averages; (Art. 642)
No. L-42926, Sept. 13, 1985)
3. Workmen’s Compensation cases (now Employees’ Compensation
4. Maritime collision. (Art. 835)
under the Labor Code); (Oching v. San Diego, G.R. No. 775, Dec. 17,
4. When the shipowner is guilty of fault or negligence; Note: But if the Who can file a maritime protest?
captain is the one who is guilty, doctrine may still be invoked, hence, 1. In case of maritime collision, the passenger or other persons
abandonment is still an option. interested who may be on board the vessel or who were in a condition
5. Private carrier; or who can make known their wishes (Arts. 835-836) or the captain
himself. (Verzosa and Ruiz v. Lim, G.R. No. 20145, Nov. 15, 1923)
6. Voyage is not maritime in character.
2. The captain in cases of:
Claim Against Insurance
a. Arrival under stress
If a vessel was insured, may the claimants go after the insurance
proceeds? b. Shipwreck; or
c. If the vessel has gone through a hurricane or where the captain
believes that the cargo has suffered damages or averages.
Yes. In case of a lost vessel, the claimants may go after the proceeds of
the insurance covering the vessel. (1999 Bar Question) Filing a Maritime Protest
What is collision? Two vessels figured in a collision resulting in considerable loss of cargo.
The damaged vessels were safely conducted to a port. Kim, a
passenger and Ruby, a shipper who suffered damage to his cargo, did
It is the impact of two moving vessels. not file maritime protest. Can Kim and Ruby successfully maintain an
action to recover losses and damages arising from the collision?
What is allision?

Ruby, the shipper can successfully maintain an action to recover losses

It is the impact between a moving vessel and a stationary one.
and damages arising from the collision notwithstanding his failure to file
What are the zones of time in the collision of vessel? a maritime protest since the filing thereof is required only on the part of
Kim, who, being a passenger of the vessel at the time of the collision,
was expected to know the circumstances of the collision. Kim's failure to
1. First zone – all time up to the moment when risk of collision begins. file a maritime protest will therefore prevent him from successfully
Note: One vessel is a privileged vessel and the other is a vessel maintaining an action to recover his losses and damages. (Art
required to take action to avoid collision. 836).(2007 Bar Question)

2. Second zone – time between moment when risk of collision begins Losses and Damages Suffered by Cargoes
and moment it becomes practically a certainty. During a typhoon, vessel SS Anna collided with M/V Joanna. The
Note: In this zone, the conduct of the vessels are primordial. It is in this collision would be avoided if the captain of SS Anna was not drunk and
zone that vessels must observe nautical rules, unless a departure the captain of SS Joanna was not asleep. Who should bear the
therefrom becomes necessary to avoid imminent danger. The vessel damages to the vessels and their cargoes?
which does not make such strict observance is liable.
3. Third Zone – time when collision is certain and up to the time of The ship owners of SS Anna and M/V Joanna shall each bear their
impact. Note: An error at this point no longer bears any consequence. respective loss of vessels. For the losses and damages suffered by their
What is an error in extremis? cargoes, both ship owners are solidarily liable. (1998 Bar Question)
What is a shipwreck?

The sudden movement made by a faultless vessel during the third zone
of collision with another vessel which is at fault under the second zone. The loss of the vessel at sea as a consequence of its grounding, or
Even if sudden movement is wrong, no responsibility will fall on the running against an object in sea or on the coast. If the wreck was due to
faultless vessel. malice, negligence, or lack of skill of the captain, the owner of the vessel
What are the rules governing liabilities of parties in case of collision? may demand indemnity from said captain.

1. One vessel at fault – The ship owner of such vessel shall be liable Who shall bear the losses in shipwreck?
for all resulting damages.
2. Both vessels at fault – Each vessel shall suffer their respective General Rule: The loss of a ship and her cargo shall fall upon their
losses but as regards the owners of the cargoes, both vessels shall be respective owners. (Art. 840)
jointly and severally liable.
3. Vessel at fault not known – Each vessel shall suffer its own losses
and both shall be solidarily liable for loses or damages on the cargo. Exception: If the wreck was due to malice, negligence, or lack of skill of
(Doctrine of Inscrutable Fault). the captain, or because the vessel put to sea was insufficiently repaired
and equipped, the ship agent or the shippers may demand indemnity
4. Fortuitous event – Each shall bear its own damage. from the captain for the damage caused to the vessel or to the cargo by
5. Third vessel at fault – The third vessel shall be liable for losses and the accident. (Art. 841)
damages sustained. What cases are covered under the COGSA?
Maritime Protest
What is the role of a “protest” with respect to collisions? It applies only in case of loss or damage, and not to misdelivery or
The action for recovery of damages arising from collisions cannot be conversion of goods. (Ang v. American Steamship Agencies, Inc.,
admitted if a protest or declaration is not presented within twenty-four G.R. No. L-22491, Jan. 27, 2967)
hours before the competent authority of the point where the collision
took place, or that of the first port of arrival of the vessel, if in Philippine
territory, and to the Filipino consul if it occurred in a foreign country (Art. Also, the deterioration of goods due to delay in their transportation
835). constitutes "loss" or "damage" within the meaning of Sec. 3(6) of
COGSA. (Mitsui O.S.K. Lines Ltd. v. CA, G.R. No. 119571, Mar. 11,
Note: Failure to make a protest is not an impediment to the 1998)
maintenance of a civil action based on quasi-delict.
Clause 18 of the bill of lading provides that the owner should not be Does the CPC confer upon the holder any proprietary right or interest in
liable for loss or damage of cargo unless written notice thereof was the route covered thereby?
given to the carrier within 30 days after receipt of the goods. However,
No. (Luque v. Villegas, G.R. No. L-22545, Nov. 28, 1969). However,
Section 3 of the Carriage of Goods by Sea Act provides that even if a
with respect to other persons and other public utilities, a certificate of
notice of loss or damage is not given as required, "that fact shall not
public convenience as property, which represents the right and authority
affect or prejudice the right of the shipper to bring suit within one year
to operate its facilities for public service, cannot be taken or interfered
after the delivery of the goods." Which of these two provisions should
with without due process of law. Appropriate actions may be maintained
in courts by the holder of the certificate against those who have not
been authorized to operate in competition with the former and those
who invade the rights which the former has pursuant to the authority
Clause 18 must of necessity yield to the provisions of the Carriage of
granted by the Public Service Commission (A.L. Animen Transportation
Goods by Sea Act in view of the proviso contained in the same Act
Co. v. Golingco, G.R. No. 17151, Apr. 6, 1922)
which says: "Any clause, covenant, or agreement in a contract of
carriage relieving the carrier or the ship from liability for loss or damage
to or in connection with the goods or lessening such liability otherwise
What are the requirements for the grant of certificate of public
than as provided in this Act, shall be null and void and of no effect."
(Sec. 3) This means that a carrier cannot limit its liability in a manner
contrary to what is provided for in said Act, and so clause 18 of the bill 1. Applicant must be a citizen of the Philippines. If the applicant is a
of lading must of necessity be null and void. (E. E. Elser, Inc. v. CA, Corporation, 60% of its capital must be owned by Filipinos
G.R. No. L-6517, Nov. 29, 1954) 2. Applicant must prove public necessity
Is Art. 1155 of the Civil Code providing that the prescription of actions is 3. Applicant must prove the operation of proposed public service will
interrupted by the making of an extrajudicial written demand by the promote public interest in a proper and suitable manner; and
creditor applicable also to actions brought under the COGSA?
4. Applicant must have sufficient financial capability to undertake
proposed services and meeting responsibilities incidental to its
No, written claims does not toll the running of the one-year prescriptive operation. (Kilusang Mayo Uno v. Garcia G.R. No. 108584, Dec. 22,
period under the COGSA. (Dole Philippines, Inc. v. Maritime Company 1994)
of the Philippines, G.R. No. L-61352, Feb. 27, 1987)
Who are the persons who can give notice to, and bring suit against the Cite instances where a certificate of public convenience is not
carrier? necessary?

1. The shipper 1. Warehouses

2. The consignee; or 2. Animal-‐drawn vehicles or banca powered by oar or by sail; tug boats
3. Any legal holder of the bill of lading like the indorsee, subrogee, or and lighters
the insurer of the goods. (Kuy v. Everett Steamship Corporation, G.R. 3. Airships except as to fixing rates
No. L-5554, May 27, 1953)
4. Radio companies, except as to fixing of rates
Prescription of Actions Against the Carrier
5. Ice plants
Does the one-year prescriptive period within which to file a case against
the carrier also apply to a claim filed by an insurer who stands as a 6. Public market
subrogee to the insured? 7. Public utilities operated by the national government or political
subdivision except as to rates.
Yes, it includes the insurer of goods. Also, whether the insurer files a
third party complaint or maintains an independent action is of no What are the grounds that oppositors may raise to the application for a
moment (Filipino Merchants Insurance Co., Inc. v. Alejandro, G.R. certificate of public convenience?
No. L-54140, Oct. 14, 1986). Note: The ruling in the above-cited case
should apply only to suits against the carrier filed either by the shipper, 1. The area has already a well-established operator – prior operator
the consignee or the insurer, not to suits by the insured against the rule.
insurer. The basis of the insurer’s liability is the insurance contract and 2. Interpose an objection stating that the grant of the application would
such claim prescribes in 10 years, in accordance with Art. 1144 of the result to a ruinous competition.
Civil Code. (Mayer Steel Pipe Corporation v. CA, G.R. No. 124050,
June 19, 1997) 3. Attack the citizenship of the applicant (Sec. 11, Art. XII of the 1987
Constitution prohibits the granting of franchise or certificate for the
What is a public utility? operation of public utility in favor of non-Filipino citizens); or
A business or service engaged in regularly supplying the public 4. The applicant does not have the necessary financial capacity.
with some commodity or service of public consequence sush as
electricity, gas, water, transportation, telephone or telegraph
service. What are the guidelines to eliminate the sale and transfer of expired
and/or dead Certificate of Public Conveniences (CPCs)?
What is a public service? 1. No approval of sale and transfer of a CPC shall be accepted where
the validity of CPC being conveyed is less than 6 months on the date of
Every person that may own, operate, manage, control in the Philippines, its filing with the LTFRB.
for hire/compensation, with general/limited clientele whether permanent,
occasional or accidental, and done for general business purposes, any 2. No application for approval of sale and transfer of a CPC shall be
common carrier, railroad, street railway, traction railway, subway motor accepted unless the units authorized therein are registered with the LTO
vehicle, steamboat, or steamship line, ferries and watercraft, shipyard, for the current year.
ice-plant, electric light, heat and power or any other public utility. 3. Where the authorized units under the CPC conveyed have all not
What is a Certificate of Public Convenience (CPC)? been registered with the LTO for the current year, the application for the
approval of sale and transfer will be accepted and processed only for
the actual number of registered units corresponding to the CPC
An authorization issued for the operation of public services for which no conveyed.
franchise, either municipal or legislative, is required by law, such as a 4. No application for approval of sale and transfer of a CPC shall be
common carrier. accepted, unless all fees/dues have been fully paid to the LTO and
LTFRB, and taxes to the BIR (DOTC Order 2010-34).
Under the Public Service Law, a certificate of public convenience can be What is the prior operator rule?
sold by the holder thereof because it has considerable material value
and is considered a valuable asset (Raymundo v. Luneta Motor Co.,
G.R. No. 39902, Nov. 29, 1933). Provides existing franchise operator preferential right within authorized
territory as long as said operator renders satisfactory and economical
service. This rule subordinates the prior applicant rule which gives first
applicant priority only if things and circumstances are equal. A prior
operator must be given the opportunity to extend its transportation
services before permitting a new operator to operate in the territory of 4. Classifications
said prior operator. 5. Schedules
6. Commutation
7. Mileage
What are the exceptions of prior operator rule? 8. Kilometrage
Where public interest would be better served by the new operator: 9. Other special rates. (Sec 16)

1. Where the old operator failed to make an offer to meet the increase in
traffic; May the Commission approve rates proposed by public services?

2. Where the CPC granted to the new operator s a maiden certificate; Yes. The Commission may, in its discretion, approve rates proposed by
public services provisionally and without necessity of any hearing; but it
3. When the application of the rule would be conducive to monopoly. shall call a hearing thereon within thirty days, thereafter, upon
What is the Prior Applicant Rule? publication and notice to the concerns operating in the territory affected.
In case the public service equipment of an operator is used principally
or secondarily for the promotion of a private business, the net profits of
Applies to situations wherein two applicants are applying for a certificate said private business shall be considered in relation with the public
of public convenience over a given territory. Where both applicants are service of such operator for the purpose of fixing the rates. (Sec 16)
similarly situated, the prior applicant shall have the certificate over the
What is the Third Operator Rule? Can Phividec Industrial Authority (PIA) temporarily operate as a seaport
cargo-handler upon agreement with the Philippine Ports Authority (PPA)
sans a franchise or a license from Congress or PPA?
Where two operators are more than serving the public there is no Yes. PPA was created for the purpose of, among others, promoting the
reason to permit a third operator to engage in competition with them. growth of regional port bodies. In furtherance of this objective, PPA is
The fact that it is only one trip and of little consequence is not sufficient empowered, after consultation with relevant government agencies, to
reason to grant the application. (Yangco v. Esteban, G.R. No. 38586, make port regulations particularly to make rules or regulation for the
Aug. 18, 1933) planning, development, construction, maintenance, control, supervision
What is the Protection of Investment Rule? and management of any port or port district in the country. With this
mandate, the decision to bid out cargo-handling services is within the
province and discretion of PPA which necessarily required prior study
The law contemplates that the first licensee will be protected in his and evaluation. This task is left to the judgment of PPA and cannot be
investment and will not be subjected to a ruinous competition. So long set aside absent grave abuse of discretion on its part. As long as the
as an operator under a prior license complies with its terms and standards are set in determining the contractor and such standards are
conditions and the reasonable rules and regulations for its operation, reasonable and related to the purpose for which they are used, courts
and meets the reasonable demands of the public, it will be protected should not inquire into the wisdom of PPA’s choice. x x x [F]ranchises
rather than destroy its investment by the granting of the second license from Congress are not required before each and every public utility may
to another person for the same thing over the same route of travel. operate because the law has granted certain administrative agencies
Note: The "prior operator" and "protection of investment" rules cannot the power to grant licenses for or to authorize the operation of certain
take precedence over the convenience of the public. (Martires Ereno public utilities. (Oroport Cargoholding Services, Inc. vs. Phivdec
Co. v. Public Service Commission, G.R. No. L-25962, Sept. 30, Industrial Authority, G.R. No. 166785, July 28, 2008, [Quisumbing,
1975) J.])
May the registered owner of the vehicle be allowed to prove that there is
already a transfer of ownership to another person under the kabit
What is the so-called “Must-Carry Rule”? system?
The “Must Carry Rule” favors both broadcasting organizations and the
public. It prevents cable companies from excluding broadcasting
organization especially in those places not reached by signal. Also, the No. One of the primary factors considered in the granting of a certificate
rule prevents cable television companies from depriving viewers in far- of public convenience for the business of public transportation is the
flung areas the enjoyment of programs available to city viewers. This financial capacity of the holder of the license, so that liabilities arising
mandatory coverage provision under Section 6.2 of said Memorandum from accidents may be duly compensated. The kabit system renders
Circular, requires all cable television system operators, operating in a illusory such purpose and, worse, may still be availed of by the grantee
community within the Grade “A” or “B” contours to “must carry” the to escape civil liability caused by a negligent use of a vehicle owned by
television signals of the authorized television broadcast stations, x x x another and operated under his license. If a registered owner is allowed
as the circular was issued to give consumers and the public a wider to escape liability by proving who the supposed owner of the vehicle is,
access to more sources of news, information, entertainment and other it would be easy for him to transfer the subject vehicle to another who
programs/contents. The carriage of ABS-CBN’s signals by virtue of the possesses no property with which to respond financially for the damage
must-carry rule in Memorandum Circular No. 04-08-88 is under the done. (Lim v. CA, G.R. No. 125817, Jan. 16, 2002)
direction and control of the government though the NTC which is vested What is the reason behind the proscription against the kabit system?
with exclusive jurisdiction to supervise, regulate and control
telecommunications and broadcast services/facilities in the Philippines.
The imposition of the must-carry rule is within the NTC’s power to The thrust of the law in enjoining the kabit system is not so much as to
promulgate rules and regulations, as public safety and interest may penalize the parties but to identify the person upon whom responsibility
require, to encourage a larger and more effective use of may be fixed in case of an accident with the end view of protecting the
communications, radio and television broadcasting facilities, and to riding public. The policy therefore loses its force if the public at large is
maintain effective competition among private entities in these activities not deceived, much less involved. (Lim v. CA, G.R. No. 125817, Jan.
whenever the Commission finds it reasonably feasible. (ABS-CBN 16, 2002)
Broadcasting Corporation vs. Philippine Multi-Media System, Inc.,
G.R. Nos. 175769-70, January 19, 2009 [Ynares-Santiago, J.]). What is the so-called “boundary system”?

Public Service Commission Under this system the driver is engaged to drive the owner/operator’s
unit and pays the latter a fee commonly called boundary for the use of
Who has the power to fix rates? the unit. Whatever he earned in excess of that amount is his
income. (Paguio Transport Corp. v. NLRC, G.R. No. 119500, Aug.
28, 1998)
The Public Service Commission.

What kind of relationship exists between the owner of the vehicle and
What is the extent of power by the Commission to fix rates? the driver under a "boundary system" arrangement?
The relationship between jeepney owners/operators on one hand and
The Public Service Commission has the power to fix and determine the jeepney drivers on the other under the boundary system is that of
following which shall be imposed observed and followed thereafter by employer-employee and not of lessor-lessee. (Martinez v. NLRC, G.R.
any public service: No. 117495, May 29, 1997).
1. Individual or joint rates
2. Tolls The features which characterize, the "boundary system" – namely, the
3. Charges fact that the driver does not receive a fixed wage but gets only the
excess of the amount of fares collected by him over the amount he pays
to the jeep- owner, and that the gasoline consumed by the jeep is for
When will one’s right to damages be extinguished?
the account of the driver – are not sufficient to withdraw, the relationship
between them from that of the employer and employee. (National The right to damages shall be extinguished if an action is not brought
Labor Union v. Dinglasan, G.R. No. L-14183, Nov. 4, 1993) within two years, reckoned from the date of arrival at the destination, or
from the date on which the aircraft ought to have arrived, or from the
date on which the carriage stopped.
Is the approval by the Public Utility Commission of the sale,
Note: Despite the express mandate that an action for damages should
encumbrance or lease of property is a condition precedent to the validity
be filed within 2 years from the arrival at the place of destination, such
of a contract?
rule shall not be applied where delaying tactics were employed by
No. While in the old law the sale without the approval of the Public Utility airline itself in a case where a passenger wishes to settle his complaint
Commission was declared null and void, under Commonwealth Act 146, out-of-court but the airline gave him the runaround, answering the
the new law, the sale may not only be negotiated but completed before passenger’s letters but not giving in to his demands, hence, giving the
said approval. In other words, the approval by the Commission is not a passenger no time to institute the complaint within the reglamentary
condition precedent to the validity of the contract. The approval is only period. (United Airlines v. Uy, G.R. No. 127768, Nov. 19, 1999)
necessary to protect public interest (Darang vs. Belizar, G.R. No. L-
19487, January 31, 1967).
Could a person recover a claim covered by Warsaw Convention after
the lapse two years?
When Warsaw Convention this law applicable?
No. A claim covered by the Warsaw Convention can no longer be
This Convention applies to all international carriage of persons, luggage recovered under local law, if the statute of limitations of two years has
or goods performed by aircraft for reward. It applies equally to gratuitous already lapsed. (PAL. v. Savillo, 557 SCRA 66)
carriage by aircraft performed by an air transport undertaking. (Art. 1[1])

What constitutes willful misconduct?

What is an international transportation?
The definition of "willful misconduct" depends in some measure on
Any carriage in which, according to the contract made by the parties, which court is deciding the issue. Some common factors that courts will
the place of departure and the place of destination, whether or not there consider are:
be a break in the carriage or a transshipment, are situated either:
1. Knowledge that an action will probably result in injury or damage
2. Reckless disregard of the consequences of an action, or
1. Within the territories of two High Contracting Parties; or
3. Deliberately failing to discharge a duty related to safety. Courts may
2. Within the territory of a single High Contracting Party, if there is an also consider other factors
agreed stopping place within a territory subject to the sovereignty,
suzerainty, mandate or authority of another Power, even though that
Power is not a party to the Convention. (Art. 1[2]) Is the failure of the carrier to deliver the passenger’s luggage at the
designated time and place ipso facto constitutes wilful misconduct?

Note: A High Contracting Party is one of the original parties to the

convention. No. There must be a showing that the acts complained of were impelled
by an intention to violate the law, or were in persistent disregard of one's
rights. It must be evidenced by a flagrantly or shamefully wrong or
What are the limitations to the liability of air carriers? improper conduct (Luna vs. CA, GR No. 100374-‐75, November 27,
1. In the carriage of persons – 250,000 francs for each passenger.
Nevertheless, by special contract, the carrier and the passenger may
agree to a higher limit of liability.
Is the carrier’s guessing of which luggage contained the firearms
2. In the carriage of registered baggage and of cargo – Two hundred constitutes willful misconduct?
and fifty (250) francs per kilogramme, unless the passenger or
consignor has made, at the time when the package was handed over to
the carrier, a special declaration of interest in delivery at destination and Yes. The guessing of which luggage contained the firearms amounted
has paid a supplementary sum if the case so requires. to willful misconduct under Section 25(1) of the Warsaw Convention.
(Northwest Airlines vs. CA, GR No. 120334, January 20, 1998)
Note: In the case of loss, damage or delay of part of registered baggage
or cargo, or of any object contained therein, the weight to be taken into
consideration in determining the amount to which the carrier's liability is Is the allegation of willful misconduct resulting in a tort is insufficient to
limited shall be only the total weight of the package or packages exclude the case from the realm of Warsaw Convention?
concerned. Nevertheless, when the loss, damage or delay of a part of
the registered baggage or cargo, or of an object contained therein,
affects the value of other packages covered by the same baggage Yes. A cause of action based on tort did not bring the case outside the
check or the same air waybill, the total weight of such package or sphere of the Warsaw Convention. (Lhuiller vs. British Airways, GR No.
packages shall also be taken into consideration in determining the limit 171092, March 15, 2010).
of liability.
3. As regards objects of which the passenger takes charge himself – CORP.
Five thousand (5,000) francs per passenger. (Art. 22) Note: Carrier is
not entitled to the foregoing limit if the damage is caused by willful FACTS:
misconduct or default on its part (Art. 25) > Remington Industrial ordered 194 hot rolled steel sheets from
Wangs. Wangs forwarded the order to its supplier Burwill. The sheets
were loaded on MV Indian Reliance in Poland and shipped to
Is a stipulation relieving the carrier from or limiting its liability valid? the Philippines under a Bill of Lading. Iron Bulk Shipping represented
the charterer in the Philippines.
No. Any provision tending to relieve the carrier of liability or to fix a lower > Upon discharge of the cargo, the sheets were found to be wet
limit than that which is laid down in this Convention shall be null and and with rust extending to 50 to 60% of each sheet.
void but the nullity of such provision does not involve the nullity of the > No one honored the claims of loss and as recourse, Remington
whole contract. (Art. 23[1]) filed an action for collection. Both lower and appellate courts ruled
in favor of Remington.
What are the exceptions to these limitations? > The charterer‘s defense (Iron Bulk) was that the sheets were
1. Willful misconduct already rusty when they were loaded on the ship. However, the Bill of
Lading it issued was found to be a clean bill of lading (i.e. it does
2. Default amounting to willful misconduct not indicate any defect on the goods covered by it). The sheets
3. Accepting passengers without ticket were found to be in a ―fair, usually accepted condition‖.
4. Accepting goods without airway bill or baggage without baggage > The supplier‘s defense (Wangs) was that Iron Bulk did not
check exercise extraordinary diligence in shipping the sheets.
> The appellate court dismissed the case against Wangs and now, consignee.
only Iron Bulk raised the case on certiorari. 9. Trial Court ordered Appellant Macondray to pay. Appellant

1. Whether or not Iron Bulk exercised extraordinary diligence? 1. Whether the lower court had jurisdiction
No. YES.
True the case invoked only the sum of P1,889.58, but it is also true
> Diligence required: Even if the cargo was already in a damaged that appellee's action against appellant is one involving admiralty
condition at the time it was accepted for transportation, the carrier is not jurisdiction, the exercise of which pertains originally and
relieved from its responsibility to exercise due care in handling exclusively to Courts of First Instance.
the merchandise and in employing the necessary precautions to prevent
the cargo from further deteriorating. Extraordinary diligence requires
the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for safe 2. Whether American Insurance has cause of action against Macondray
carriage and delivery. The common carrier must exercise due diligence YES
to forestall or lessen the loss (by applying additional safety measures to Appellant relies on the provisions of paragraph 22 of the bill of
make sure that the cargo is protected from corrosion). lading to the effort that the carrying vessel, her owner and agent,
are not liable for loss or damage occurring after the discharge of
> Presumption: Except in the cases mentioned under Art. 1734, if the the goods. Appellant's contention rests entirely upon the
goods are lost, destroyed or deteriorated, common carriers erroneous assumption that the carrying vessel had discharged all
are presumed to have been at fault or to have acted negligently unless the goods covered by the bill of lading in accordance with its
they prove that they observed extraordinary diligence. obligation.
2. Whether or not the CA erred in relying on the pro forma Bill of Under the Carriage Contract covering the cargoes in question, it
Lading? No. was the duty of the carrying vessel to discharge them at the port of
Cebu City, via the port of Manila. It is clear therefore, that the
> Two-fold character: A bill of lading operates as both a receipt and a discharge effected at the latter port did not terminate the carrying
contract. It is a receipt for the goods shipped (dates, place, description, vessel's responsibility which included the transshipment of the
quality and value) and a contract to transport and deliver the same as cargoes from the port of Manila to the port of Cebu City. While it
therein stipulated. complied with the obligation with respect to most of the cargoes
Estoppel: Since Iron Bulk shipping failed to annotate in the bill of lading covered, by the bill of lading, it failed to do so in relation to the one
the alleged damaged condition of the cargo when it was loaded, they skid of truck parts which, according to the stipulation of facts, was
are bound by the description contained therein and they are now not loaded on board the M/S "Bohol". In truth and in fact, the same
estopped from denying the contents of the said bill of lading. has never been found.

American Insurance Co., Inc. v Macondray & Co., Inc (1971)

PARTIES: 3. Whether Appellant Macondray is the real party in interest

Importer/Consignee- Atlas Consolidated Mining and Development YES

Corporation Appellant Macondray contends that the action should’ve been bought
Shipper- Ansor Corp. of NY (S/S Toledo) against the shipper, Ansor Corp
Appellant is correct in saying that actions must be prosecuted not only
in the name of the real party in interest but also against the real party in
Insurer: interest. It is in error, however, in contending that it is not liable for the
Apellee insurer: American Inusrance Co. Inc. - insured the cargoes loss of the skid of truck parts.
against damages until the Port of Cebu for P5, 700 in favor of consignee If the fact were that said cargo was loaded and thereafter lost on board
the M/S "Bohol" or upon its discharge at the port of Cebu City, We
would agree that appellant is not liable. It was stipulated in this case,
however, that the said skid of truck parts was not loaded at all on board
Forwarding Agent of Ansor Corp: Macondray& Co., Inc-agent in the the M/S "Bohol." In accepting the same on board the S/S "Toledo" at the
Philippines of the S/S "Toledo", a common carrier in foreign trade port of New York for shipment to Cebu City, via the port of Manila, it
between the United States and Philippine Ports;
become precisely appellant's duty to see to it that it was loaded in
Manila on board the M/S "Bohol" or any other vessel, for the port of
Transshipment: Cebu City. Not having complied with this duty, its liability for the loss is
Port of NY > Manila (via S/S Toledo) > Cebu (via M/S Bohol) unavoidable.

FACTS: Ansor Corp. complied with its part of the transaction by delivering the
1. On or about September 12, 1962, certain cargoes covered by lost cargo to the S/S "Toledo" at the port of New York; thereafter
the bill of lading were imported by Atlas Consolidated Mining and paragraph 11 of the bill of lading operated to make appellant
Development Corporation and were loaded by the shipper, Ansor Macondray, the shipper's forwarding agent whose duty precisely was to
Corporation of New York on board the S/S "Toledo" at the port of have the cargo, upon arrival at the port of Manila, transshipped to the
New York for delivery to Atlas at Cebu City via Manila. port of Cebu City.
2. The freight up to Cebu City was paid in advance. The American As a general rule under the provisions of the Code of Commerce, the
Insurance Company insured the cargoes against damage up to consignee of a cargo carried by a vessel has a cause of action against
Cebu City for $5,700.00 in favor of the consignee. the latter's agent for the undelivered cargo or any portion thereof. This
3. The S/S "Toledo' discharged them at the port of Manila on being the case, it is its duty to compensate appellee for the loss
October 17, 1962. suffered.
4. For their transshipment to Cebu City they were loaded on
board the M/S "Bohol".
5. Upon the vessel's arrival in Cebu City on November 12, 1962,
the cargoes were discharged and delivered to the 666 SCRA 226
congsigneeminus one skid of truck parts which was not loaded on DOCTRINE:
the M/S "Bohol". The missing cargo was valued at $482.96 CIF
Cebu, equivalent at that time to P1,889.58. The term “carriage of goods” in the Carriage of Goods by Sea Act
6. The consignee filed the corresponding claim with herein (COGSA) covers the period from the time the goods are loaded to the
appellant (agent in the Philippines of the S/S "Toledo", a common vessel to the time they are discharged therefrom.
carrier in foreign trade between the United States and Philippine
Ports) who disclaimed liability therefor alleging that the cargoes • The carrier and the ship shall be discharged from all liability in
had been discharged in full at the port of Manila. respect of loss or damage unless suit is brought within one year after
7. A claim for the insured value of the cargo amounting to delivery of the goods or the date when the goods should have been
P2,087.20 plus the sum of P87.30 as expenses of survey was filed delivered.
with appellee under the covering insurance policy and the same
was duly paid, thereby acquiring by subrogation the rights of the
8. Thereafter the corresponding action was filed in the lower
court to recover from appellant what appellee had paid to the
the port of destination — Davao. When the letters of complaint
FACTS: sent to Nordeutscher Lloyd failed to elicit the desired response,
Samar Mining filed a formal claim for P1,691.93, the equivalent of
$424.00 at the prevailing rate of exchange at that time, against the
• On November 9, 2002, Macro-Lito Corporation, through M/V “DIMI
former, but neither paid.
P” vessel, 185 packages of electrolytic tin free steel, complete and in
good condition.
Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd
• The goods are covered by a bill of lading, had a declared value of
and CF Sharp & Co. brought in AMCYL as third party defendant.
$169,850.35 and was insured with the Insuracne Company of North
The trial court rendered judgment in favor of Samar Mining,
America (Petitioner) against all risk.
ordering Nordeutscher Lloyd, et. al. to pay the amount of P1,691.93
• The carrying vessel arrived at the port of Manila on November 19,
plus attorney’s fees and costs. However, the Court stated that
2002, and when the shipment was discharged therefrom, it was noted
Nordeutscher Lloyd, et. al. may recoup whatever they may pay
that 7 of the packages were damaged and in bad condition.
Samar Mining by enforcing the judgment against third party
• On Novermber 21, 2002, the shipment was then turned over to the
defendant AMCYL, which had earlier been declared in default.
custody of Asian Terminals. Inc. (Respondent) for storage and
Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said
safekeeping pending its withrawal by the consignee.
• On November 29, 2002, prior to the withrawal of the shipment, a joint
inspection of the said cargo was conducted. The examination report
showed that an additional 5 packages were found to be damaged and in
The following are the pertinent ports, as provided in the bill of
bad order.
• On January 6, 2003, the consignee, San Miguel Corporation filed
Port of Loading: Bremen, Germany
separate claims against both the Petioner and the Respondent for the
Port of discharge from ship: Manila
damage caused to the packages.
Port of destination/Port of discharge of the goods: Davao
• The Petitioner then paid San Miguel Corporation the amound of PhP
431,592.14 which is based on a report of its independent adjuster.
As plainly indicated on the face of the bill, the vessel M/S
• The Petitioner then formally demanded reparation against the
Schwabenstein is to transport the goods only up to Manila.
Respondent for the amount it paid San Miguel Corporation.
Thereafter, the goods are to be transshipped by the carrier to the
• For the failure of the Respondent to satisfy the demand of the
port of destination.
Petitioner, the Petitioner filed for an action for damages with the RTC of
• The trial court found that indeed, the shipment suffered additional ISSUE:
damage under the custody of the Respondent prior to the turn over of
Whether or not a stipulation in the bill of lading exempting the carrier
the said shipment to San Miguel.
from liability for loss of goods not in its actual custody (i.e., after their
• As to the extent of liability, Respondent invoked the Contract for
discharge from the ship) is valid.
Cargo Handling Services executed between the Philippine Ports
Authority and the Respondent. Under the contract, the Respondent’s
liability for damage to cargoes in its custody is limited to PhP5,000 for HELD:
each package, unless the value of the cargo shipment is otherwise
specified or manifested in writing together with the declared Bill of It is clear that in discharging the goods from the ship at the port of
Lading. The trial Court found that the shipper and consignee with the Manila, and delivering the same into the custody of AMCYL, the bonded
said requirements. warehouse, appellants were acting in full accord with the contractual
• However, the trial court dismissed the complaint on the ground that stipulations contained in Bill of Lading No. 18. The delivery of the goods
the Petitioner’s claim was barred by the statute of limitations. It held that to AMCYL was part of appellants' duty to transship (meaning to transfer
the Carriage of Goods by Sea Act (COGSA), embodied in for further transportation from one ship or conveyance to another) the
Commonwealth Act No. 65 is applicable. The trial court held that under goods from Manila to their port of destination-Davao.
the said law, the shipper has the right to bring a suit within one year
after the delivery of the goods or the date when the goods should have The extent of appellant carrier's responsibility and/or liability in the
been delivered, in respect of loss or damage thereto. transshipment of the goods in question are spelled out and delineated
• Petitioner then filed before the Supreme Court a petition for review under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: “the carrier
on certiorari assailing the trial court’s order of dismissal. shall not be liable in any capacity whatsoever for any delay, loss or
damage occurring before the goods enter ship's tackle to be loaded or
ISSUE/S: after the goods leave ship's tackle to be discharged, transshipped or
1.) Whether or not the trial court committed an error in forwarded”. Further, in Section 11 of the same bill, it was provided that
dismissing the complaint of the petitioner based on the one-year “this carrier, in making arrangements for any transshipping or forwarding
prescriptive period for filing a suit under the COGSA to an arrastre vessels or means of transportation not operated by this carrier shall be
operator? YES. considered solely the forwarding agent of the shipper and without any
other responsibility whatsoever even though the freight for the whole
transport has been collected by him… Pending or during forwarding or
2.) Whether or not the Petitioner is entitled to recover actual damages
transshipping the carrier may store the goods ashore or afloat solely as
against the Respondent? YES, but only PhP164,428.76
agent of the shipper…”

HELD: We find merits in Nordeutscher’s contention that they are not liable for
• The term “carriage of goods” covers the period from the time the loss of the subject goods by claiming that they have discharged the
when the goods are loaded to the time when they are discharged same in full and good condition unto the custody of AMCYL at the port
from the ship. Thus, it can be inferred that the period of time when of discharge from ship — Manila, and therefore, pursuant to the
the goods have been discharged from the ship and given to the aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility
custody of the arrastre operator is not covered by the COGSA. for the cargo had ceased.The validity of stipulations in bills of lading
exempting the carrier from liability for loss or damage to the goods when
the same are not in its actual custody has been upheld by Us in
• The Petitioner, who filed the present action for the 5 packages that
were damaged while in the custody of the respondent was not fortright
SCRA 674 (1968), ruling that “pursuant to the terms of the Bill of Lading,
in its claim, as it knew that the damages it sought, based on the report
appellee's responsibility as a common carrier ceased the moment the
of its adjuster covered 9 packages. Based on the report, only four of the
goods were unloaded in Manila and in the matter of transshipment,
nine packages were damaged in the custody of the Respondent. The
appellee acted merely as an agent of the shipper and consignee”
Petitioner can be granted only the amount of damages that is due to it.
Samar Mining Co., Inc. vs Nordeutscher Lloyd (G.R. No. L-28673, 1984) In the present case, by the authority of the above pronouncements, and
FACTS: in conformity with the pertinent provisions of the Civil Code, Section 11
The case arose from an importation made by Samar Mining Co. of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are
Inc. of 1 crate Optima welded wedge wire sieves through the M/S valid stipulations between the parties insofar as they exempt the carrier
Schwabenstein, a vessel owned by Nordeutscher Lloyd, from liability for loss or damage to the goods while the same are not in
(represented in the Philippines by its agent, C.F. Sharp & Co., Inc.), the latter's actual custody.
which shipment is covered by Bill of Lading No. 18 duly issued to
consignee Samar Mining. Upon arrival of the vessel at the port of Acareful perusal of the provisions of the New Civil Code on common
Manila, the importation was unloaded and delivered in good order carriers directs our attention to Article 1736, which reads: “The
and condition to the bonded warehouse of AMCYL. The goods extraordinary responsibility of the common carrier lasts from the time
were however never delivered to, nor received by, the consignee at the goods are unconditionally placed in the possession of, and received
by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has season of rains and monsoons, the ship captain and his crew should
a right to receive them, without prejudice to the provisions of article have anticipated the perils of the sea. Citing Arada v. CA,7 it said that
1738.” In relation to this, Article 1738 provides: “the extraordinary findings of the BMI were limited to the administrative liability of the
liability of the common carrier continues to be operative even during the owner/operator, officers and crew of the vessel. However, the
time the goods are stored in a warehouse of the carrier at the place of determination of whether the carrier observed extraordinary diligence in
destination, until the consignee has been advised of the arrival of the protecting the cargo it was transporting was a function of the courts, not
goods and has had reasonable opportunity thereafter to remove them or of the BMI.
otherwise dispose of them.”
Art. 1738 finds no applicability to the instant case. The said article
contemplates a situation where the goods had already reached their Whether or not the Doctrine of Limited Liability applies.
place of destination and are stored in the warehouse of the carrier. The
subject goods were still awaiting transshipment to their port of Held:
destination, and were stored in the warehouse of a third party when last
seen and/or heard of. However, Article 1736 is applicable to the instant No it does not.
suit. Under said article, the carrier may be relieved of the responsibility
for loss or damage to the goods upon actual or constructive delivery of Common carriers are bound to observe extraordinary diligence over the
the same by the carrier to the consignee, or to the person who has a goods they transport, according to all the circumstances of each case;
right to receive them. There is actual delivery in contracts for the In all other cases not specified under Article 1734 of the Civil Code,
transport of goods when possession has been turned over to the common carriers are presumed to have been at fault or to have acted
consignee or to his duly authorized agent and a reasonable time is negligently, unless they prove that they observed extraordinary
given him to remove the goods. In the present case, there was actual diligence. From the nature of their business and for reasons of public
delivery to the consignee through its duly authorized agent, the carrier. policy, common carriers are bound to observe extraordinary diligence
over the goods they transport, according to all the circumstances of
Lastly, two undertakings are embodied in the bill of lading: the transport each case. In the event of loss, destruction or deterioration of the
of goods from Germany to Manila, and the transshipment of the same insured goods, common carriers are responsible; that is, unless they
goods from Manila to Davao, with Samar Mining acting as the agent of can prove that such loss, destruction or deterioration was brought
the consignee. The moment the subject goods are discharged in Manila, about—among others—by “flood, storm, earthquake, lightning or other
Samar Mining’s personality changes from that of carrier to that of agent natural disaster or calamity.” In all other cases not specified under
of the consignee. Such being the case, there was, in effect, actual Article 1734 of the Civil Code, common carriers are presumed to have
delivery of the goods from appellant as carrier to the same appellant as been at fault or to have acted negligently, unless they prove that they
agent of the consignee. Upon such delivery, the appellant, as erstwhile observed extraordinary diligence.
carrier, ceases to be responsible for any loss or damage that may befall The doctrine of limited liability under Article 587 of the Code of
the goods from that point onwards. This is the full import of Article 1736. Commerce is not applicable to the present case. This rule does not
apply to situations in which the loss or the injury is due to the concurrent
But even as agent of the consignee, the appellant cannot be made negligence of the ship-owner and the captain. It has already been
answerable for the value of the missing goods. It is true that the established that the sinking of M/V Central Bohol had been caused by
transshipment of the goods, which was the object of the agency, was the fault or negligence of the ship captain and the crew, as shown by
not fully performed. However, appellant had commenced said the improper stowage of the cargo of logs. “Closer supervision on the
performance, the completion of which was aborted by circumstances part of the shipowner could have prevented this fatal miscalculation.” As
beyond its control. An agent who carries out the orders and instructions such, the shipowner was equally negligent. It cannot escape liability by
of the principal without being guilty of negligence, deceit or fraud, virtue of the limited liability rule.
cannot be held responsible for the failure of the principal to accomplish
the object of the agency. Sealoader Shipping Corporation vs. Grand Cement Manufacturing
COMPANY OF NORTH AMERICA, respondent. Doctrine:
Contributory Negligence is conduct on the part of the injured
Doctrine of Limited Liability does not apply to situations in which the loss party, contributing as a legal cause to the harm he has suffered,
or the injury is due to the concurrent negligence of the shipowner and which falls below the standard to which he is required to conform
the captain. for his own protection

Facts: Facts:
Sealoader executed a Time Charter Party Aggrement with Joyce
1. On July 25, 1990 at Puerto Princesa, Palawan, the petitioner Launch for the chartering of MT Viper in order to tow its unpropelled
received on board its vessel, the M/V ‘Central Bohol,’ 376 pieces of barges for a minimum of 15 days.
Philippine Apitong Round Logs and undertook to transport said
shipment to Manila for delivery to Alaska Lumber Co., Inc. Sealoder entered into a contract with Grand Cement for the loading of
cement clinkers and the delivery thereof to Manila. On March 31, 1994,
2. During the voyage the degree of the position of the ship would Sealoder’s barge arrived at the wharf of Grand Cement tugged by MT
change due to the shifting of the logs inside. Eventually at about 15 Viper. It was not immediately loaded as the employees of Grand
degrees the captain ordered for everyone to abandon the ship. Cement were loaded another vessel.

3. Respondent alleged that the total loss of the shipment was caused
by the fault and negligence of the petitioner and its captain. Petitioner On April 4, typhoon Bising struck Cebu area. The barge was still docked
while admitting the sinking of the vessel, interposed the defense that the at the wharf of Grand Cement. As it became stronger, MT Viper tried to
vessel was fully manned, fully equipped and in all respects seaworthy; tow the barge away but it was unsuccessful because the towing line
that all the logs were properly loaded and secured; that the vessel’s connecting the vessels snapped since the mooring lines were not cast
master exercised due diligence to prevent or minimize the loss before, off, which is the ultimate cause. Hence, the barge rammed the wharf
during and after the occurrence of the storm. causing significant damage.

4. “It raised as its main defense that the proximate and only cause of Grand Cement filed a complaint for damages (P2.4M) since Sealoader
the sinking of its vessel and the loss of its cargo was a natural disaster, ignored its demands. They allege that Sealoader was negligent when it
a tropical storm which neither [petitioner] nor the captain of its vessel ignored its employee’s advice to move the vessels after it had received
could have foreseen.” weather updates. Sealoader filed a motion to dismiss on the ground that
Joyce Launch is the one liable since it was the owner of MT Viper,
5. The RTC was unconvinced that the sinking of M/V Central Bohol who’s employees were manning the vessel. Sealoader filed a cross-
had been caused by the weather or any other caso fortuito. It noted that claim against Joyce Launch. Joyce maintains that the damages were
monsoons, which were common occurrences during the months of July due to force majeure and faulted Grand Cement’s employees for
to December, could have been foreseen and provided for by an ocean- abandoning the wharf leaving them helpless and for not warning them
going vessel. Applying the rule of presumptive fault or negligence early on.
against the carrier, the trial court held petitioner liable for the loss of the
Upon testimonies, the RTC rendered judgment in favor of Grand
6. The CA affirmed the trial court’s finding that the southwestern Cement holding the two companies liable since there was complete
monsoon encountered by the vessel was not unforeseeable. Given the disregard of the storm signal, the captain of the vessel was not present
and the vessel was not equipped with a radio or any navigational facility, although the markings of which may have changed, it was conceded
which is mandatory. Joyce launch did not appeal. that these corresponded to the exact measurements of the boxes as to
their width, length and depth that were taken at the time of delivery in
Hongkong. Furthermore, it was proved the upon delivery in Hongkong,
On appeal, the CA affirmed the decision but on MR, it partly reversed its
the 6 cases were loaded in hold No. 9 of the ship and that the same 6
decision finding Grand Cement to be guilty of contributory negligence
cases were taken out of the same hold in Manila.
since it was found that it was still loading the other vessel at the last
minute just before the storm hit, hence Sealoder’svessel did not move. UY CHACO SONS & CO. v. ADMIRAL LINE 46 Phil 418
Damages were reduced to 50%. Hence, petition for review to SC.
Doctrine: Where property in the hands of a common carrier is not
Issue: delivered within a reasonable time after it has reached its destination,
the carrier, in the absence of any legal exemption and after demand has
Who should be liable for damage sustained by the wharf of Grand
been made and delivery refused, is liable for a conversion of the

Ruling: A tender of the property, to be effectual, must have been made within
Sealoader is liable for its negligence. First because it was not equipped the time in which the defendant was entitled to deliver it and the plaintiff
with a radio or a navigational facility and it failed to monitor the bound to receive it.
prevailing weather conditions. Second, it cannot pass the responsibility
of casting off the mooring lines because the people at the wharf could Facts:
not just cast off the mooring lines without any instructions from the crew 1. Plaintiff Mariano Uy Chaco Sons & Co. alleges that upon
of the vessel. It should have taken the initiative to cast off the mooring arrival of the S. S. Satsuma at the port of Manila, there were short-
lines early on. delivered one case of varnish and paint remover and fifty bales of
oakum, for the conversion of which, defendant is liable.
With regard to Grand Cement’s contributory negligence, the court found 2. Defendant Admiral Line argues that the merchandise had been
that it was not guilty thereof. It had timely informed the barge of the delayed, had been found, and delivery thereof had been tendered
impending typhoon and directed the vessels to move to a safer place. and rejected.
Sealoader had the responsibility to inform itself of the prevailing weather 3. It appears that the interval which elapsed between the date
conditions in the areas where its vessel was to sail. It cannot merely rely when the merchandise should have been delivered and the
on other vessels for weather updates and warnings on approaching presentation of the complaint was approximately 11 months. The
storms. For to do so would be to gamble with the safety of its own delay which ensued between the date when the merchandise
vessel, putting the lives of its crew under the mercy of the sea, as well should have been delivered and the date when it was finally
as running the rick of causing damage to property of third parties for tendered was close to 2 years and 4 months. The time which
which it would necessarily be liable. passed between the date when the merchandise should have been
delivered and the date when the defense of tender was set up, was
KuiPai & Co. v. Dollar Steamship Line over 3 years.
It is the duty of the carrier to deliver the transported articles in good Issue:Whether or not defendant is guilty of conversion?
order and condition as when received, and for failure to do so, the
carrier is liable for the corresponding damage. However, it devolves Held:
upon the plaintiff to both allege and prove that the articles tendered
were not the same as those, which he delivered to the carrier. Yes. As a general rule, mere delay in the delivery of goods by a
common carrier, no matter how long continued, is not a conversion
thereof, but is only a breach of the contract of carriage. Therefore,
Facts: where a carrier fails to deliver goods within a reasonable time, although
On April 12, 1927 MeeHing Chan of Hongkong shipped and delivered to he thereby makes himself liable for the damages incurred by reason of
Dollar Steamship Line (Dollar) on board its ship President Taft, 6 cases the delay, the consignee cannot refuse to accept the goods from him
of goods, wares and merchandise in good order and condition, and recover their value but is compelled to receive them.
consigned to KuiPai& Co. (KuiPai). The American Consul at Hongkong
then, could not and did not examine the specific contents of the boxes, However, a demand and a refusal to deliver is sometimes essential to
by the same token and reason, Dollar did not make any examination or show a conversion. Even after demand, if the goods are tendered
have any personal knowledge of the contents of the cases. These cases before a suit is brought, the consignee cannot refuse to receive the
were however measured and weighed, after which, thecorresponding goods and sue for conversion, his sole remedy being an action for
bills of lading were issued for such acceptance and Dollar agreed to damages resulting from the delay.
deliver the same to KuiPai in Manila.
Though the carrier may delay ever so long, the owner cannot charge
KuiPai now alleges that Dollar failed and neglected to deliver such him with a conversion, or for the value of the goods, if they are safely
goods, despite its payment of all freight charges due. To prove such kept, unless they have been demanded of the carrier and their delivery
failure, KuiPai presented records of the Manila Terminal Company refused.
showing that the 2 packages or cases lost were never landed in Manila
from the ship. Where property in the hands of a common carrier is not delivered within
a reasonable time after it has reached its destination, the carrier, in the
Dollar denies this allegation claiming that it tendered to KuiPai 6 absence of any legal exemption and after demand has been made and
identical cases shipped by MeeHing Chan and that KuiPai accepted and delivery refused, is liable for a conversion of the property. The
took delivery of only 4, and refused to accept delivery of the other 2. As consignee, under such circumstances, may elect to waive all the title to
evidence, Dollar presented the 2 cases, which were refused by KuiPai the property and sue for conversion, and after he has done so, a
although the marks on them were changed and the testimony of the subsequent tender by the carrier will not be available for it as a defense.
checker at the time the ship was unloaded and that of Manila Terminal
Company, that the cargo of the ship exactly tallies with the bills of lading A tender of the property, to be effectual, must have been made within
which were issued by the defendant. the time in which the defendant was entitled to deliver it and the plaintiff
bound to receive it. In this case, the tender made was not until long after
the lapse of this period, and, not being accepted, is no bar to plaintiff’s
Issue: right to recover.
Whether or not the Dollar delivered to KuiPai in Manila the 6 identical
boxes, which were delivered on board its ship? A delay of more than 2 years in making delivery was conclusively
unreasonable. A delay in pressing a defense predicated on tender, of
more than 2 years counted from the date when the complaint was filed,
Ruling: was likewise unreasonable. Defendant was unable to turn the goods
The court ruled in favor of Dollar. It is the duty of the carrier to deliver over to plaintiff at any time before the complaint was presented, and in
the transported articles in good order and condition as when received, fact, could not do so until a long time thereafter. From the foregoing,
and for failure to do so, the carrier is liable for the corresponding defendant was in effect guilty of conversion and must accordingly
damage. However, it devolves upon the plaintiff to both allege and respond for the value of the property at the time of conversion.
prove that the articles tendered were not the same as those, which he Cu Bon Liong v Java Pacific Line
delivered to the carrier.
In the case at bar, Dollar was able to prove that the 2 alleged missing
boxes were indeed tendered. By presenting the actual cases in court,
A shipment of potatoes were being delivered to a Cu Bon Liong(buyer), when shipped, except that it received only 1,685 sacks.
and upon arrival of the vessel at Manila and upon their discharge from - Upon actual weighing, it was discovered that the shortage was
the carrying-vessel, the potatoes were dumped into the sea by the equal to 41 sacks of rice.
Bureau of Customs at the request of the Buyer, because according to - Thus, the City of Iloilo filed a complaint against NARIC and
him, they were of no commercial value. He then demanded the Carrier Southern Lines for the recovery of the value of the shortage of the
to pay for the potatoes on the ground that it was their fault and shipment of rice (Php 6,486.35).
negligence (Over storage and delay) - The lower court absolved NARIC but sentenced Southern Lines
to pay the amount.
- CA affirmed.
- Hence, this petition for review.
The carrier is NOT liable. Right of Carrier to examine goods damaged in - Southern Lines claims exemption from liability by contending
transit- The party accused of negligence in the contract of transportation that the shortage in the shipment of rice was due to such factors
of perishable goods resulting in damage to said goods should be given as shrinkage, leakage or spillage of the rice on account of the bad
the opportunity to examine the goods and determine the extent of the condition of the sacks at the time it received the same and
damage, and if possible, the cause of such damage. Consideration of negligence of the agents of City of Iloilo in receiving the shipment.
fairness would require that if the defendant is accused of negligence in
the contract of transportation of plaintiff's potatoes resulting in the total
damage of the said shipment. By petitioning the Collector to dump the
- Whether Southern Lines is liable for the loss or shortage of the
shipment into the bay upon its arrival, plaintiff-appellant deprived the
rice shipped.YES
defendants of the opportunity to defend themselves.
- Whether the City of Iloilo is precluded from filing an action for
Go Pun v. Fieldman's Insurance damages on account of its failure to present a claim within 24
Facts: hours from receipt of the shipment as stated in the bill of

Sept 22, 1961: Go Pun purchased from Valderrama and Sons at Negro
Occidental lumber worth P21,258.14. The lumber wer insured with HELD:
Fieldman's Insurance for P29000- 14000 in the name of Go Pun under a - YES. The SC held that the contention of Southern Lines with
Marine Cargo Policy and 15000 under Graciano Aguillon under another respect to the improper packing is untenable.Under Art. 361 of the
policy. One of the policies was secured in Agullion's name, because Code of Commerce, the carrier, in order to free itself from liability,
those were the lumber that Aguillon purchased from Go Pun. But it as was only obliged to prove that the damages suffered by the goods
Go Pun who paid the premium. And at the time of loss, Aguillon has not were “by virtue of the nature or defect of the articles.” Under Art.
paid the purchase price. 362, the plaintiff, in order to hold the defendant liable, was obliged
to prove that the damages to the goods is by virtue of their nature,
occurred on account of its negligence or because the defendant
Sept 23 1961: the lumber were loaded on the barge despite the did not take the precaution adopted by careful persons.It held that
presence of tropical depression in the loading area. When the ship and if the fact of improper packing is known to the carrier or his
its tugboat reached the mouth of the river, the patron decided to go back servants, or apparent upon ordinary observation, but it accepts the
the loading dock, however it hit a sunken object on its way causing goods notwithstanding such condition, it is not relieved of liability
water to rish into the vessel. to lighten the load, pieces of lumber we for loss or injury resulting therefrom.
jettisoned into the sea, the lumber left on the barge were damaged by
seawater. - NO. The SC noted that Southern Lines failed to plead this
defense in its answer to City of Iloilo’s complaint and, therefore,
Go Pun demanded Fieldman to pay, but despite Fieldman's adjuster's the same is deemed waived and cannot be raised for the first
reports, it still refused to pay. Hence Go Pun sued Fieldman and the time.The SC also cited the finding of the CA that City of Iloilo filed
Shipping company the action within a reasonable time; that the action is one for the
refund of the amount paid in excess, and not for damages or the
recovery of shortage; the bill of lading does not at all limit the time
Issues: for the filing of action for the refund of money paid in excess.
1. Whether or not the shipping company is negligent
2. Whether or not the shipping company is solidarily liable with the Eastern Shipping Lines Inc. v. IAC, 150 SCRA 463
insurance company Doctrine:
When a carrier fails to establish any caso fortuito, the presumption by
Held: law of fault or negligence on the part of the carrier applies.
1. Yes. The uncontradicted evidence shoes that the vessel of the Facts:
shipping company put to sea despite rough seas and increment - 13 coils of uncoated 7-wire stress relived wire strand for
weather. Defendant shipping company cannot exempt itself from prestressed concrete were shipped on board the vessel “Japri
liability on claim of loss due to Act of God. To be exempt from Venture” (owned by Easter Shipping Lines) for delivery to
liability for loss because of an act of god, the common carrier must Stresstek Post-Tensioning Phils. in Manila. The cargo was insured
be free from any previous negligence or misconduct by which the by First Nationwide Assurance Corporation (FNAC).
loss or damage must have been occasioned. Although the - The vessel arrived in Manila and discharged the cargo to the
immediate ir proximate cause of a loss in any given instance may custody of E.Razon Inc., from whom the consignee’s customs
have been an act of god, yet if the carrier unnecessarily exposed broker received it for delivery to the consignee’s warehouse.
the property to such accident by any culpable act or omission of - It appears that while en route to Manila, the vessel encountered
his own, he is not excused. very rough seas and stormy weather and the cargo stored in the
2. Yes. They are alternatively but primarily liable. The liability of the lower hatch of the vessel was flooded with water about one foot
common carrier and the insurer of the goods lost or damaged while in deep. That upon survey, it was found that several coils were rusty
transit is solidary, not joint, although it arises from the occurence of the on one side and that the wetting of the cargo was caused by fresh
same accident. The carrier is liable by reason of the fault and water that entered the hatch when the vessel encountered heavy
negligence of its skipper; the liability of the insurer springs from the fact weather.
of loss of pr damage to the goods. - FNAC paid Stresstek about Php 172K for damage and loss to
the insured cargo.
SOUTHERN LINES INC vs CA and CITY OF ILOILO - Being subrogated to the rights of Stresstek, FNAC now seeks o
DOCTRINE:If the fact of improper packing is known to the carrier or his recover from Eastern what it has indemnified Stresstek less the
servants, or apparent upon ordinary observation, but it accepts the salvage value of the goods, or the total of about Php 124K.
goods notwithstanding such condition, it is not relieved of liability for - The RTC ordered for the dismissal of the case.
loss or injury resulting therefrom. Upon appeal, the CA held that Eastern is liable to FNAC.

FACTS: Issue:
- The City of Iloilo requisitioned for rice from the National Rice
and Corn Corporation (NARIC). Whether Easter should be held liable even if it claims that the shipment
- NARIC shipped 1,726 sacks of rice consigned to the City of was discharged and delivered complete into the custody of the arrastre
Iloilo on board of SS General Wright belong to Southern Lines. operator under clean tally sheets.
- The City of Iloilo received the shipment and paid the amount
stated in the bill of lading (around Php 63K). Held:
- However, at the bottom of the bill of lading, it was noted that - YES. In arriving at the decision, the SC agreed with the CA on
City of Iloilo received the merchandise in the same condition as its findings and conclusions.
- The heavy seas and rains referred to in the master’s report were submitted and tested, the steel sheets found in bad order were wet
not caso fortuito, but normal occurrences that an ocean going with fresh water. Fifth, Belgian -- in a letteraddressed to the
vessel, particularly in the month of September which, in our area, Philippine Steel --admitted that they were aware of the condition of
is a month of rains and heavy seas would encounter as a matter of the four coils found in bad order and condition.
routine. They are not unforeseen nor unforeseeable. These are
- YES. First, the provision of COGSA provides that the notice of claim
conditions that ocean-going vessels would encounter and provide
need not be given if the state of the goods, at the time of their receipt,
for, in the ordinary course of voyage.
has been the subject of a joint inspection or survey. Here, prior to
- The rain water (not sea water) found its way into Japri Venture
unloading the cargo, an Inspection Report as to the condition of the
is a clear indication that care and foresight did not attend the
goods was prepared and signed by representatives of both parties.
closing of the ship’s hatches so that rain water would not find its
Second, as stated in the same provision, a failure to file a notice of
way into the cargo,
claim within three days will not bar recovery if it is nonetheless filed
- Since Easter has failed to establish any caso fortuito, the
within one year. This one-year prescriptive period also applies to the
presumption of fault or negligence on the part of the carrier
shipper, the consignee, the insurer of the goods or any legal holder of
applies; and the carrier must present evidence that it has observed
the bill of lading.
the extraordinary diligence required in Art. 1733 to escape liability.
- A claim is not barred by prescription as long as the one-year period
The SC held that the presumption that the cargo was in apparent
has not lapsed. In the present case, the cargo was discharged on July
good condition when it was delivered by the vessel to the arrastre
31, 1990, while the Complaint51 was filed by respondent on July 25,
operation by the clean tally sheets has been overturned. The
1991, within the one-year prescriptive period.
evidence is clear to the effect that the damage to the cargo was
suffered while aboard petitioner’s vessel. - YES. In this case, there was no stipulation in the Bill of Lading
limiting the carrier's liability. Neither did the shipper declare a higher
Belgian Overseas Chartering and Shipping N.V. v. Philippine First
valuation of the goods to be shipped. This fact notwithstanding, the
Insurance Co.
insertion of the words "L/C No. 90/02447 cannot be the basis for
Facts: Belgian’s liability.
- CMC Trading A.G. shipped on board the M/V Anangel Sky at - First, a notation in the Bill of Lading which indicated the amount of
Hamburg, Germany 242 coils of various Prime Cold Rolled Steel the Letter of Credit obtained by the shipper for the importation of steel
sheets for transportation to Manila consigned to the Philippine sheets did not effect a declaration of the value of the goods as required
Steel Trading Corporation. by the bill. That notation was made only for the convenience of the
- On July 28, 1990, M/V Anangel Sky arrived at the port of Manila shipper and the bank processing the Letter of Credit.
and, within the subsequent days, discharged the subject cargo. - Second, a bill of lading is separate from the Other Letter of Credit
Four (4) coils were found to be in bad order. arrangements. Thus, Belgian’s liability should be computed based on
- Finding the four (4) coils in their damaged state to be unfit for US$500 per package and not on the per metric ton price declared in the
the intended purpose, the consignee Philippine Steel Trading Letter of Credit.
Corporation declared the same as total loss.
Republic v. Hijos de F. Escaño Inc. 8 CAR 850
- Philippine First Insurance paid the claim of Philippine Steel and
was thus subrogated. FACTS:
- Philippine First then instituted a complaint for recovery of the
amount paid to the consignee as insured. RP is the beneficiary of 93 cases of dry skimmed milk from the
- Belgian claims that the damage and/or loss was due to pre- UNICEF for distribution to children. Defendant Luzon Brokerage
shipment damage, to the inherent nature, vice or defect of the has been contracted by RP to handle the warehousing and
goods, or to perils, danger and accidents of the sea, or to transshipment of the milk to feeding agencies in different parts of
insufficiency of packing thereof, or to the act or omission of the the Philippines.
shipper of the goods or their representatives. Belgian further
argued that their liability, if there be any, should not exceed the Luzon Brokerage shipped through the shipping broker of
limitations of liability provided for in the bill of lading and other defendant Hijos de Escano (Escano) the 93 cases of milk on board
pertinent laws. Finally, Belgian averred that, in any event, they a vessel owned and operated by Escano for Southern Leyte. The
exercised due diligence and foresight required by law to prevent shipment was consigned to the Bontoc Rural Health Unit in
any damage/loss to said shipment. Southern Leyte in the care of Mrs. Tacardon. Bontoc is a
- The RTC dismissed the complaint. municipality in Southern Leyte which is about 24 kilometers from
- The CA reversed and ruled that Belgian were liable for the loss Malitbog.
or the damage of the goods shipped, because they had failed to
overcome the presumption of negligence imposed on common The shipment arrived in Malitbog on Jan 19. Mrs. Tacardon
carriers. As to the extent of Belgian’s liability, the CA held that the received copies of the bill of lading on Jan 24 from Luzon
package limitation under COGSA was not applicable, because the Brokerage, with a letter telling her to take delivery of the
words "L/C No. 90/02447" indicated that a higher valuation of the shipment. By failure of Mrs. Tacardon to claim the shipment upon
cargo had been declared by the shipper. arrival, it was deposited in a warehouse of Escano. On Jan. 28,
the branch manager of Escano met Mrs. Tacardon in front of the
municipal building and the former reiterated to the latter to take
delivery of the shipment. But before claim for the delivery of the
- Whether the notice of loss was timely filed. (Belgian claims that
cargo could be made, the entire cargo were burned on Jan 31 as a
pursuant to Section 3, paragraph 6 of COGSA, respondent should
result of a fire which broke out in a house near the said bodega.
have filed its Notice of Loss within three days from delivery. They
assert that the cargo was discharged on July 31, 1990, but that
As a result, RP instituted an action against Luzon Brokerage, the
respondent filed its Notice of Claim only on September 18, 1990.)
shipping broker, and Escano for the recovery of the value of the
milk which was burned.
Whether the package limitation of liability under COGSA is
applicable. (Belgian contends that assuming that they are liable
Lower court held that since the consignee has been advised of the
their liability should be limited to US$500 per package as provided
arrival and has had reasonable time to remove them (from Jan 28 –
in the Bill of Lading and by Section 4(5)of COGS
Jan 31), defendant is relieved from extraordinary diligence and the
loss of the shipment was due to force majeure.
- NO. Mere proof of delivery of the goods in good order to a ISSUES:
common carrier and of their arrival in bad order at their destination 1. W/N the lower court erred in holding that Mrs. Tacardon was
constitutes a prima facie case of fault or negligence against the negligent in failing to take delivery of the cargo within reasonable
carrier. time from arrival thereof at the port of consignment – NO
- In this case, Belgian failed to rebut the prima facie presumption
of negligence. First, as stated in the Bill of Lading, Belgian 2. W/N the lower court erred in holding that the loss and
received the subject shipment in good order and condition in destruction of the shipment was due to force majeure by reason of
Germany. Second, prior to the unloading of the cargo, an which exempts it from liability. – NO
Inspection Report prepared and signed by representatives of both
parties showed the steel bands broken, the metal envelopes rust- HELD:
stained and heavily buckled, and the contents thereof exposed and 1. According to Art. 1736 of the Civil Code, the extraordinary
rusty. Third, Bad Order Tally Sheet issued by Jardine Davies responsibility of the carrier lasts from the time the goods are
Transport Services stated that the four coils were in bad order and unconditionally placed in the possession of, and received by the
condition. Normally, a request for a bad order survey is made in carrier for transportation until the same are delivered, actually or
case there is an apparent or a presumed loss or damage.Fourth, constructively, by the carrier to the consignee or to the person
the Certificate of Analysis stated that, based on the sample who has a right to receive them, without prejudice to Art.
1738. This article provides that the extraordinary liability of the actually or constructively, by the carrier to the consignee or to the
common carrier continues to be operative even during the time the person who has a right to receive them, without prejudice to the
goods are stored in a warehouse of the carrier at the place of provisions of Article 1738.” The court a quo held that the delivery of the
destination, until the consignee has been advised of the arrival of shipment in question to the warehouse of the Bureau of Customs is not
the goods and has had reasonable opportunity thereafter to the delivery contemplated by Article 1736; and since the burning of the
remove them or otherwise dispose of them. warehouse occurred before actual or constructive delivery of the goods
to the appellees, the loss is chargeable against the appellant.
In the instant case, Mrs. Tacardon admitted having received notice
2. It should be pointed out, however, that in the bills of lading issued
of such arrival when she received copies of the bill of lading on
for the cargoes in question, the parties agreed to limit the responsibility
Jan. 24 with advice to take delivery of the goods. On Jan. 28, she
of the carrier. The stipulation is valid not being contrary to law, morals or
was personally told by the manager of the carrier companyto take
public policy.
delivery of the goods. It was incumbent upon Mrs. Tacardon to
take delivery of the shipment within a reasonable time from Jan. 3. The petitioners however, contend that the stipulation does not bind
24. Notice by the carrier that the cargo had already arrived, them since it was printed at the back of the B/L and that they did not
thereby placing the same at the disposal of the shipper or sign the same. However, as the Court held in OngYiu vs. CA, while it
consignee, amounts to a constructive delivery of the cargo which may be true that a passenger had not signed the plane ticket, he is
automatically released the carrier of the extraordinary nevertheless bound by the provisions thereof. Such provisions have
responsibility. Thus, when the goods were destroyed by fire, the been held to be a part of the contract of carriage, and valid and binding
duty to exercise extraordinary diligence on the part of the carrier upon the passenger regardless of the latter's lack of knowledge or
for vigilance of the goods had already ceased. assent to the regulation.
4. Also, where fortuitous event is the immediate and proximate cause
RP contends that there was no negligence on not being able to of the loss, the obligor is exempt from liability for non-performance.In
take delivery on Jan. 24 because on that day, Mrs. Tacardon had to the case at bar, the burning of the customs warehouse was an
attend to a difficult case of delivery of a patient which required her extraordinary event which happened independently of the will of the
present elsewhere up to Jan. 26, and then Jan. 27 was a Sunday. appellant. The latter could not have foreseen the event.
However, the Court ruled that the shipper cannot defer taking the
goods away in order to attend to another matters of its own, no 5. There is nothing in the record to show that the carrier incurred in
matter how important they may be. Otherwise, the continuance of delay in the performance of its obligation. It appears that it had not only
the extraordinary liability of the carrier would be dependent upon notified UyBico and Servando of the arrival of their shipment, but had
causes of which it has no intervention and not of its own making. demanded that the same be withdrawn. In fact, pursuant to such
demand, UyBico had taken delivery of 907 cavans of rice before the
2. The rule is that the carrier may be absolved of liability for the burning of the warehouse.
destruction of the cargo if it can show that the goods were lost, 6. Nor can the carrier or its employees be charged with negligence.
destroyed, or deteriorated by reason of any of the causes in art. The storage of the goods in the Customs warehouse pending
1734. Here, the cargo was destroyed by a fortuitous event in the withdrawal thereof by UyBico and Servando was undoubtedly made
form of a fire which broke out not in the warehouse but in a nearby with their knowledge and consent. Since the warehouse belonged to
house which spread to the bodega because it was windy and the and was maintained by the government, it would be unfair to impute
municipality did not have fire-fighting equipment and despite negligence to the carrier, the latter having no control whatsoever over
efforts exerted to put the fire out by the men of Escano. Thus, the the same.
carrier is not
liable. Overseas Factors, Inc v South Sea Shipping
We find no merit in the argument that fire is not among the causes
enumerated in Art. 1734. Said article makes mention of “other Overseas Factor (Seller), entered into a contract to supply 5,000 Metric
natural disaster or calamity” and this has reference to tons of Kangni rice with National Rice and Corn Corp(Purchaser). The
extraordinary fortuitous events which according to para. 2 of Art. two entered into an agreement that the shipment shall be imported from
1680 includes fire, the cause of which, is not imputable to the fault Pakistan aboard a ship owned by South Sea Shipping (Carrier). A
of the carrier, as in the instant case. Servando vs. Philippine Steam cofinancier of Seller entered into a surety bond agreement with an
Navigation Co. Insurance company owned by the carrier to guarantee the payment by
the charterers from HK of the losses that may arise, in favor of the
Facts: Carrier. Upon arrival of the goods in Manila, the Carrier refused to
1. Clara UyBico and AmparoServando loaded on board a vessel of unload the rice unless the balance of the freight and other charges were
Philippine Steam Navigation Co. for carriage from Manila to Negros paid. The Carrier was paid in rupees, but it wanted to be paid in British
Occidental 1,528 cavans of rice and 44 cartons of colored paper, toys sterling or pesos. This resulted to a delay of 8 days, and demurrage. A
and general merchandise. complaint was filed against the Carrier to accept the payment and to
allow unloading of the cargo. The Carrier lost and appealed.
2. The contract of carriage of cargo was evidenced by a Bill of Lading
(B/L). There was a stipulation limiting the responsibility of the carrier for
loss or damage that may be caused to the shipment Issue: Whether or not the Carrier had a right to hold the cargo?
a. “carrier shall not be responsible for loss or damage to
shipments billed ‘owner’s risk’ unless such loss or damage is due to the Held:
negligence of the carrier. Nor shall the carrier be responsible for loss
or damage caused by force majeure, dangers or accidents of the sea, Carrier's lien exists if freight was not paid. The fact that the freight was
war, public enemies, fire”. already included in the purchase price of the goods paid by the
purchaser to the appellees(Seller), did not free the cargo from the
3. Upon arrival of the vessel at its destination, the cargoes were carrier's lien as as provided for in Article 665 of the Code of Commerce,
discharged in good condition and placed inside the warehouse of the if the freight has not yet been fully paid by the Charter-Seller. Moreover,
Bureau of Customs. under clause No. 8 of the charter party, provides: "Owners shall have a
4. UyBico was able to take delivery of 907 cavans of rice. lien on the cargo for freight, deadfreight, demurrage, and damages for
detention. Charterers shall remain responsible for deadfreight and
5. Unfortunately, the warehouse was razed by fire of unknown origin demurrage(including damages for detention), incurred at the port of
later that same day destroying the remaining cargoes. loading. Charterers shall also remain responsible for freight and
6. UyBico and Servando filed a claim for the value of the goods demurrage(including damages for detention) incurred at port of
against the carrier. discharge, but to such extent as the Owners have been unable to obtain
payment thereof by exercising the lien on the cargo.
7. The lower court ruled in their favor. It held that the delivery of the
shipment to the warehouse is not the delivery contemplated by Art. PHILIPPINE REFINING CO., INC. vs. FRANCISCO JARQUE, JOSE
1736 of the CC. And since the burning of the warehouse occurred prior COROMINAS, and ABOITIZ & CO., defendants. JOSE COROMINAS
to the actual or constructive delivery of the goods, the loss is chargeable Doctrine: It is essential that a record of documents affecting the title to a
against the vessel. vessel be entered in the record of the Collector of Customs at the port of
Issue:Whether or not the carrier is liable for the loss of the goods. entry. Otherwise a mortgage on a vessel is generally like other chattel
mortgages as to its requisites and validity
1. Article 1736 of the CC imposes upon common carriers the duty to
observe extraordinary diligence from the moment the goods are Philippine Refining Co., Inc., and Francisco Jarque executed three
unconditionally placed in their possession "until the same are delivered, mortgages on the motor vessels Pandan and Zaragoza. These
documents were recorded in the record of transfers and incumbrances the broker tried to secure the release of the cargo, it was informed by
of vessels for the port of Cebu and each was therein denominated a Smith, Belle, & Co. that the free time for removing the containers from
"chattel mortgage". Neither of the first two mortgages had appended an the container yard had expired on June 26 for the first vessel, and on
affidavit of good faith. The third mortgage contained such an affidavit, July 9, in the case of the 2nd vessel, and that demurrage charges had
but this mortgage was not registered in the customs house until the begun to run a day after the free time, respectively.
period of thirty days prior to the commencement of insolvency
proceedings against Francisco Jarque. On July 13, La Suerte paid P47,680 representing the total demurrage
charges on all the containers, but it was not able to obtain its goods. It
A fourth mortgage was executed by Francisco Jarque and Ramon was able to obtain only a partial release of the cargo because of the
Aboitiz on the motorship Zaragoza and was entered in the chattel breakdown of the arrastre's equipment at the container yard. On July
mortgage registry of the register of deeds on within the thirty-day period 16, La Suerte sent a letter to Smith, Bell & Co. requesting
before the institution of insolvency proceedings. Francisco was declared reconsideration of the demurrage charges, but was refused.
an insolvent with the result that an assignment of all the properties of Subsequently, La Suerte refused to pay any more demurrage charges
the insolvent was executed in favor of Jose Corominas. Judge Jose M. on the ground that the delay in the release of the cargo was not due to
Hontiveros declined to order the foreclosure of the mortgages, but on its fault but to the breakdown of the equipment at the container yard.
the contrary sustained the special defenses of fatal defectiveness of the
mortgages. La Suerte filed this suit in the RTC for specific performance to compel
respondents to release 7 container vans consigned to it free of charge.
Issue: Whether or not the mortgages were defective.
In their answer, private respondents claimed that they were not free to
waive these charges because under the United States Shipping Act of
Held: 1916 it was unlawful for any common carrier engaged in transportation
involving the foreign commerce to charge or collect a greater or lesser
Yes. Vessels are considered personal property under the civil law. compensation that the rates and charges specified in its tariffs on file
Similarly under the common law, vessels are personal property although with the Federal Maritime Commission.
occasionally referred to as a peculiar kind of personal property. They
are subject to mortgage agreeably to the provisions of the Chattel RTC dismissed petitioner's complaint. It cited the bill of lading which
Mortgage Law. provided:

The only difference between a chattel mortgage of a vessel and a 23. The ocean carrier shall have a lien on the goods, which shall survive
chattel mortgage of other personalty is that it is not now necessary for a delivery, for all freight, dead freight, demurrage, damages, loss,
chattel mortgage of a vessel to be noted in the registry of the register of charges, expenses and any other sums whatsoever payable or
deeds, but it is essential that a record of documents affecting the title to chargeable to or for the account of the Merchant under this bill of lading
a vessel be entered in the record of the Collector of Customs at the port . . . . RTC likewise invoked clause 29 of the bill of lading which provided:
of entry. Otherwise a mortgage on a vessel is generally like other chattel
mortgages as to its requisites and validity. 29. . . .The terms of the ocean carrier's applicable tariff, including tariffs
covering intermodal transportation on file with the Federal Maritime
In the case, the absence of the affidavit vitiates a mortgage as against Commission and the Interstate Commission or any other regulatory
creditors and subsequent encumbrancers. As a consequence a chattel body which governs a portion of the carriage of goods, are incorporated
mortgage of a vessel wherein the affidavit of good faith required by the herein.
Chattel Mortgage Law is lacking, is unenforceable against third persons.
18. The RTC held that the bill of lading was the contract between the
TELENGTAN BROTHERS(LA SUERTE CIGAR) V. COURT OF parties and, therefore, petitioner was liable for demurrage charges. It
APPEALS rejected petitioner's claim of force majeure in such a way that the delay
FACTS: in the delivery of the containers was caused by the breaking down of the
equipment of the arrastre operator. The Court reasoned that still plaintiff
has to pay the corresponding demurrage charges. The possibility that
Private respondent K-Line is a foreign shipping company doing biz in the equipment would break down was not only foreseeable, but actually,
PH, its shipping agent is respondent Smith, Bell & Co., Inc. It is a foreseen, and was not caso fortuito. CA affirmed.
member of the Far East Conference, the body which fixes rates by
agreement of its member-shipowners. The conference is registered with
the U.S. Federal Maritime Commission. ISSUE: Whether or not La Suerte is liable for demurrage for delay in
removing its cargo from the containers - YES but only for the period July
Van Reekum Paper, Inc. entered into a contract of affreightment with 3 - 13, 1979 with respect to ten containers and from July 10 - July 13,
the K-Line for the shipment of 468 rolls of container board liners from 1979, in respect of two other containers
Georgia to Manila, consigned to herein petitioner La Suerte Cigar. The
contract of affreightment was embodied in Bill of Lading issued by the HELD:
carrier to the shipper. The expenses of loading and unloading were for
the account of the consignee (La Suerte). The shipment was packed in
12 container vans. At Tokyo, the cargo was transhipped on two vessels Payment of demurrage
of the K-Line. Ten (10) container vans were loaded on the 1st vessel, La Suerte's contention is that the bill of lading does not provide for the
while two (2) were loaded on another vessel. payment of container demurrage, as Clause 23 of the bill of lading only
says "demurrage," i.e., damages for the detention of vessels. Here there
On June 11, the first vessel arrived at the port of Manila. La Suerte was is no detention of vessels. It invokes a case where SC defined
notified in writing of the ship's arrival, together with information that "demurrage" as follows:
container demurrage would be charged unless the consignee took
delivery of the cargo within ten (10) days. Demurrage, in its strict sense, is the compensation provided for in the
contract of affreightment for the detention of the vessel beyond the time
On June 21, the other vessel arrived and was discharged of its contents agreed on for loading and unloading. Essentially, demurrage is the
the next day. On the same day the shipping agent Smith, Bell & Co. claim for damages for failure to accept delivery… Whatever may be the
released the Delivery Permit for twelve (12) containers to the broker merit of petitioner's contention, the fact is that clause 29(a) also of the
upon payment of freight charges on the bill of lading. On June 22, La bill of lading, in relation to Rule 21 of the Far East Conference Tariff ,
Suerte’s broker presented the shipping documents to the Bureau of specifically provides for the payment by the consignee of demurrage for
Customs. But the latter refused to act on them because the manifest of the detention of containers and other equipment after the so-called "free
the 1st vessel covered only 10 containers, whereas the bill of lading time."
covered 12 containers.
A bill of lading is both a receipt and a contract. As a contract, its terms
The broker therefore sent back the manifest to Smith, Bell & Co with the and conditions are conclusive on the parties, including the consignee.
request that the manifest be amended. Smith, Bell & Co. refused on the The enforcement of the rules of the Far East Conference and the
ground that an amendment would violate the Tariff and Customs Code Federal Maritime Commission is in accordance with R.A. 1407 which
relating to unmanifested cargo. declares that the Philippines, in common with other maritime nations,
recognizes the international character of shipping in foreign trade and
Later however, it agreed to add a footnote reading "Two container vans existing international practices in maritime transportation and that it is
carried by other vessel to complete the shipment of twelve containers part of the national policy to cooperate with other friendly nations in the
under the bill of lading." maintenance and improvement of such practices. Period of Demurrage
With respect to the period of La Suerte’s liability, La Suerte cannot be
The manifest was approved for release only on July 3. On July 11, when held liable for demurrage starting June 27 on the 10 containers because
the delay in obtaining release of the goods was not due to its fault. have the following meaning, unless the context of the particular usage
of the term indicates otherwise;
The evidence shows that the Bureau of Customs refused to give an
entry permit to petitioner because the manifest issued by K-Line stated a. "Maritime Industry", briefly referred to as "industry" in the broadest
only 10 containers whereas the bill of lading also issued by the K-Line concept of the term. All enterprises engaged in the business of
showed there were 12 containers. For this reason, petitioner's broker designing, constructing, manufacturing, acquiring, operating, supplying,
had to see Smith, Bell & Co. on June 22, but the latter did not repairing and/or maintaining vessels, or component parts thereof; of
immediately do something to correct the manifest. Smith, Bell & Co. was managing and/or operating shipping lines, stevedoring arrastre and
asked to "amend" the manifest, but it refused to do so on the ground customs brokerage services, shipyards, drydocks, marine railways,
that this would violate the law. It was only on June 29 that it thought of marine repair shops, shipping and freight forwarding agencies and
adding instead a footnote, by which time the "free time" had already similar enterprises.
expired. Now June 29 was a Friday. Again it is probable the correct
manifest was presented to the Bureau of Customs only on Monday, July b. "Vessels" or "Watercraft" Any barge, lighter, bulk carrier, passenger
2, and therefore it was only on July 3 that it was approved. ship freighter, tanker, container ship, fishing boats or other artificial
contrivance utilizing any source of motive power, designed, used or
It was therefore only from July 3 that La Suerte could have claimed its capable of being used as a means of water transportation operating
cargo and charged for any delay With respect to the other two either as common contract carrier, including fishing vessels covered
containers, demurrage was properly considered to have accrued on July under Presidential Decree No. 43, except (1) those owned and/or
10 since the "free time" expired on July 9. The period of delay, however, operated by the Armed Forces of the Philippines and by foreign
for all the 12 containers must be deemed to have stopped on July 13, governments for military purposes, and (ii) bancas, sailboats and other
because on this date petitioner paid P47,680.00. If it was not able to get waterborne contrivance of less than three gross tons capacity and not
its cargo from the container vans, it was because of the breakdown of motorized.
the shifter or cranes of the arrastre service operation. It would be unjust
to charge demurrage after July 13, since the delay in emptying the c. "Philippine national" A citizen of the Philippines; or a partnership or
containers was not due to the fault of La suerte In sum, we hold that association wholly owned by and composed of citizens of the
petitioner can be held liable for demurrage only for the period July 3-13, Philippines; or a corporation organized under the laws of the Philippines
1979 and that in accordance with the stipulation in its bill of lading. of which at least sixty per cent of the capital stock outstanding and
entitled to vote is owned and held by Philippine citizens; or a trustee of
Endeisa vs. Taleon
funds for pensions or other employee retirement or separation benefits,
Facts: where the trustee is a Philippine national and at least sixty per cent of
the funds will accrues to the benefit of the Philippine nationals:
The case at bar involves a dispute over the ownership of a lorcha (a Provided, That where a corporation and its non-Filipino stockholders
kind of boat) named Leal. As found by the trial court, the lorcha formerly own stock in an enterprise, at least sixty percent of the members of the
belonged to Francisco Elorriaga. After his death, his widow decided to governing board of both corporations must be Philippine nationals.
sell the boat. After a series of sales, it eventually ended up with Pedro
Endeisa. Meanwhile, Jesusa Laureano secured the attachment of the d. "Philippine flag vessel" A vessel or watercraft registered under
lorcha as being property of Luis Rivera. It was sold at public auction by Philippine laws.
the Sheriff Jose Taleon despite notice from Pedro Endeisa that the
lorcha belonged to him. Hence, the present suit filed by Endeisa e. "Foreign flag vessel" A vessel or watercraft registered under the laws
claiming ownership over the lorcha. Luis Rivera claims that he is the of a country other than the Philippines.
owner of the boat since he was the one in possession and not Endeisa.
f. "Philippines shipping companies" Philippine nationals registered and
licensed under the laws of the Philippines to engage in the business of
Issue: Who is the rightful owner of the lorcha? overseas and/or domestic water transportation.

Held: Pedro Endeisa. Section 12(h). Approve the sale, lease or transfer of management of
vessels owned by Philippine Nationals to foreign owned or controlled
Luis Rivera indeed had possession of the lorcha at the time it was
attached and sold. However, was no proof as to when the said -------------------------------------
possession commenced and how it was acquired. Paragraph 2 of Article
573 of the Code of Commerce states that the ownership of a vessel ARTICLE 574. Builders of vessels may employ the materials and follow,
may be acquired by possession. However such possession must be in with respect to their construction and rigging, the systems most suitable
good faith, continued for three years, and with good title duly recorded. to their interests. Ship owners and seamen shall be subject to what the
None of these requisites have been proven in favor of possession of laws and regulations of the public administration on navigation,
Luis Rivera. Hence, Pedro Endeisa is entitled to the possession of the customs, health, safety of vessels, and other similar matters.
LAWS RELATED TO VESSELS AND SHIPPING IN THE PHILIPPINES ARTICLE 575. Co-owners of vessels shall have the right of repurchase
and redemption in sales made to strangers, but they may exercise the
CODE OF COMMERCE same only within the nine days following the inscription of the sale in the
registry, and by depositing the price at the same time.
ARTICLE 573. Merchant vessels constitute property which may be
acquired and transferred by any of the means recognized by law. The -------------------------------------
acquisition of a vessel must appear in a written instrument, which shall
not produce any effect with respect to third persons if not inscribed in [With respect to Article 575, read Article 1620 of Civil Code]
the registry of vessels.
Article 1620. A co-owner of a thing may exercise the right of redemption
The ownership of a vessel shall likewise be acquired by possession in in case the shares of all the other co-owners or of any of them, are sold
good faith, continued for three years, with a just title duly recorded. In to a third person. If the price of the alienation is grossly excessive, the
the absence of any of these requisites, continuous possession for ten redemptioner shall pay only a reasonable one. Should two or more co-
years shall be necessary in order to acquire ownership. owners desire to exercise the right of redemption, they may only do so
in proportion to the share they may respectively have in the thing owned
A captain may not acquire by prescription the vessel of which he is in in common. (1522a)
ARTICLE 576. In the sale of a vessel it shall always be understood as
[With respect to Article 573, read P.D. No. 474, Sections 3 & 12(h) included the rigging, masts, stores and engine of a streamer
appurtenant thereto, which at the time belongs to the vendor. The arms,
Presidential Decree No. 474 munitions of war, provisions and fuel shall not be considered as
included in the sale.
FUNCTIONS IN THE PHILIPPINES, CREATING THE MARITIME The vendor shall be under the obligation to deliver to the purchaser a
INDUSTRY AUTHORITY, AND FOR OTHER PURPOSES certified copy of the record sheet of the vessel in the registry up to the
date of the sale.
Section 3. Definition of Terms. The terms, as used, in this Decree, shall
ARTICLE 577. If the alienation of the vessel should be made while it is respective ownership, for the expenses for repairing the vessel, and for
on a voyage, the freightage which it earns from the time it receives its other expenses which are incurred by virtue of a resolution of the
last cargo shall pertain entirely to the purchaser, and the payment of the majority. They shall likewise be liable in the same proportion for the
crew and other persons who make up its complement for the same expenses for the maintenance, equipment, and provisioning of the
voyage shall be for his account. vessel, necessary for navigation.

If the sale is made after the vessel has arrived at the port of its ARTICLE 592. The resolution of the majority with regard to the repair,
destination, the freightage shall pertain to the vendor, and the payment equipment, and provisioning of the vessel in the port of departure shall
of the crew and other individuals who make up its complement shall be bind the minority, unless the minority membersrenounce their interests,
for his account, unless the contrary is stipulated in either case. which must be acquired by the other co-owners, after a judicial
appraisement of the value of the portion or portions assigned. The
ARTICLE 578. If the vessel being on a voyage or in a foreign port, its resolutions of the majority relating to the dissolution of the partnership
owner or owners should voluntarily alienate it, either to Filipinos or to and sale of the vessel shall also be binding on the minority.
foreigners domiciled in the capital or in a port of another country, the bill
of sale shall be executed before the consul of the Republic of the The sale of the vessel must be made at public auction, subject to the
Philippines at the port where it terminates its voyage and said provisions of the law of civil procedure, unless the co-owners
instrument shall produce no effect with respect to third persons if it is unanimously agree otherwise, saying always the right of repurchase
not inscribed in the registry of the consulate. The consul shall and redemption provided for in Article 575.
immediately forward a true copy of the instrument of purchase and sale
of the vessel to the registry of vessels of the port where said vessel is ARTICLE 593. The owners of a vessel shall have preference in her
inscribed and registered. charter over other persons, under the same conditions and price. If two
or more of them should claim this right, the one having the greater
In every case the alienation of the vessel must be made to appear with interest shall be preferred; and should they have equal interests, the
a statement of whether the vendor receives its price in whole or in part, matter shall be decided by lot.
or whether he preserves in whole or in part any claim on said vessel. In
case the sale is made to a Filipino, this fact shall be stated in the ARTICLE 606. If the captain should be a co-owner of the vessel, he
certificate of navigation. may not be discharged unless the ship agent returns to him the amount
of his interest therein, which, in the absence of agreement between the
When a vessel, being on a voyage, shall be rendered useless for parties, shall be appraised by experts appointed in the manner
navigation, the captain shall apply to the competent judge on court of established in the law of civil procedure.
the port of arrival, should it be in the Philippines; and should it be in a
foreign country, to the consul of the Republic of the Philippines, should ARTICLE 607. If the captain who is a co-owner should have obtained
there be one, or, where there is none, to the judge or court or to the the command of the vesselby virtue of a special agreement contained in
local authority; and the consul, or the judge or court, shall order an the articles of association, he may not be deprived of his office except
examination of the vessel to be made. for the causes mentioned in Article 605.

If the consignee or the insurer should reside at said port, or should have ARTICLE 608. In case of the voluntary sale of the vessel, all contracts
representatives there, they must be cited in order that they may take between the ship agent and the captain shall terminate, reserving to the
part in the proceedings on behalf of whoever may be concerned. latter his right to the indemnity which may pertain to him, according to
the agreements made with the ship agent. They vessel sold shall
ARTICLE 579. After the damage to the vessel and the impossibility of remain subject to the security of the payment of said indemnity if, after
her being repaired, in order to continue the voyage had been shown, its the action against the vendor has been instituted, the latter is found to
sale at public auction shall be ordered, subject to the following rules: be insolvent.

1.The hull of the vessel, its rigging, engines, stores, and other articles ------------------------------
shall be appraised, after making an inventory, said proceedings to be
brought to the notice of the persons who may wish to take part in the Presidential Decree No. 761
2.The order or decree ordering the auction to be held shall be posted in ALLOWING THE REGISTRATION OF VESSELS THE OWNERSHIP
the usual places, an announcement thereof to be inserted in the Official OF WHICH IS VESTED IN CORPORATIONS OR ASSOCIATIONS, AT
Gazette and in two of the newspapers of the largest circulation of the LEAST SIXTY PERCENT OF THE CAPITAL STOCK OR CAPITAL OF
port where the auction is to be held, should there be any. The period WHICH BELONG TO CITIZENS OF THE PHILIPPINES, AND FOR
which may be fixed for the auction shall not be less than twenty days. OTHER PURPOSES

3. These announcements shall be repeated every ten days, and their Section 1. Section 806 of the Tariff and Customs Code of the
publication shall be made to appear in the records. Philippines, as amended, is hereby amended to read as follows:

4. The auction shall be held on the day fixed, with the formalities Sec. 806. Certificate of Philippine Registry. Upon registration of a vessel
prescribed in the common law for judicial sales. of domestic ownership, and of more than fifteen tons gross, a certificate
of Philippine registry shall be issued for it. If the vessel is of domestic
5. If the sale should take place while the vessel is in a foreign country, ownership, and of fifteen tons gross or less, the taking of the certificate
the special provisions governing such cases shall be observed. of Philippine registry shall be optional with the owner. "Domestic
ownership, as used in this section means ownership vested in citizens
ARTICLE 585. For all purposes of law not modified or restricted by the of the Philippines or corporations or associations organized under the
provisions of this Code, vessels shall continue to be considered as laws of the Philippines at least sixty per centum of the capital stock or
personal property. capital of which is wholly owned by citizens of the Philippines, and, in
the case of corporations or associations which will engage in coastwise
ARTICLE 589.If two or more persons should be part owners of a trade the president or managing directors thereof shall be such citizens:
merchant vessel, a partnership shall be presumed as established by the Provided, That the members of the crew of the vessel, except
coowners. This partnership shall be governed by the resolutions of the specialized fishing vessels, shall all be citizens of the Philippines,
majority of the members. Provided, That the certificate of Philippine registry issued to a vessel
prior to the approval of this Code shall not be affected; Provided, further,
If the part owners should not be more than two, the disagreement of That any vessel of more than fifteen gross tons which on February
views, if any, shall be decided by the vote of the member having the eight, nineteen hundred and eighteen, had a certificate of Philippine
largest interest. If the interests are equal, it should be decided by lot.The registry under existing law, shall likewise be, deemed a vessel of
person having the smallest share in the ownership shall have one vote; domestic ownership if there has been no change in its ownership or if
and proportionately the other part owners as many votes as they have the capital of the association or capital stock of the corporation owning
parts equal to the smallest one. such vessel has not been transferred to persons
who are not citizens of the Philippines and if any such vessels should
A vessel may not be detained, attached or levied upon in execution in have been totally lost through shipwreck, collision or any other marine
its entirety, for the private debts of a part owner, but the proceedings disaster while being lawfully operated, it may be replaced with another
shall be limited to the interest which the debtor may have in the vessel, vessel of the same or lesser tonnage by the same person, association
without interfering with the navigation. or corporation owning and operating same by virtue of this section,
under such terms and conditions as may be prescribed by the Maritime
ARTICLE 591.All the part owners shall be liable, in proportion to their Industry Authority consistent with public policy and with the view of its
utility for government service in case of war or any public emergency: Article 1486. In the case referred to in two preceding articles, a
Provided, further, That the controlling interest of the association or stipulation that the installments or rents paid shall not be returned to the
corporation shall not be considered as held by the citizen of the vendee or lessee shall be valid insofar as the same may not be
Philippines; (a) if less than sixty percent of the capital or capital stock is unconscionable under the circumstances. (n)
held by such citizens or such capital or capital stock is subject to any
trust or fiduciary obligation in favor of any person not a citizen of the -------------------------------
Philippines; (b) if less than sixty percent of the capital or capital stock in
said association or corporation entitled to vote is in the hands of citizens Republic Act No. 7471
of the Philippines; (c) if by means of (a) any contract or agreement,
more than forty percent of the capital or capital stock can be voted AN ACT TO PROMOTE THE DEVELOPMENT OF PHILIPPINE
directly or indirectly in favor of any person not a citizen of the OVERSEAS SHIPPING
Philippines: or (d) if by other means, the control of more than forty
percent of the capital or capital stock of the association or corporation is SECTION 1. Title. — This Act shall be known and cited as the
conferred upon or allowed to be exercised by any person not a citizen of "PhilippineOverseas Shipping Development Act."
the Philippines."
SECTION 2. Declaration of Policy. — It is hereby declared the policy of
Section 2. The above definition of "domestic ownership" the Government of the Philippines to:
notwithstanding, an enterprise duly registered with the Board of
Investments, under R.A. 5186 or 6135, whether or not entirely owned by (a) Develop and maintain a Philippine Metropolitan Marine composed of
foreign nationals, may register its own vessels under the provision of the well-equipped, safe and modern vessels most suited for, Philippine
section immediately preceding if such vessels are to be used requirements and conditions, manned by qualified Filipino officers and
exclusively to transport its own raw materials and finished products in crew, and owned and operated under the Philippine flag by citizens of
Philippine waters as an incident to its manufacturing, processing or the Philippines or by associations or corporations organized under the
business activity registered with the Board of Investments and certified laws of the Philippines, at least sixty percent (60%) of the capital of
to by said Board as an essential element in the operation of the which is owned by citizens of the Philippines;
registered project.
(b) Assist in the development, recovery and expansion of Philippine
Section 3. Any provision of the law, decree, executive order, or rules overseas shipping capable of meeting the requirements of the
and regulations to the contrary notwithstanding, the Maritime Industry expanding international trade of the Philippines;
Authority is hereby vested with the exclusive authority over the
registration and documentation of Philippine vessels, as well as the (c) Provide assistance to Philippine Shipping enterprises and encourage
issuance of all certificates, licenses or other documents necessary or the long range vessel acquisition development modernization and
incident to such registration and documentation. expansion through private investments without direct government
financial assistance; and
Section 4. The Maritime Industry Authority shall be subject to approval
by the Office of the President, issue such rules and regulations (d) Create a Healthy climate to attract private enterprises.
implementing the provisions of this decree.
SECTION 3. Definition. — As used this Act:
Section 5. All laws, decrees, executive orders, or rules and regulations,
or parts thereof, inconsistent with this Decree are hereby repealed or (a) "Philippine overseas shipping" means the transport of goods and/or
modified accordingly. passengers by a ship owned and operated under the Philippine flag by
a Philippine shipping enterprise, except when the ship is operated solely
Section 6. This Decree shall take effect immediately. between ports in the Philippines;

------------------------------ (b) "Philippine shipping enterprise" means a citizen of the Philippines or

an association or corporation organized under the laws of the
CA 65 - COGSA Philippines, at least sixty percent (60%) of the capital of which is owned
by citizens of the Philippines and engaged exclusively in Philippine
TITLE I - Section 1. When used in this Act overseas shipping;
(a) The term "carrier" includes the owner or the charterer who enters
into a contract of carriage with a shipper. (c) "MARINA" means the Maritime Industry Authority;
(d) The term "ship" means any vessel used for the carriage of goods by
sea. (d) "Monetary authority" means the Central Bank of the Philippines and
any other agency in charge of foreign exchange controls; and
(e) "Regulation" means the rules and regulations promulgated pursuant

Article 1132. The ownership of movables prescribes through Section 10 hereof.

uninterrupted possession for four years in good faith.
SECTION 4. Foreign Exchange Requirements. — Foreign exchange
The ownership of personal property also prescribes through requirements of Philippine Shipping enterprises for the purchase of
uninterrupted possession for eight years, without need of any other oceangoing vessels for registration under the Philippine flag, for repair
condition.With regard to the right of the owner to recover personal or improvement of vessels, for importation of engines, spare parts,
property lost or of which he has been illegally deprived, as well as with accessories, supplies, containers and for other expenses required for
respect to movables acquired in a public sale, fair, or market, or from a the operation of vessels in foreign ports or in the high seas, when
merchant's store the provisions of Articles 559 and 1505 of this Code recommended by the MARINA, shall be made available to the Philippine
shall be observed. (1955a) shipping enterprise subject to the regulations.

Article 1484. In a contract of sale of personal property the price of which SECTION 5. Acquisition of Oceangoing Vessels. — Philippine shipping
is payable in installments, the vendor may exercise any of the following enterprises may likewise acquire oceangoing vessels for Philippine
remedies: overseas shipping upon approval by the MARINA, subject to the
(1) Exact fulfillment of the obligation, should the vendee fail to pay; guidelines prescribed in the regulations: provided, that:
(2) Cancel the sale, should the vendee's failure to pay cover two or
moreinstallments; (a) The funds utilized in the acquisition of the vessel are financed from
(3) Foreclose the chattel mortgage on the thing sold, if one has been sources other than the Philippine banking system;
constituted, should the vendee's failure to pay cover two or more (b) No guaranty of the monetary authority or of any Philippine
installments. In this case, he shall have no further action against the government or private financial institution is granted or extended for the
purchaser to recover any unpaid balance of the price. Any agreement to purpose;
the contrary shall be void. (1454-A-a) (c) The vessel serves as sole collateral for the financing of the vessel
and no other asset of the Philippine shipping enterprise is pledge,
Article 1485. The preceding article shall be applied to contracts mortgaged, or used as security in case of default;
purporting to be leases of personal property with option to buy, when (d) All foreign exchange requirements for the servicing of the loan, the
the lessor has deprived the lessee of the possession or enjoyment of operation, maintenance and repair of the vessel, the purchase of
the thing. (1454-Aa) supplies and related equipment shall be financed solely from earnings
derived from the operation of the vessel and no foreign exchange shall
be made available by the monetary authority and the Philippine banking formulate and promulgate the rules and regulations necessary for the
system for these purposes; implementation of this Act taking into consideration the policies and
(e) Mortgage documents and/or other financial agreements shall be filed programs of the Government for the development of the Philippine
with the monetary authority and such other government agencies in overseas shipping.
charge of such mortgage formalities; and
(f) Any excess foreign exchange earning shall be inwardly remitted and SECTION 11. Annual Report. — The MARINA, in coordination with the
surrendered to the Philippine banking system. monetary authority and the Department of Finance, shall submit an
annual report to the President of the Philippines and the Congress of
SECTION 6. Exemption from Import Duties and Taxes. — The the Philippines on the implementation of this Act, which report shall
importation by a Philippine shipping enterprise of oceangoing vessels include:
for registration under the Philippine flag shall be exempt from the
payment of import duties and taxes. The spare parts for the repair (a) The amount of foreign exchange earned, acquired and spent by
and/or overhaul of vessels shall likewise be exempt from the payment of Philippine shipping enterprises;
import duties and taxes provided, that such items are destined or (b) The amount of income tax and import duties and taxes for which
consigned either to: exemption have been granted;
(c) The additional oceangoing vessels constructed, purchased or
(a) A Philippine dry-docking or repair facility, accredited by the MARINA acquired, the improvement made thereon and the additional related
and registered as a customs-bonded warehouse, which will undertake equipment procured; and
the necessary repairs and works on the vessel; and (d) Such other information as the MARINA may deem necessary or the
President of the Philippines may require.
(b) The vessel in which the items are to be installed: provided That, if
such items are found in locations other than the two (2) aforementioned SECTION 12. Penal Provisions. — Violation of the provisions of this Act
ones or in places not authorized by customs, the person or entity in or the rules and regulations promulgated to implement the same shall
possession of such items shall be subject to full duties and taxes, be punished by a fine of not more than Ten thousand pesos (P10,000)
including surcharges and penalties. or imprisonment for not more than five (5) years, or both such fine and
imprisonment, at the discretion of the court.
Local manufactures or dealers who sell machinery, equipment,
materials and spare parts to a Philippine shipping enterprise shall be If the violation is committed by an association or corporation, the
entitled to tax credits for the full amount of import duties and taxes penalties prescribed hereunder shall be imposed on the president the
actually paid thereon, or on parts or components thereof, subject to the chief executive officer and the other officials and employees responsible
approval of the Secretary of Finance, upon the recommendation of the for the violation.
If the violation is committed by a government official or employee, he
SECTION 7. Exemption from Income Tax. — A Philippine shipping shall, in addition to the penalties prescribed hereunder, be dismissed
enterprise shall be exempt from payment of income tax on income from the government service with all administrative penalties accessory
derived from Philippine overseas shipping for a period of ten (10) years thereto.
from the date of approval of this Act: provided, that:
SECTION 13. Repealing Clause. — All laws, executive orders,
(a) The entire net income, after deducting not more than ten percent regulations, or parts thereof, inconsistent with the provisions of this Act
(10%) thereof for distribution of profits or declaration of dividends, which are hereby repealed, amended or modified accordingly.
would otherwise be taxable under the provisions of Title II of the
Qualitrans v. Royal Class
National Internal Revenue Code, is reinvested for the construction,
purchase, or acquisition of vessels and related equipment and/or in the Facts:
improvement of modernization of its vessels and related equipment in 1. Qualitrans Limousine Service, Inc., was the grantee of a certificate of
accordance with the regulations; and public convenience issued by the defunct Board of Transportation to
operate a "garage (tourist) air-conditioned service" from Manila t any
(b) The cumulative amount so reinvested shall not be withdrawn for a point in Luzon
period of ten (10) years after the expiration of the period of income tax
exemption or until the vessel or related equipment so acquired have 2. A decision by the BOT amended the certificate for garage service into
been fully paid, whichever date comes earlier. Any amount not so one for limousine tourist service for the transportation of all outgoing
invested or withdrawn prior to the expiration of the period stipulated passengers of the Manila International Airport
herein shall subject to the corresponding income tax, including 3. A Deed of Absolute Sale was executed by private respondent with
penalties, surcharges and interests. Transcare, Inc., a duly licensed limousine service operator and likewise,
a holder of a certificate of public convenience.
SECTION 8. Registration and Deletion of Vessels. — All vessels owned
by Philippine shipping enterprises and availing of the incentives under 4. By virtue of said sale, the franchise granted to Transcare, Inc. for the
this Act shall be registered under the Philippine flag. Said vessels can use of 40 units of tourist cars was sold to private respondent.
only be deleted from the Philippine registry after the MARINA has 5. On December 27, 1985, upon application filed for the approval of
determined that: aforementioned sale, an Order was issued by the Land Transportation
Commission granting a provisional permit in favor of private respondent
(a) No other Philippine shipping enterprise is interested in acquiring the (Annexes C and 3, CA-G.R. SP No. 10049); Annexes B and 3 CA-G.R.
vessel; or No. 10370-SP). The prefatory portion thereof states: The application
(b) The vessel has to be scrapped. filed in this case is for the approval of sale made by TRANSCARE, INC.,
in favor of ROYAL CLASS LIMOUSINE SERVICE of the Certificate of
SECTION 9. Requisition of Vessels. — The President of the Philippines Public Convenience issued in Case Nos. 81-4405 and 82-415
may, in times of war and other national emergency, requisition authorizing the operation of a TOURIST CAR (AIR-CONDITIONED)
absolutely or temporarily, for any naval or military purpose, any and all SERVICE within the New Manila International Airport and from said
vessels of the Philippine registry. The Government shall pay the owner place to any point in the Island of Luzon accessible to motor vehicle
or operator of the vessel, based on normal conditions at the time of traffic and vice-versa, involving the right to operate forty (40) units
requisition; authorized therein. ... (Emphasis supplied).

(a) The fair market value, if the vessel is taken absolutely, or 6. Petitioner argues that the application filed by private respondent was
(b) The fair charter value, if the vessel is taken temporarily. In case of for the route from the "New Manila International Airport to hotels and
disagreement, such fair value shall be determined by an arbitration from said hotels to any point in Luzon accessible to vehicular traffic and
committee composed of: vice-versa", and not from the "New Manila International Airport ... to any
(c) One (1) member to be appointed by the MARINA; point in the Island of Luzon.”
(d) One (1) member to be appointed by the owner or operator of the 7. Petitioner claims that respondent has been soliciting passengers from
vessel; and the New Manila International Airport to transport them to any point in
(e) One (1) member to be appointed by the two (2) members so Luzon to the prejudice of petitioner's business. 8. Essentially,
appointed. petitioner’s main contention is that they should be the only business to
be offering that particular service. Issue: Is petitioner’s contention
The decision of the arbitration committee shall be final and binding on correct?
both parties.
SECTION 10. Rules and Regulations. — The MARINA, in consultation NO, it is not.
with the monetary authority and the Department of Finance, shall jointly
case on the grounds (a) that Mrs. Granada, not being a party in interest,
> Under the constitution, it is to the best interest of the public to have had no personality to ask for the case's reopening; (b) that the decision
two or more companies in the field to stimulate business and prevent sought to be reopened had already become final and inalterable; and (c)
monopolies pursuant to the constitutional mandate of equitable that the issues raised by Mrs. Granada were judicial issues not within
distribution of opportunities, income and wealth, and regulation of the jurisdiction of the Public Service Commission.
competition and prohibition of monopolies.
As noted at the beginning of this opinion, the Public Service
> the Court finds it "hard to conceive how it would be for the best Commission granted the petition to reopen and, after hearing both
interests of the public" 17, to have one line only, "and how the public parties, found that the sale of the Natividad certificates to Escoto was
would be injured by the granting of the certificate in question, for it must presumptively in fraud of creditors under Article 1387 of the New Civil
be conceded that two companies in the field would stimulate the Code, providing that:.
ART. 1387. All contracts by virtue of which the debtor alienates property
> It is simply bellyaching to say that Royal Class had transcended the by gratuitous title are presumed to have been entered into in fraud of
bounds of the certificate of public convenience granted to it. What creditors, when the donor did not reserve sufficient property to pay all
Qualitrans is plainly carping about is the threat the Royal Class' debts contracted before the donation.
certificate of public convenience poses on its foothold in the "limo"
Alienations by onerous title are also presumed fraudulent when made
service business. This is monopolism, plainly and simply, and we
by persons against whom some judgment has been rendered in any
cannot tolerate it.
instance or some writ of attachment has been issued. The decision or
> There is no merit in the claims that Royal Class has been guilty of attachment need not refer to the property alienated, and need not have
unfair competition. For starters, its Certificate of Public Convenience been obtained by the party seeking the rescission.
has been duly issued. The CPC cannot therefore be said to have been
In addition to these presumptions, the design to defraud creditors may
acquired through duress or deceit to warrant such a charge.
be proved in any other manner recognized by the law of evidence. The
> Accordingly, Petitioner’s petition must be dismissed. Public Service Commission likewise found that Mrs. Granada had no
previous knowledge of the petition for the Public Service Commission to
approve the transfer; and that she had sustained, or was in immediate
INC G.R. No. L-39655 | March 21, 1975 | J. Fernando
danger of sustaining, injury as a result of the transfer, and, in view
Facts: thereof, revoked its previous approval of the sale and ordered that
1. Both petitioner and private respondent Sultan Rent-a-Car are Escoto's certificates be cancelled. Unable to secure reconsideration,
domestic corporations. Arrow has in his favor a certificate of public Escoto came to this Court on appeal by certiorari, claiming lack of
convenience (CPN) to operate a public utility bus air-conditioned-auto- jurisdiction and or grave abuse of discretion.
truck service from Cebu City to Mactan International Airport and vice- ISSUE:
versa with the use of twenty (20) units.
Whether or not PSC has no jurisdiction over the case.
2. Sultan filed a petition with the respondent Board for the issuance of a
CPN to operate a similar service on the same line. Eight days later,
without the required publication, the Board issued an Order granting it NO. There is no denying that in petitioning the Commission for the
provisional permit to operate. approval of the transfer of Natividad's units and service certificates to
Escoto, the applicants did not disclose to the Public Service
3. After filing an MR and for the cancellation of such provisional permit
Commission that a judgment had been previously obtained by Mrs.
filed but without awaiting final action thereon, Arrow filed the present
Granada against the transferor, nor that a writ of execution had been
petition for certiorari with preliminary injunction, alleging that the
issued against her, thereby rendering the transfer presumptively
question involved herein is purely legal and that the issuance of the
fraudulent as against the judgment creditor. Nor is it doubtful that had
Order without the Board having acquired jurisdiction of the case yet, is
the foregoing circumstances been revealed, the Public Service
patently illegal or was performed without jurisdiction.
Commission could very well have refused to approve the transfer, since
4. In their answer, the respondents denied the need for publication the latter was subject to rescission by the regular courts, leading to a
before a provisional permit can be issued, in light of Presidential Decree consequent disruption of the public services transferred, to the
No. 101, which authorized respondent Board to grant provisional detriment of the general public.
permits when warranted by compelling circumstances and to proceed
Moreover, the Commission could not but view with disfavor a petition for
promptly along the method of legislative inquiry. Issue: W/N publication
its approval of a transaction of doubtful correctness, for such
is necessary before provisional permits can be granted
approbation tended to place the Commission's acts and reputation in a
Held: derogatory light, making it appear as if it were cooperating to defraud a
No. It is the well-settled doctrine that for a provisional permit, an ex creditor. Under the circumstances, the Public Service Commission had
parte hearing suffices. The decisive consideration is the existence of the authority to revoke its approval, because under the Public Service law
public need, as shown in this case by the respondent Board. Petition for (Section 16 [m], Commonwealth Act No. 146), it could cancel or revoke
certiorari dismissed. a certificate "whenever the facts and circumstances on the strength of
which a certificate was issued have been misrepresented or materially
ESCOTO VS. ANUNCIACION VDA DE GRANADA changed", concealment of material facts being in effect a
FACTS: misrepresentation.

Private respondent Anunciacion Vda. de Granada had instituted an The order complained of in the case before us is proof that the Public
action in 31 March 1964 against Rosita Natividad, former holder of the Service Commission regarded the facts concealed from it as material
certificates in question, and operator of several PUJ jitneys, to recover and that, if known, would have caused it to withhold or deny approval of
damages for the death of her husband, who was hit by one of said the transfer in question. In Pecson vs. Pecson, 78 Phil. 522, this Court
vehicles. upheld the Commission's power to cancel a certificate of public
convenience upon proof that the holder was a mere dummy of the
The driver had been criminally convicted and in the civil suit Mrs. transferor. The case at bar being very similar in nature, it should be
Granada was awarded an indemnity of P70,000, plus 10% attorney's governed by the same principle. The non-appearance of respondent
fees, by the Court of First Instance of Iloilo and execution pending Mrs. Granada in the initial case was due to the petitioner's concealment
appeal was ordered. The judgment was affirmed by the Court of of the preceding judgment in her favor, for which she is not to blame.
Appeals and ultimately became final upon this Supreme Court denying Likewise, the lapse of the period to appeal the Public Service
review on 2 July 1970. Commission order approving a transfer of certificates can not bar its
cancellation for misrepresentation of actual facts.
Meanwhile, Rosita Natividad and Emiliano U. Escoto, on 27 April 1970,
applied to the Public Service Commission for approval of the sale for Litimco v. La Mallorca
P40,000 of the 77 jitneys and the public service certificates owned by Facts:
the former to the latter, pursuant to a deed allegedly executed on 3 June
1964, almost six (6) years prior to the petition to the Public Service Tomas Litimco filed a petition before the Public Service Commission
Commission. No objection having been filed, despite publication, the (PSC) praying for authority to operate a TPU service on the line Manila-
Public Service Commission approved the transfer, as aforesaid, on 5 Malolos via Sta. Isabel with the use of 10 units. Several operators filed
August 1970. written oppositions. \

On 23 September 1970, Mrs. Granada petitioned the Public Service Before PSC could render its decision, La Mallorca, another operator,
Commission for a reopening of the case and the setting aside of moved to reopen the case stating that if the petition to operate the line
approval of the transfer of the equipment and certificates to Escoto, proposed be granted it would work to its prejudice and so it requested a
pleading the foregoing facts; that the sale by Natividad to Escoto was reopening in order that it may file its opposition. The motion was
simulated and fictitious; and that Mrs. Granada had not discovered the granted.
transfer until 16 September 1970. Escoto opposed the reopening of the
However, instead of presenting evidence in support of its opposition, La to PSC
Mallorca moved for postponement, only to announce days later that
instead of merely objecting to the petition, it decided to file an Batranco appeared and filed an application for a permit, praying that the
application under a separate number (Case No. 63120) requesting for petition of Orlanes be denied, alleging that:
authority to operate the same line applied for by petitioner by rerouting 4 a. it is operating a regular service of auto trucks between Batangas
of its 10 round trip units of the line Malolos-Manila via Guiguinto. and some parts in Tayabas
b. since 1918, it has been operating a regular service between Taal
The PSC rendered decision denying petitioner’s application but granting
and Rosario, and in 1920, its service was extended to the municipality
that of respondent on the ground that the latter has a better right to
of San Juan de Bolbok, with a certificate of PC issued
render the service applied for.
c. in 1925, Orlanes obtained from PSC a certificate of PC, as
Petitioner contends that the Public Service Commission erred because: aforementioned
1. his application was filed much ahead than that of respondent and as d. Orlanes inaugurated operations in March of 1926, but maintained it
such it is entitled to preference on the part between Taal and Bantilan for only about three months,
when he abandoned it in June; he did not renew it until five days before
2. in awarding the line to respondent it in effect gave recognition to the the hearing of case No. 10301
unfair attitude of respondent e. said case 10301 was filed by Batranco praying that:
3. to grant the service in favor of respondent will work to the prejudice of i. its number of trip hours within the areas (conflicting routes) over
the riding public for it would be allowing respondent to abandon a which Orlanes likewise prays to be a regular operator be increased,
portion of its service on its original line Manila-Malolos via Guiguinto, a and/or
service which was previously found to promote the need and ii. all irregular operators be prohibited from operating their respective
convenience of the people in said territory. licenses, unless they should observe an interval of two hours before, or
one hour after, the regular hours of Batranco
Respondent reasoned out that its: f. from June, 1926, Orlanes and Batranco were jointly operating a
1. application for rerouting will not involve any increase of trips or units regular service between Bantilan and Lucena, with trips every half an
nor will involve the purchase of new trucks, while that of petitioner would hour
call for the use of 10 new trucks, which means a further depletion of the g. Orlanes not having asked for a regular service between Bantilan
already depleted dollar reserve of our government and Taal, Batranco remedied this under authority and increased its trips
between Bantilan and Tayabas to make due and timely connections in
2. application for re-routing will not involve the acquisition of an Bantilan to all other points in the Province of Batangas
operating right over the national highway from Malolos railroad crossing h. the service maintained by Batranco is sufficient to satisfy the
up to Guiguinto, while, on the other hand, petitioner’s application will convenience of the public
involve the acquisition of a new operating right i. the PC does not require the granting of the permit for the service
Issue: which Orlanes applied for, since to do so would result in ruinous
competition and grave prejudice of the company without any benefit to
Who has a better right to render the service? the public
PSC granted the petition of Orlanes, as prayed for. Batranco filed a
Litimco. Since it is admitted that he is financially competent and able to motion for rehearing, which was denied. It then appealed to the SC.
operate the line proposed and is also an operator of a bus line from
Manila to Malolos via Bulacan, we see no plausible reason why he
should not be given preference to operate the service applied for Issue:
considering that he is the first one to apply for such line. Whether a certificate of PC to operate a public utility be issued to an
This is in accord with the policy to stave off any act of discrimination or applicant (Orlanes) thereof in a field where a person is already granted
partiality against any application for operation of a new line. While there a license (Batranco)?
may be cases where an applicant, even if ahead in time, was not given
the service, it is because it was proven that he was financially Held:
incompetent, or otherwise disqualified, to render the service, If an
applicant is qualified financially, and is able to undertake the service, he The decision of the PSC is revoked and set aside, the case being
should be given the preference as a matter of fairness and justice. remanded for further proceedings. So long as an operator under a prior
license complies with the terms and conditions of his license and
Priority in the filing of the application for a certificate of public reasonable rules and regulation for its operation and meets the
convenience is, other conditions being equal, an important factor in reasonable demands of the public, it is the duty of PSC to protect rather
determining the right of the public service companies. than to destroy his investment by the granting of a subsequent license
The argument that the application of petitioner for the operation of the to another for the same thing over the same route of travel. The granting
new line calls for the purchase of 10 new trucks is of no consequence, if of such a license does not serve its convenience or promote the
the operation will redound to the benefit of the riding public. The interests of the public.
operation of a new line as a general proposition always involves a new The questions presented involve a legal construction of the powers and
investment which may happen even with old operators. In the course of duties of the PSC, and the purpose and intent for which it was created,
operation, and with the passing of time, new equipment and facilities and the legal rights and privileges of a public utility operating under a
may be found necessary to maintain an efficient service, which prior license.
additional expenditure cannot certainly be considered as a cause for
disruption of the service. This is a matter of finance which concerns 1. An autobus line is a public utility, a common carrier, and an
exclusively the one who desires to operate the new line. important factor in the business conditions of the Islands, which is daily
branching out and growing very fast.
At any rate, the new line merely covers 7 kilometers of new territory
It must apply for and obtain a license or permit from the PSC, and
which traverses three sparsely populated barrios, and considering that
comply with defined terms and conditions before such a business can
respondent did not deem it necessary to cover said territory except after be operated. When license is granted, the operator must conform to,
the passing of many years, and only thought of giving the service when and comply with, all reasonable rules and regulations of the PSC.
petitioner filed his application, fairness requires that preference be given
to petitioner.
2. The object and purpose of PSC, among others, is to look out for,
BATANGAS V. ORLANES and protect, the interests of the public, and, in the instant case, to
provide it with safe and suitable means of travel over the highways in
question, in like manner that a railroad would be operated under like
terms and conditions. For many and different reasons, it has never been
In his application for a permit, Cayetano Orlanes alleges that: the policy of a PSC to grant a license for the operation of a new line of
a. he is the holder of a certificate of public convenience (PC) issued railroad which parallels and covers the same field and territory of
by the Public Service Commission (PSC) in case No. 7306, to operate another old established line, for the simple reason that it would result in
an autobus line ruinous competition, and would not be of any benefit or convenience to
i. from Taal to Lucena, passing through Batangas, Bolbok and the public.
Bantilan (in the Province of Batangas), and Candelaria and Sariaya (in
the Province of Tayabas), without any fixed schedule The PSC has ample power and authority to make any and all
ii. however, he could not accept passengers from intermediate points reasonable rules and regulations for the operation of any public utility
in which Batangas Transportation Co. (Batranco) has authority to and to enforce compliance therewith, failure of which permits the PSC to
operate by virtue of a prior license revoke the license. It also has ample power to specify and define what a
b. he then has applied for a fixed schedule for those lines in which his reasonable compensation is for the services rendered to the public.
license is limited and requests that he be converted into a regular
operator on a fixed schedule, thereby submitting a proposed schedule The fact that PSC has previously granted a license to any person to
operate a bus line over a given highway and thereafter refuses to grant Batranco, yet on its own volition and to meet the increase of its
a similar license to another over the same highway, does not in the least business, it has applied to the PSC for authority to increase the number
create a monopoly in the person of the licensee, for the reason that the of daily trips, thus showing a spirit that ought to be commended.
PSC has, at all times, the powers enumerated previously.
6. The petition of Orlanes to become regular over the conflicting
Act No. 3108, as amended by Act No. 3316, created the PSC. The routes is largely based upon the growing demands of the public, as
supervision and control of public utilities under said law is very broad evidenced by the application of Batranco in case No. 10301.
and comprehensive.
However, Batranco operated its line five years before Orlanes ever
Section 15 of Act No. 3108 provides that the Commission shall have turned a wheel, yet the legal effect of the decision of the PSC is to give
power, after hearing, upon notice, by order in writing to require every an irregular operator, who was the last in the field, a preferential right
public utility: over a regular operator, who was the first in the field. That is not the law,
a. To comply with the laws of the Philippine Islands; and there is no legal principle upon which it can be sustained.
b. To furnish safe, adequate, and proper service as regards the
manner of furnishing the same as well as the maintenance of the So long as the first licensee keeps and performs the terms and
necessary material equipment, etc; conditions of its license and complies with the reasonable rules and
c. To establish, construct, maintain, and operate any reasonable regulations of the Commission and meets the reasonable demands of
extension of its existing facilities, where such extension is reasonable the public, it should have more or less of a vested and preferential right
and practicable and will furnish sufficient business to justify the over a person who seeks to acquire another and a later license over the
construction and maintenance of the same; same route. This is for the protection on his investment, and for avoiding
d. To keep a uniform system of books, records and accounts; ruinous competition.
e. To make specific answer with regard to any point on which the
Commission requires information, and to furnish annual reports of 7. On the issue of the existence of monopoly if the certificate of PC is
finance and operations; issued only to one operator:
f. To carry, whenever the Commission may require, a proper and
adequate depreciation account; In the National Coal Company case, the Philippine SC said: “When
g. To notify the Commission of all accidents; there is no monopoly. – There is no such thing as a monopoly where a
h. That when any public utility purposes to increase or reduce any property is operated as a public utility under the rules and regulations of
existing individual rates, it shall give the Commission written notice thirty the Public Utility Commission and the terms and provision of the Public
days prior to the proposed change; and Utility Act.” (emphasis supplied)
i. No public utility as herein defined shall operate in the Philippine
Islands without having first secured from the Commission a certificate, Section 775 of Pond on Public Utilities, recognized as a standard
which shall be known as Certificate of Public Convenience, to the effect authority: “The policy of regulation, upon which our present public utility
that the operation of said public utility and the authorization to do commission plan is based and which tends to do away with competition
business will promote the public interest in a proper and suitable among public utilities as they are natural monopolies, is at once reason
manner. (emphasis supplied) and the justification for the holding of our courts that the regulation of an
The power of the Commission to issue a certificate of PC depends on existing system of transportation, which is properly serving a given field,
the condition precedent that, after a full hearing and investigation, the or may be required to do so, is to be preferred to competition among
Commission shall have found as a fact that the operation of the several independent systems. x x x The prime object and real purpose
proposed public service and its authority to do business is for the of commission control is to secure adequate sustained service for the
convenience of the public. public at the least possible cost, and to protect and conserve
investments already made for this purpose. Experience has
3. In the Philippines, the certificate of public convenience shows: demonstrated beyond any question that competition among natural
monopolies is wasteful economically and results finally in insufficient
and unsatisfactory service and extravagant rates.
To whom it may concern:
THIS IS TO CERTIFY, That in pursuance of the power and authority
8. No additional certificate of PC is necessary (citing various US
conferred upon it by subsection (i) of section 15 of Act No. 3108 of the
jurisprudence), where:
Philippine Legislature,
a. existing certificate holders was not given an opportunity to render
additional service desired
after having duly considered the application of ................. for a
b. there is no complaint as to existing rates and the present company
certificate of public convenience the operation of ........................ in
is rendering adequate service
connection with the evidence submitted in support thereof, has rendered
c. one bus service would be ample for all requirements
its decision on................, 192...., in case No. ............, declaring that the
d. no clear and affirmative showing that an existing is unable or has
operation by the applicant ...................... of the business above
refused to maintain adequate and satisfactory service
described will promote the public interests in a proper and suitable
e. existing operators equipped adequately to accommodate the public,
manner, and granting................. to this effect the corresponding
no complaints having been received in regard to service rendered
authority, subject to the conditions prescribed in said decision.
f. after years of effort, an operator would be deprived of the fruits of
Given at Manila Philippine Islands, this ......... day of ....................., 192
his labor and of the capital he has invested by a larger concern desiring
to operate between the same points
g. the admission of another operator into the territory served by
present licensees would render their licensee oppressive and
confiscatory because of further division and depletion of revenues and
would defeat the purpose of the statue and disorganize the public
h. the service within the territory proposed to be served appeared to
be adequate and it was the policy of the Commission to protect the
established line in the enjoyment of business which it had built, and in
4. The certificate of PC granted to Orlanes expressly recites that it
view of the further fact that it was very uncertain whether the applicant
“will promote the public interests in a proper and suitable manner.” Yet
could secure sufficient business to enable him to operate profitably
no such finding of fact was made by the Commission.
i. it is not shown that the utility desiring to enter a competitive field can
give such service as will be a positive advantage to the public, provided
There is no claim or pretense that:
that the existing utility furnishing adequate service at reasonable rates
a. Batranco has violated any of the terms and conditions of its license
at the time of the threatened competition
b. PSC found the grant of a license to Orlanes as a regular operator
j. the existing service is reasonable, safe, and adequate as required
over the conflicting routes is required or necessary for the convenience
by statue
of the traveling public
k. no necessity is shown for additional service
c. The services of Batranco over the conflicting routes is subject to
l. the route is adequately served by a railroad and other bus line,
any complaint or criticism by the public
although the proposed service would be an added convenience to the
5. Where an operator is rendering good, sufficient and adequate
service to the public, that the convenience does not require and the
public interests will not be promoted in a proper and suitable manner by
Mandbusco Inc. v. Francisco - Prior Operator Rule
giving another operator a certificate of public convenience to operate a
competing line over the same route. DOCTRINES:
1. Definition of “Prior Operator Rule:” before permitting a new
It does not appear that the public has ever made any complaint of operator to operate in the territory of another operator already
established with a certificate of public convenience, the PRIOR the intersection serves as a common access to Highway 54 where
operator must first be given the opportunity to EXTEND its service passengers embark for separate destinations.
in order to meet the public needs. Public operators must be
shielded from ruinous competition by giving the prior operator the Lacking any positive proof that the petitioners already adequately
opportunity to IMPROVE his equipment and services before served the transportation requirements of the inhabitants of barrio
allowing a new operator to serve in the same territory. Pinagbuhatan and other nearby places, the Court refused to
2. An instance when the Prior Operator rule is NOT APPLICABLE overturn the decision of the PSC, especially since that decision is
is when the new operator is only granted a MAIDEN franchise, or reasonably supported by evidence.
one which does not really overlap with the entire route of the old
operator but covers only a short portion of the old operator’s route The petitioners invoke the "old operator rule," which is to the
AS A CONVERGENCE POINT. (So if a maiden franchise is granted effect that a public utility operator should be shielded from ruinous
to a new operator covering a portion of the old operator’s route, competition by affording him the opportunity to improve his
the Prior Operator rule cannot be invoked by the old operator to equipment and service before allowing a new operator to serve in
contest the grant of the new franchise). the same territory he covers.
[Note: this second doctrine was not really in the case but it is in
the book of Perez p. 292, which, I think, more clearly emphasized This rule has no application in this case because the certificate of
the point of the case]. public convenience granted to the respondent is a maiden
franchise covering a route that connects barrio Pinagbuhatan and
the intersection of Highway 54 and Shaw Boulevard. Mandaluyong
Bus Co., Inc. operates about 3 buses on the line extending from
Respondent Pablo Francisco applied for a Certificate of Public
barrio Pinagbuhatan to Plaza Miranda in Quiapo, which was
Convenience to operate 5 jeepneys along the Pinagbuhatan, Pasig
essentially intended to cover the great distance run between barrio
– Shaw Blvd route which can be divided into 2 parts:
Pinagbuhatan and Quiapo, Manila (via all these roads: Pasig
A. FROM: Barrio Pinagbuhatan, Pasig
Boulevard, P. Sanchez, V. Mapa, Valenzuela, Old Sta. Mesa, Sta.
TO: the poblacion of Pasig
Mesa Boulevard, Legarda, Tanduay, P. Casal, Ayala Bridge,
B. FROM: the poblacion
Concepcion, Arroceros, Quezon Bridge and Quezon Boulevard…)
TO: the INTERSECTION of Highway 54 (now EDSA) and Shaw
On the other hand, the grant in favor of the respondent covers only
a brief shuttle run of 8 kilometers linking barrio Pinagbuhatan
directly with the Pasig poblacion and the crossing of Highway 54
Petitioners (all bus operators) contested the application of
and Shaw Boulevard.
respondent and presented two witnesses:
1. Dantayana, an official inspector of the Commission: in an
Therefore, even though indeed overlapping with the route operated
effort to prove that the available vehicles are in already in excess
on by Petitioners, the route granted to Respondent was only a
of the number actually needed to meet the needs of passengers in
mere portion of it, and cannot be said to encroach on the right of
that area, he testified that the route to and from Pasig to Shaw
Petitioners as prior operators.
Boulevard is already being serviced by buses that are usually left
half-filled and jeepneys with only about 6 passengers each
2. Clemente, President of Mandbusco: testified that there was
then about 125 buses operating between Pasig and Quiapo and
about 51 jeepneys servicing the area to and from Shaw Boulevard Originally, Pardes was authorized to operate a 17 buses. In
to various parts of Pasig. He claims that this number of vehicles addition, she was authorized to register 3 more buses. However,
more than meets the transportation need of the public. He adds she was not able to register the 3 additional buses nor to operate
that Mandbusco already made considerable investments and the the other 17 buses so she filed a petition requesting that she be
grant of the franchise to respondent would threaten his company’s allowed to re-register the 20 units.
financial stability.
Having found that petitioner had not only failed to comply with the
Petitioners argue that because of the facts testified to by the 2 conditions set forth in her certificate of public convenience but
witnesses, the franchise applied for by respondent should not be practically abandoned the service for a period of 3 years, the
granted. Commission not only denied the petition but cancelled her original
certificate except for one unit.
The Public Service Commission granted the franchise to
respondent, upon a finding that the public will be benefited thereby Thus this petition for review to the SC.
because there was NO DIRECT SERVICE from Barrio Pinagbuhatan
to Shaw Boulevard at that time, and residents from Barrio A grantee of a certificate of public convenience who fails to
Pinagbuhatan had to take 2 rides to reach the intersection and comply with his commitment for reasons which do not appear
some of the establishments near there like the provincial hospital. justifiable does not merit any grace on grounds of equity, for he
should be deemed to have forfeited the privilege he has been
Petitioner filed an MR, which was likewise denied. They now file a granted. The duty of the Commission to protect the investment of
Petition for Review with the SC on the ground that the PSC an operator refers only to operators of good standing and not to
violated the Prior Operator Rule when it granted respondent his those whose investment has deteriorated or disappeared through
franchise. their own fault.

Whether the Commission erred when it granted the franchise to

Decision of the Commission granting the franchise to respondent
is affirmed.

The court found that the Dantayana testimony only covered Part B
of the route applied for by petitioner. As previously stated, Part B
of the proposed route is a convergence point of passengers
coming from other barrios in Pasig (not only Pinagbuhatan) and
also those coming from Manila. His testimony failed to take into
consideration the passenger traffic coming directly from Barrio
Pinagbuhatan. The application of respondent was made for the
benefit of those living in Barrio Pinagbuhatan so the testimony of
Dantayana, not having included the passenger traffic directly from
there, is irrelevant to the issue at bar.

On the Clemente testimony, the court found that the buses and
jeepneys referred to did not actually run the full route applied for
by respondent. The overlapping of service exists only with regard
to the second part of that route (Part B above), and this is clearly
unavoidable since the stretch of road from the Pasig poblacion to