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I. G ENERAL C ONSIDERATIONS
A. Public Utilities

FILIPINIZATION OF PUBLIC UTILITIES

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

BERNAS
• SEC 11; SUBJECT MATTER— It is not about the capacity to acquire a public utility franchise but the authority to grant
franchises. The CONST. provides that the issuance shall be subject to amendment, alteration or repeal by Congress does
not necessarily imply that only Congress has the power to grant such authorization. Congress may also delegate the
authority to government agencies. (Albano vs. Reyes)
o FRANCHISE; DEFINED— secondary franchise to operate, not the primary franchise that vests a body of men with
corporate existence. Sec 11 prohibits not mere formation of public utility without the required proportion of
Filipino capital. It prohibits the granting of a franchise or other form of authorization for the operation of a public
utility already in existence but w/o the requisite proportion of Filipino capital.
o CORPORATION OR ASSOCIATION; WHEN CONSIDERED FILIPINO—(1) organized under Phil laws (2) at least 60% of its
capital is owned by Filipino citizens.
o PUBLIC UTILITY; DEFINITION—(1) CA 146, Sec 13 (b) (2) Public utility is a utility corporation which renders service to
the general public for compensation (Iloilo Ice and Cold Storage Co. vs. Public Utility Board)
! Public character—does not depend on the number of persons who avail of its services but on WON it is
open to serve all members of the public who may require it.
• FRANCHISE, CERTIFICATE OR ANY OTHER FORM OF AUTHORIZATION FOR THE OPERATION OF A PUBLIC UTILITY; REQUISITES—
(1) only granted: (a) to citizens of the Philippines or (b) to corporations or associations organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by such citizens;
(2) not be exclusive in character;
(3) not be longer period than 50 years;
(4) subject to amendment, alteration, or repeal by the Congress when the common good so requires

CLASS DISCUSSION
• Public utility; Board of directors—Maximum: 40% foreign: shows defensive policy of the state to not put vital industries under the control
of foreigners

CASES:
• Public utility; defined—A "public utility" is a business or service engaged in regularly supplying the public with some
commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service.
(Metro Cebu Water v Adala)
o Water districts—Water districts fall under the term “public utility” (Metro Cebu Water v Adala)
• Common carriers—Common carriers exercise a sort of public office, and have duties to perform in which the public is
interested. Their business is, therefore, 'affected with a public interest (Munn v Illinois)
o Example—Elevators (Grain warehouse) most certainly tends to a common charge and is become a thing of public
interest and use, which ought to be under public regulation (Munn v Illinois)
• When property is clothed with public interest—Property does become clothed with a public interest when used in a manner to
make it of public consequence, and affect the community at large. (Munn v Illinois)
• Property having public interest; effects—When private property is used for a public purpose and is affected with public
interest, it ceases to be juris privati only and becomes subject to regulation. (RP v Meralco)When private property is affected
with a public interest it ceases to be juris privati only; and, in case of its dedication to such a purpose as this, the owners
cannot take arbitrary and excessive duties, but the duties must be reasonable. (Munn v Illinois)
• Regulation; basis—The regulation of rates to be charged by public utilities is founded upon the police powers of the State and
statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. The regulation is to
promote the common good. (RP v Meralco)
o Extent of regulation— When one devotes his property to a use in which the public has an interest, he, in effect, grants
to the public an interest in that use, and must submit to be controlled by the public for the common good, to the
extent of the interest he has thus created. Submission to regulation may be withdrawn by the owner by discontinuing
use; but as long as use of the property is continued, the same is subject to public regulation. (Munn v Illinois)
o Rate-fixing; just and reasonable rates; factors considered in determination—In determining the just and reasonable
rates to be charged by a public utility, three major factors are considered by the regulating agency: a) rate of return; b)
rate base and c) the return itself or the computed revenue to be earned by the public utility based on the rate of return
and rate base. The rate of return is a judgment percentage, which if multiplied with the rate base, provides a fair
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return on the public utility for the use of its property for service to the public. The rate of return of a public utility is
not prescribed by statute but by administrative and judicial pronouncements. This Court has consistently adopted a
12% rate of return for public utilities. The rate base, on the other hand, is an evaluation of the property devoted by
the utility to the public service or the value of invested capital or property, which the utility is entitled to a return.
(RP v Meralco)
• Franchise; power to grant—the term "franchise" broadly so as to include, not only authorizations issuing directlyfrom
Congress in the form of statute, but also those granted by administrative agencies to which the power to grant franchises has
been delegated by Congress (Metro Cebu v Adala)

TEMPORARY STATE TAKE OVER OF BUSINESS AFFECTED WITH PUBLIC INTEREST

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

BERNAS
• NATIONAL EMERGENCY; DEFINED—threat from external aggression, calamities, or natural disasters, but NOT strikes.
• DURATION OF TAKEOVER—the duration of the emergency is the measure of the duration of the takeover
• AUTHORIZATION TO TAKEOVER—Sec 17 gives the power to the State, not to the President. The President acquires emergency
powers (Art 6, Sec 23: powers cease upon the next adjournment of Congress unless sooner withdrawn by the same) when
given by Congress in a state of emergency declared by Congress. (David vs. Ermita)
• BUSINESS AFFECTED WITH PUBLIC INTEREST; DEFINED—
o Munn v Illinois—when used in a manner to make it of public consequence, and affect the community at large;
grants to the public an interest in that use and must submit to be controlled by the public for the common good, to
the extent of interest he has thus created.
o 1986 ConCom deliberations—business that has a lot of repercussion on the public, whether it be public utility or
other businesses which may partake of the characteristics of public utility but which is not yet considered public
utility or any business which concerns a mass-based consumer group and esp among the low income groups

CASES:
• President’s authority to declare a state of national emergency distinguished from authority to exercise emergency
powers—The President could validly declare the existence of a state of national emergency even in the absence of a
Congressional enactment under Art 7 Sec 18. However, the exercise of emergency powers, such as the taking over of
privately owned public utility or business affected with public interest,requires a delegation from Congress under Art 6
Sec 23. (David v Arroyo)
• Take over clause; nature—Art 12 Sec 17 must be understood as an aspect of the emergency powers clause.Thus, when
Section 17 states that the "the State may, during the emergency and under reasonable terms prescribed by it, temporarily
take over or direct the operation of any privately owned public utility or business affected with public interest," it refers to
Congress, not the President. Now, whether or not the President may exercise such power is dependent on whether
Congress may delegate it to him pursuant to a law prescribing the reasonable terms thereof. (David v Arroyo)
• Emergency; definition and scope—Emergency, as a generic term, connotes the existence of conditions suddenly
intensifying the degree of existing danger to life or well-being beyond that which is accepted as normal. Emergencies, as
perceived by legislature or executive in the United Sates since 1933, have been occasioned by a wide range of situations,
classifiable under three (3) principal heads: a) economic b) natural disaster, and c) national security. "Emergency," as
contemplated in our Constitution, is of the same breadth. It may include rebellion, economic crisis, pestilence or epidemic,
typhoon, flood, or other similar catastrophe of nationwide proportions or effect. This is evident in the Records of the
Constitutional Commission (David v Arroyo)

Section 18. The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of
just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government.

BERNAS
• Distinguish from other provisions—
o Sec 11: Filipinization of public utilities (Filipino ownership):: Sec 18: Nationalization of industries and public utilities
(State ownership)
o Sec 9: “public use” requirement:: Sec 18: “interest of national welfare or defense” requirement
! Public welfare is broader than public use
• EXTENT OF NATIONALIZATION—Bernas submits partial nationalization
• JUST COMPENSATION; WHEN REQUIRED—If nationalization should entail expropriation, Sec 18 requires that transfer of
ownership can only be upon payment of just compensation.

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

BERNAS
• SEC 19—Statement of public policy on monopolies and on combinations in restraint of trade. It is anti-trust and espouses fair
competition
• MONOPOLIES—not necessarily prohibited. The State must still decide whether public interest demands monopolies be
regulated or prohibited
o Simplest form: only 1 seller or producer of a product or service for which there are no substitutes
o Complex form: joint acquisition or maintenance by members of a conspiracy, formed for that purpose, of the power
to control and dominate trade and commerce in a commodity to such an extent that they are able as a group to
exclude actual or potential competitors from the field accompanied with the intention and purpose to exercise such
power.
• Combinations in restraint of trade—prohibited. Also, see RPC 186.

2. CA 146, as amended, Sec 13 (b)

CA 146 Sec 13 (b) The term "public service" includes every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or
passenger, or both with or without fixed route and whether may be its classification, freight or carrier service of any class, express
service, steamboat or steamship line, pontines, ferries, and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine railways, marine repair shop, [warehouse] wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power water supply and power, petroleum, sewerage system, wire or wireless communications system,
wire or wireless broadcasting stations and other similar public services: Provided, however, That a person engaged in agriculture, not
otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third parties engaged in agriculture, not itself or themselves a public
service, for operation by the latter for a limited time and for a specific purpose directly connected with the cultivation of his or their
farm, the transportation, processing, and marketing of agricultural products of such third party or third parties shall not be
considered as operating a public service for the purposes of this Act.

a. What is a public utility?

b. What is public service?

CLASS DISCUSSION
• Public utility; test—1) good or service “of public consequence”: determined by circumstances 2) property for public use; and 3)
general/limited clientele but no discrimination
o Classification as public utility is subject to change
o “Ice plant” “Ice refrigeration plant”—obsolete; no longer applicable

In the middle of transpo and public utility are common carriers,

Transpo! Public utility!

Q: May cable and Internet be considered public utility? Was not contemplated but have the elements of public utility
Q: Is media public utility? No. Does not satisfy #2 (for public use) (David v Arroyo)
Q: What is the legal relationship that binds capital and public utility? Lease (Tatad v Garcia)
Q: Is the place of incorporation of a corporation matter? Yes. Under Art 12 Sec 11 of C “to corporations or associations organized under the laws of
the Philippines”
Q: True or False—All forms of transportation are public utilities—False
Q: Is a limo service a public utility? Yes. General/ limited clientele

CASES
• Franchise; power to grant not limited to Congress—That the Constitution provides in Art. XII, Sec. 11 that the issuance of a
franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment,
alteration or repeal by Congress does not necessarily, imply, as petitioner posits that only Congress has the power to grant

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such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to
issue such authorization for certain classes of public utilities. (Albano v Reyes)
o Example—the lawmaker has empowered the PPA to undertake by itself the operation and management of the MICP
or to authorize its operation and management by another by contract or other means, at its option. The latter power
having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to operate
and manage the MICP becomes unnecessary. (Albano v Reyes)
• Public utility; use not ownership—What constitutes a public utility is not their ownership but their use to serve the public. The
Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a
franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the
public. (Tatad v Garcia)
o Ownership; defined—a relation in law by virtue of which a thing pertaining to one person is completely subjected to
his will in everything not prohibited by law or the concurrence with the rights of another (Tatad v Garcia)
o Operation of public utility distinguished from ownership of facilities and equipment used to serve the public—The
exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to
serve the public as a public utility unless theoperator has a franchise. The right to operate a public utility may exist
independently and separately from the ownership of the facilities thereof. One can own said facilities without
operating themas a public utility, or conversely, one may operate a public utility without owning the facilities used to
serve the public. The devotion of property to serve the public may be done by the owner or by the person in control
thereof who may not necessarily be the owner thereof. (Tatad v Garcia)
o Nationality requirement; reckoning point—the mere formation of a public utility corporation does not ipso facto
characterize the corporation as one operating a public utility. The moment for determining the requisite Filipino
nationality is when the entity applies for a franchise, certificate or any other form of authorization for that purpose
(Tatad v Garcia)
• Franchise; nature—a property right and cannot be revoked or forfeited without due process of law.The determination of the
right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more
properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State "upon
complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of Court), the reason being that the abuse of a franchise is a public
wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose
brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government.
(PLDT v NTC)
• Franchise; as condition precedent to grant of CPCN depends on purpose—The requirements of Act No. 667 show that it was
intended to apply exclusively to any person or corporation who desires a franchise to construct and maintain an electricline or
power plant and line for business purposes, that is, to render service to the general public at such rate of compensation as may
be approved and regulated by the government. Clearly, therefore, it should not be made to apply to an applicant who applied
for a certificate of public convenience and service to operate and maintain an electric plant exclusively for its own use in
connection with the operation of its cement factory and for the use of its employees living within the compound of the factory
— the latter to receive service free of charge. (Teresa Electric & Power Co. v PSC)
o Class discussion: SC said municipal franchise is not necessary because not a public utility but why was there a need for a
CPCN?
• Franchise; subject to amendment, alteration or repeal—Statutes enacted for the regulation of public utilities, being a proper
exercise by the State of its police power, are applicable not only to those public utilities coming into existence after its passage,
but likewise to those already established and in operation (RCPI v NTC)
• Franchise; not exclusive in nature—Nobody has any exclusive right to secure a franchise or a certificate of public convenience.
Above any or all considerations, the grant of franchises and certificates of public convenience and service should be guided by
public service and interest; the latter are the primordial considerations to be taken into account. (Teresa Electric & Power Co v
PSC)
o Examples—
! Sec 47 of PD 198—“No franchise shall be granted to any other person or agency for domestic, industrial or
commercial water service within the district or any portion thereof unless and except to the extent that the
board of directors of said district consents thereto by resolution adopted…”—was held to be repugnant to
the Constitution. (Metro Cebu v Adala)
! The mere fact that the petitioner possesses a franchise to put up and operate a radio communications system
in certain areas is not an insuperable obstacle to the public respondent's issuing the proper certificate to an
applicant desiring to extend the same services to those areas. (RCPI v NTC; Note: in this case, grant of
franchise under Sec 4(a) of RA 2036 requires Secretary of Public Works and Communications to allot to the
grantee the frequencies and wave lengths to be used and issued to the grantee a license for such case)
! Interconnection order—As disclosed during the hearing, the interconnection sought by ETCI is by no means
a "parasitic dependence" on PLDT. The ETCI system can operate on its own even withoutinterconnection,
but it will be limited to its own subscribers. What interconnection seeks to accomplish is to enable the
system to reach out to the greatest number of peoplepossible in line with governmental policies laid down.
Cellular phones can access PLDT units and vice versa in as wide an area as attainable. With the broader
reach, publicinterest and convenience will be better served. Free competition in the industry may provide
the answer to a much-desired improvement in the quality and delivery of this type of public utility, to
improved technology, fast and handy mobile service, and reduced user dissatisfaction. After all, neither
PLDT nor any other public utility has a constitutional right to a monopoly position in view of the
Constitutional proscription that no franchise certificate or authorization shall be exclusive in character or
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shall last longer than fifty (50) years. Additionally, the State is empowered to decide whether public interest
demands that monopolies be regulated or prohibited.(PLDT v NTC)
• Class discussion: Interconnection is dynamic, for the public good and a police power measure of the State.
The cellphone industry became lucrative after this landmark case. Cruz, who dissented, did not foresee its
advantages. Interconnection would have taken a longer time.

Philippine Airlines
PD 1590 Section 7. In case of war, insurrection, domestic trouble, public calamity, or national emergency, the Philippine Government
upon order of the President shall have the right to take over and operate the equipment of the grantee, paying just compensation for
such use or damages.

Cebu Air, Inc.

RA 7151 Section 8. Right of Government – In case of war, insurrection, domestic trouble, public calamity or national emergency, the
Philippine Government, upon the order of the President, shall have the right to take over and operate the equipment of the grantee
paying for its use or damages.

SeaAir Inc.
RA 9517Section 10. Right of Government. - A special right is hereby reserved to the President of the Philippines, in times of war,
rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order, to temporarily take over and operate the
facilities or equipment of the grantee, to temporarily suspend the operation of any facility or equipment in the interest of public safety,
security and public welfare, or to authorize the temporary use and operation thereof by any agency of the government, upon due
compensation to the grantee, for the use of said facilities or equipment during the period when they shall be so operated.

Asian Spirit Inc.

RA 9183 Section 10.Right of Government. - A special right is hereby reserved to the President of the Philippines, in time of war,
rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order, to temporarily take over and operate the
facilities or equipment of the grantee, to temporarily suspend the operation of any facility or equipment of the grantee, to temporarily
suspend the operation of any facility or equipment in the interest of public safety, security and public welfare, or to authorize the
temporary use and operation thereof by any agency of the government, upon due compensation to the grantee for the use of said
facilities or equipment during period when they shall be so operated.

B. Transportation
1. Definition
2. Public Nature
a. Public Service Act
Section 13.
(a) The Commission shall have jurisdiction, supervision, and control over all public services and their franchises, equipment,
and other properties, and in the exercise of its authority, it shall have the necessary powers and the aid of the public force:
Provided, That public services owned or operated by government entities or government-owned or controlled corporations
shall be regulated by the Commission in the same way as privately-owned public services, but certificates of public
convenience or certificates of public convenience and necessity shall not be required of such entities or corporations: And
provided, further, That it shall have no authority to require steamboats, motor ships and steamship lines, whether privately-
owned, or owned or operated by any Government controlled corporation or instrumentality to obtain certificate of public
convenience or to prescribe their definite routes or lines of service.
(b) The term "public service" includes every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle,
either for freight or passenger, or both with or without fixed route and whether may be its classification, freight or carrier
service of any class, express service, steamboat or steamship line, pontines, ferries, and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine railways, marine repair shop, [warehouse] wharf or dock,
ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power water supply and power,
petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other
similar public services: Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns a
motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is offered for hire or
compensation to a third party or third parties engaged in agriculture, not itself or themselves a public service, for operation
by the latter for a limited time and for a specific purpose directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of such third party or third parties shall not be considered
as operating a public service for the purposes of this Act.
(c) The word "person" includes every individual, co-partnership, joint-stock company or corporation, whether domestic or
foreign, their lessees, trustees, or receivers, as well as any municipality, province, city, government-owned or controlled
corporation, or agency of the Government of the Philippines, and whatever other persons or entities that may own or
possess or operate public services. (As amended by Com. Act 454 and RA No. 2677)
Section 14. The following are exempted from the provisions of the preceding section:
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(a) Warehouses;
(b) Vehicles drawn by animals and bancas moved by oar or sail, and tugboats and lighters;
(c) Airships within the Philippines except as regards the fixing of their maximum rates on freight and passengers;
(d) Radio companies except with respect to the fixing of rates;
(e) Public services owned or operated by any instrumentality of the National Government or by any government-owned or
controlled corporation, except with respect to the fixing of rates. (As amended by Com. Act 454, RA No. 2031, and RA No.
2677 )
Section 15. With the exception of those enumerated in the preceding section, no public service shall operate in the
Philippines without possessing a valid and subsisting certificate from the Public Service Commission known as "certificate of
public convenience," or "certificate of public convenience and necessity," as the case may be, to the effect that the operation of
said service and the authorization to do business will promote the public interests in a proper and suitable manner.
The Commission may prescribe as a condition for the issuance of the certificate provided in the preceding paragraph that the
service can be acquired by the Republic of the Philippines or any instrumentality thereof upon payment of the cost price of
its useful equipment, less reasonable depreciation; and likewise, that the certificate shall be valid only for a definite period of
time; and that the violation of any of these conditions shall produce the immediate cancellation of the certificate without the
necessity of any express action on the part of the Commission.
In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other
circumstances affecting its value in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or amendment of certificates actually in force and to those which may
hereafter be issued, to permit to modify itineraries and time schedules of public services, and to authorizations to renew and
increase equipment and properties.
Section 16. Proceedings of the Commission, upon notice and hearing. - The Commission shall have power, upon proper
notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary :
(a) To issue certificates which shall be known as certificates of public convenience, authorizing the operation of public
service within the Philippines whenever the Commission finds that the operation of the public service proposed and the
authorization to do business will promote the public interest in a proper and suitable manner. Provided, That thereafter,
certificates of public convenience and certificates of public convenience and necessity will be granted only to citizens of the
Philippines or of the United States or to corporations, co-partnerships, associations or joint-stock companies constituted and
organized under the laws of the Philippines; Provided, That sixty per centum of the stock or paid-up capital of any such
corporations, co-partnership, association or joint-stock company must belong entirely to citizens of the Philippines or of the
United States: Provided, further, That no such certificates shall be issued for a period of more than fifty years.
(b) To approve, subject to constitutional limitations any franchise or privilege granted under the provisions of Act No. Six
Hundred and Sixty-seven, as amended by Act No. One Thousand and twenty-two, by any political subdivision of the
Philippines when, in the judgment of the Commission, such franchise or privilege will properly conserve the public interests,
and the Commission shall in so approving impose such conditions as to construction, equipment, maintenance, service, or
operation as the public interests and convenience may reasonably require, and to issue certificates of public convenience and
necessity when such is required or provided by any law or franchise.
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation,
mileage, kilometrage, and other special rates which shall be imposed observed and followed thereafter by any public service:
Provided, That the Commission may, in its discretion, approve rates proposed by public services provisionally and without
necessity of any hearing; but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice to the
concerns operating in the territory affected: Provided, further, That in case the public service equipment of an operator is
used principally or secondarily for the promotion of a private business, the net profits of said private business shall be
considered in relation with the public service of such operator for the purpose of fixing the rates.
(d) To fix just and reasonable standards, classifications, regulations, practices, measurement, or service to be furnished,
imposed, observed, and followed thereafter by any public service.
(e) To ascertain and fix adequate and serviceable standards for the measurement of quantity, quality, pressure, initial
voltage, or other condition pertaining to the supply of the product or service rendered by any public service, and to
prescribe reasonable regulations for the examination and test of such product or service and for the measurement thereof.
(f) To establish reasonable rules, regulations, instructions, specifications, and standards, to secure the accuracy of all meters
and appliances for measurements.
(g) To compel any public service to furnish safe, adequate, and proper service as regards the manner of furnishing the same
as well as the maintenance of the necessary material and equipment.
(h) To require any public service to establish, construct, maintain, and operate any reasonable extension of its existing
facilities, where in the judgment of said Commission, such extension is reasonable and practicable and will furnish sufficient
business to justify the construction and maintenance of the same and when the financial condition of the said public service
reasonably warrants the original expenditure required in making and operating such extension.
(i) To direct any railroad, street railway or traction company to establish and maintain at any junction or point of connection
or intersection with any other line of said road or track, or with any other line of any other railroad, street railway or traction
to promote, such just and reasonable connection as shall be necessary to promote the convenience of shippers of property, or
of passengers, and in like manner direct any railroad, street railway, or traction company engaged in carrying merchandise,
to construct, maintain and operate, upon reasonable terms, a switch connection with any private sidetrack which may be
constructed by any shipper to connect with the railroad, street railway or traction company line where, in the judgment of
the Commission, such connection is reasonable and practicable and can be out in with safety and will furnish sufficient
business to justify the construction and maintenance of the same.
(j) To authorize, in its discretion, any railroad, street railway or traction company to lay its tracks across the tracks of any
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other railroad, street railway or traction company or across any public highway.
(k) To direct any railroad or street railway company to install such safety devices or about such other reasonable measures as
may in the judgment of the Commission be necessary for the protection of the public are passing grade crossing of (1) public
highways and railroads, (2) public highways and streets railway, or (3) railways and street railways.
(l) To fix and determine proper and adequate rates of depreciation of the property of any public service which will be
observed in a proper and adequate depreciation account to be carried for the protection of stockholders, bondholders or
creditors in accordance with such rules, regulations, and form of account as the Commission may prescribe. Said rates shall
be sufficient to provide the amounts required over and above the expense of maintenance to keep such property in a state of
efficiency corresponding to the progress of the industry. Each public service shall conform its depreciation accounts to the
rates so determined and fixed, and shall set aside the moneys so provided for out of its earnings and carry the same in a
depreciation fund. The income from investments of money in such fund shall likewise be carried in such fund. This fund
shall not be expended otherwise than for depreciation, improvements, new construction, extensions or conditions to the
properly of such public service.
(m) To amend, modify or revoke at any time certificate issued under the provisions of this Act, whenever the facts and
circumstances on the strength of which said certificate was issued have been misrepresented or materially changed.
(n) To suspend or revoke any certificate issued under the provisions of this Act whenever the holder thereof has violated or
willfully and contumaciously refused to comply with any order rule or regulation of the Commission or any provision of
this Act: Provided, That the Commission, for good cause, may prior to the hearing suspend for a period not to exceed thirty
days any certificate or the exercise of any right or authority issued or granted under this Act by order of the Commission,
whenever such step shall in the judgment of the Commission be necessary to avoid serious and irreparable damage or
inconvenience to the public or to private interests.
(o) To fix, determine, and regulate, as the convenience of the state may require, a special type for auto-busses, trucks, and
motor trucks to be hereafter constructed, purchased, and operated by operators after the approval of this Act; to fix and
determine a special registration fee for auto-buses, trucks, and motor trucks so constructed, purchased and operated:
Provided, That said fees shall be smaller than more those charged for auto-busses, trucks, and motor trucks of types not
made regulation under the subsection.
Section 18. It shall be unlawful for any individual, co-partnership, association, corporation or joint-stock company, their
lessees, trustees or receivers appointed by any court whatsoever, or any municipality, province, or other department of the
Government of the Philippines to engage in any public service business without having first secured from the Commission a
certificate of public convenience or certificate of public convenience and necessity as provided for in this Act, except grantees
of legislative franchises expressly exempting such grantees from the requirement of securing a certificate from this
Commission as well as concerns at present existing expressly exempted from the jurisdiction of the Commission, either
totally or in part, by the provisions of section thirteen of this Act.
Section 19. Unlawful Acts. - It shall be unlawful for any public service:
(a) To provide or maintain any service that is unsafe, improper, or inadequate or withhold or refuse any service which can
reasonably be demanded and furnished, as found and determined by the Commission in a final order which shall be
conclusive and shall take effect in accordance with this Act, upon appeal of otherwise.
(b) To make or give, directly or indirectly, by itself or through its agents, attorneys or brokers, or any of them, discounts or
rebates on authorized rates, or grant credit for the payment of freight charges, or any undue or unreasonable preference or
advantage to any person of corporation or to any locality or to any particular description of traffic or service, or subject any
particular person or corporation or locality or any particular description of traffic to any prejudice or disadvantage in any
respect whatsoever; to adopt, maintain, or enforce any regulation, practice or measurement which shall be found or
determined by the Commission to be unjust, unreasonable, unduly preferential or unjustly discriminatory in a final order
which shall be conclusive and shall take effect in accordance with the provisions of this Act, upon repeal or otherwise.
(c) To refuse or neglect, when requested by the Director of Posts or his authorized representative, to carry public mail on the
regular trips of any public land transportation service maintained or operated by any such public service; upon such terms
and conditions and for a consideration in such amount as may be agreed upon between the Director of Posts and the public
service carrier of fixed by the Commission in the absence of an agreement between the Director of Posts and the carrier. In
case the Director of Posts and public service carrier are unable to agree on the amount of the compensation to be paid for the
carriage of the mail, the Director of Posts shall forthwith request the Commission to fix a just and reasonable compensation
for such carriage and the same shall be promptly fixed by the Commission in accordance with Section sixteen of this Act.
Section 20. Acts requiring the approval of the Commission. - Subject to established limitations and exceptions and saving
provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the
approval and authorization of the Commission previously had –
(a) To adopt, establish, fix, impose, maintain, collect or carry into effect any individual or joint rates, commutation, mileage
or other special rate, toll, fare, charge, classification or itinerary. The Commission shall approve only those that are just and
reasonable and not any that are unjustly discriminatory or unduly preferential, only upon reasonable notice to the public
services and other parties concerned, giving them a reasonable opportunity to be heard and the burden of the proof to show
that the proposed rates or regulations are just and reasonable shall be upon the public service proposing the same.
(b) To establish, construct, maintain, or operate new units or extend existing facilities or make any other addition to or
general extension of the service.
(e) Hereafter to issue any stock or stock certificates representing an increase of capital; or issue any share of stock without
par value; or issue any bonds or other evidence of indebtedness payable in more than one year from the issuance thereof,
provided that it shall be the duty of the Commission, after hearing, to approve any such issue maturing in more than one
year from the date thereof, when satisfied that the same is to be made in accordance with law, and the purpose of such issue
be approved by the Commission. (f) To capitalize any franchise in excess of the amount, inclusive of any tax or annual
charge, actually paid to the Government of the Philippines or any political subdivision thereof as the consideration of said

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franchise; capitalize any contract for consolidation, merger or lease, or issue any bonds or other evidence of indebtedness
against or as a lien upon any contract for consolidation, merger, or lease: Provided, however, that the provisions of this
section shall not prevent the issuance of stock, bonds, or other evidence of indebtedness subject to the approval of the
Commission by any lawfully merged or consolidated public services not in contravention of the provisions of this section.
(g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates, privileges, or rights or any part thereof;
or merge or consolidate its property, franchises privileges or rights, or any part thereof, with those of any other public
service. The approval herein required shall be given, after notice to the public and hearing the persons interested at a public
hearing, if it be shown that there are just and reasonable grounds for making the mortgaged or encumbrance, for liabilities of
more than one year maturity, or the sale, alienation, lease, merger, or consolidation to be approved, and that the same are
not detrimental to the public interest, and in case of a sale, the date on which the same is to be consummated shall be fixed in
the order of approval: Provided, however, that nothing herein contained shall be construed to prevent the transaction from
being negotiated or completed before its approval or to prevent the sale, alienation, or lease by any public service of any of
its property in the ordinary course of its business.
(h) To sell or register in its books the transfer or sale of shares of its capital stock, if the result of that sale in itself or in
connection with another previous sale, shall be to vest in the transferee more than forty per centum of the subscribed capital
of said public service. Any transfer made in violation of this provision shall be void and of no effect and shall not be
registered in the books of the public service corporation. Nothing herein contained shall be construed to prevent the holding
of shares lawfully acquired. (As amended by Com. Act No. 454.)
(i) To sell, alienate or in any manner transfer shares of its capital stock to any alien if the result of that sale, alienation, or
transfer in itself or in connection with another previous sale shall be the reduction to less than sixty per centum of the capital
stock belonging to Philippine citizens. Such sale, alienation or transfer shall be void and of no effect and shall be sufficient
cause for ordering the cancellation of the certificate.

b. CPC, CPCN and the Prior Operator Rule

i. Nature of Franchise

CLASS DISCUSSION
• Franchise—franchise is both a privilege (revocable and issued only upon meeting certain requirements) and a property (cannot be
taken away without DPL and one can exercise all rights of ownership over it)
• Franchise; State approval in case of transfer; Ratio—1) identification 2)personal circumstances/ qualifications
• Franchise; hearing—process of evaluating conditions to arrive at a decision

CASES:
• Franchise; as a valuable asset—Certificates of public convenience have come to have considerable material value. They
are valuable assets. The certificate under our law, considered as a species of property, would be liable to execution.
(Raymundo v Luneta Motor)
• Franchise; personal in nature—Since a franchise is personal in nature any transfer or lease thereof should be notified to
the PSC so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that,
before approval is granted, there should be a public hearing with notice to all interested parties in order that the
commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property
covered by the franchise, or if the sale or lease is detrimental to public interest. If the property covered by the franchise is
transferred, or leased to another without obtaining the requisite approval, the transfer is not binding against Public
Service Commission and in contemplation of law, the grantee continues to be responsible under the franchise in relation
to the Commission and to the public. (Y Transit Co v NLRC: Current holders would, in effect, be agents of the owners)
• Franchise; rights of a holder—insofar as the interest of the State is involved, a certificate of public convenience does not
confer upon the holder any proprietary right or interest or franchise in the route covered thereby and in the public
highways. However, with respect to other persons and other public utilities, a certificate of public convenience as
property, which represents the right and authority to operate its facilities for public service, cannot be taken or interfered
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 granted by the PSC. (Cogeo-Cubao Operator v CA: right of ownership was exercised by
filing a case/ enforcement of a proprietary right)

ii. Scope of Franchise

• Ferry—the continuation by means of boats, barges, or rafts, of a highway or the connection of highways located on
the opposite banks of a stream or other body of water. The term necessarily implies transportation for a short
distance, almost invariably between two points, which is unrelated to other transportation; right or franchise granted
by the state or its authorized mandatories to continue by means of boats, an interrupted land highway over the
interrupting waters and to charge toll for the use thereof by the public. (San Pablo v Pantranco citing Javellana)
o Includes various waters: (1) But an arm of the sea may include various subordinate descriptions of waters,
where the tide ebbs and flows. It may be a river, harbor, creek, basin, or bay; and it is sometimes used to
designate very extensive reaches of waters within the projecting capes or points or a country. (2) In an early
case the court said: "The distinction between rivers navigable and not navigable, that is, where the sea does,
or does not, ebb and flow, is very ancient. The former are called arms of the sea, while the latter pass under
the denomination of private or inland rivers"

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• Ferry Service—water service that crosses rivers (San Pablo v Pantranco)
• Ferry Service; distinguished from coastwise or interisland service—“we are inclined to believe that the Legislature
intended ferry to mean the service either by barges or rafts, even by motor or steam vessels, between the banks of a
river or stream to continue the highway which is interrupted by the body of water, or in some cases to connect two
points on opposite shores of an arm of the sea such as bay or lake which does not involve too great a distance or too
long a time to navigate But where the line or service involves crossing the open sea like the body of water between
the province of Batangas and the island of Mindoro which the oppositors describe thus "the intervening waters
between Calapan and Batangas are wide and dangerous with big waves where small boat barge, or raft are not
adapted to the service," then it is more reasonable to regard said line or service as more properly belonging to
interisland or coastwise trade.” (San Pablo v Pantranco citing Javellana)
• Coastwise or interisland service; Example—May a land transportation company be authorized to operate a ferry
service or coastwise/interisland shipping service along its authorized route as an incident to its franchise without the
need of filing a separate application for the same?Held: No. The two terminals are separated by an open sea so cannot
be considered a continuation of the highway. It is a coastwise or interisland shipping service, not a ferryboat service.
Pantranco should secure a separate CPC for the operation of an interisland or coastwise shipping service in
accordance with the provisions of the law. Its CPC as a bus transportation cannot be merely amended to include this
water service under the guise that it is a mere private ferry service
o Ratio:(1) Environmental circumstances—San Bernardino Strait, which separates Matnog and Allen, leads to the
Pacific Ocean. Parties admit the distance between Matnog and Allen is about 23 km, which maybe negotiated by
motorboat or vessel in about 1 ½ hours as claimed by Pantranco and 2 hours according to San Pablo.(2)
Pantranco charges its passengers separately from the charges for the bus trips and issues separate tickets
whenever they board the MV Black Double that crosses Matnog and Allen. In short, Pantranco acted as a private
carrier, not a common carrier. It does not accept walk-in passengers for the purpose of crossing the sea.(3)
Anomalous situation will jeopardize the safety and interests of passengers and cargo owners which the court
will not allow, that is, Pantranco claims to be a common carrier to observe extraordinary diligence in the
transportation of its passengers and goods and a private carrier insofar as the ferryboat service is concerned (not
be held to account as a common carrier towards its passengers and cargo, in the latter case). (San Pablo v
Pantranco)

iii. Prior Operator Rule

• Prior Operator Rule—So long as the first licensee keeps and performs the terms and conditions of its license and
complies with the reasonable rules and regulations of the Commission and meets the reasonable demands of the
public, it should have more or less of a vested and preferential right over a person who seeks to acquire another and
a later license over the same route. Otherwise, the first license would not have protection on his investment, and
would be subject to ruinous competition and thus defeat the very purpose and intent for which the Public Service
Commission was created.(Batangas v Orlanes)
o Shorter version: 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 giving another operator a certificate of public convenience to operate a competing line over the same
route.
• Prior Operator Rule; Rationale—The policy of the state is to compel an established public utility occupying a given
filed to provide adequate service and at the same time protect it from ruinous competition, and to allow it an
opportunity to provide additional service when required instead of permitting such service by a newly established
competitor. (1) To secure adequate sustained service for the public at the least possible cost, and to protect and
conserve investments already made for this purpose. (2) Experience has demonstrated beyond any question that
competition among natural monopolies is wasteful economically and results finally in insufficient and unsatisfactory
service and extravagant rates. (Batangas v Orlanes)
• Prior Operator Rule;Example—The evidence is conclusive that the Batangas Transportation Company operated its
line five years before Orlanes ever turned a wheel, yet the legal effect of the decision of the Public Service
Commission is to give an irregular operator, who was the last in the field, a preferential right over a regular operator,
who was the first in the field. That is not the law, and there is no legal principle upon which it can be sustained. It
does not appear that the public has ever made any complaint the Batangas Transportation Company, yet on its own
volition and to meet the increase of its business, it has applied to the Public Service Commission for authority to
increase the number of daily trips to nineteen, thus showing a spirit that ought to be commended. (Batangas v
Orlanes)

CLASS DISCUSSION
• Q: What are other names for the Prior Operator Rule? Protection of Investment Rule
• Q: How is monopoly addressed? Regulation of prices
• Q: How do you reconcile non-exclusivity of franchise and prior operator rule? POR does not grant exclusivity but only
grants preference. Also, CONST. does not absolutely prohibit monopoly.The State shall regulate or prohibit
monopoliesonly when the public interest so requires. (Art 12 Sec 9)

iv. Kabit System

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• Kabit System—a person who has been granted a certificate of public convenience allows another person who owns motor
vehicles to operate under such franchise for a fee. (Teja v IAC) or percentage of the earnings (Lim v CA)
• Kabit System; void and inexistent—Although not outrightly penalized as a criminal offense, the kabit system is invariably
recognized as being contrary to public policy and, therefore, void and in existent under NCC 1409. It is a fundamental
principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds then.
(NCC 1412)
• Kabit system; reason behind being void—(1) A certificate of public convenience is a special privilege conferred by the
government. Abuse of this privilege by the grantees thereof cannot be countenanced. (2) The "kabit system" has been
identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices.
(Teja v IAC) (3) MAIN PURPOSE: not to penalize the parties but to identify the person upon whom responsibility may be
fixed in case of an accident with the end view of protecting the riding public. (Lim v CA) Also, one of the primary factors
considered in the granting of a certificate of public convenience for the business of public transportation is the financial
capacity of the holder of the license, so that liabilities arising from accidents may be duly compensated. The kabit system
renders illusory such purpose because the registered owner is allowed to escape liability by proving who the supposed
owner of the vehicle is, and it would be easy for him to transfer the subject vehicle to another who possesses no property
with which to respond financially for the damage done. (Lim v CA, citing Dizon v Octavio) In other words, he places a
“middleman” between him and the public to escape liability (PCI Leasing v UCPB)
• Kabit System; Example—Nale was persuaded to buy from Jaucian a motorcycle with side car on the condition that
Jaucian would be the one to register every year the motorcycle with LTC but the latter failed to register both CM and the
motorcycle, notwithstanding the fact that Nale gave him mortgage fee and registration fee and had the motorcycle
insured. Nale stopped paying the balance so Jaucian filed an action for sum of money with damages. Held: The parties
are in pari delicto, neither of them may bring an action against the other to enforce their illegal contract (NCC 1412(1))
(Teja v IAC: Sir says the moral of the story is bawal maging kabit)
• Kabit System; Rights of a Kabit—GR: Operator under the kabit system could not sue without joining the registered owner
of the vehicle as his principle XPN: When equity demands an exception as in the case of Lim v CA (quick facts: Gonzales’
(kabit) jeep collided with a ten-wheeler truck owned by Lim, driven by Gunnaban, who owned responsibility for the accident, but
parties did not agree as to the amount of damages so Gonzales sued Lim. Lim contends Gonzales is not the real party in interest),
where the court gave the following reasons:
o In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system does not
exist. First, neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose
from the negligence of another vehicle in using the public road to whom no representation, or misrepresentation, as
regards the ownership and operation of the passenger jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that private respondent Gonzales and the registered owner
of the jeepney were in estoppel for leading the public to believe that the jeepney belonged to the registered
owner. Third, the riding public was not bothered nor inconvenienced at the very least by the illegal arrangement. On
the contrary, it was private respondent himself who had been wronged and was seeking compensation for the
damage done to him. Certainly, it would be the height of inequity to deny him his right. (I included the everything
because Sir said to note the reasons mentioned. Also, he says “kabits have rights too”)
v. CPC v CPCN

CLASS DISCUSSION:
• What is the difference between CPC and CPCN?
o CPC: administrative agencies determine (e.g. water utilities)
o CPCN: Congressional franchise then proceed to administrative agency for another authorization (e.g. telecom,
airlines)

CASES:
• Congress; Delegation of power—It is generally recognized that a franchise may be derived indirectly from the state
through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to
agencies other than those of a legislative nature. In pursuance of this, it has been held that privileges conferred by grant
by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by
an act of the Legislature.
o There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an
indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of
Article XII recognizes Congress' control over any franchise, certificate or authority to operate a public utility, it
does not mean Congress has exclusive authority to issue the same. Franchises issued by Congress are not
required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate
this function to government agencies, specialized particularly in their respective areas of public service.
o In PAL v CAB (1997), Sec 10 RA 776 clearly reveals intent of Congress to delegate the authority to regulate the
issuance of a license to operate domestic air transport services.
o CLASS DISCUSSION: PAL case was decided in 1997. But RA 9183 (2003) and RA 9517(2009) subsequently
granted franchises to Asian Spirit and Sea Air, respectively. Thus, Congress still has power to issue franchise
after it supposedly delegate such power.
! Quick facts: PAL argues CPCN: franchise required:: CPC: no franchise required. Held: The use of the
word "necessity", in conjunction with "public convenience" in a certificate of authorization to a public
service entity to operate, does not in any way modify the nature of such certification, or the
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requirements for the issuance of the same. It is the law, which determines the requisites for the issuance
of such certification, and not the title indicating the certificate.
• “Necessity”;“Public Convenience”; defined—Public convenience and necessity exists when the proposed facility will
meet a reasonable want of the public and supply a need which the existing facilities do not adequately afford. It does not
mean or require an actual physical necessity or an indispensable thing. The terms "convenience" and "necessity" are to be
construed together, although they are not synonymous, and effect must be given both. The convenience of the public
must not be circumscribed by according to the word "necessity" its strict meaning or an essential requisites.

3. Private nature; rights and obligations of parties inter se arising from transactions relating to transportation
a. Absent a transportation contract
• Accommodation passengers—passengers, who paid nothing for the service, can be considered as invited guests within the
meaning of the law. As accommodation passengers or invited guests, owner or driver of the common carrier owes to them
merely the duty to exercise reasonable care so that they may be transported safely to their destination.
o "The rule is established by the weight of authority that the owner or operator of an automobile owes the duty to
an invited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury
by increasing the hazard of travel. This rule, as frequently stated by the courts, is that an owner of an automobile
owes a guest the duty to exercise ordinary or reasonable care to avoid injuring him. Since one riding in an automobile
is no less a guest because he asked for the privilege of doing so, the same obligation of care is imposed upon the
driver as in the case of one expressly invited to ride" Defendant, therefore, is only required to observe ordinary care,
and is not in duty bound to exercise extraordinary diligence as required of a common carrier by our law (Articles
1755 and 1756, new Civil Code). (Lara v Valencia)

b. Arising from a transportation contract

c. Liability of registered owner
• Registered owner; common carriers—under the Public Service Act, if the property covered by a franchise is transferred or
leased to another without obtaining the requisite approval, the transfer is not binding on the Public Service Commission and,
in contemplation of law, the grantee continues to be responsible under the franchise in relation to the operation of the vehicle,
such as damage or injury to third parties due to collisions (PCI Leasing v UCPB)
• Registered owner; private vehicle—(not offered for service to the general public)—Public Service Act is inapplicable but
registered owner of the vehicle driven by a negligent driver may still be held liable under compulsory motor vehicle
registration and the liabilities of employers forquasi-delicts under the Civil Code. (PCI Leasing v UCPB)
o Civil Code—For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered
owner may be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved party seeks relief
based on a delictor crime under Articles 100 and 103 of the Revised Penal Code; or 2) solidarily, if the complainant
seeks relief based on a quasi-delict under Articles 2176 and 2180 of the Civil Code. It is the option of the plaintiff
whether to waive completely the filing of the civil action, or institute it with the criminal action, or file it separately or
independently of a criminal action;his only limitation is that he cannot recover damages twice for the same act or
omission of the defendant.In case a separate civil action is filed, the registered owner of a motor vehicle is primarily
and directly responsible for the consequences of its operation, including the negligence of the driver, with respect to
the public and all third persons.In contemplation of law, the registered owner of a motor vehicle is the employer of
its driver, with the actual operator and employer, such as a lessee, being considered as merely the owner's agent.This
being the case, even if a sale has been executed before a tortious incident, the sale, if unregistered, has no effect as to
the right of the public and third persons to recover from the registered owner.(PCI Leasing v UCPB)
! Therefore, a sale, lease, or financial lease that is not registered with the Land Transportation Office, still does
not bind third persons who are aggrieved in tortious incidents, for the latter need only to rely on the public
registration of a motor vehicle as conclusive evidence of ownership. (PCI Leasing v UCPB)
o Motor Vehicle Registration; aim—not to make registration the operative act by which ownership in vehicles is
transferred but to identify the owner so that if any accident happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. (to
forestall inconvenient and prejudicial instances where there is no positive identification of owner or drivers)(PCI
Leasing v UCPB)
• Registered owner; not allowed provethe actual and real owner—the lawdoes not relieve him directly of the responsibility that
the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property
with which to respond financially for the damage or injury done. Proper Remedy: A registered owner who has already sold or
transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the
damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for
relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that the law
demands and requires. (PCI Leasing v UCPB)

C. Regulation of the Transportation Industry

1. DOTC

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EO 125
Sec. 4. Mandate. The Ministry shall be the primary policy, planning, programming, coordinating, implementing, regulating and
administrative entity of the Executive Branch of the government in the promotion, development and regulation of dependable
and coordinated networks of transportation and communication systems as well as in the fast, safe, efficient and reliable postal,
transportation and communications services.
To accomplish such mandate, the Ministry shall have the following objectives:
(a) Promote the development of dependable and coordinated networks of transportation and communications systems;
(b) Guide government and private investment in the development of the country's intermodal transportation and
communications systems in a most practical, expeditious, and orderly fashion for maximum safety, service, and cost
effectiveness;
(c) Impose appropriate measures to that technical, economic and other conditions for the continuing economic viability of the
transportation and communications entities are not jeopardized and do not encourage inefficiency and distortion of traffic
patronage;
(d) Develop an integrated plan for a nationwide transmission system in accordance with national and international
telecommunications service requirements including, among others, radio and television broadcast relaying, leased channel
services and data transmission;
(e) Guide government and private investments in the establishment, operation and maintenance of an international switching
system for incoming and outgoing telecommunications services;
(f) Encourage the development of a domestic telecommunications industry in coordination with the concerned entities
particularly, the manufacture of communications/electronics equipment and components to complete and support, as much as
possible, the expansion, development, operation and maintenance of the nationwide telecommunications network;
(g) Provide for a safe, reliable and efficient postal system for the country.

EO 125-A
"Sec. 5. Powers and Functions. To accomplish its mandate, the Department shall have the following powers and functions:
(a) Formulate and recommend national policies and guidelines for the preparation and implementation of integrated and
comprehensive transportation and communications systems at the national, regional and local levels;
(b) Establish and administer comprehensive and integrated programs for transportation and communications, and for this purpose,
may call on any agency, corporation, or organization, whether public or private, whose development programs include
transportation and communications as an integral part thereof, to participate and assist in the preparation and implementation of
such program;
(c) Assess, review and provide direction to transportation and communication research and development programs of the
government in coordination with other institutions concerned;
(d) Administer and enforce all laws, rules and regulations in the field of transportation and communications;
(e) Coordinate with the Department of Public Works and Highways in the design, location, development, rehabilitation,
improvement, construction, maintenance and repair of all infrastructure projects and facilities of the Department. However,
government corporate entities attached to the Department shall be authorized to undertake specialized telecommunications, ports,
airports and railways projects and facilities as directed by the President of the Philippines or as provided by law;
(f) Establish, operate and maintain a nationwide postal system that shall include mail processing, delivery services, and money
order services and promote the art of philately;
(g) Issue certificates of public convenience for the operation of public land and rail transportation utilities and services;
(h) Accredit foreign aircraft manufacturers and/or international organizations for aircraft certification in accordance with
established procedures and standards;
(i) Establish and prescribe rules and regulations for identification of routes, zones and/or areas of operations of particular operators
of public land services;
(j) Establish and prescribe rules and regulations for the establishment, operation and maintenance of such telecommunications
facilities in areas not adequately served by the private sector in order to render such domestic and overseas services that are
necessary with due consideration for advances in technology;
(k) Establish and prescribe rules and regulations for the operation and maintenance of a nationwide postal system that shall include
mail processing, delivery services, money order services and promotion of philately;
(l) Establish and prescribe rules and regulations for issuance of certificates of public convenience for public land transportation
utilities, such as motor vehicles, trimobiles and railways;
(m) Establish and prescribe rules and regulations for the inspection and registration of air and land transportation facilities, such as
motor vehicles, trimobiles, railways and aircrafts;
(n) Establish and prescribe rules and regulations for the issuance of licenses to qualified motor vehicle drivers, conductors, and
airmen;
(o) Establish and prescribe the corresponding rules and regulations for the enforcement of laws governing land transportation, air
transportation and postal services, including the penalties for violations thereof, and for the deputation of appropriate law
enforcement agencies in pursuance thereof;
(p) Determine, fix and/or prescribe charges and/or rates pertinent to the operation of public air and land transportation utility
facilities and services, except such rates and/or charges as may be prescribed by the Civil Aeronautics Board under its charter, and,
in cases where charges or rates are established by international bodies or associations of which the Philippines is a participating
member or by bodies or associations recognized by the Philippine government as the proper arbiter of such charges or rates;
(q) Establish and prescribe the rules, regulations, procedures and standards for the accreditation of driving schools;
(r) Administer and operate the Civil Aviation Training Center (CATC) and the National Telecommunications Training Institute
(NTTI); and
(s) Perform such other powers and functions as may be prescribed by law, or as may be necessary, incidental, or proper to its
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mandate or as may be assigned from time to time by the President of the Republic of the Philippines."

EO 292
Book IV Title XV
TRANSPORTATION AND COMMUNICATIONS

CHAPTER 1#GENERAL PROVISIONS

Section 1. Declaration of Policy. - The State is committed to the maintenance and expansion of viable, efficient, fast, safe and
dependable transportation and communications systems as effective instruments for national recovery and economic progress. It
shall not compete as a matter of policy with private enterprise and shall operate transportation and communications facilities only
in those areas where private initiatives are inadequate or non-existent.
Section 2. Mandate. - The Department of Transportation and Communications shall be the primary policy, planning, programming,
coordinating, implementing, regulating and administrative entity of the Executive Branch of the government in the promotion,
development and regulation of dependable and coordinated networks of transportation and communications systems as well as in
the fast, safe, efficient and reliable postal, transportation and communications services.
Section 3. Powers and Functions.- To accomplish its mandate, the Department shall:
(1) Formulate and recommend national policies and guidelines for the preparation and implementation of integrated and
comprehensive transportation and communications systems at the national, regional and local levels;
(2) Establish and administer comprehensive and integrated programs for transportation and communications, and for this purpose,
it may call on any agency, corporation or organization, whether public or private, whose development programs include
transportation and communications as integral parts thereof, to participate and assist in the preparation and implementation of
such programs;
(3) Assess, review and provide direction to transportation and communications research and development programs of the
government in coordination with other institutions concerned;
(4) Administer and enforce all laws, rules and regulations in the field of transportation and communications;
(5) Coordinate with the Department of Public Works and Highways in the design, location, development, rehabilitation,
improvement, construction, maintenance and repair of all infrastructure projects and facilities of the Department. However,
government corporate entities attached to the Department shall be authorized to undertake specialized telecommunications, ports,
airports and railways projects and facilities as directed by the President of the Philippines or as provided by law;
(6) Establish, operate and maintain a nationwide postal system that shall include mail processing, delivery services and money
order services and promote the art of philately;
(7) Issue certificates of public convenience for the operation of public land and rail transportation utilities and services;
(8) Accredit foreign aircraft manufacturers or international organizations for aircraft certification in accordance with established
procedures and standards;
(9) Establish and prescribe rules and regulations for identification of routes, zones or areas of operation of particular operators of
public land services;
(10) Establish and prescribe rules and regulations for the establishment, operation and maintenance of such telecommunications
facilities in areas not adequately served by the private sector in order to render such domestic and overseas services that are
necessary with due consideration for advances in technology;
(11) Establish and prescribe rules and regulations for the issuance of certificates of public convenience for public land transportation
utilities, such as motor vehicles, trimobiles and railways;
(12) Establish and prescribe rules and regulations for the inspection and registration of air and land transportation facilities, such as
motor vehicles, trimobiles, railways and aircraft;
(13) Establish and prescribe rules and regulations for the issuance of licenses to qualified motor vehicle drivers, conductors and
airmen;
(14) Establish and prescribe the corresponding rules and regulations for enforcement of laws governing land transportation, air
transportation and postal services, including the penalties for violations thereof, and for the deputation of appropriate law
enforcement agencies in pursuance thereof;
(15) Determine, fix or prescribe charges or rates pertinent to postal services and to the operation of public air and land
transportation utility facilities and services, except such rates or charges as may be prescribed by the Civil Aeronautics Board under
its charter and, in cases where charges or rates are established by international bodies or associations of which the Philippines is a
participating member or by bodies or associations recognized by the Philippine government as the proper arbiter of such charges or
rates;
(16) Establish and prescribe the rules, regulations, procedures and standards for the accreditation of driving schools;
(17) Administer and operate the Civil Aviation Training Center (CATC) and the National Telecommunications Training Institute
(NTTI); and
(18) Perform such other powers and functions as may be provided by law.
Section 4. Organizational Structure. - The Department shall consist of the Department Proper, the Department Regional Offices, the
Land Transportation Franchising and Regulatory Board, and the Attached Agencies.

CHAPTER 2#DEPARTMENT PROPER

Section 5. Office of the Secretary. - The Office of the Secretary shall consist of the Secretary, his immediate staff, the Franchising
Review Staff and the Investigation, Security and Law Enforcement Staff.
The Franchising Review Staff shall be headed by a Review Staff Director with the same rank, salary and privileges of a Department
Regional Director who shall be appointed by the President upon the recommendation of the Secretary. The Franchising Review Staff
shall assist the Secretary in the review of cases and matters pertaining to, among others, grants of franchises and the regulation
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thereof.
The Investigation, Security and Law Enforcement Staff shall be headed by a Staff Director with the same rank, salary and privileges
of a Department Service Chief. The Investigation, Security and Law Enforcement Staff shall be responsible for: (a) providing
security and intelligence for the Department; (b) coordinating security and intelligence activities of security units of its offices and
attached agencies; and (c) undertaking law enforcement, functions and activities relating to land transportation.
Section 6. Undersecretaries. - The Secretary shall be assisted by four (4) Undersecretaries. Each Undersecretary shall have control and
supervision over the respective offices and services assigned to him by the Secretary.
Section 7. Assistant Secretaries. - The Secretary shall also be assisted by eight (8) Assistant Secretaries each of whom shall be
responsible for the four (4) staff offices and four (4) line offices. Each Assistant Secretary shall report to the respective
Undersecretary to whom he is assigned by the President.
Section 8. Staff Offices. - The Department shall have the following staff offices:
(1) The Office of the Assistant Secretary for Administrative and Legal Affairs composed of the Administrative Service and the Legal
Service;
(2) The Office of the Assistant Secretary for Finance and Comptrollership composed of the Finance and Management Service and
the Comptrollership Service;
(3) The Office of the Assistant Secretary for Planning and Project Development composed of the Planning Service and the Project
Development Service; and
(4) The Office of the Assistant Secretary for Management Information and Project Management composed of the Management
Information Service and the Project Management Service.
Section 9. Line Offices. - The Department shall have the following line offices:
(1) The Office of the Assistant Secretary for Land Transportation;
(2) The Office of the Assistant Secretary for Postal Services;
(3) The Office of the Assistant Secretary for Telecommunications; and
(4) The Office of the Assistant Secretary for Air Transportation.
The line offices shall each have an Executive Director who shall assist the respective Assistant Secretary in the implementation and
enforcement of the policies, programs and projects, and the pertinent laws on their respective areas of responsibilities.
Section 10. Service Units in the Office of the Assistant Secretary for Land Transportation. - There shall be two service units in the Office of
the Assistant Secretary for Land Transportation, namely:
(1) Law Enforcement Service, and
(2) Traffic Adjudication Service.
Each of the aforesaid service units shall be headed by a Service Chief to be appointed by the President upon recommendation of the
Secretary of Transportation and Communication.
Section 11. Functions of the Law Enforcement Service. - The Law Enforcement Service shall have the same functions and powers as
those that the former Law Enforcement Division in the Office of the Assistant Secretary for Land Transportation exercised.
Section 12. Functions of the Traffic Adjudication Service. - The Traffic Adjudication Service shall have the following powers and
functions:
(1) To hear and decide cases involving violations of laws, rules and regulations governing land transportation and to impose fines
and/or penalties therefor; provided that violations resulting in damage to property and/or physical injuries or violations
constituting offenses punishable under the Revised Penal Code and other penal laws shall be under the jurisdiction of the regular
courts;
(2) To order the impounding of motor vehicles and confiscation of plates or the arrest of violators of laws, rules and regulations
governing land transportation;
(3) To issue subpoena and subpoena duces tecum and to summon witnesses to appear in any proceedings thereof, and to administer
oaths and affirmations;
(4) To promulgate rules and regulations governing the proceedings before it; provided that except with respect to paragraph c, the
rules of procedure and evidence prevailing in the courts of law shall not be controlling and all reasonable means to ascertain the
facts in each case shall be used without regard to technicalities of law and procedures but all in the interest of due process; and
(5) To perform such other functions and duties as may be provided by law, or as may be necessary, or proper or incidental to its
powers and functions.

CHAPTER 3#DEPARTMENT SERVICES

Section 13. Department Services. - The Department Services shall include the following:
(1) Administrative Service;
(2) Legal Service;
(3) Finance and Management Service;
(4) Comptrollership Service;
(5) Planning Service;
(6) Project Development Service;
(7) Management Information Service; and
(8) Project Management Service.
Each of the above named services shall be headed by a Service Chief appointed by the President upon the recommendation of the
Secretary.

CHAPTER 4#REGIONAL OFFICES

Section 14. Regional Offices. - The Department shall have three (3) Regional Offices in each of the administrative regions of the
country: the Regional Office for Land Transportation, the Regional Office for Telecommunications and the Regional Office for Postal
Services. Each Regional Office shall be headed by a Regional Director to be assisted by an Assistant Regional Director.
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The Regional Offices shall essentially be line in character and shall be responsible for the delivery of all front line services of the
Department.
For such purposes, the Regional Offices shall have, within their respective administrative regions, the following functions:
(1) Implement laws, policies, plans, programs, projects, rules and regulations of the Department;
(2) Provide efficient and effective service to the people;
(3) Coordinate with regional offices of other departments, offices and agencies;
(4) Coordinate with local government units; and
(5) Perform such other functions as may be provided by law.
The Office of the Secretary shall have direct line supervision and control over Regional Offices.

CHAPTER 5#REGULATORY BOARD

Section 15. Land Transportation Franchising and Regulatory Board. - The quasi-judicial powers and functions with respect to land
transportation shall be exercised through the Land Transportation and Regulatory Board, hereinafter referred to as the "Board".
Section 16. Composition of the Board. - The Board shall be composed of a Chairman and two (2) members with the rank, salary and
privileges of an Assistant Secretary, all of whom shall be appointed by the President of the Philippines upon recommendation of the
Secretary of Transportation and Communications. One (1) member of the Board shall be a member of the Bar and shall have been
engaged in the practice of law in the Philippines for at least five (5) years, another a holder of a degree in civil engineering, and the
other a holder of a degree in economics, finance or management both with the same number of years of experience and practice.
Section 17. Executive Director and Support Staff of the Board. - The Board shall have an Executive Director who shall also be appointed
by the President of the Philippines upon the recommendation of the Secretary of Transportation and Communications. He shall
have the rank, salary and privileges of a Department Service Chief. He shall assist the Board in the performance of its powers and
functions.
The Board shall be supported by the Technical Evaluation Division, Legal Division, Management Information Division,
Administrative Division and Finance Division.
Section 18. Supervision and Control Over the Board. - The Secretary of Transportation and Communications, through his duly
designated Undersecretary, shall exercise administrative supervision and control over the Land Transportation Franchising and
Regulatory Board.
Section 19. Powers and Functions of the Land Transportation Franchising and Regulatory Board. - The Board shall:
(1) Prescribe and regulate routes, economically viable capacities, and zones or areas of operation of public land transportation
services provided by motorized vehicles in accordance with the public land transportation development plans and programs
approved by the Department of Transportation and Communications;
(2) Issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land
transportation services provided by motorized vehicles, and prescribe the appropriate terms and conditions therefor;
(3) Determine, prescribe, approve and periodically review and adjust reasonable fares, rates and other related charges, relative to
the operation of public land transportation services provided by motorized vehicles;
(4) Issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction and in
which cases the pertinent provisions of the Rules of Court shall apply;
(5) Punish for contempt of the Board, both direct and indirect, in accordance with the pertinent provisions of, and the penalties
prescribed by, the Rules of Court;
(6) Issue subpoena and subpoena duces tecum and to summon witnesses to appear in any proceedings of the Board, to administer
oaths and affirmations, and, in appropriate cases, to order the search and seizure of all vehicles and documents, upon probable
cause and as may be necessary for the proper disposition of the cases before it;
(7) Conduct investigations and hearings of complaints for violation of the public service laws on land transportation and of the
Board's rules and regulations, orders, decisions or rulings and to impose fines or penalties for such violations;
(8) Review motu propio the decisions/actions of the Regional Franchising and Regulatory Offices;
(9) Promulgate rules and regulations governing proceedings before the Board and the Regional Franchising and Regulatory Office.
However, except with respect to paragraphs 4, 5, 6, and 7 hereof, the rules of procedure and evidence prevailing in the courts of law
should not be controlling but rather the spirit and intention of said rules. The Board and the Regional Franchising and Regulatory
Offices shall use every and all reasonable means to ascertain facts in each case speedily and objectively and without regard to
technicalities of law and procedures, all in the interest of due process;
(10) Fix, impose and collect, and periodically review and adjust, reasonable fees and other related charges for services rendered;
(11) Formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public utilities,
standards of measurements or design, and rules and regulations requiring operators of any public land transportation service to
equip, install and provide in their utilities and in their stations such devices, equipment, facilities and operating procedures and
techniques as may promote safety, protection, comfort and convenience to persons and property in their charges as well as the
safety of persons and property within their areas of operation;
(12) Coordinate and cooperate with other government agencies and entities concerned with any aspect involving public land
transportation services with the end in view of effecting continuing improvement of such services; and
(13) Perform such other functions and duties as may be provided by law, or as may be necessary, or proper or incidental to the
purposes and objectives of the Department;
Section 20. Decisions of the Board; Appeals therefrom or Review Thereof . - The Board, in the exercise of its powers and functions, shall sit
and render its decision en banc. Every such decision, order, or resolution of the Board must bear the concurrence and signature of at
least two (2) members thereof.
The decision, order or resolution of the Board shall be appealable to the Secretary within thirty (30) days from receipt of the
decision. However, the Secretary may motu propio review and decision or action of the Board before the same becomes final.
Section 21. Regional Franchising and Regulatory Offices. - There shall be a Regional Franchising and Regulatory Office in each of the
administrative regions of the country which shall be headed by a Regional Director having the rank, salary and privileges of a

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Department Assistant Regional Director. The Regional Franchising and Regulatory Offices shall hear and decide uncontested
applications/petitions for routes, within their respective administrative regions but that applications/petitions for routes extending
beyond their respective territorial jurisdiction shall be heard and decided by the Board.
Section 22. Appeals. - The decisions, orders or resolutions of the Regional Franchising and Regulatory Offices shall be appealable to
the Board within thirty (30) days from receipt of the decision.

CHAPTER 6#ATTACHED AGENCIES

Section 23. Attached Agencies and Corporations. - The following agencies and corporations are attached to the Department: The
Philippine National Railways, the Maritime Industry Authority, the Philippine National Lines, the Philippine Aerospace
Development Corporation, the Metro Manila Transit Corporation, the Office of Transport Cooperatives, the Philippine Ports
Authority, the Philippine Merchant Marine Academy, the Toll Regulatory Board, the Light Rail Transit Authority, the Transport
Training Center, the Civil Aeronautics Board, the National Telecommunications Commission and the Manila International Airport
Authority.
Section 24. Functions of Attached Agencies and Corporations. - The Agencies attached to the Department shall continue to operate and
function in accordance with the respective charters or laws creating them, except when they conflict with this Code.

a. Air
i. Civil Aviation Authority
RA 9497 (2008)
SEC. 4. Creation of the Authority. - There is hereby created an independent regulatory body with quasi-judicial
and quasi-legislative powers and possessing corporate attributes to be known as the Civil Aviation Authority of
the Philippines (CAAP), hereinafter referred to as the "Authority" attached to the Department of Transportation
and Communications (DOTC) for the purpose of policy coordination. For this purpose, the existing Air
Transportation Office created under the provisions of Republic Act No. 776, as amended, is hereby abolished.
Notwithstanding the foregoing, nothing in this Act shall diminish the powers and functions of the Civil
Aeronautics Board (CAB) as provided for under Republic Act. No. 776, also known as "The Civil Aeronautics Act
of the Philippines", as amended.
(a) Establishment of Authority Headed by a Director General - The Authority shall beheaded by a Director
General of Civil Aviation, referred to in this Act as the "Director General," who shall be appointed by the
President of the Philippines and shall be responsible for all civil aviation in the Philippines and the administration
of this Act. The Director General shall be appointed based on the qualifications herein provided and shall have a
tenure of office for a period of four (4) years. His appointment may be extended for another non-extendible term
of four (4) years and shall only be removed for cause in accordance with the rules and regulations prescribed by
the Civil Service Commission.
(b) Responsibility of the Director General - The Director General shall be responsible for the exercise of all powers
and the discharge of all duties of the Authority and shall have control over all personnel and activities of the
Authority.
SEC. 21. Policies. - In the exercise and performance of its powers and duties under this Act, the Authority shall
consider the following, among other things, as being in the public interest and in accordance with the public
convenience and necessity:
(a) The development and utilization of the air potential of the Philippines;
(b) The encouragement and development of an air transportation system properly adapted to the present and
future of foreign and domestic commerce of the Philippines;
(c) The regulation of air transportation in such manner as to support sound economic condition in such
transportation and to improve the relations between air carriers;
(d) Ensuring the safety, quality, reliability, and affordability of air transport services for the riding public; and
(e) The encouragement and development of a viable and globally competitive Philippine aviation industry.

SEC. 24. Powers of the Board. - The Board shall have the following general powers:
(a) Provide comprehensive policy guidance for the promotion and development of the Philippine aviation
industry, as provided for in this Act;
(b) Ensure that the Authority performs its functions in a proper, efficient and effective manner;
(c) Decide the objectives, strategies and policies of the Authority in accordance with the provisions of this Act;
(d) Determine the organizational structure of the Authority in accordance with the provisions of this Act,
establish a human resources management system based on merit and fitness, and adopt a rational compensation
and benefits scheme;
(e) Exercise appellate powers on any decisions, findings and rulings of the Director General, to issue subpoena ad
testificandum or subpoena duces tecum requiring the attendance and testimony of witnesses in any matter or inquiry
pending before the Board and require the production of books, papers, contracts, agreements and all other
documents submitted for purposes of this section to be under oath and verified by the person in custody thereof
as to the truth and correctness of data appearing in such books, papers, tariffs, contracts, agreements and all other
documents;
(f) Exercise appellate powers to order the taking of depositions in any proceeding, or investigation, pending
before the Board at any stage of such proceeding or investigation;
(g) Use available services, equipment, personnel and facilities of other agencies of the Philippine Government, on
a reimbursable basis when appropriate and, on a similar basis, to co-operate with those agencies in the
establishment and use of services, equipment and facilities of the Authority;
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(h) Use the property of the Authority in such a manner as may appear to the Authority to be requisite,
advantageous or convenient with a view to making the best use of any of the property of the Authority in relation
to its functions under this Act;
(i) Invest such of the Authority's funds that are not immediately required for operating expenses, or other
immediate obligations in any business venture the Board may deem appropriate, or in such secured note,
government securities, and other negotiable instruments that satisfy the guidelines prescribed by the Board.
Funds of the Authority shall be deposited in such commercial and universal banks as the Board may determine,
subject to the requirements of existing laws. The Board shall designate the officials authorized to deposit in or
withdraw funds from such depository banks;
(j) Promulgate rules and regulations as may be necessary in the interest of safety in air commerce pertaining to the
issuance of the airman's certificate including the licensing of operating and mechanical personnel, type certificate
for aircraft, aircraft engines, propellers and appliances, airworthiness certificates, air carrier operating certificates,
air agency certificates, navigation facility and aerodrome certificates; air traffic routes; radio and aeronautical
telecommunications and air navigation aids; aircraft accident inquiries; aerodromes, both public and private-
owned; construction of obstructions to aerodromes; height of buildings; antennae and other edifices; registration
of aircrafts; search and rescue; facilitation of air transports; operations of aircrafts, both for domestic and
international, including scheduled and non-scheduled; meteorology in relation to civil aviation; rules of the air;
air traffic services; rules for prevention of collision of aircrafts, identification of aircraft; rules for safe altitudes of
flight; and such other rules and regulations, standards, governing other practices, methods and/or procedures as
the Director General may find necessary and appropriate to provide adequately for safety regularity and
efficiency in air commerce and air navigation;
(k) Impose and fix reasonable charges and fees for the use of government aerodromes or air navigation facilities;
for services rendered by the Authority in the rating of any aerodrome or air navigation facilities, civil aviation
schools and instructors, aircraft repair stations, and aircraft radio and aeronautical telecommunications stations;
(l) Fix the reasonable charges to be imposed in the use of privately-owned air navigation facilities and
aerodromes;
(m) Adopt a system for the registration of aircraft as hereinafter provided;
(n) Determine and fix, landing fees, parking space fees, royalties on sales or deliveries, direct or indirect, to any
aircraft for its use of aviation gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other
royalties, fees or rentals for the use of any of the property under its management and control;
(o) Approve the annual and supplementary budget plan and utilization of retained revenue;
(p) Exercise the corporate powers granted to the Authority;
(q) Upon its own initiative or the recommendation of the Director General or an application of a private person,
grant exemption from the requirements of observing rules or regulations issued in accordance with this Act:
Provided, That said grant of exemption is not prejudicial to flight safety;
(r) Formulate rules and regulations concerning compliance of the carrier and the public for the safe transport of
goods and materials by air pursuant to international standards or Annexes to the Chicago Convention; and
(s) In coordination with the appropriate government agency tasked to provide airport security, shall:
(1) Prescribe reasonable regulation requiring that all passengers and all property intended to be carried in the
aircraft cabin in commercial air transport be screened by weapon-detecting procedure or facilities employed or
operated by employees or agents of the air operator or foreign air operator prior to boarding the aircraft for such
transportation;
(2) Prescribe such other reasonable rules and regulations requiring such parties, methods and procedures as the
Director General may find necessary to protect persons and property aboard aircraft operating in commercial air
transport against acts of criminal violence and aircraft piracy; and
(3) To the extent practicable, require uniform procedures for the inspection, detention, and search of persons and
property in domestic commercial air transport and international commercial air transport to assure their safety
and to assure that they will receive courteous and efficient treatment by air operators and their agents and
employees.

SEC. 35. Powers and Functions of the Director General. - The Director General shall be the chief executive and
operating officer of the Authority. He shall have the following powers, duties and responsibilities:
(a) To carry out the purposes and policies established in this Act; to enforce the provisions of the rules and
regulations issued in pursuance to said Act; and he shall primarily be vested with authority to take charge of the
technical and operational phase of civil aviation matters;
(b) To designate and establish civil airways, to acquire, control, operate and maintain along such airways,
navigation facilities and to chart such airways and arrange for their publication including the aeronautical charts
or maps required by the international aeronautical agencies, by utilizing the equipment, supplies or assistance of
existing agencies of the government as far as practicable;
(c) To issue airman's certificate specifying the capacity in which the holder thereof is authorized to serve as
airman in connection with aircraft and shall be issued only upon the finding that the applicant is properly
qualified and physically able to perform the duties of the position. The certificate shall contain such terms,
conditions and limitations as the Director General may determine to be necessary to assure safety in air
commerce: Provided, however, That the airman's license shall be issued only to qualified persons who are citizens of
the Philippines or qualified citizens of countries granting similar rights and privileges to citizens of the
Philippines;
(d) To issue airworthiness certificate for aircraft which shall prescribe the duration of such certificate, the type of

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service for which the aircraft may be used, and such other terms and conditions and limitations as are required;
(e) To issue air carrier operating certificate in accordance with the minimum safety standards for the operation of
the air carrier to whom such certificate is issued. The air carrier operating certificate shall be issued only to
aircrafts registered under the provisions of this Act;
(f) To issue type certificate for aircraft, aircraft engine, propellers and appliances;
(g) To inspect, classify and rate any air navigation facilities and aerodromes available for the use of aircraft as to
its suitability for such use and to issue a certificate for such air navigation facility and aerodrome; and to
determine the suitability of foreign aerodromes, air navigation facilities as well as air routes to be used prior to
the operation of Philippine-registered aircraft in foreign air transportation and from time to time thereafter as
may be required in the interest of safety in air commerce;
(h) To issue certificates of persons or civil aviation schools giving instruction in flying, repair stations, and other
air agencies and provide for the examination and rating thereof;
(i) To provide for the enforcement of the rules and regulations issued under the provisions of this Act and to
conduct investigation for violations thereto. In undertaking such investigation, to require by subpoena ad
testificandum or subpoena duces tecum, the attendance and testimony of witnesses, the production of books, papers,
documents, exhibits matter, evidence, or the taking of depositions before any person authorized to administer
oath. Refusal to submit the reasonable requirements of the investigation committee shall be punishable in
accordance with the provisions of this Act;
(j) To collect and disseminate information relative to civil aeronautics and the development of air commerce and
the aeronautical industry; to exchange with foreign governments, information pertaining to civil aeronautics; and
to provide for direct communication on all matters relating to the technical or operational phase of aeronautics
with international aeronautical agencies:
(k) To acquire and operate such aircraft as may be necessary to execute the duties and functions of the Authority
prescribed in this Act;
(l) To plan, design, acquire, establish, construct, operate, improve, maintain, and repair necessary aerodromes and
other air navigation facilities;
(m) To collect and receive charges and fees for the registration of aircraft and for the issuance and/or renewal of
licenses or certificates for aircraft, aircraft engines, propellers and appliances, and airmen as provided in this Act;
(n) To impose fines and/or civil penalties in respect thereto;
(o) To participate actively with the largest possible degree in the development of international standardization of
practices in aviation matters important to safe, expeditious, and easy navigation, and to implement as far as
practicable the international standards, recommended practices and policies adopted by appropriate international
aeronautical agencies;
(p) To exercise and perform its powers and duties under this Act consistent with any obligation assumed by the
Republic of the Philippines in any treaty, convention or agreement on civil aviation matters;
(q) To cooperate, assist and coordinate with any research and technical agency of the government on matters
relating to research and technical studies on design, materials, workmanship, construction, performance,
maintenance and operation of aircraft, aircraft engines, propellers, appliances, and air navigation facilities
including aircraft fuel and oil: Provided, That nothing in this Act shall be construed to authorize the duplication of
the laboratory research, activities or technical studies of any existing governmental agency;
(r) To designate such prohibited and danger areas, in consonance with the requirements of the international
aeronautical agencies and national security;
(s) To issue, deny, suspend, cancel or revoke any certificate, license pertaining to aircraft, airmen and air agencies:
Provided, That any order denying, suspending, cancelling, revoking the certificate or license may he appealed to
the Board, whose decisions shall he final within fifteen (15) days from the date of notification of such denial,
cancellation or revocation;
(t) To grant authorization to civil aircraft or persons to carry instruments or photographic devices to be used for
aerial photography or taking of pictures by photograph or sketching of any part of the Philippines; and
(u) Pursuant to a board resolution, to enter into, make and execute contracts of any kind with any person, firm, or
public or private corporation.

ii. Civil Aeronautic Board

RA 776
SECTION 5. Composition of the Board. - The Civil Aeronautics Board shall be composed of the Secretary of
Transportation and Communications or his designated representative as Chairman, the Assistant Secretary
for Air Transporta- tion of the Department of Transportation and Communications as Vice-Chairman, the
Commanding General of the Philippine Air Force* and two (2) members to be appointed by the President of
the Philippines. They shall hold office at the pleasure of the Presi- dent.
No member of the Board shall have any pecuniary interest in, or own any stock or bond of, any civil
aeronautics enterprise.

SECTION 10. Powers and duties of the Board. –

(A) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of
air transportation, and shall have the general supervision and regulation of, the jurisdiction and control
over, air carriers, general sales agents, cargo sales agents, and airfreight forwarders as well as their property,
property rights, equipment, facilities, and franchise, in so far as may be necessary for the purpose of
carrying out the provisions of this Act.
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(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter 4 of this Act, to issue, deny, amend, revise, alter, modify,
cancel, suspend, or revoke, in whole or in part, upon petition or complaint, or upon its own initiative, any
temporary operating permit or Certificate of Public Convenience and Necessity; Provided, however, That in
the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic
of the Philippines. (Note: this was involved in PAL v CAB (1968))

(2) To fix and determine reasonable individual, joint or special rates, charges or fares, which an air carrier
may demand, collect or receive for any service in connection with air commerce. The Board may adopt any
original, amended, or new individual, joint or special rates, charges or fares proposed by an air carrier if the
pro- posed individual, joint, or special rates, charges for fares are not unduly preferential or unduly
discriminatory or unreasonable. The burden of proof to show that the proposed individual, joint or special
rates, charges or fares are just and reasonable shall be upon the air carrier proposing the same.
In fixing rates, charges, fares under the provisions of this Act, the Board shall take into consideration, among
other factors:
(a) The effect of such rates upon the movement of traffic;
(b) The need in the public interest of adequate and
efficient transportation of persons and property by air carriers at the lowest cost consistent with the
furnishing of such service.
(c) Such standards respecting the character and quality of service to be rendered by air carriers as may be
prescribed by or pursuant to law;
(d) The inherent advantages of transportation by aircraft; and
(e) The need of each air carrier for revenues sufficient to enable such air carrier, under honest, economical,
and efficient management, to provide ade- quate and efficient air carrier service.
(3) To authorize any type of charters whether domestic or international and special air services or flight
under such terms and conditions as in its judgment public interest requires. Notwithstanding the existence
of bilateral air agreement, the CAB is authorized to grant any foreign airline increase in frequencies and/or
capacities on international routes when in its judgment the national interest requires it, provided that the
utilization of the increase frequencies and capacities is not more than thirty days. All grants of frequencies
and/or capacities shall be subject to the approval of the President.
(4) To approve or disapprove increase and/or decrease of capital, lease, pur- chase, sales of aircraft of air
carrier engaged in air commerce; consolidation, merger, purchase, lease and acquisition and control of
operating contracts between domestic foreign air carriers, or between domestic air carriers or any person
engaged in any phase of aeronautics.
(5) To inquire into the management of the business of any air carrier and, to the extent reasonably necessary
for such inquiry, to obtain from such carrier, and from any person controlling, or controlled by, or under
common control with, such air carrier, full and complete reports and other informations. Such reports shall
be under oath whenever the Board so requires.
(6) To require annual, monthly, periodical, and special reports from any air carrier, to prescribe the manner
and form in which such reports shall be made, and to re- quire from any air carrier specific answers to all
questions upon which the Board may deem information to be necessary. Such reports shall be under oath
whenever the Board so requires. The Board may also require any air carrier to file with it any contract,
agreement, understanding or arrangement, or a true copy thereof, between such air carrier and any other
carrier or person, in relation to any traffic affected by the provisions of this Act.
(7) To prescribe the forms of any and all accounts, records, and memoran- da of the movement of traffic, as
well as of the receipts and expenditures of money, and the length of times such accounts, records and
memoranda shall be preserved: Provid- ed, that any air carrier may keep additional accounts, records, or
memoranda if they do not impair the integrity of the accounts, records, or memoranda prescribed or
approved by the Board and do not constitute an undue financial burden on such air carrier.
(8) To require each officer and director of any air carrier to transmit a report describing the shares of stock
with any persons engaged in any phase or other interest held by such air carrier of aeronautics, and the
holding of the stock in and control of, oth- er persons engaged in any phase of aeronautics.

CASES:
• CAB; Authority to issue TOP—Sec 10-C (1) of RA 776 explicitly authorizes CAB to issue a Temporary Operating
Permit. Nothing contained in either said section or CH4 of RA 776, negates the power to issue TOP before the
completion of applicant’s evidence and that of the oppositor on the main petition. CAB’s authority to grant a
TOP “upon its own initiative” strongly suggests the power to exercise said authority, even before the
presentation of evidence has begun.(PAL v CAB (1968)) Assuming arguendo that a legislative franchise is a
prerequisite to the issuance of a permit, the absence of the same does not affect the jurisdiction of the Board to
hear the application, but tolls only upon the ultimate issuance of the requested permit (PAL v CAB (1997))
o The policy of our public service law sanctions the issuance of TOP or CPCN before the submission of a
case for decision on the merits. (PAL v CAB (1968))
o TOP; Factors considered—1) the service be required by public convenience and necessity; and 2)
applicant is fit, as well as willing and able to render such service properly, in conformity with law and
pertinent rules, regulations and requirements. (PAL v CAB (1968))
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CLASS DISCUSSION:
• Which agency is tasked to regulate the transportation industry? DOTC
• Distinguish the 2 agencies regulating air transportation.
CAAP CAB
Registration; Airman’s certificate Economic aspect (as a business)
• Distinguish the 2 agencies regulating land transportation
LTFRB LTO
Economic aspect Registration (all vehicles)
• What is the difference bet agencies regulating air transpo and those regulating land transpo? Agencies regulating
air transpo are attached to DOTC only for policy and program coordination while agencies regulating land
transpo are under the control and supervision of DOTC and DOTC has appellate jurisdiction over them. In short,
there is a shorter leash for land than air. Why? Land transpo needs more regulation because there are more
players as it requires less capital and more people use it.

b. Land
CASES:
• Deregulation; Fare range scheme—Under Sec 16 (c) of the Public Service Act, Congress delegated to the defunct
PSC the power of fixing rates of public servies. LTFRB, the existing regulatory body, today is likewise vested
with the same power under Sec 5 (c) EO 202. Thus, LTFRB is entrusted with the power of subordinate legislation.
With this authority, the administrative body may implement broad policies laid down in a statute by filling in
the details, which the Congress may neither have time or competence to provide. However, nowhere under the
aforesaid provisions of law are regulatory bodies authorized to delegate that power to a common carrier, a
transport operator or other public service. (KMU v Garcia)
o Eg. Authority given by LTFRB to provincial bus operators to set a fare ranger of plus or minus 15%,
later increased to plus 20% minus 25%, over and above the existing authorized fare without having to
file a petition for the purpose is tantamount to undue delegation of legislative authority. Effects: (1)
leave the riding public at the mercy of transport operators who may increase fairs every hour, day,
month or year, whenever it pleases them or whenever they deem it “necessary” to do so. (2)
compounded fare (computed in a manner similar to those of compounded bank interest rates)—addtl
amount equiv to 20% over and above the authorized fare over a period of time (KMU v Garcia)
o Potestas delegate non delegari potest. (What has been delegated cannot be delegated); ratio—delegated
power constitutes not only a right but also a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the intervening mind of another. (KMU v Garcia)
• Rate-fixing—a delicate and sensitive government function that requires dexterity of judgment and sound
discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility and
the public. (KMU v Garcia)
• Rate -fixing; just and reasonable rates—the rate should enable the public utilities to generate revenues sufficient
to cover operational costs and provide reasonable return on the investments. On the other hand, a rate, which is
too high becomes discriminatory, and contrary to public interest. A just and reasonable rate must be affordable
to the end user who will utilize the services. (KMU v Garcia)
• Rate-fixing; notice and hearing—notice and hearing cannot be done away with. The people, represented by
reputable oppositors, deserve to be given full opportunity to be heard in the opposition to any fare increase.
(KMU v Garcia)
• CPC; Incompatible with presumption of public need—CPC is an authorization granted by LTFRB for the
operation of land transportation services for public use as required by law. Requirements are enumerated in Sec
16 (a) of the Public Service Act. One of which is the applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the public interest in a proper and suitable manner.
(Sec 16 (a)(iii)) This is entirely incompatible with “a presumption of public need in favor of an applicant for a
proposed transport service without the necessity of having to prove public necessity”. In case of a conflict
between a statute and an AO, the former must prevail. (KMU v Garcia)
• CPC; Public convenience and necessity—generally means something fitting or suited to the public need. It exists
when the proposed facility or service meets a reasonable want of the public and supply a need which the
existing facilities do not adequately supply. It is a question of fact, established by evidence in a public hearing
conducted for that purpose. Basic convenience is the primary consideration for which a CPC is issued. Therefore,
an applicant must at all times, be required to prove his capacity and capability to furnish the service which he
has undertaken to render. (KMU v Garcia)

i. Land Transportation Office

EO 125-A

Sec. 9. Assistant Secretaries and Service Chiefs. The Secretary shall also be assisted by eight (8) Assistant Secretaries
appointed by the President upon the recommendation of the Secretary, each of whom shall respectively be
responsible for the following four (4) staff offices composed of eight (8) services and four (4) line offices, and shall
report to the respective Undersecretaries assigned by the Secretary, which Undersecretary shall have control and
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supervision over said respective services and offices:
(a) Office of the Assistant Secretary for Administrative and Legal Affairs;
1) Administrative Service, and
2) Legal Service
(b) Office of the Assistant Secretary for Finance and Comptrollership;
1) Finance and Management Service, and
2) Comptrollership Service
c) Office of the Assistant Secretary for Planning and Project Development;
1) Planning Service, and
2) Project Development Service
(d) Office of the Assistant Secretary for Management Information Service and Project Management;
1) Management Information Service, and
2) Project Management Service
e) Office of the Assistant Secretary for Land Transportation;
(f) Office of the Assistant Secretary for Postal Services;
(g) Office of the Assistant Secretary for Telecommunications;
(h) Office of the Assistant Secretary for Air Transportation.
Each of the above-named services shall be headed by a service chief appointed by the President upon the
recommendation of the Secretary."

"Sec. 11. Department Regional Offices. The Department shall have three (3) Department Regional Offices in each of
the administrative regions of the country: the Department Regional Office for land Transportation, the Department
Regional Office for Telecommunications and the Department Regional Office for Postal Services. The present
Regional Offices of the Land Transportation Commission are hereby abolished and their functions are transferred
to the respective Department Regional Offices for Land Transportation. The present Regional Offices of the Bureau
of Telecommunications are hereby abolished and their functions are transferred to the respective Department
Regional Offices for Telecommunications. The present Regional Offices of the Bureau of Posts are hereby abolished
and their functions are transferred to the corresponding Department Regional Offices for Postal Services. Each
Department Regional Office shall be headed by a Department Regional Director and assisted by a Department
Assistant Regional Director. The present Airport Offices of the Bureau of Air Transportation are hereby abolished
and their functions are transferred to the Department Airport Offices. The abolition of the herein Regional Offices
and the transfer of their functions shall be governed by the provisions of Section 15 (b) hereof.
The Department Regional Offices shall essentially be line in character and shall be responsible for the delivery of all
front line services of the Department.
For such purposes, the Department Regional Offices shall have within their respective administrative regions, the
following functions:
(a) Implement laws, and policies, plans, programs, projects, rules and regulations of the Department;
(b) Provide efficient, and effective service to the people;
(c) Coordinate with regional offices of other departments, offices and agencies;
(d) Coordinate with local government units;
(e) Perform such other functions as may be provided by law."

Sec. 13. Abolition/Transfer/Consolidation:

(a) The Land Transportation Commission is hereby abolished and its staff functions are transferred to the service
offices of the Department Proper and its line functions are transferred to the Department Regional Offices for Land
Transportation as provided in Section 11 herein. Such transfer of functions is subject to the provisions of Section 15
(b) hereof. The quasi-judicial powers and functions of the Commission are transferred to the Department. The
corresponding position structure and staffing pattern shall be approved and prescribed by the Secretary pursuant
to Section 16 hereof.

EO 292
TITLE XV
Section 9.Line Offices. - The Department shall have the following line offices:
(1) The Office of the Assistant Secretary for Land Transportation;
xxx
The line offices shall each have an Executive Director who shall assist the respective Assistant Secretary in the
implementation and enforcement of the policies, programs and projects, and the pertinent laws on their respective
areas of responsibilities.

ii. Land Transportation Franchising and Regulatory Board

EO 202

Sec. 1. Creation of the Land Transportation Franchising and Regulatory Board. There is hereby created in the
Department of Transportation and Communications, the Land Transportation Franchising and Regulatory Board
hereinafter referred to as the "Board".

Sec. 2.Composition of the Board. The Board shall be composed of a Chairman and two (2) members with the same
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rank, salary and privileges of an Assistant Secretary, all of whom shall be appointed by the President of the
Philippines upon recommendation of the Secretary of Transportation and Communications. One (1) member of the
Board shall be a member of the Bar and shall have engaged in the practice of law in the Philippines for at least five
(5) years, another a holder of a degree in civil engineering, and the other a holder of a degree in economics, finance
or management both with the same number of years of experience and practice.

Sec. 4. Supervisionand Control Over the Board. The Secretary of Transportation and Communications, through his
duly designated Undersecretary, shall exercise administrative supervision and control over the Land
Transportation Franchising and Regulatory Board.

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

Sec. 6. Decision of the Board; Appeals therefrom and/or Review thereof. The Board, in the exercise of its powers
and functions, shall sit and render its decisions en banc. Every such decision, order, or resolution of the Board must
bear the concurrence and signature of at least two (2) members thereof.
The decision, order or resolution of the Board shall be appealable to the Secretary within thirty (30) days from
receipt of the decision: Provided, That the Secretary may motu proprio review any decision or action of the Board
before the same becomes final.

Sec. 7. Creation of Regional Franchising and Regulatory Offices. There shall be a Regional Franchising and
Regulatory Office in each of the administrative regions of the country which shall be headed by a Board Regional
Manager having the rank, salary and privileges of a Department Assistant Regional Director. The Regional
Franchising and Regulatory Offices shall hear and decide uncontested applications/petitions for routes, within
their respective administrative regions: Provided, That applications/petitions for routes extending their respective
territorial jurisdictions shall be heard and decided by the Board.

EO 292
TITLE XV
CHAPTER 5
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Regulatory Board

SECTION 15. Land Transportation Franchising and Regulatory Board.—The quasi-judicial powers and functions
with respect to land transportation shall be exercised through the Land Transportation and Regulatory Board,
hereinafter referred to as the “Board”.

SECTION 16. Composition of the Board.—The Board shall be composed of a Chairman and two (2) members with
the rank, salary and privileges of an Assistant Secretary, all of whom shall be appointed by the President of the
Philippines upon recommendation of the Secretary of Transportation and Communications. One (1) member of the
Board shall be a member of the Bar and shall have been engaged in the practice of law in the Philippines for at least
five (5) years, another a holder of a degree in civil engineering, and the other a holder of a degree in economics,
finance or management both with the same number of years of experience and practice.

SECTION 17. Executive Director and Support Staff of the Board.—The Board shall have an Executive Director
who shall also be appointed by the President of the Philippines upon the recommendation of the Secretary of
Transportation and Communications. He shall have the rank, salary and privileges of a Department Service Chief.
He shall assist the Board in the performance of its powers and functions.
The Board shall be supported by the Technical Evaluation Division, Legal Division, Management Information
Division, Administrative Division and Finance Division.

SECTION 18. Supervision and Control Over the Board.—The Secretary of Transportation and Communications,
through his duly designated Undersecretary, shall exercise administrative supervision and control over the Land
Transportation Franchising and Regulatory Board.

SECTION 19. Powers and Functions of the Land Transportation Franchising and Regulatory Board.—The Board
shall:
(1) Prescribe and regulate routes, economically viable capacities, and zones or areas of operation of public land
transportation services provided by motorized vehicles in accordance with the public land transportation
development plans and programs approved by the Department of Transportation and Communications;
(2) Issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation
of public land transportation services provided by motorized vehicles, and prescribe the appropriate terms and
conditions therefor;
(3) Determine, prescribe, approve and periodically review and adjust reasonable fares, rates and other related
charges, relative to the operation of public land transportation services provided by motorized vehicles;
(4) Issue preliminary or permanent injunction, whether prohibitory or mandatory, in all cases in which it has
jurisdiction and in which cases the pertinent provisions of the Rules of Court shall apply;
(5) Punish for contempt of the Board, both direct and indirect, in accordance with the pertinent provisions of, and
the penalties prescribed by, the Rules of Court;
(6) Issue subpoena and subpoena duces tecum and to summon witnesses appear in any proceedings of the Board,
to administer oaths and affirmations, and, in appropriate cases, to order the search and seizure of all vehicles and
documents, upon probable cause and as may be necessary for the proper disposition of the cases before it;
(7) Conduct investigations and hearings of complaints for violation of the public service laws on land
transportation and of the Board’s rules and regulations, orders, decisions or rulings and to impose fines or penalties
for such violations;
(8) Review motu proprio the decisions/actions of the Regional Franchising and Regulatory Offices;
(9) Promulgate rules and regulations governing proceedings before the Board and the Regional Franchising and
Regulatory Office. However, except with respect to paragraphs 4, 5, 6 and 7 hereof, the rules of procedure and
evidence prevailing in the courts of law should not be controlling but rather the spirit and intention of said rules.
The Board and the Regional Franchising and Regulatory Offices shall use every and all reasonable means to
ascertain facts in each case speedily and objectively and without regard to technicalities of law and procedures, all
in the interest of due process;
(10) Fix, impose and collect, and periodically review and adjust, reasonable fees and other related charges for
services rendered;
(11) Formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public
utilities, standards of measurements or design, and rules and regulations requiring operators of any public land
transportation service to equip, install and provide in their utilities and in their stations such devices, equipment,
facilities and operating procedures and techniques as may promote safety, protection, comfort and convenience to
persons and property in their charges as well as the safety of persons and property within their areas of operation;
(12) Coordinate and cooperate with other government agencies and entities concerned with any aspect involving
public land transportation services with the end in view of effecting continuing improvement of such services; and
(13) Perform such other functions and duties as may be provided by law, or as may be necessary, or proper or
incidental to the purposes and objectives of the Department;

SECTION 20. Decisions of the Board; Appeals therefrom or Review Thereof.—The Board, in the exercise of its
powers and functions, shall sit and render its decision en banc. Every such decision, order, or resolution of the
Board must bear the concurrence and signature of at least two (2) members thereof.
The decision, order or resolution of the Board shall be appealable to the Secretary within thirty (30) days from

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receipt of the decision. However, the Secretary may motu proprio review any decision or action of the Board before
the same becomes final.

SECTION 21. Regional Franchising and Regulatory Offices.—There shall be a Regional Franchising and
Regulatory Office in each of the administrative regions of the country which shall be headed by a Regional Director
having the rank, salary and privileges of a Department Assistant Regional Director. The Regional Franchising and
Regulatory Offices shall hear and decide uncontested applications/petitions for routes, within their respective
administrative regions but that applications/petitions for routes extending beyond their respective territorial
jurisdiction shall be heard and decided by the Board.

SECTION 22. Appeals.—The decisions, orders or resolutions of the Regional Franchising and Regulatory Offices
shall be appealable to the Board within thirty (30) days from receipt of the decision.

c. Water
i. Maritime Industry Authority
EO 125, as amended by EO 125-A

Sec. 3. Section 14 of said Executive Order is hereby renumbered as Section 12 and amended to read as follows:
"Sec. 12. Maritime Industry Authority. The Maritime Industry Authority is hereby retained and shall have the
following functions:
(a) Develop and formulate plans, policies, programs, projects, standards, specifications and guidelines geared
toward the promotion and development of the maritime industry, the growth and effective regulation of shipping
enterprises, and for the national security objectives of the country;
(b) Establish, prescribe and regulate routes, zones and/or areas of operation of particular operators of public water
services;
(c) Issue Certificates of Public Convenience for the operation of domestic and overseas water carriers;
(d) Register vessels as well as issue certificates, licenses or documents necessary or incident thereto;
(e) Undertake the safety regulatory functions pertaining to vessel construction and operation including the
determination of manning levels and issuance of certificates of competency to seamen;
(f) Enforce laws, prescribe and enforce rules and regulations, including penalties for violations thereof, governing
water transportation and the Philippine merchant marine, and deputize the Philippine Coast Guard and other law
enforcement agencies to effectively discharge these functions;
(g) Undertake the issuance of licenses to qualified seamen and harbor, bay and river pilots;
(h) Determine, fix and/or prescribe charges and/or rates pertinent to the operation of public water transport
utilities, facilities and services except in cases where charges or rates are established by international bodies or
associations of which the Philippines is a participating member or by bodies or associations recognized by the
Philippine Government as the proper arbiter of such charges or rates.
(i) Accredit marine surveyors and maritime enterprises engaged in shipbuilding, shiprepair, shipbreaking,
domestic and overseas shipping ship management and agency;
(j) Issue and register the continuous discharge book of Filipino seamen;
(k) Establish and prescribe rules and regulations, standards and procedures for the efficient and effective discharge
of the above functions;
(l) Perform such other functions as may now or hereafter be provided by law."

RA 9295

SEC. 8.Deregulation of the Domestic Shipping Industry. - In order to encourage investments in the domestic
shipping industry by existing domestic ship operators and attract new investment from new operators and
investors, domestic ship operators are hereby authorized to establish their own domestic shipping rates: Provided,
That effective competition is fostered and public interest is served.
The MARINA shall monitor all shipping operations and exercise regulatory intervention where it is established
after due process that public interest needs to be protected and safeguarded.

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

SEC. 11.Rates. - Every domestic ship operator shall have the right to fix its own passenger pr cargo rates, or both.

II. Common Carriers

A. In General
1) Definitions, essential elements
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

CASES:
• Public utility (Sec 14 of Act 2307)—elements: (1) the individual, copartnership, etc must be a public utility and (2) the
business in which such individual, copartnership, etc is engaged must be for public use. So long as such individual,
copartnership, etc is engaged in a purely private enterprise, without attempting to render service to all who may apply,
he is not a public utility for public use. (US v Tan Piaco)
• Public use—“use by the public”. (US v Tan Piaco)
• Public use; essential feature—indefinite or unrestricted quality (not confined to privilege individuals but open to the
indefinite public). There must be, in general, a right, which the law compels the power to give to the general public.
Public use is not synonymous with public interest.The true criterion: whether the public may enjoy it by right or only by
permission(US v Tan Piaco)
o Look into the character of the business to be done and the proposed mode of doing it. If the use is merely
optional with the owners or the public benefit is merely incidental, it is not a public use. (US v Tan Piaco)
o Eg. Not for public use—Renting of 2 automobile trucks used on highways to carry passengers and freight under
a special contract in each case without holding oneself out to carry all passengers and all freight for all persons
who might offer passengers and freight. (US v Tan Piaco)
• Common carrier; NCC 1732—extends to carrier either by land, air or water, which hold themselves out as ready to engage
in carrying goods or transporting passengers or both for compensation as a public employment and not as a casual
occupation (PPI v CA), offering his services to the public generally (FPIC v CA)
o Common carrier; does not include travel agency—object of contract with travel agency: service of arranging and
facilitating client’s booking, ticketing and accommodation in the package tour:: object of contract of carriage:
transportation of passengers or goods. Standard of care for travel agencies: diligence of a good father of a family
(Crisostomo v CA)
• Common carrier; NCC 1732 in relation to Public Service Act—concept of common carrier under NCC 1732 coincide neatly
with notion of public service under Public Service Act, which partially supplements the law on common carriers in NCC.
Sec 13(b) of Public Service Act: “with general or limited clientele, whether permanent, occasional, or accidental, and done
for general business purpose”
• Common carrier; NCC 1732 makes no distinction—between: (1) principal business and ancillary activity (2) regular or
scheduled basis and occasional, episodic or unscheduled basis (3)to the general public and to a narrow segment of the
general population
o Eg. De Guzman’s is considered a common carrier even though he merely backhauled goods for other merchants
from Mla to Pangasinan, although such back-hauling was done on a periodic rather than regular manner and
even though his principal occupation was not the carriage of goods for others. (De Guzman v CA)
! Note: In this case, SC also held that CPC is not a requisite for the incurring of liability under CC
provisions governing common carriers. That liability arises the moment a person or firm acts as a
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common carrier, without regard to whether or not such carrier has also complied with the requirements
of the applicable regulatory statute and implementing regulations and has been granted a certificate of
public convenience or other franchise. To exempt private respondent from the liabilities of a common
carrier because he has not secured the necessary certificate of public convenience, would be offensive to
sound public policy; that would be to reward private respondent precisely for failing to comply with
applicable statutory requirements.
o E.g. Asia Lighterage contends that it is a private carrier with no fixed and publicly known route, maintains no
terminals and issues no tickets. Held: The principal business of the petitioner is that of lighterage and
drayage and it offers its barges to the public for carrying or transporting goods by water for compensation. Asia
Lighterage is clearly a common carrier, whether its carrying of goods is done on an irregular rather than
scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly
known routes. Neither does it have to maintain terminals or issue tickets. (Asia Lighterage v CA)
• Common carrier; test—whether the given undertaking is part of the business engaged in by the carrier which he has held
out to the general public as his occupation rather than the quantity or extent of the business transacted. (Bascos v CA)
o Common carrier; another test—(1) He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of goods for person generally
as a business and not as a casual occupation; (2) He must undertake to carry goods of the kind to which his
business is confined; (3) He must undertake to carry by the method by which his business is conducted and over
his established roads; and (4) The transportation must be for hire. (FPIC v CA)
o E.g. Bascos made the admission that she was in the trucking business, offering her trucks to those with cargo to
move. JA are conclusive and no evidence is required to prove the same. (Bascos v CA)
o E.g. Grantee of a pipeline concession is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common
carrier. [Other supporting laws: Art 86 of RA 387 or Petroleum Act of the Philippines—Pipeline concessionaire as
common carrier; Art 7 of RA 387—Petroleum operation as public utility; BIR Ruling 69-83] Therefore, it is
exempt from business tax as provided for in Sec 133 (j) of LGC. (FPIC v CA)CLASS DISCUSSION: Is there a
common carrier in this case? The case doesn’t deal with its liability as a common carrier. The crux of the case is tax
• Common carrier; distinguished from a private or special carrier—Private carrier is a person or corporation offering a
service, and the undertaking is a single transaction, not a part of the general business or occupation although involving
the carriage of goods for a fee. (PPI v CA)
o Difference between common carriers and private carriers:
Common carrier Private carrier
Extraordinary diligence Ordinary diligence
Presumption of fault or negligence in the case of No such presumption
loss, destruction or deterioration of the goods Whoever alleges damage to or deterioration of the
Has the burden of proving otherwise goods carrier has the burden of proving the cause was
the negligence of the private carrier
o No control over conduct of driver—[A] person who hires a public automobile and gives the driver directions as
to the place to which he wishes to be conveyed, but exercises no other control over the conduct of the driver, is
not responsible for acts of negligence of the latter or prevented from recovering for injuries suffered from a
collision between the automobile and a train, caused by the negligence or the automobile driver (Fabre v CA—
quick facts: bus service for school children hired by Word of World Christian Fellowship Inc for transportation
of 33 members from Mla to La Union and back)CLASS DISCUSSION:definition of private carrier=single transaction
• Bill of lading—(1) receipt and (2) document of title, (3) a contract (CLASS DISCUSSION: BUT in Home Insurance v
American Steamship, except # 3: not a contract of common carriage because the contract was the charter party)
• Charter-party—A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by
the owner to another person for a specified time or use. (PPI v CA)
• Charter-party; Types—(PPI v CA)
a) Contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a
whole, to carry goods for others (REMAINS PUBLIC)
i. time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
ii. voyage charter, wherein the ship is leased for a single voyage.
o E.g. Caltex v Sulpicio—voyage charterer is not liable for damages resulting from a collision
between the chartered vessel and a passenger ship. The rights and responsibilities of ownership
rest on the owner. The charterer is free from liability to third persons in respect of the ship. Note:
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered
is seaworthy. The duty rests upon the common carrier simply for being engaged in public service. (Implied
warranty of seaworthiness under Sec 3(1) of COGSA is based on the fact that public must of necessity rely
on the care and skill of common carriersin the vigilance over the goods and safety of the passengers, especially
because with the modern development of science and invention, transportation has become more rapid, more
complicated and somehow more hazardous)
• In both cases, the charter-party provides for the hire of vessel only, either for a determinate period of
time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages
of the master and the crew, and defray the expenses for the maintenance of the ship.
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o Eg. While the possession and control of the ship not entirely transferred to the charterer, the vessel was chartered
to its full and complete capacity. The charter had the option to go north or south or v.v., loading, stowing and
discharging at risk and expense.(Home Insurance v American Steamship)
b) Charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control over its navigation, including the
master and the crew, who are his servants. (BECOMES PRIVATE)
• Common carrier; special cargo—provisions of CC on common carriers were taken from Anglo-American law. Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only,
becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its
agent is valid, and not contrary to public policy. The CC provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier. (Home Insurance v American Steamship) CLASS DISCUSSION: This
has been overturned by PPI v CA: the rule in US does not find application in our jurisdiction for the growing concern for safety in the
transportation of passengers and/or carriage of goods by sea requires a more exacting interpretation of rules governing common
carriers.
CLASS DISCUSSION:
• Who is the shipper? Owner of goods; contracts with carrier to carry goods
• Who is the consignee? One to receive the goods
• Who is the carrier? One which carries the goods
• Concept/ Definition of common carrier: trend is towards liberal construction but not liberal enough to include travel
agency. Just remember 3 things: 1) carriage 2) for hire 3) does not discriminate within its market

AGBAYANI
Transportation defined.-- a contract of transportation is one whereby a certain person or association of persons obligate themselves to
transport persons, things, or news from one place to another for a fixed price
Classification :
1. As to object: (1) things; (2) persons; (3) news
2. As to place of travel: (1) land; (2) water; (3) air
Parties to contract of transportation:
(1) shipper or consignor.-- person to be transported; one who gives rise to the contract of transportation by agreeing to deliver the things
or news to be transported, or to present his own person or those of other or others in the case of transportation of passengers
(2) carrier or conductor.-- one who binds himself to transport persons, things, or news as the case may be; one employed in or engaged in
the business of carrying goods for other for hire
(3) consignee.-- the party to whom the carrier is to deliver the things being transported; one to whom the carrier may lawfully make
delivery in accordance with its contract of carriage (but the shipper and the consignee may be one person)
Freight defined.-- The terms has been defined as:
(1) the price or compensation paid for the transportation of goods by a carrier, at sea, from port to port. But the term is also used to
denote (2) the hire paid for the carriage of goods on land from place to place, or on inland streams or lakes. The name is also applied to
(3) the goods or merchandise transported at sea, on land, or inland streams or lakes.
Thus the term is used in 2 senses: to designate the price for the carriage, also called freightage, or to designate the goods carried.
Contracts through transportation agents.—A contract of transportation is not changed, altered or affected by the mere fact that the
obligor avails of other parties to effect the transportation agreed upon, as in the case of transportation agents.
Carriers defined.-- Persons or corporations who undertake to transport or convey goods, property or persons, from one place to
another, gratuitously or for hire, and are classified as private or special carriers, and common or public carriers
Private carriers defined.-- Those who transport or undertake to transport in a particular instance for hire or reward
Common carriers vs Private carriers:
(1) the common carrier holds himself out in common, that is, (1) the private carrier agrees in some special case with some
to all persons who choose to employ him, as ready to carry for private individual to carry for hire
hire; no one can be a common carrier unless he has held himself
out to the public as a carrier in such a manner as to render him
liable to an action if he should refuse to carry for anyone who
wished to employ him
(2) a common carrier is bound to carry all who offer such goods as (2) a private carrier is not bound to carry for any reason, unless it
it is accustomed to carry and tender reasonable compensation for enter into a special agreement to do so
carrying them
(3) a common carrier is a public service and is therefore subject to (3) a private carrier does not hold itself out as engaged in the
regulation business for the public, and is therefore not subject to regulation
as a common carrier.

Test for a common carrier:

(1) He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to
engage in the transportation of goods for persons generally as a business, and not a casual occupation.
(2) He must undertake to carry goods of the kind to which his business is confined.
(3) He must undertake to carry by the methods by which his business is conducted, and over his established roads.
(4) The transportation must be for hire.

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The true test is whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business actually transacted, or the no. and character of the
conveyances used in the employment (the test is therefore the character of the business actually carried on by the carrier.)
Case : an airplane owner is a common carrier where he undertakes for hire to carry all persons who apply for passage indiscriminately
as long as there is room and no legal excuse for refusing; airlines engaged in the passenger service on regular schedules on definite
routes, who solicit patronage of the traveling public, advertise schedules for routes, times of leaving and rates of fare, and make the
usual stipulation as to baggage are common carriers
Characteristics of common carriers:
(1) The common carrier undertakes to carry for all people indifferently; he holds himself out as ready to engage in the transportation of
goods for hire as a public employment and not as a casual occupation, and he undertakes to carry for all persons indifferently, within
the limits of his capacity and the sphere of the business required of him, so that he is bound to serve all who apply and is liable for
refusal, without sufficient reason, to do so
(2) The common carrier cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic in those
goods
Exception : for some sufficient reason, where the discrimination in such goods is reasonable and necessary (substantial grounds)
(3) No monopoly is favored - the Commission has the power to say what is a reasonable compensation to the utility and to make
reasonable rules and regulations for the convenience of the traveling public and to enforce them
(4) Public convenience - for the best interests of the public
Meaning of Public use.-- It is not confined to privileged individuals, but is open to the indefinite public; there must be a right which
the law compels the owner to give to the general public. Public use is not synonymous with public interest. The true criterion is
whether the public may enjoy it by right or only by permission
The law prohibits unreasonable discrimination by common carriers.-- The law requires common carriers to carry for all persons,
either passengers or property, for exactly the same charge for a like or contemporaneous service in the transportation of like kind of
traffic under substantially similar circumstances or conditions. The law prohibits common carriers (CC) from subjecting any person,
etc. or locality, or any kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever.
Exception: When the actual cost of handling and transporting is different, then different rates may be charged
Cases : (1) merchandise of like quantity may not be considered alike - the quantity, kind and quality may be exactly the same, and yet
not be alike, so far as the cost of transportation is concerned
(2) shipments may be alike although composed of different classes of merchandise - difference in the charge for handling and
transporting may only be made when the difference is based upon actual cost
Determination of justifiable refusal:
This involves a consideration of the following--
(1) suitability of the vessels of the company for the transportation of such products;
(2) reasonable possibility of danger or disaster, resulting from their transportation in the form and under the conditions in which they
are offered for carriage;
(3) the general nature of the business done by the carrier;
(4) all the attendant circumstances which might affect the question of the reasonable necessity for the refusal by the carrier to undertake
the transportation of this class of merchandise
Case: The mere fact that the carriage of dynamites may lead to destructive explosions is not sufficient to justify refusal if it can be
proven that in the condition in which it is offered for carriage there is no real danger to the carrier nor reasonable ground to fear that
the vessel and those on board will be exposed to unnecessary or unreasonable risks.
2) Nature of Business; power of State to regulate
Art. 1765. The Public Service Commission may, on its own motion or on petition of any
interested party, after due hearing, cancel the certificate of public convenience granted to any
common carrier that repeatedly fails to comply with his or its duty to observe extraordinary
diligence as prescribed in this Section.
CASE:
• Power of State to regulate—This right of the state to regulate public utilities is founded upon the police power, and
statutes for the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as
well as of the utilities themselves. Such statutes are, therefore, not unconstitutional, either impairing the obligation of
contracts, taking property without due process, or denying the equal protection of the laws, especially inasmuch as
the question whether or not private property shall be devoted to a public and the consequent burdens assumed is
ordinarily for the owner to decide; and if he voluntarily places his property in public service he cannot complain that
it becomes subject to the regulatory powers of the state. (51 C. J., sec. 21, pp. 9-10.) in the light of authorities which
hold that a certificate of public convenience constitutes neither a franchise nor contract, confers no property right,
and is mere license or privilege. (Pantranco v PSC)
o Example—Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public Service
Commission but are "a part of the charter of every utility company operating or seeking to operate a
franchise" in the Philippines. (Streator Aqueduct Co. v. et al., 295 Fed. 385.) The business of a common
carrier holds such a peculiar relation to the public interest that there is superinduced upon it the right of
public regulation. When private property is "affected with a public interest it ceased to be juris privati only."
• Power to regulate; Applicability of statutes—Statutes enacted for the regulation of public utilities, being a proper
exercise by the state of its police power, are applicable not only to those public utilities coming into existence after its
passage, but likewise to those already established and in operation. As soon as the power is exercised, all phases of
operation of established utilities, become at once subject to the police power thus called into operation.

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AGBAYANI
Common carriers are subject to legislative regulation.-- The business of a common carrier holds such a peculiar relation to the public
interest that there is superinduced upon it the right of public regulation. The business of a common carrier is affected with public
interest. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an
interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he had thus
created.
Limitation on power to regulate.—Such regulations must not have the effect of depriving an owner of his property without due
process of law, nor of confiscating, or appropriating private property without just compensation, nor of limiting or prescribing
irrevocably vested rights or privileges lawfully acquired under a charter or franchise [just compensation, due process of law]
When judiciary may interfere with legislative regulation of common carriers.-- The judiciary ought not to interfere with legislative
regulations unless they are so plainly and palpably unreasonable as to make their enforcement equivalent to the taking of property for
public use without such compensation as under all circumstances is just both to the owner and to the public.

3) Nature and Basis of Liability

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5,
6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.
CASES
• Liability; based on contract; direct and immediate—The contract of defendant to transport plaintiff carried with it, by
implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains (civil code, article
1258). That duty, being contractual, was direct and immediate, and its non-performance could not be excused by proof that the
fault was morally imputable to defendant's servants.
o The liability of masters and employers for the negligent acts or omissions of their servants or agents, when such acts
or omissions cause damages which amount to the breach of a contact, is not based upon a mere presumption of the
master's negligence in their selection or control, and proof of exercise of the utmost diligence and care in this regard
does not relieve the master of his liability for the breach of his contract. (Cangco v MRR)
o The action for breach of contract imposes on the defendant carrier a presumption of liability upon mere proof of
injury to the passenger; that latter is relieved from the duty to established the fault of the carrier, or of his employees,
and the burden is placed on the carrier to prove that it was due to an unforeseen event or to force majeure (Cangco
vs. Manila Railroad Co., 38 Phil., 768, 777). Moreover, the carrier, unlike in suits for quasi-delict, may not escape
liability by proving that it has exercised due diligence in the selection and supervision of its employees (Fores v
Miranda)
o The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from
the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the
discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or
avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of carriage. (LRTA v Navidad)
o The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons
with due regard for all circumstances. Such duty of a common carrier to provide safety to its passengers so obligates
it not only during the course of the trip but for so long as the passengers are within its premises and where they
ought to be in pursuance to the contract of carriage. The statutory provisions render a common carrier liable for
death of or injury to passengers (a) through the negligence or willful acts of its employees or b) on account of willful
acts or negligence of other passengers or of strangers if the common carrier’s employees through the exercise of due
diligence could have prevented or stopped the act or omission. In case of such death or injury, a carrier is presumed
to have been at fault or been negligent, and by simple proof of injury, the passenger is relieved of the duty to still
establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure. In the absence of satisfactory explanation by the carrier
on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the
presumption would be that it has been at fault, an exception from the general rule that negligence must be proved.
(LRTA v Navidad)
• Extraordinary diligence; ratio—This extraordinary diligence required of common carriers is calculated to protect the
passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard
of care is imperatively demanded by the precariousness of human life and by the consideration that every person must in
every way be safeguarded against all injury. (Code Commission; Isaac v AL Ammen)
o Extraordinary diligence; xpn: emergency rule—"where a carrier's employee is confronted with a sudden emergency,
the fact that he is obliged to act quickly and without a chance for deliberation must be taken into account, and he is
held to the some degree of care that he would otherwise be required to exercise in the absence of such emergency but
must exercise only such care as any ordinary prudent person would exercise under like circumstances and
conditions, and the failure on his part to exercise the best judgment the case renders possible does not establish lack
of care and skill on his part which renders the company, liable. (Code Commission; Isaac v AL Ammen)
• Doctrine of Last Clear Chance; inapplicable—t]he principle about "the last clear" chance, would call for application in a suit
between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from
the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and
its owners on the ground that the other driver was likewise guilty of negligence." (Phil Rabbit v IAC)

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• Driver; not solidarily liable with carrier—The driver cannot be held jointly and severally liable with the carrier in case of
breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between
the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore to the
passenger, even if such breach be due to the negligence of his driver. In other words, the carrier can neither shift his liability
on the contract to his driver nor share it with him, for his driver's negligence his. Secondly, if We make the driver jointly and
severally liable with the carrier, that would make the carrier's liability personal instead of merely vicarious and consequently,
entitled to recover only the share which corresponds to the#driver, contradictory to the explicit provision of NCC 2181 (Phil
Rabbit v IAC)

AGBAYANI
Extraordinary diligence required of common carriers.-- The law requires CC to exercise extraordinary diligence which means that
they must render service with the greatest skill and utmost foresight. The extra-ordinary diligence required of carriers in the handling
of the goods of the shippers and consignees last from the time the cargoes are loaded in the vessels until they are discharged and
delivered to the consignees.
Reasons for requiring extra-ordinary diligence.-- The nature of the business of common carriers and the exigencies of public policy
demand that they observe extra-ordinary diligence; the business of CC is impressed with a special public duty and therefore subject to
control and regulation by the state. The public must of necessity rely on the care and skill of CC in the vigilance over the goods and
safety of the passengers
Rigorous law on common carriers not applicable to special employment as carrier.-- The laws applicable to CC are rigorous and
should not be extended to a person who has neither expressly assumed that character, nor by his conduct and from the nature of his
business justified the belief on the part of the public that he intended to assume it.
Registered owner primarily and solidarily liable with driver, under the "kabit system."—Registered owner is primarily and
solidarily liable for the damage caused by the vehicle registered in his name, even if the said vehicle had already been sold, leased or
transferred to another person who was, at the time of the accident, actually operating the vehicle. The operator of record continues to
be the operator of the vehicle in contemplation of law, as regards the public and third persons, and as such is responsible for the
consequences incident to its operation; such owner/operator of record is held in contemplation of law as the employer of the driver.
Kabit system.—One whereby a person who has been granted a certificate of public convenience allows other persons who own
vehicles to operate them under such license, for a fee or percentage of the earnings. This is contrary to public policy, and therefore, void
and inexistent; "this is a pernicious system that cannot be too severely condemned; it constitutes an imposition upon the good faith of
the govt."
Reason for holding registered owner liable.—The law does not relieve the registered owner directly of the responsibility that the law
fixes and places upon him as an incident or consequence of registration -- where a registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy for him by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite person or to one who possesses no property with which to respond financially for
the damage or injury done; in case of an accident, the registered owner should not be allowed to disprove his ownership to the
prejudice of the person injured or to be relieved from responsibility

4) Classes of Common Carriers

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

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

Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

5) Law Applicable
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by
the Code of Commerce and by special laws.

Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common
carrier for their loss, destruction or deterioration

AGBAYANI
New Civil Code primarily governs common carriers.-- The Provisions of the Civil Code [1732-1766] primarily govern common carriers
and the provisions of the Code of Commerce [Overland Transportation and Maritime Commerce] and special laws [Carriage of Goods
by Sea Act; Salvage Act] have only subsidiary application to common carriers.

B. Common Carriage of Goods

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

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether
international or civil; #
(3) Act of omission of the shipper or owner of the goods; #
(4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public
authority.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required in Article 1733.
CASES:
• Presumption of negligence—The mere proof of delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to
how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstance inconsistent with its liability. (Articles 361-363, Code of Commerce.)
(Ynchausti v Dexter)
o Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights, and when
goods are delivered on board ship in good order and condition, and the shipowner delivers them to the shipper
in bad order and condition, it then devolves upon the shipowner to both allege and prove that the goods were
damaged by the reason of some fact which legally exempts him from liability; otherwise, the shipper would be
left without any redress, no matter what may have caused the damage. (Mirasol v Dollar)
o Example—The defendant having received the two boxes in good condition, its legal duty was to deliver them to
the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in
New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of
the defendant and beyond the control of the plaintiff. The defendant having admitted that the boxes were
damaged while in transit and in its possession, the burden of proof then shifted, and it devolved upon the
defendant to both allege and prove that the damage was caused by reason of some fact which exempted it from
liability. As to how the boxes were damaged, when or where, was a matter peculiarly and exclusively within the
knowledge of the defendant and in the very nature of things could not be in the knowledge of the plaintiff. To
require the plaintiff to prove as to when and how the damage was caused would force him to call and rely upon
the employees of the defendant's ship, which in legal effect would be to say that he could not recover any
damage for any reason. (Mirasol v Dollar)

AGBAYANI
Responsibility of common carriers.—In general, CC are responsible for the loss, destruction, or deterioration of the goods carried by
them. This responsibility arises from contract, as the relation between a carrier and its patrons is of a contractual nature. A failure on
the carrier to use extra-ordinary care in carrying goods or passengers safely is a breach of contract and constitutes culpa contractual not
culpa aquiliana. While the liability of a carrier as an insurer is not recognized in this jurisdiction, a carrier is liable for damages suffered
by goods carried if such damages arise from its negligence. The carrier is also liable even in those cases where the cause of the loss or
damage is unknown.
Due extraordinary diligence required, carriers given wide discretion in selection and supervision of persons to handle goods.—The
law requires CC to exercise extra-o diligence which means that they must render service with the greatest skill and utmost foresight.
The extraordinary diligence required of CC in the handling of the goods of the shipper and the consignees lasts from the time the
cargoes are loaded in the vessels until they are discharged and delivered to the consignees. To comply with this obligation, CC should
be afforded the right of having a wide discretion in the selection and supervision of persons who will handle the goods.
Air carrier can terminate services of pilot for serious misconduct and drunkenness, because of its duty of extraordinary diligence.--
The CC can terminate the services of its drivers, pilots and EEs for serious misconduct and drunkenness because of its duty of extra-
ordinary diligence. Whenever a passenger dies or is injured the presumption is that the CC is at fault notwithstanding the fact that it
has exercised due diligence of a good father of a family in the selection and supervision of its EEs. Thus, extraordinary measures and
diligence should be exercised by it for the safety of its passengers and their belongings. A CC can terminate an EE whose continued
service is inimical to its interests and the safety of the passengers.
Carrier has duty to keep and care for goods carried.-- It is the duty of the CC to properly and carefully handle, carry, keep and care for
the goods carried and to exercise due care to ascertain and consider the nature of the goods offered for shipment and to use such
methods for their care during the voyage as their nature requires. The carrier is liable for injury to, or loss of, cargo resulting from the
failure to properly care for and handle the cargo en route; and it is required to provide adequate ventilation for the safe carriage of the
cargo, and provide reasonable and ordinary inspection and care in and about the transportation of cargo. A vessel should not accept
cargo unless it can be given the type of storage that its character requires, for placing of conditions in a bill of lading does not relieve
the vessels of obligation to take appropriate care of the cargo.
Duty of carrier to deliver cargo in good condition as when loaded.-- There is no absolute obligation for a CC to accept cargo. It should
not be accepted unless it can be given the type of storage that its character requires. Where a vessel accepts a cargo for shipment for
valuable consideration, it takes the risk of delivering it in good condition as when it was loaded. And if the fact of improper packing is
known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it
is not relieved of liability for loss or injury resulting therefrom. In the exercise of extra-ordinary diligence required by law, the CC must
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give due regard to all circumstances and take all steps necessary to insure the safety of the passengers and the goods given the
circumstances.
Presumption of negligence.-- Under Art. 1735, if the goods are proved to have been lost, destroyed or deteriorated, CC are presumed
to have been at fault or to have acted negligently, unless they prove that they have observed the extra-o diligence required by law.
The plaintiff needs only to prove that the goods he transported have been lost, destroyed or deteriorated; CC must then prove that he
has exercised extra-ordinary diligence required by law or that the loss, etc. was due to accident or some other circumstances
inconsistent with its liability
Mere proof of delivery of goods in order to a carrier, and of their arrival at the place of destination in bad order makes out a prima facie
case against the CC
Defenses available to CC:
1. Art. 1734
2. Art. 1735 (exercise of extra-ordinary diligence required by law)
3. Natural disaster: The CC is exempt from liability if he proves that the loss or destruction of the merchandise was due to accident and
force majeure and not to fraud, fault or negligence on the part of the EEs and owners of the CC.
CC cannot interpose the defense that it exercised due diligence in the selection and supervision of EEs. The liability of the CC arises
from breach of the contract of carriage and not from culpa aquiliana. It is however the duty of CC to teach their drivers not to overload
vehicles, not to exceed safe and legal speed limits, and other safety precautions.
Carrier not insurer.-- CC are not required to exercise all the care, skill and diligence of which the human mind can conceive nor such as
will free the transportation of passengers from all possible perils.
A CC is not an insurer of the safety of the passengers and is not absolutely and at all events to carry them safely and without injury.

2) Exemption from liability

a. Natural Disaster
Art. 1734 (1), supra

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must
have been the proximate and only cause of the loss. However, the common carrier must exercise due
diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural
disaster in order that the common carrier may be exempted from liability for the loss, destruction, or
deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the
public enemy referred to in Article 1734, No. 2.

Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster
shall not free such carrier from responsibility.

CODE OF COMMERCE

ART. 361. — The merchandise shall be transported at the risk and venture of the shipper, if the contrary has
not been expressly stipulated.
As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by
reason of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the
account and risk of the shipper.1äwphï1.ñët
Proof of these accidents is incumbent upon the carrier.

ART. 362. — Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes
mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage his established among careful persons, unless
the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different
from what they really were.
If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost,
on account of their nature or by reason of unavoidable accident, there being no time for their owners to dispose
of them, the carrier may proceed to sell them, placing them for this purpose at the disposal of the judicial
authority or of the officials designated by special provisions.
• Onus Probandi—“Where goods are shipped and the usual bill of lading given, ‘promising to deliver them in good order,
the dangers of the seas excepted,’ and they are found to be damaged the onus probandi is upon the owners of the vessel,
to show that the injury was occasioned by one of the excepted causes.But, although the injury may have been occasioned
by one of the excepted causes, yet still the owners of the vessel are responsible if the injury might have been avoided, by
the exercise of reasonable skill and attention on the part of the persons employed in the conveyance of the goods. But the
onus probandi then becomes shifted upon the shipper, to show the negligence.
o Example—The damage here was caused by rain and sea water — the risk of which is inherently incident to
carriage on deck — the Defendant cannot be held liable. It is not permissible for the court, in the absence of any
allegation or proof of negligence, to attribute negligence to the ship’s employees in the matter of protecting the
goods from rains and storms. The complaint on the contrary clearly indicates that the damage done was due to
the mere fact of carriage on deck, no other fault or delinquency on the part of anybody being alleged. (Martini v
Marcondray)

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• Natural Disaster; Fire—Fire may not be considered a natural disaster or calamity. This must be so as it arises almost
invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused
by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier.
o Example—1) smoke was noticed when fire was already big so must have started 24 hours before it was noticed
2) after cargoes were stored in the hatches, no regular inspection was made as to their condition during the
voyage. The crew could not have even explain what could have cause the fire. The defendant failed to
satisfactorily show that extraordinary vigilance and care had been made by the crew to prevent the occurrence of
the fire. (Eastern Shipping v IAC)
• Natural Disaster; Typhoon—
o Example; Meeting a typhoon head-on falls short of due diligence required from a common carrier. More
importantly, the officers/employees themselves of petitioner admitted that when the towing bits of the vessel
broke that caused its sinking and the total loss of the cargo upon reaching the Pasig River, it was no longer
affected by the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human factor,
i.e., negligence had intervened. (Asia Lighterage v CA)
o The loss and damage of the goods shipped by the Chinaman, Ong Bieng Sip, was due to the stranding and wreck
of#the lorcha Pilar in the heavy storm or hurricane; this the plaintiff did not deny, and admitted that it took place
between the afternoon of the 5th and early in the morning of the 6th of December, 1908, so it is evident that the
defendant is exempt from the obligation imposed by the law to prove the occurrence of the said storm,
hurricane, or cyclone in the port of Gubat, and, therefore, if said goods were lost or damaged and could not be
delivered in Catarman, it was due to a fortuitous event and a superior, irresistible natural force, or force majeure,
which completely disabled the lorcha intended for their transportation to the said port of the Island of Samar.
The record bears no proof that the said loss or damage caused by the stranding or wreck of the lorcha Pilar as a
result of the storm mentioned, occurred through carelessness or negligence on the part of the defendant
company, its agents or#the patron of the said lorcha, or because they did not take the precautions usually adopted
by careful and diligent persons, as required by article 362 of the Code of Commerce. (Tan Chiong v Inchausti)

AGBAYANI
Effect of New Civil Code.-- Transportation of the merchandise "at the risk and venture of the shipper" means that the shipper will
suffer losses and deterioration arising from fortuitous event, force majeure, or inherent nature and defects of the goods. It does not mean
that the carrier is free from liability for losses and deterioration arising from his negligence or fault, w/c is presumed. Thus construed,
par. 1 of Art. 361 is not inconsistent with Art. 1735 of the NCC.
Requisites for defense of natural disaster:
1. Art. 1739 -- natural disaster must have been the proximate and only cause of the loss
2. The CC must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of flood, storm, or other
natural disaster. If the CC does not exercise due diligence in minimizing the loss, he may yet be held liable notwithstanding the fact
that the loss, destruction or deterioration of the goods arose out of natural disaster.
3. Art. 1740 -- the CC must not be in delay. If the CC incurs in delay, a natural disaster shall not free it from responsibility. Under Art.
1165 par. 3, if the obligor incurs delay, he shall be responsible for any fortuitous event until he has effected delivery.
However, if between the delay or refusal of the CC to transport the goods and the loss of the goods due to an act of God there
intervened the shipper's negligence, thus causing a break in the chain of causation between the act of God which caused their
loss and the CC's fault, the act of God is the proximate cause of the loss and the carrier's delay or refusal to transport the goods, is
merely the remote cause. In such cases, the shipper is not even entitled to set up the claim of contributory negligence. It is then
necessary that it be established that the CC was guilty of a willful or negligent act and that between this willful or negligent act and the
act of God, no negligence on the part of the shipper intervened.
Accident due to defects of carrier not caso fortuito.-- Accidents caused either by defects in the carrier or through the negligence of the
carrier is not caso fortuito. The passenger or shipper has every right to presume that the carrier is perfectly in good condition and could
transport him safely and securely to his destination

b. Act of Public Enemy

Art 1734 (2), supra

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must
have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence
to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in
order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the
goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to
in Article 1734, No. 2.

AGBAYANI
Acts of public enemy.-- This defense is not absolute. Under 1739, in order for the CC to be exempted from liability, (1) the act of the
public enemy must have been the proximate and only cause; and (2) the CC must have exercised due diligence to prevent or minimize
the loss before, during and after the act of the public enemy causing the loss, destruction or deterioration of the goods.

c. Act or omission of shipper

Art. 1734 (3), supra

Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the
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proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages,
which however, shall be equitably reduced.

d. Character of goods, etc.

Art. 1734 (4), supra

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

CODE OF COMMERCE
Art. 366. Within twenty-four hours following the receipt of the merchandise a claim may be made against the
carrier on account of damage or average found upon opening the packages, provided that the indications of
the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in
which case said claim shall only be admitted at the time of the receipt of the packages.
After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim
whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported
were delivered.
CASES:
• Nature or defect of articles—Under the provisions of article 361 the defendant, in order to free itself from liability, was only
obliged to prove that the damages suffered by the goods were "by virtue of the nature or defect of the articles." Under the
provisions of article 362 the plaintiff, in order to hold the defendant liable, was obliged to prove that the damages to the goods
by virtue of their nature, occurred on account of its negligence or because the defendant did not take the precaution usually
adopted by careful persons. (Govt v Inchausti)
o Example—The defendant proved, and the plaintiff did not attempt to dispute, that the roofing tiles in question were
of a brittle and fragile nature; that they were delivered by the plaintiff to the defendant in bundles of ten each, tied
with bejuco [rattan], without any packing or protective covering. The plaintiff did not even attempt to prove any
negligence on the part of the defendant. On the hand, the defendant offered proof to show that there was no
negligence on its part, by showing that the tiles were loaded, stowed, and discharged by handlabor, and not be
mechanical devices which might have caused the breakage in question. In this jurisdiction there is no presumption of
negligence on the part of the carriers in case like the present. The plaintiff, not having proved negligence on the part
of the defendant, is not entitled to recover damages. (Govt v Inchausti)
• Improper packing—if the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary
observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting
thereform. (Southern Lines v CA)
o Example—appellant (petitioner) itself frankly admitted that the strings that tied the bags of rice were broken; some
bags were with holes and plenty of rice were spilled inside the hull of the boat, and that the personnel of the boat
collected no less than 26 sacks of rice which they had distributed among themselves." This finding, which is binding
upon this Court, shows that the shortage resulted from the negligence of petitioner.
• Code of Commerce; Art 366—"It has been held that a stipulation in the contract of shipment requiring the owner of the goods
to present a notice of his claim to the carrier within a specified time after the goods have arrived at their destination is in the
nature of a condition precedent to the owner's right to enforce a recovery, that he must show in the first instance that be has
complied with the condition, or that the circumstances were such that to have complied with it would have required him to do
an unreasonable thing. The weight of authority, however, sustains the view that such a stipulation is more in the nature of a
limitation upon the owner's right to recovery, and that the burden of proof is accordingly on the carrier to show that the
limitation was reasonable and in proper form or within the time stated." (Southern Lines v CA)
o In the case at bar, the record shows that petitioner failed to plead this defense in its answer to respondent's complaint
and, therefore, the same is deemed waived (Section 10, Rule 9, Rules of Court), and cannot be raised for the first time
at the trial or on appeal. (Southern Lines v CA)

e. Order of competent authority

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

• Order of competent authority; power to issue order—Before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority to unload the scrap iron, it must
be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that
it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power
of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of
scrap iron belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties
that the cargo of scrap iron was accumulated by the appellant through separate purchases here and there from
private individuals. The fact remains that the order given by the acting mayor to dump the scrap iron into the
sea was part of the pressure applied by Mayor Jose Advincula to shakedown the appellant for P5,000.00. The
order of the acting mayor did not constitute valid authority for appellee Mauro Ganzon and his representatives
to carry out. In any case, the intervention of the municipal officials was not of a character that would render
impossible the fulfillment by the carrier of its obligation. The petitioner was not duty bound to obey the illegal
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order to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance of the
same order was attended with such force or intimidation as to completely overpower the will of the petitioner’s
employees. The mere difficulty in the fulfillment of the obligation is not considered force majeure. (Ganzon v CA)

AGBAYANI
Order or act of competent authority.—Under 1743, the CC is not responsible for the loss, etc. of the goods if the public authority had
power to issue the order. Where the officer acts without legal process, the CC will be held liable.

3) Duration of Extraordinary Responsibility

Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the
provisions of Article 1738.

Art. 1737. The common carrier's duty to observe extraordinary diligence over the goods remains in full force and effect
even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of
stoppage in transitu.

Art. 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods
are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of
the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.
• Commencement—The receipt of goods by the carrier has been said to lie at the foundation of the contract to
carry and deliver, and if actually no goods are received there can be no such contract. The liability and
responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or
receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the
vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight,
the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry
goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the
vessel to bring the goods to it, the lighters are for the time itssubstitutes, so that the bill of landing is applicable to
the goods as soon as they are placed on the lighters. (Compania Maritima v Insurance)
o Commencement; Test—Had the control and possession of the cotton been completely surrendered by
the shipper to the railroad company? Whenever the control and possession of goods passes to the
carrier and nothing remains to be done by the shipper, then it can be said with certainty that the
relation of shipper and carrier has been established (Compania Maritima v Insurance)
o Commencement; not formal execution of a receipt or bill of lading—The liability of the carrier as
common carrier 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 acceptance. Even where it is provided by statute that liability commences with the
issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier.
(Compania Maritima v Insurance)
• Duration—This extraordinary liability lasts from the time the goods are placed in the possession of the carrier
until they are delivered to the consignee, or "to the person who has the right to receive them" (Article 1736,
Idem.), but these provisions only apply when the loss, destruction or deterioration takes place while the goods
are in the possession of the carrier, and not after it has lost control of them. The reason is obvious. While the
goods are in its possession, it is but fair that it exercise extraordinary diligence in protecting them from damage,
and if loss occurs, the law presumes that it was due to its fault or negligence. This is necessary to protect the
interest the interest of the owner who is at its mercy. The situation changes after the goods are delivered to the
consignee. (Lu Do v Binamira)
o Example—Is the carrier responsible for the loss considering that the same occurred after the shipment
was discharged from the ship and placed in the possession and custody of the customs authorities?
HELD: While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or
to the person who has a right to receive them", contemplated in Article 1736, because in such case the
goods are still in the hands of the Government and the owner cannot exercise dominion over them, we
believe however that the parties may agree to limit the liability of the carrier considering that the goods
have still to through the inspection of the customs authorities before they are actually turned over to the
consignee. This is a situation where we may say that the carrier losses control of the goods because of a
custom regulation and it is unfair that it be made responsible for what may happen during the
interregnum. (Lu Do v Binamira)
AGBAYANI
When carrier's responsibility begins.—Under Art. 1738, the extra-o responsibility of the CC begins from the time the goods are
delivered to the carrier. The delivery to the CC must place the goods to be transported unconditionally in the possession of the
CC and the CC must receive them. Otherwise, the extra-ordinary responsibility of the CC will not commence.
When carrier's responsibility terminates.—Under 1738, the extra-ordinary responsibility of the CC is terminated at the time the goods
are delivered to the consignee or the person who has a right to receive them (actual or constructive delivery).
Constructive delivery: Notice by the CC that the cargo had already arrived, placing them at the disposal of the shipper or consignee
releases CC from extra-ordinary responsibility. From such moment the consignee or shipper should exercise over the cargo the
ordinary control pertinent to ownership (should unload cargo from the CC)
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Shipper bound to observe all diligence in obtaining delivery of goods.—The shipper is bound to observe all diligence in obtaining
delivery of the goods. Once the goods are delivered, the extraordinary responsibility of the CC ceases.
Liability of shipper for delay in obtaining delivery of goods, demurrage.—The shipper is liable for lost earnings occasioned by the
unnecessary delay in the use of the vehicles belonging to the carrier, due in turn to the failure of the former, upon receipt of notice of
the arrival of the goods at the place of destination, to unload forthwith and take away the cargo from the vehicles. This is a charge for
demurrage (addtl. service provided by CC)
Effect of storing in transit.—Under 1737, the temporary unloading or storage of the goods during the time that they are being
transported does not interrupt the extra-ordinary responsibility of the CC
Exception: Where the shipper or owner exercises its right of stoppage in transitu (the act by which the unpaid vendor of goods stops
their progress and resumes possession of them, while they are in the course of transit from him to the purchaser, and not yet actually
delivered to the latter. This is exercised when the buyer is or becomes insolvent.)
Responsibility of carrier when right exercised.—The extra-ordinary responsibility of the CC ceases when the goods being transported
are temporarily unloaded or stored in transit be reason of the exercise of the right of stoppage in transitu by the unpaid seller. The CC
holds the goods in the capacity of an ordinary bailee or warehouseman upon the theory that the exercise of the right of stoppage in
transit terminates the contract of carriage (ordinary diligence is required)
Effect of storage in warehouse of carrier.—Under 1738, the extra-ordinary responsibility of the CC does not cease notwithstanding the
fact that the goods being transported are stored in the warehouse of the CC at the place of destination. Extra-ordinary responsibility
ceases only after the consignee has been advised of the arrival of the goods and has had reasonable opportunity to remove them or
otherwise dispose of them.
Liability as a warehouseman (ordinary diligence) arises only when the consignee has been advised of the arrival of the goods and has
had reasonable opportunity to remove them or otherwise dispose of them

4) Agreement Limiting Liability

a. As to diligence required
Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence
shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the common carrier; and #
(3) Reasonable, just and not contrary to public policy.

Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary
to public policy:
(1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will
not be liable for any loss, destruction, or deterioration of the goods; #
(3) That the common carrier need not observe any diligence in the custody of the goods; #
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family,
or of a man of ordinary prudence in the vigilance over the movables transported; #
(5) That the common carrier shall not be responsible for the acts or omission of his or its employees; #
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished; #
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.

Art. 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof, to
which the contract refers shall be taken into consideration on the question of whether or not a stipulation
limiting the common carrier's liability is reasonable, just and in consonance with public policy

b. As to amount of liability
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in
the bill of lading, unless the shipper or owner declares a greater value, is binding.

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction,
or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly
and freely agreed upon
• Kinds of stipulations—Three kinds of stipulations have often been made in a bill of lading. The first is one
exempting the carrier from any and all liability for loss or damage occasioned by its own negligence. The second
is one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a
higher rate of freight. According to an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid and enforceable. (Heacock v
Macondray)
• Small print—the requirements of NCC 1750 have not been met. It can not be said that the appellee had actually
entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket stub that
was issued by the appellant to the appellee. The fact that those conditions are printed at the back of the ticket

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stub in letters so small that they are hard to read would not warrant the presumption that the appellee was
aware of those conditions such that he had "fairly and freely agreed" to those conditions. The trial court has
categorically stated in its decision that the "Defendant admits that passengers do not sign the ticket, much less
did plaintiff herein sign his ticket when he made the flight on November 23, 1959." We hold, therefore, that the
appellee is not, and can not be, bound by the conditions of carriage found at the back of the ticket stub issued to
him when he made the flight on appellant's plane on November 23, 1959. (Shewaram v PAL)
• Failure to declare higher value or pay additional charges—The Court sustained the validity of a printed
stipulation at the back of an airline ticket limiting the liability of the carrier for lost baggage to a specified
amount and ruled that the carrier's liability was limited to said amount since the passenger did not declare a
higher value, much less pay additional charges. While it may be true that petitioner had not signed the plane
ticket, he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or
assent to the regulation.” It is a contract of adhesion. The one who adheres to it is in reality free to reject it
entirely; if he adheres, he gives his consent. A contract limiting liability upon an agreed valuation does not
offend against the policy of the law forbidding one from contracting against his own negligence." (Ong Yiu v
CA)
o Example—Petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated
at the back of the ticket. (Pan Am v IAC,infra, discussion under IV International Air Transport (Warsaw
Convention))
• In relation to Warsaw Convention—Although the Warsaw Convention has the force and effect of law in this
country, being a treaty commitment assumed by the Philippine government, said convention does not operate as
an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an
absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable for damages in
the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation
of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for
damages for violating the rights of its passengers under the contract of carriage, especially if wilfull misconduct
on the part of the carrier's employees is found or established, which is clearly the case before Us. When petitioner
airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed place and time,
some special species of injury must have been caused to him. For sure, the latter underwent profound distress
and anxiety, and the fear of losing the opportunity to fulfill the purpose of his trip. In fact, for want of
appropriate clothings for the occasion brought about by the delay of the arrival of his luggage, to his
embarrassment and consternation respondent Alcantara had to seek postponement of his pre-arranged
conference with the Director General of Trade of the host country. (Cathay Pacific v CA)

c. Factor affecting Agreement

Art. 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or owner if the
common carrier refused to carry the goods unless the former agreed to such stipulation.

Art. 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the
loss, destruction, or deterioration of the goods.

Art. 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid

Art. 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof, to which
the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the
common carrier's liability is reasonable, just and in consonance with public policy.

Art. 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the
goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or
deterioration.

AGBAYANI
Kinds of stipulation limiting liability.—The following stipulations are often made in a bill of lading bill of lading:
1. stipulation exempting the CC from any and all liability for loss or damage occasioned by its own negligence - VOID
2. stipulation providing for an unqualified limitation of such liability to an agreed stipulation - VOID
3. stipulation limiting the liability of the CC to an agreed valuation unless the shipper declares a higher value and pays a higher rate of
freight – VALID and ENFORCEABLE
When stipulation limiting liability valid.—Under 1744, the shipper or owner and the CC may stipulate to limit the liability of the CC
for the loss, destruction or deterioration of goods to a degree less than extraordinary diligence :
1. the stipulation must be in writing and signed by both parties;
2. the stipulation must be supported by valuable consideration other than the service rendered by the CC;
3. the stipulation must be reasonable, just and not contrary to public policy. This applies only when the CC is acting as such but not
when it acts as a private carrier [in Home Insurance vs American Steamship Co., the SC held that the Civil Code provisions on CC
should not be applied where the CC is not acting as such but as a private carrier; such policy has no force where the public at large is
not involved]

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The parties may stipulate that the diligence to be exercised by the CC be less than extra-ordinary diligence, provided that the
requirements under Article 1744 are complied with. However, the parties cannot reduce the diligence to less than that of a good father
of a family. Art. 1745 provides for 7 stipulations which shall be considered unreasonable, unjust and contrary to public policy.
Construction of stipulations limiting common carrier's liability.—An exemption in general words not expressly relating to
negligence, even though the words are wide enough to include loss by negligence or default of CC's servants, must be construed as
limiting the liability of the CC as assurer, and not as relieving him from the duty of exercising reasonable skill and care
Effect of lack of competitor to common carrier.—Under 1751, the lack of competition of the CC shall be considered in determining
WON a stipulation limiting CC's liability is reasonable, just and in consonance with public policy.
Examples of valid stipulations:
1. 1748 - an agreement limiting the CC's liability for delay on account of strikes or riots
2. 1749, Heacock vs Macondray - a stipulation that the CC's liability is limited to the value of the goods appearing in bill of lading
unless the shipper or owner declares a greater value
3. 1750 - a contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods,
if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon
Under 1746, an agreement limiting the CC's liability may be annulled by the shipper or owner if the CC refused to carry the goods
unless the former agreed to such stipulation. The effect of the shipper's consent obtained by means of refusal on the part of the carrier
to carry the goods is to make the agreement limiting the CC's liability voidable at the instance of the shipper
Principles : [St. Paul Insurance vs Macondray, 70 SCRA 122]
1. A stipulation in the bill of lading limiting the CC's liability to the value of the goods appearing in the bill, unless the shipper or owner
declares a greater value, is valid and binding.
2. The insurer who pays the insured on his claim for damage is merely subrogated to the rights of the insured; therefore, said insurer
cannot collect from the CC more than what the insured can collect from the CC.
3. The obligation to pay the damage begins from the date it fails to deliver the shipment in good condition to the consignee (on the basis
of the rate of exchange on that date).
Effect of delay in transportation, etc.—Under 1747, the CC cannot avail of the contract limiting his liability in these cases : (1) where
the CC delays the transportation of the goods; (2) where the CC changes the stipulated or usual route [in both cases, the delay or
change of route must be without just cause]
Presumption as to negligence in case of limited liability.-- Under 1752, the presumption continues even when there is an agreement
limiting the liability of the CC in the vigilance of the goods. This presumption is disputable or rebuttable by evidence that the CC
exercised extra-ordinary diligence.

5) Applicable Law in Foreign Trade

Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common
carrier for their loss, destruction or deterioration.

AGBAYANI
The Civil Code governs the liability of the CC in case of loss, damage or deterioration. Under 1766, in all matters not regulated by the
Civil Code, the rights and obligations of CC shall be governed by the Code of Commerce and by special laws which are suppletory to
the provisions of the Civil Code.

6) Rules on Passenger Baggage

Art. 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage which is not in his personal
custody or in that of his employee. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable. #

Art. 1998. The deposit of effects made by the travellers in hotels or inns shall also be regarded as necessary. The
keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to
their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which
said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. (1783)

Art. 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal
property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not
that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the
keeper of the hotels or inns shall be considered in determining the degree of care required of him. (1784a)

Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the
use of arms or through an irresistible force. (n)

Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants
or visitors, or if the loss arises from the character of the things brought into the hotel. (n)

Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable
for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. (n)

AGBAYANI

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Classes of baggage of passengers.-- The law makes a distinction between (1) baggage in the custody of the passengers or their EEs; and
(2) baggage not in such custody but in that of the CC.
Liability for baggage in custody of passenger.-- Art. 1754 refers to Arts. 1998, 2000- 2003 concerning the responsibility of hotel keepers.
Under 1998, the baggage of passengers in their personal custody or in that of their EEs while being transported shall be regarded as
necessary deposits. The CC shall be responsible for such baggage as depositaries, provided that (1) notice was given to them or to their
EEs, of the baggage brought by their passengers, and that (2) the passengers take the precautions which said CCs advised relative to the
care and vigilance of their baggage.
Responsibility for acts of EEs, thieves.-- Under 2000, a CC is responsible as a depositary for the loss of or injury to the baggage in the
personal custody of passengers, caused by the CC's servants or EEs but not those caused by force majeure. Under 2001, the act of a thief
or robber, who has entered the CC's vehicle is not deemed force majeure, unless it is done with the use of arms or through irresistible
force. Under 2002, the CC is not liable if the loss of the baggage in the personal custody of the passenger is due to the acts of the
passengers, his family, servants or visitors, OR if the loss arises from the character of the baggage.
Stipulations limiting liability.—Under 2003, a CC cannot free himself from responsibility by posting notices to the effect that he is not
liable for the baggage brought by the passengers. Any stipulation diminishing the responsibility required under 1998 to 2001 shall be
void.
Liability for baggage not in custody of passenger.-- This refers to baggage delivered to the custody of the CC and received by him, to
be carried in the same manner as other goods being transported by him. As the CC has custody of such baggage and are carried like
any other goods, the provisions on carriage of goods shall apply (extra-ordinary diligence in the vigilance over the goods).
The moment the effects of a passenger are unconditionally placed in the possession of and received by a carrier for conveyance, the law
immediately imposes on the CC extra-ordinary responsibility for the loss thereof which lasts until the actual or constructive delivery of
the effects to the passenger as the person who has the right to receive them (presumption of negligence exists but may be rebutted by
proof of exercise of extraordinary diligence or causes under 1734).
A CC is liable for the loss of baggage although not declared and the charges not paid, if it accepted them for transportation

C. Common Carriage of Passengers

1) Nature and extent of responsibility

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

Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for all the circumstances.
CASES:
• Principles governing liability of common carrier—1) liability of a carrier is contractual and arises upon breach of its
obligation. There is breach if it fails to exert extraordinary diligence according to all circumstances of each case 2)
carrier is obliged to carry its passenger with utmost diligence of a very cautious person, having due regard for all the
circumstances 3) a carrier is presumed to be at fault or to have acted negligently in case of death of, or injury to,
passengers, it being its duty to prove that it exercised extraordinary diligence; and 4) the carrier is not an insurer
against all risks of travel (Isaac v AL Amnen)
o Principles governing liability of common carrier; not an insurer against all risks of travel—A transportation
company being a franchised carrier is duty bound to transport its passengers from the point of origin to the
place of destination, but such duty does not encompass all the risks attendant to a passenger in transit, for if
that would be the case a transportation firm would be a good source of stipends for the family of one who
would like to end it all by simply boarding a passenger bus, pay his fare and then intentionally fall from it.
A carrier could not be charged with all the care and diligence for each and every individual passenger. It is
enough that his employees must see to it: 1) that a passenger places himself safely inside the vehicle 2) that it
is operated carefully and 3) that its mechanism is perfectly alright to avoid mishaps. It would be
unreasonable to exact upon operators of public utility trucks to determine beforehand that a certain
passenger is not liable to fall dizzy or sleepy on the way, for that is the very lookout of the passenger himself
(Landicho v Batangas Transpo Company)
o Example; no due regard for all of the circumstances—The mere fact that the bus was inspected only recently
and found to be in order would not exempt the carrier from liability unless it is shown that the particular
circumstances under which the bus would travel were also considered. It does not appear that the carrier
gave due regard for all the circumstances in connection with the said inspection. The bus in which the
deceased were riding was heavily laden with passengers, and it would be traversing mountainous,
circuitous and ascending roads. Thus the entire bus, including its mechanical parts, would naturally be
taxed more heavily than it would be under ordinary circumstances. (Landingin v Pantranco)
• Utmost diligence; scope;
o Crew or complement—The duty to exercise the utmost diligence on the part of common carriers is for the
safety of passengers as well as for the members of the crew or the complement operating the carrier, the
airplane in the case at bar. And this must be so for any omission, lapse or neglect thereof will certainly result
to the damage, prejudice, nay injuries and even death to all aboard the plane, passengers and crew members
alike. (PAL v CA)
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o Cargadores— Despite the absence of a passenger-carrier relationship between them, carrier is still
responsible for their safety while on board the barge because it knew the presence and role of the stevedores
in its barge and thus consented to their presence. The services rendered were the valuable consideration in
exchange for the transportation fare.(Sulpicio v CA)
• Utmost diligence; emergency rule as an exception—Failure to observe the same degree of care that as ordinary
prudent man would exercise under ordinary circumstances when confronted with a sudden emergency was held to
be warranted and a justification to exempt the carrier from liability. Long version: where a carrier's employee is
confronted with a sudden emergency, the fact that he is obliged to act quickly and without a chance for deliberation
must be taken into account, and he is held to the some degree of care that he would otherwise be required to exercise
in the absence of such emergency but must exercise only such care as any ordinary prudent person would exercise
under like circumstances and conditions, and the failure on his part to exercise the best judgment the case renders
possible does not establish lack of care and skill on his part which renders the company, liable (Isaac v AL Amnen)
• Utmost diligence; travel documents—carrier has the duty to inspect whether its passengers have the necessary travel
documents, however, such duty does not extend to checking the veracity of every entry in these documents.
o Example—The power to admit or not an alien into the country is a sovereign act which cannot be interfered
with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein
respondents (JAL v CA)
• Defects; manufacturer as agent of carrier—The preponderance of authority is in favor of the doctrine that a passenger
is entitled to recover damages from a carrier for an injury resulting from a defect in an appliance purchased from a
manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had exercised the
degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of
the necessary tests. For the purposes of this doctrine, 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. According to this theory, the good
repute of the manufacturer will not relieve the carrier from liability. (Necesito v Paras)
o Note: In short, the effect would be the same if carrier constructs it himself or selects a manufacturer to
construct it for him. “That it does not exercise control over the former is because it elects to place that matter
in the hands of the manufacturer, instead of retaining the supervising control itself”. This is based on
respondeat superior (Necesito v Paras)
• Defects; rationale for carrier’s liability—The rationale of the carrier's liability is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier.
Having no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no
remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not in insurer of
the safety of his passengers, should nevertheless be held to answer for the flaws of his equipment if such flaws were
at all discoverable. (Necesito v Paras)
• Defects; for carrier to be exempt from liability—if the accident was due to a latent defect in the material or
construction of the car, that not only could it not have discovered the defect by the exercise of such care, but that the
builders could not by the exercise of the same care have discovered the defect or foreseen the result. This rule applies
the same whether the defective car belonged to the carrier or not. (Necesito v Paras)
o Example—It nowhere appears that either the manufacturer or the carrier at any time tested the steering
knuckle to ascertain whether its strength was up to standard, or that it had no hidden flaws would impair
that strength. Plus, there is testimony that weakening of the knuckle could be detected. The periodical visual
inspection of the steering knuckle as practiced by the carrier's agents did not measure up to the required
legal standard of "utmost diligence of very cautious persons" — "as far as human care and foresight can
provide", and therefore that the knuckle's failure can not be considered a fortuitous event that exempts the
carrier from responsibility (Necesito v Paras)
• Defects; not caso fortuito—An accident caused by defects in the automobile is not a caso fortuito. The rationale of the
carrier's liability is the fact that "the passenger has neither the choice nor control over the carrier in the selection and
use of the equipment and appliances in use by the carrier. (Landingin v Pantranco)
CLASS DISCUSSION:
• What is standard of diligence required of common carriers? Extraordinary diligence
• For passengers, how is the standard further expounded? "as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the circumstances" (NCC 1755)
• What must be considered? means of operation (employees), vehicle (check-up), route, seating and/or baggage capacity,
conditions of road and weather, etc. [far-reaching; in short, must think of everything]
• For goods- is it the same standard required as persons? depends on the circumstances
• ISAAC--Why was the common carrier not held liable in this case? driver swerved to the extreme right; could have stopped
and waited but emergency rule applies
• CN: L-arm; effect: mitigates liability but there is still a breach
• LANDINGIN- how did carrier fail to extraordinary diligence?
• LANDICHO- what situation does this principle seek to avoid? good source of stipends...
• NECESITO- adequate periodical testing of the parts should have been undertaken
• PAL- What is the cause of action? BOC due to gross negligence in allowing Bustamante to continue flying. What obligation
was breached? to observe extraordinary negligence (endangered passengers of PAL).
• Who can invoke CC provisions on common carriers? passengers but SC extended to crew

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• SULPICIO- what is the subject of the contract of carriage? goods; but stevedores' presence was justified as stated in the
contract.
• Relate to PAL. Who can invoke the provisions on common carrier
• JAPAN AIRLINES- SC upheld the principle that CC is not the insurer of all risks; loss due to inconsistent travel documents
• Mile-high club--> turbulence--> head injuries? how about STD?

AGBAYANI
Common carriers must exercise extraordinary diligence in carrying passengers.-- Art. 1755 shows clearly the high degree of care and
extra-ordinary diligence required of a CC with respect to its passengers.
Carrier's duty of extraordinary diligence extends also to crew members.-- The duty to exercise the utmost diligence on the part of CCs
is for the safety of passengers as well as for the members of the crew or the complement operating the carrier.
This must be so for any omission, lapse or neglect thereof will certainly result to the damage, prejudice, injuries or even death to all
aboard the plane.

2) Duration of responsibility
Cf.Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the
provisions of Article 1738.

Warsaw Convention - Article 17. The carrier is liable for damage sustained in the event of the death or wounding of a
passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took
place on board the aircraft or in the course of any of the operations of embarking or disembarking.

Code of Commerce –
ARTICLE 698.In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in
proportion to the distance covered, without right to recover for losses and damages if the interruption is due to
fortuitous event or to force majeure, but with a right to indemnity if the interruption should have been caused by the
captain exclusively. If the interruption should be caused by the disability of the vessel, and a passenger should agree to
await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay
shall be for his own account. In case of delay in the departure of the vessel, the passengers have the right to remain on
board and to be furnished with food for the account of the vessel unless the delay is due to fortuitous events or to force
majeure. If the delay should exceed ten days, passengers requesting the same shall be entitled to the return of the fare;
and if it is due exclusively to the fault of the captain or ship agent, they may also demand indemnity for losses and
damages. A vessel exclusively devoted to the transportation of passengers must take them directly to the port or ports of
destination, no matter what the number of passengers may be, making all the stops indicated in its itinerary
CASES:
• Persons boarding and alighting—the duty that the carrier of passengers owes to its patrons extends to persons boarding
the cars as well as to those alighting therefrom (Del Prado v Meralco)
• Persons boarding and alighting; Means of entering and leaving—The contract of defendant to transport plaintiff carried
with it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains
(Cangco v MRR)
• Persons boarding and alighting; duty not to increase peril white attempting to board—There is no duty on the part of a
carrier to stop its cars to let on intending passengers at other points than those appointed for stoppage. Nevertheless,
although the motorman of this car was not bound to stop to let the plaintiff on, it was his duty to do act that would have
the effect of increasing the plaintiff's peril while he was attempting to board the car. The premature acceleration of the car
was, in our opinion, a breach of this duty. (Del Prado v Meralco)
• Reasonable time or opportunity to leave premises—the relation of carrier and passenger does not cease at the moment the
passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until
the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a
reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. (La Mallorca v CA)
o Examples—Thus, a person who, after alighting from a train, walks along the station platform is considered still a
passenger.So also, where a passenger has alighted at his destination and is proceeding by the usual way to leave
the company's premises, but before actually doing so is halted by the report that his brother, a fellow passenger,
has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother,
he is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the
protection of the railroad and company and its agents. (La Mallorca v CA)
o Reasonable time—made to depend on the attending circumstances of the case, such as the kind of common
carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration
of the time element per se without taking into account such other factors (Aboitiz v CA)
! Reasonable time; vessel versus bus—It is of common knowledge that, by the very nature of petitioner's
business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from
the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and
the number of passengers it can load, such vessels are capable of accommodating a bigger volume of

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both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need
at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a
bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. In
consonance with common shipping procedure as to the minimum time of one (1) hour allowed for the
passengers to disembark, it may be presumed that the victim had just gotten off the vessel when he
went to retrieve his baggage. (Aboitiz v CA)
! Reasonable time; stranded passengers—Undisputably, PAL's diversion of its flight due to inclement
weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its
passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is
deemed equipped to deal with situations as in the case at bar. What we said in one case once again
must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at
the port of destination and has left the carrier's premises. 22 Hence, PAL necessarily would still have to
exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded
passengers until they have reached their final destination. On this score, PAL grossly failed considering
the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact
that the private respondent was a stranger to the place. (PAL v CA)
• Negligence by agents of the carrier—The coming of the men with a torch was to be expected and was a natural sequence
of the overturning of the bus, the trapping of some of its passengers and the call for outside help. What is more, the
burning of the bus can also in part be attributed to the negligence of the carrier, through is driver and its conductor.
According to the witness, the driver and the conductor were on the road walking back and forth. They, or at least, the
driver should and must have known that in the position in which the overturned bus was, gasoline could and must have
leaked from the gasoline tank and soaked the area in and around the bus, this aside from the fact that gasoline when
spilled, specially over a large area, can be smelt and directed even from a distance, and yet neither the driver nor the
conductor would appear to have cautioned or taken steps to warn the rescuers not to bring the lighted torch too near the
bus. Said negligence on the part of the agents of the carrier come under the codal provisions above-reproduced,
particularly, Articles 1733, 1759 and 1763. (Bataclan v Medina: proximate Cause—'that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result
would not have occurred)
CLASS DISCUSSION
• Q: When does CC obtain responsibility over the passenger? embarking, on board and disembarking
o Airplane- tube and shuttle
o LRT-platform
o Jeep-part where jeep is supposed to stop, even if he hasn't touched the jeep yet
• CANGCO- safe means of entering and leaving the premises
• DEL PRADO- How could you tweak the facts to make the CC liable? did not stop but passenger ran after
• LA MALLORCA- common carrier must afford their passengers: 1) reasonable opportunity 2) reasonable time to leave the
premises and to get their baggage/s
• BATACLAN: “the case involves a breach of contract of transportation for hire, the Medina Transportation having undertaken
to carry Bataclan safely to his destination, Pasay City. We also agree with the trial court that there was negligence on the part
of the defendant, through his agent, the driver Saylon. There is evidence to show that at the time of the blow out, the bus was
speeding”—Why BOC and not QD when the bus was no longer traveling? They are still considered passengers because
employees of carrier are expected to help after the accident.
• ABOITIZ- How do you determine what is responsibility? nature of business, etc (see case)
• PAL (226 SCRA 423)- not just bodily injuries or death, even comfort and convenience, delay, disrespecting the passengers
• BACHELOR-FE: free from human agency

AGBAYANI
When relationship of carrier and passenger terminates.-- The relation of CC and passenger does not cease at the moment that the
passenger alights from the CC's vehicle at a place selected by the CC at the point of destination, but continues until the passenger had
reasonable time or a reasonable opportunity to leave the CC's premises. What is a reasonable time or a reasonable delay within this rule
is to be determined from all the circumstances

3) Presumption of negligence
Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.

AGBAYANI
Presumption of negligence.-- CCs are presumed to have been at fault or to have acted negligently in case of death or injuries to
passengers. This disputable presumption may only be overcome by superior evidence that he had observed extraordinary diligence
prescribed in 1733, 1755, 1756. Where death or injury results to the passenger because of the negligence of the CC's Es, the CC is liable,
notwithstanding the fact that he had exercised all the diligence of a good father of a family, in the selection and supervision of his EEs
xxx
Consequently, in an action for damages, the issue is not WON the party seeking damages has adduced sufficient evidence to show the
negligence of the CC but WON the carrier has presented the required quantum of proof to overcome the presumption that it has been
at fault or that it acted negligently in the performance of its duty.

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In the exercise of extraordinary diligence, the CC must give due regard for all circumstances in connection with the transport of
passengers
How presumption of negligence overcome.—To overcome such presumption, it must be shown that the CC had observed the
required extraordinary diligence or that the accident was caused by fortuitous event. In order to constitute caso fortuito that would
exempt a person from responsibility, it is necessary that :
1. The event must be independent of human will;
2. The occurrence must render it impossible for the obligor to fulfill his obligation in a normal manner;
3. The obligor must be free of a concurrent or contributory fault or negligence. [Estrada vs Consolacion, 71 SCRA 523]
Carrier not precluded from proving negligence of other carrier involved in collision.-- While the plaintiff-passenger does not need to
prove the negligence of the CC, he may not preclude the CC from proving the legal defense of negligence of the other vehicle involved
in the collision (the CC may file a third-party complaint against the other vehicle for reimbursement)
"Last clear chance" rule not applicable to contracts of carriage.-- The principle of last clear chance applies only in a suit between the
owners and drivers of two colliding vehicles; it does not apply where a passenger demands responsibility from the
CC to enforce its contractual obligation; it would be iniquitous to exempt the driver and his ER on the ground that the other driver was
also negligent
Court need not make express finding of carrier's fault or negligence.-- The court need not make an express finding of fault or
negligence on the part of the CC in order to hold it responsible to pay the damages sought by the passenger. By the contract of carriage,
the CC assumes the express obligation to observe extraordinary diligence in transporting the passenger This is an exception to general
rule that negligence must be proved.
Carriers not ordinarily liable for injuries to passengers due to fires or explosions caused by articles brought into conveyance by
other passengers.-- CC is not ordinarily liable for injuries to passengers due to fires or explosions caused by articles brought into
conveyance by other passengers.
Fairness demands that in measuring the CC's duty towards its passengers, allowance should be given to the reliance that should be
reposed on the sense of responsibility of all the passengers in regard to their common safety (that the passenger will not take with him
anything dangerous to his co-passengers.) For the carrier to be liable, he must be aware, through his EEs of the nature of the article or
must have had some reason to anticipate danger therefrom (circumstances must show that there are causes for apprehension that the
passenger's baggage is dangerous and that the CC fails to act in the fact of such evidence) [Nocum vs Laguna Bus Co., 1969]

4) Force Majeure
CASES:
• Force Majeure; elements— (1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor
to comply with his obligation, must be independent of the human will. (2) It must be impossible to foresee the event
which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid. (3) The occurrence must be
such as to render it impossible for the debtor to fulfill his obligation in a normal manner. And (4) the obligor (debtor)
must be free from any participation in the aggravation of the injury resulting to the creditor. (Bachelor Express v CA)
• Force Majeure; carrier’s liability—In order that a common carrier may be absolved from liability in case of force
majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was
not negligent in causing the injuries resulting from such accident. (Bachelor Express v CA: in short, no negligence
that might have occasioned the loss or accident)
o Example— The sudden act of the passenger who stabbed another passenger in the bus is within the context
of force majeure. Considering the factual findings of the Court of Appeals-the bus driver did not immediately
stop the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell from the
bus door when it was opened or gave way while the bus was still running; the conductor panicked and blew
his whistle after people had already fallen off the bus; and the bus was not properly equipped with doors in
accordance with law-it is clear that the petitioners have failed to overcome the presumption of fault and
negligence found in the law governing common carriers. (Bachelor Express v CA)
5) Limitation of Liability—validity of stipulations
Art. 1757. The responsibility of a common carrier for the safety of passengers as required in Articles 1733 and 1755
cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise.

Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is
valid, but not for willful acts or gross negligence

AGBAYANI
Ticket given to a passenger is a written contract.-- Ticket given to passenger is a written contract with the ff. elements: (1) the consent
of the contracting parties manifested by the fact that the passenger boards the ship and the shipper consents or accepts him in the ship
for transportation; (2) cause or consideration which is the fare paid by the passenger as stated in the ticket; (3) object, which is the
transportation of the passenger from the place of departure to the place of destination which are stated in the ticket.
Passenger bound notwithstanding his failure to sign ticket containing stipulation limiting liability.-- Even if the passenger failed to
sign the ticket, he is nevertheless bound by the provisions thereof. Such provisions are part of the contract of carriage, regardless of the
passenger's lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion which is not entirely prohibited
by law. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Accordingly, where the CC
incurred delay, it is liable only for the amount printed in the ticket the passenger not having declared a higher value for his luggage nor
paid addtl. charges.
Dispensing with or limiting liability.—General rule: Under 1757, the extraordinary diligence required under 1733 and 1755 for the
carriage of passengers cannot be dispensed with or lessened (1) by stipulation, (2) by the posting of notices, (3) by statements on tickets,
or (4) otherwise
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What cannot be stipulated in a carriage of passengers :
(1) absolutely exempting the CC from liability from the passenger's death or injuries;
(2) lessening the extraordinary diligence required by law to the diligence of a good father of a family
Exception: Effect of gratuitous carriage.-- Under 1758, the CC and the passenger may validly stipulate limiting the CC's liability for
negligence where the passenger is carried gratuitously (but the parties cannot stipulate to entirely eliminate liability of CC)
Effect of reduction of fares.-- Under 1758 (2), the reduction of fare does not justify any limitation of the CC's liability -- the law requires
gratuitous passage.
The law is much stricter with respect to carriage of passengers as compared with carriage of goods: a stipulation limiting the CC's
liability in writing, signed by the parties, supported by sufficient consideration, not contrary to law will still be void where the
passenger is not carried gratuitously.
Liability of owner of CC to accommodation passengers or invited guests.-- [Lara vs Valencia, 1958] an owner of an automobile owes a
guest the duty to exercise ordinary or reasonable care to avoid injuring him; since one riding in an automobile is no less a guest because
he asked for the privilege of doing so, the same obligation of care is imposed upon the driver and owner as in the case of one expressly
invited to ride

6) Responsibility for acts of employees

Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of
the former's employees, although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employees.
Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated or limited by
stipulation, by the posting of notices, by statements on the tickets or otherwise
CASES:
• Carrier’s obligation to select employees—It is the carrier's strict obligation to select its drivers and similar employees with
due regard not only to their technical competence and physical ability, but also, no less important, to their total
personality, including their patterns of behavior, moral fibers, and social attitude. (Maranan v Perez)
• Absolute liability under NCC—The Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike
the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against willful
assaults or negligent acts committed by their employees. The death of the passenger in the Gillaco case was truly a
fortuitous event, which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous
events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove
from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force
majeure. The new Civil Code of the Philippines expressly makes the common carrier liable for intentional assaults
committed by its employees upon its passengers, by the wording of Art. 1759 (Maranan v Perez)
• Absolute liability; basis— (1) the doctrine of respondeat superior— the carrier is liable only when the act of the employee is
within the scope of his authority and duty. It is not sufficient that the act be within the course of employment only OR (2)
the principle that it is the carrier's implied duty to transport the passenger safely— it is enough that the assault happens
within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in
disobedience of the carrier's orders. The carrier's liability here is absolute in the sense that it practically secures the
passengers from assaults committed by its own employees.
o Absolute liability; basis; 2nd view under NCC 1759—(1) the special undertaking of the carrier requires that it
furnish its passenger that full measure of protection afforded by the exercise of the high degree of care
prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but
above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the
carrier for the servant's violation of duty to passengers, is the result of the formers confiding in the servant's
hands the performance of his contract to safely transport the passenger, delegating therewith the duty of
protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the
passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against
passengers, since it, and not the passengers, has power to select and remove them.
• Absolute liability; Employees and independent contractors—In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent
firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of
carriage. (LRTA v Navidad)
CLASS DISCUSSION
• How would you describe the liability of the common carrier? Absolute
• T/F: The common carrier is liable for bodily harm caused by employees because it is liable for the acts of the employee. F
(under the contract: carry passengers safely, not under the concept of respondeat superior (vicarious liability)
• Beyond the scope--e.g. outside working hours
• In violation of the orders--e.g. proceeded despite bad weather
• Is a common carrier always going to be liable? Not related to contract of carriage
• DE GILLACO- Decided under the old Civil Code. If decided under NCC, the ruling will not be the same. See Maranan; within
the premises--basis of liability (not important how injury was arrived at)
• MARANAN- how can common carrier not be held liable under the claim of self-defense? argue that it is a fortuitous event
• LRTA- extends to independent contractor
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• To argue: start with presumption, then the main obligation-- contract of carriage before you argue under the responsibility for
acts of employees
• One passenger harmed another passenger, is common carrier liable? See NCC 1763

AGBAYANI
Liability for negligence or willful acts of employees.-- Under 1759, CC are held liable for the death or injuries to passengers caused by
the negligence or the willful acts of their EEs, although such EEs may have acted beyond the scope of their authority or in violation of
the orders of the CC. The CC cannot escape liability by interposing the defense that its EEs have acted without any authority or against
the orders of the CC
The passenger is entitled to protection from personal violence by the CC or its agents or EEs since the contract of transportation
obligates the CC to transport a passenger safely to his destination and a CC is responsible for the misconduct of its EEs (Cardenas vs
Fernando, 54 OG no. 4, p. 1043 (1957):
(1) extraordinary diligence required of CC: calculated to protect the passengers as demanded by the preciousness of human life and by
the consideration that every person must in every way be safeguarded against all injury; (2) liability for injury of passenger is based on
a breach of contract of carriage for failure to bring the passenger safely to his destination
Reason for making the CC liable for the misconduct of its EEs in their own interest.-- The servant is clothed with delegated authority
and charged with the duty by the CC, to execute his undertaking to carry the passenger safely; when the EE mistreats the passenger, he
violates the contractual obligation of the CC for which he represents the CC
Liability of CC for defects of its equipment.—A passenger is entitled to recover damages from a CC for an injury resulting from a
defect in an appliance purchased from a manufacturer, whenever it appears that the defect would have been discovered by the CC if it
had exercised the degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of
the necessary tests; for the purposes of this doctrine, the manufacturer is considered as being in law the agent or servant of the CC, as
far as regards the work of constructing the appliance
Common carrier is exempt from acts of EE not done in line of duty.-- The CC is exempt from liability where the EE was never in a
position in which it became his duty to his ER to represent him in discharging any duty of the CC towards the passenger; the EE is
deemed as a stranger or co-passenger since his act was not done in the line of duty
Defense of diligence in selection, etc., of employees.-- CC cannot escape liability by interposing defense that he exercised due
diligence in the selection and supervision of his EEs; his liability is based on culpa contractual
When relationship of carrier and passenger terminates.-- The relation of CC and passenger does not cease at the moment that the
passenger alights from the CC's vehicle at a place selected by the CC at the point of destination, but continues until the passenger had
reasonable time or a reasonable opportunity to leave the CC's premises. What is a reasonable time or a reasonable delay within this rule
is to be determined from all the circumstances
Elimination or limitation of carrier's liability.-- Under 1760, the CC's liability for the negligence or willful acts of his EEs which cause
death of or injury to passengers cannot be eliminated or limited by (1) stipulation, (2) by the posting of notice, (3) by statements on the
tickets, or (4) otherwise

7) Responsibility for acts of strangers and co-passengers

Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence
of a good father of a family could have prevented or stopped the act or omission.
CASES:
•Liable only when there’s negligent omission of EEs—A tort committed by a stranger which causes injury to a passenger
does not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held
responsible is the negligent omission by the carrier's employees to prevent the tort from being committed when the same
could have been foreseen and prevented by them.
o Example; no negligent omission—Private respondent's personnel lost no time in bringing the petitioner to the
provincial hospital in Naga City where he was confined and treated. (Pilapil v CA: bystander along the highway
hurled a stone at Pilapil)
• Legal standard; only ordinary diligence—Further, under the same provision, it is to be noted that when the violation of
the contract is due to the willful acts of strangers, as in the instant case, the degree of care essential to be exercised by the
common carrier for the protection of its passenger is only that of a good father of a family.
CLASS DISCUSSION:
• Will negligence of a passenger exonerate a common carrier? Yes Landicho case.
• If "sumabit" ka sa jeep and you got into an accident. is the common carrier liable? Yes. assumption of risk.

AGBAYANI
The CC is responsible for such willful acts or negligence of other passengers or of strangers, provided that the CC's EEs could have
prevented or stopped the act or omission through the exercise of ordinary diligence. If the injury could not have been avoided by the
exercise of ordinary diligence on the part of the EEs of the CC, the CC is not liable
Notice that the law speaks of injuries suffered by the passenger but not his death. However, there appears to be no reason why the
common carrier should not be held liable under such circumstances.
The word "injuries" should be interpreted to include "death." (Aguedo F. Agbayani, COMMERCIAL LAW REVIEWER, 1988 ed.)

8) Duty of passenger; effect of contributory negligence

Art. 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself.

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Art. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced

CASES:
• Factors to be considered—In determining the question of contributory negligence in performing such act — that is to
say, whether the passenger acted prudently or recklessly — the age, sex, and physical condition of the passenger are
circumstances necessarily affecting the safety of the passenger, and should be considered
• Contributory negligence; example—Had he not placed his left arm on the window sill with a portion thereof
protruding outside, perhaps the injury would have been avoided as is the case with the other passenger. It is to be
noted that appellant was the only victim of the collision. (Isaac v AL Amnen)
• Contributory negligence; not an example—it may be noted that the place was perfectly familiar to the plaintiff as it
was his daily custom to get on and of the train at this station. There could, therefore, be no uncertainty in his mind
with regard either to the length of the step which he was required to take or the character of the platform where he
was alighting. Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet
slightly under way was not characterized by imprudence and that therefore he was not guilty of contributory
negligence. (Cangco v MRR)
AGBAYANI
Law does not protect negligence of passenger.-- Law does not protect negligence of passenger to the extent of doing harm or damage
upon a public utility
Diligence required of passenger.-- Diligence of a good father of a family to avoid injury to himself.
Effect of negligence of passenger.-- Where the proximate cause of the death of or injury to the passenger is his own negligence,
and not that of the CC, the CC is exempted from liability
Effect of passenger's contributory negligence.-- Contributory negligence on the part of the passenger does not justify the CC's
exemption from liability.
Where it is not the proximate cause of the death or injury, he or his heirs are not barred from recovery of damages, provided of
course that the CC is the proximate cause of his death or injury

D. Damages Recoverable from Common Carriers

1) In General
CLASS DISCUSSION:
• What are the damages that can be awarded in case of BOC? MENTAL (Moral, Exemplary, Nominal, Temperate,
Actual and Liquidated damages)
• Pecuniary loss—capable of pecuniary estimation
• Specific examples of actual damages—funeral, hospitalization, amount of damaged goods
• Is there a difference between actual and compensatory?
• Is there anything that can extend common carrier’s liability for actual damages? Death indemnity. Is death
indemnity awarded in all cases?
• Is there a general circumstance that can affect common carrier’s liability for actual damages? By agreement,
liquidated damages
• What actually damages can heirs claim for? Loss of earning capacity, funeral expenses and death indemnity,
• What is the effect of fraud or bad faith on common carrier’s liability? “reasonably attributable”. Otherwise, only
those that are“foreseen or could have reasonably foreseen”.
o Example; reasonably attributable—Pan Am v IAC
2) Actual or compensatory
Article 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory
damages.

Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall
be those that are the natural and probable consequences of the breach of the obligation, and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation. (1107a)

Article 2203. The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the
damages resulting from the act or omission in question.

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book,
concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a
common carrier.

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos,
even though there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to
the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on

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account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir
called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person
causing the death, for a period not exceeding five years, the exact duration to be fixed by the court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased.
CASES:
• Foreseeability; notice of special circumstances—In order to purpose on the defaulting party further liability than for
damages naturally and directly, i.e., in the ordinary course of things, arising from a breach of contract, such unusual or
extraordinary damages must have been brought within the contemplation of the parties as the probable result of breach at
the time of or prior to contracting. Generally, notice then of any special circumstances which will show that the damages
to be anticipated from a breach would be enhanced has been held sufficient for this effect. (Pan Am v IAC: claim for loss of
potential income was denied. SIR says: if passenger had given notice, common carrier will be liable because it could now foresee the
consequences)
• Foreseeability; loss of earning capacity—The income which Edgardo Cariaga could earn if he should finish the medical
course and pass the corresponding board examinations must be deemed to be within the same category because they
could have reasonably been foreseen by the parties at the time he boarded the bus No. 133 owned and operated by the
LTB. At that time he was already a fourth-year student in medicine in a reputable university. While his scholastic may not
be first rate, it is, nevertheless, sufficient to justify the assumption that he could have passed the board test in due time. As
regards the income that he could possibly earn as a medical practitioner, it appears that, according to Dr. Amado Doria, a
witness for the LTB, the amount of P300.00 could easily be expected as the minimum monthly income of Edgardo had he
finished his studies. (Carriaga v LTB: SIR says: principle that enabled heirs to claim lost income—NCC 2201)
• Determination of amount; factors considered—1) the number of years on the basis of which the damages shall be
computed (life expectancy) 2) the rate at which the losses sustained by said respondents should be fixed (net earnings)
(Villa-Rey v CA)
o Formula—Loss of earning capacity= Life expectancy x Net Earnings, where
! Life expectancy= 2/3 x (80- age)
! Net earnings= total earnings – living expenses – other incidental expenses
o Determination of amount; Earning capacity—as an element of damages to one's estate for his death by wrongful
act is necessarily his net earning capacity or his capacity to acquire money, "less the necessary expense for his own
living. Stated otherwise, the amount recoverable is not loss of the entire earning, but rather the loss of
that portion of the earnings, which the beneficiary would have received. In other words, only net earnings, not
gross earning, are to be considered that is, the total of the earnings less expenses necessary in the creation of such
earnings or income and less living and other incidental expenses. (Villa-Rey v CA)
o Determination of amount; basis—under NCC 1764 and 2206 (1), the award of damages for death is computed on
the basis of the life expectancy of the deceased, not his beneficiary. (PAL v CA)
• Documentary evidence; general rule and exceptions—As a rule, documentary evidence should be presented to
substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity
may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than
the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceased’s line of
work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the
minimum wage under current labor laws. (Victory Liner v Gammad)
CLASS DISCUSSION
• Why is it okay that formula does not make allowance for potential increase in income (that we peg the earning capacity)?
1) actual damages are difficult to prove 2)heirs will receive at the time of the judgment (earlier than you should)—this is
suppose to offset future increases)
• What is the best evidence to prove salaries? Income Tax Return, payrolls of the company (PAL v CA)

3) Moral
Article 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary
damages, may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the
court, according to the circumstances of each case.

Article 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of the defendant's wrongful act for omission.

Article 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
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(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover
moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in
the order named.

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that,
under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos,
even though there may have been mitigating circumstances. In addition: (3) The spouse, legitimate and illegitimate
descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of
the deceased.
CASES:
• Requisites—1) there must be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2)
there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) the award for damages is predicated on any of the cases
stated in Article 2219 of the Civil Code (Cathay Pacific v Vasquez)
• Rules involved—First, moral damages are recoverable in breach of contracts where the defendant acted fraudulently or in
bad faith (Art. 2220, New Civil Code). Second, in addition to moral damages, exemplary or corrective damages may be
imposed by way of example or correction for the public good, in breach of contract where the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner (Articles 2229, 2232, New Civil Code). And, third, a
written contract for an attorney's services shall control the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable (Sec. 24, Rule 138, Rules of Court). (Lopez v Pan Am)
• When recoverable—Where the injured passenger does not die, moral damages are not recoverable unless it is proved that
the carrier was guilty of malice or bad faith. (Fores v Miranda)
o Bad faith; defined—a state of mind affirmatively operating with furtive design or with some motive of self-
interest or will or for ulterior purpose.
o Bad faith; never presumed—Bad faith under the law cannot be presumed; it must be established by clear and
convincing evidence (PAL v Miano)
! Bad faith; example—The manager not only prevented Carrascoso from enjoying his right to a first class
seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the
humiliation of having to go to the tourist class compartment - just to give way to another passenger
whose right thereto has not been established (Air France v Carrascoso)
• NOTE: distinguishing character of air-carriers—A contract to transport passengers is quite
different in kind and degree from any other contractual relation. 43 And this, because of the
relation which an air-carrier sustains with the public. Its business is mainly with the travelling
public. It invites people to avail of the comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of
the carrier's employees, naturally, could give ground for an action for damages. Passengers do
not contract merely for transportation. They have a right to be treated by the carrier's
employees with kindness, respect, courtesy and due consideration. They are entitled to be
protected against personal misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the carrier (Air France v Carrascoso)
! Bad faith; example—As a proximate result of defendant's breach in bad faith of its contracts with
plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish.
For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only
the tourist class. At stop-overs, they were expected to be among the first-class passengers by those
awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to
travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is
rightfully to be expected from the contractual undertaking. (Lopez v Pan Am)
! Bad faith; example—when it comes to contracts of common carriage, inattention and lack of care on the
part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted
for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in
accordance with Article 2220 of the Civil Code. But in the instant case, the breach appears to be of
graver nature, since the preference given to the Belgian passenger over plaintiff was done willfully and
in wanton disregard of plaintiff's rights and his dignity as a human being and as a Filipino, who may
not be discriminated against with impunity. (Ortigas v Lufthansa)
! Bad faith; not proven—petitioner’s late delivery of the baggage for 11 days was not motivated by il will
or bad faith. Respondent immediately coordinated with its Central Baggage Services to trace private
respondent's suitcase and succeeded in finding it. Upon inquiry from their Frankfurt Station, it was
however discovered that the interline tag of private respondent's baggage was accidentally taken off.
According to Mr. Ebio, it was customary for destination stations to hold a tagless baggage until
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properly identified. The tracer telex, which contained information on the baggage, is matched with the
tagless luggage for identification. Without the tracer telex, the color and the type of baggage are used as
basis for the matching. Thus, the delay. (PAL v Miano)
o Bad faith; overbooking—What this Court considers as bad faith is the willful and deliberate overbooking on the
part of the airline carrier. Section 3 of the Economic Regulations No. 7, as amended, of the Civil Aeronautics
Board clearly states when the overbooking does not exceed 10% of the seating capacity of the aircraft, it is not
considered as a deliberate and willful act of non-accommodation (United Airlines v CA)
o Bad faith; not mere carelessness—Mere carelessness of the carrier's driver does not per se constitute or justify an
inference of malice or bad faith on the part of the carrier (Fores v Miranda)
o Bad faith; not poor judgment—The Vazquezes were not induced to agree to the upgrading through insidious
words or deceitful machination or through willful concealment of material facts. Upon boarding, Ms. Chiu told
the Vazquezes that their accommodations were upgraded to First Class in view of their being Gold Card
members of Cathay’s Marco Polo Club. She was honest in telling them that their seats were already given to
other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to consider the
remedy of offering the First Class seats to other passengers. But, we find no bad faith in her failure to do so, even
if that amounted to an exercise of poor judgment. Neither was the transfer of the Vazquezes effected for some
evil or devious purpose. As testified to by Mr. Robson, the First Class Section is better than the Business Class
Section in terms of comfort, quality of food, and service from the cabin crew; thus, the difference in fare between
the First Class and Business Class at that time was $250.9 Needless to state, an upgrading is for the better
condition and, definitely, for the benefit of the passenger. (Cathay Pacific v Vasquez)
o Moral damages are not recoverable in damages actions predicated on the contract of transportation, in view of
Articles 2219 and 2220 of the new Civil Code. By contrasting the provisions, it becomes apparent that:
! (a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e.,
wanton or deliberately injurious conduct, is essential to justify an award of moral damages; and
! (b) That a breach of contract can not be considered included in the descriptive term "analogous cases"
used in Art. 2219; not only because Art. 2220 specifically provides for the damages that are caused by
contractual breach, but because the definition of quasi-delict in Art. 2176 of the Code
expressly excludes the cases where there is a "preexisting contractual relation between the parties."
! The exception to the basic rule of damages now under consideration is a mishap resulting in the death
of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art.
2206, that entitles the deceased passenger to "demand moral damages for mental anguish by reason of
the death of the deceased"

CLASS DISCUSSION:
• What is the difference between actual damages and moral damages?
• What kind of loss is contemplated by MD?
• Rudeness can amount to bad faith
• AIR FRANCE— what was so bad about giving the seat to a white man? because right was not established
o What if pinalayas ka sa jeep and gave your seat to a white man, can you claim MD? What is peculiar to air
transportation? "it invites people to avail of the comforts and advantages it offers”
• LOPEZ -- motive of interest distinguished from ill will- motive of interest: serve or further one's interest (e.g.
overbooking) vs. ill-intention to cause harm
o What could affect the amount of moral damages? status, personal conditions, social reputation
• United Airlines: is overbooking per se bad faith? No; must be 10%; but liability does not stop there, must be given an
alternative
• Saludo: involves goods- to be delivered in the same condition
• JAL: first available connecting flight
4) Exemplary
Article 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages.

Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.

Article 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they
should be adjudicated.
• Nature—Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially
deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring
compliance with the standard which is in fact that of the highest possible degree of diligence, from common carriers and
in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame
their reckless instincts and to force them to take adequate care of human beings and their property. (Mecenas v CA)
• Example—We believe that the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up
to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose
hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt.
Santisteban was "off-duty" or "on-duty" at or around the time of actual collision is quite immaterial; there is, both

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realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that
is a common carrier upon whom the law imposes the duty of extraordinary diligence (Macenas v CA)
5) Nominal, Temperate and Liquidated
Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.

Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may
be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of
the case, be provided with certainty.

Article 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof.
CASES:
• Nominal damages; nature—Nominal damages is adjudicated in order that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for
any loss suffered. (Alitalia v IAC)
• Nominal damages; when awarded—The court may award nominal damages in every obligation arising from any source
enumerated in article 1157, or in every case where any property right has been invaded. (JAL v CA)
• Nominal damages; not precluded by omission to include specific claim—it suffices to claim a general prayer “for such
other and further just and equitable relief in the premises”, which is broad enough to comprehend nominal damages
(Alitalia v IAC)
• Nominal damages; example—She is not, of course, entitled to be compensated for loss or damage to her luggage. As
already mentioned, her baggage was ultimately delivered to her in Manila, tardily but safely. She is however, entitled to
nominal damages of P40.000.
• Nominal damages; right to be treated with kindness, respect, courtesy and consideration—Airline companies are hereby
sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more
accommodating towards customers, passengers and the general public. After all, common carriers such as airline
companies are in the business of rendering public service, which is the primary reason for their enfranchisement and
recognition in our law. Because the passengers in a contract of carriage do not contract merely for transportation, they
have a right to be treated with kindness, respect, courtesy and consideration. A contract to transport passengers is quite
different in kind and degree from any other contractual relation, and generates a relation attended with public duty. The
operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and
convenience of passengers. Passengers are human beings with human feelings and emotions; they should not be treated
as mere numbers or statistics for revenue.
o Example—Imperviousness displayed by the airline's personnel, even for just that fraction of time, was especially
condemnable particularly in the hour of bereavement of the family of Crispina Saludo, intensified by anguish
due to the uncertainty of the whereabouts of their mother's remains. Hence, it is quite apparent that private
respondents' personnel were remiss in the observance of that genuine human concern and professional
attentiveness required and expected of them. (Saludo v CA: switching of caskets)
• Nominal damages; comfort and convenience; example—While JAL was no longer required to defray private respondents'
living expenses during their stay in Narita on account of the fortuitous event (NAIA’s closure), JAL had the duty to make
the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner
JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private
respondents from "transit passengers" to "new passengers" as a result of which private respondents were obliged to make
the necessary arrangements themselves for the next flight to Manila… JAL [had an] obligation to make the necessary
arrangements to transport private respondents on its first available flight to Manila. After all, it had a contract to
transport private respondents from the United States to Manila as their final destination. (JAL v CA)
• Nominal damages; right to be notified of changes—When, as a result of engine malfunction, a commercial airline is
unable to ferry its passengers on the original contracted route, it nonetheless has the duty of fulfilling its responsibility of
carrying them to their contracted destination on the most convenient route possible. Failing in this, it cannot just
unilaterally shuttle them, without their consent, to other routes or stopping places outside of the contracted sectors.
(Savellano v Northwest)
o Example—In the present case, we must consider that petitioners suffered the inconvenience of having to wake
up early after a bad night and having to miss breakfast; as well as the fact that they were business class
passengers. They paid more for better service; thus, rushing them and making them miss their small comforts
was not a trivial thing. We also consider their social and official status. Victorino Savellano was a former mayor,
regional trial court judge and chairman of the Commission on Elections. Virginia B. Savellano was the president
of five rural banks, and Deogracias Savellano was then the incumbent vice governor of Ilocos Sur. Hence, it will
be proper to grant one hundred fifty thousand pesos (P150,000) as nominal damages to each of them, in order
tovindicate and recognize their right to be notified and consulted before their contracted stopping place was
changed. (Savellano v Northwest)
• Temperate damages; when awarded—temperate damages may be awarded in lieu of actual damages for loss of earning
capacity because the income of the victim was not sufficiently proven (Victory Liner v Gamad, citing Pleno v CA)
o Example—Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss
of earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years of
age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of
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P83,088.00 per annum when she died.41 No other evidence was presented. The award is clearly erroneous
because the deceased’s earnings does not fall within the exceptions. However, the fact of loss having been
established, temperate damages in the amount of P500,000.00 should be awarded to respondents. Under Article
2224 of the Civil Code, temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but
its amount can not, from the nature of the case, be proved with certainty. (Victory Liner v Gamad)
CLASS DISCUSSION:
• What is the key distinction between nominal and temperate damages? Nominal: recognize violation or invasion of right,
not to indemnify.
• Is overbooking per se bad faith? No. must be 10%. BUT even if less than 10%, liability does not stop there. Must be given
an alternative (e.g. first available connecting flight)
• Saludo—involves goods to be delivered in the same condition
6) Attorney’s Fees and Interest
Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be
recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.

Article 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.

AGBAYANI
Damages arising from death; factors to be considered
1. number of years on the basis of which the damages shall be computed
2. the rate at which the losses sustained should be fixed. In the determination of the losses or damages sustained by dependents
and heirs of the deceased, said damages consist not of the full amount of his earnings, but of the support they received or would
have received from him had he not died in consequence of the negligence of defendant. In fixing the amount of support, only
net earnings are to be considered-- total earnings less expenses necessary in the creation of such earnings less living and incidental
expenses
Damages recoverable when death occurs due to commission of crime.-- (1) indemnity for the death of victim (P 50T); (2) indemnity
for loss of earning capacity of the deceased; (3) moral damages; (4) exemplary damages; (5) attorney's fees and expenses of
litigation; and (6) interest. Indemnity arising from the fact of death is fixed whereas the others are still subject to the determination
of the court based on evidence presented; indemnity for death is distinct and separate from the other forms of indemnity
Common carrier not liable for moral damages to passenger injured due to negligence of driver.-- A CC's bad faith is not to be
lightly inferred from a mere finding that the contract was breached through negligence of the CC's employees (Fores vs Miranda)
Extent of liability of air carrier for death of passenger:
(1) where there was no satisfactory explanation on the part of PAL as to how and why the accident occurred, the presumption is
that it was at fault, under Art. 1756
(2) liability for lost earnings are the deceased passenger's net earnings during his expected length of life based on accepted mortality
tables (compensatory damages)
(3) PAL is not liable for exemplary damages where it was not proven that it acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner [Davila vs PAL]
Nature of liability of air carrier to its passengers:
[Zulueta vs Pan Am]
F: Filipino passenger who went to relieve himself was berated by the captain for coming back late to the plane and was called a
monkey.
Held: A passenger is entitled to courteous treatment from the carrier and its EEs and failure of the CC to comply with this obligation
will entitle the passenger to damages. The relation between CC and passenger involves special and peculiar obligations and
duties, differing in kind and degree, from those of almost every legal or contractual relation. On account of the peculiar situation
of the parties, the law implies a promise and imposes upon the CC the corresponding duty of protection and courteous
treatment.
Therefore, the CC is under the absolute duty of protecting his passengers from assault or insult by himself or his servants.
A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the
relation which an air carrier sustains with the public. Its business is mainly with the traveling public. It invites people to avail of the

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comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or
malfeasance of the CC's employees naturally could give ground for an action for damages.
Passengers do not contract merely for transportation. They have a right to be treated by the CC's EEs with kindness, respect,
courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities
and abuses from such employees. So it is, that any rude or discourteous conduct on the part of EEs towards a passenger gives the latter
an action for damages against the CC.
Damages caused by CC on third persons.-- Negligence refers to the failure to observe for the protection of the interests of
another person that degree of care, precaution, and vigilance which the circumstances justify demand, whereby such other
person suffers injury
Common carrier is liable only for damages that are natural and probable consequence of breach of contract.-- Where the CC is
guilty of a breach of contract, but acted in GF, it is liable only for the natural and probable consequences of the breach and which
the parties had foreseen or could have reasonably foreseen at the time the obligation was constituted (includes medical, hospital
expenses)
Actual damages.-- (1) lost income.-- includes income to be earned by the injured passenger or deceased passenger had he
finished his course (could have been foreseen)
(2) sum being carried by the deceased passenger which was lost
(3) funeral expenses
(4) attorney's fees
(5) loss of merchandise carried by the deceased
(6) loss of baggage and personal belongings
Exception to rule that CC is not liable for moral damages in breach of contract:
(1) where the mishap results in death of the passenger
(2) where it is proved that the CC was guilty of fraud or BF, even if death does not result Ex. suffered social humiliation, wounded
feelings, serious anxiety and mental anguish
Under 2206, the heirs of the deceased passenger may demand moral damages in an amount commensurate with the mental
anguish suffered by them
xxx
In a case where the passenger suffers physical injuries because of the CC's injuries, he cannot recover moral damages for such breach
of contract since it does not fall under any of the cases where moral damages are recoverable under Art. 2219
xxx
In determining the amount of moral damages, the TC may consider the nature and extent of the injuries and the suffering
occasioned by them and the duration thereof. The appellate court should not interfere unless such is palpably and scandalously
excessive so as to indicate that it was the result of passion, prejudice or corruption on the part of the TC
BF justifying moral damages must be in the securing, execution and enforcement of contract of carriage. BF cannot be imputed
but must be alleged and proved; mere carelessness of the CC's driver does not per se constitute or justify an inference of malice or BF
on the part of the CC
xxx
CC is subsidiarily liable for moral damages in actions ex delicto or where the action is based upon its liability arising from a crime
xxx
CC is not ordinarily liable for exemplary or corrective damages based upon the wrongful act of its EE or driver where it did not
have anything to do with the wrongful act or had not previously authorized or subsequently ratified such act (Art. 2332) This cannot
be presumed but must be proven by evidence; exemplary damages cannot be recovered as a matter of right
Nominal and exemplary damages awarded for willful breach of contract committed through agent or EE
xxx
Where the CC has incurred in delay in the delivery of the luggage of the offended party, but it had not acted in BF nor been
guilty of gross negligence, the offended party is not entitled to moral nor exemplary damages but only to the limited amount
printed in the plane ticket where the offended party had not declared a higher value nor paid addtl. transpo charges
Liability of air carriers for moral and exemplary damages.-- [Ortigas vs Lufthansa] (1) Under the pool arrangement among different
airlines of the IATA agreement of which Alitalia and Lufthansa are signatories, both airlines are constituted as agents of each
other in the issuing of tickets and other matters pertaining to their relations with those who would need their services.
(2) When it comes to contracts of common carriage, inattention and lack of care on the part of the CC resulting in the failure of
the passenger to be accommodated in the class contracted for amounts to BF or fraud which entitles the passenger to the award of
moral damages. Where the passenger's seat was given to a white passenger, there is willful breach giving rise to an action for
moral damages.
(3) Exemplary damages were awarded. Defendant as an airline should be made to pay an amount that can really serve as a
deterrent against a seeming pattern of indifference and unconcern, and discrimination for racial reasons, discernible in the
treatment of air passengers.
[PAL vs CA, 106 SCRA 391] The duty to exercise the utmost diligence on the part of the CC is for the safety of passengers as well as for
the members of the crew or the complement operating the carrier. Any omission, lapse or neglect thereof will certainly result to the
damage, prejudice, injuries and even death to all aboard the plane, passengers, and crew members alike.
xxx
[KLM vs CA] A provision in passage ticket that carriage by successive air carriers is to be regarded as a single operation makes
the ticket-issuing carrier liable for tortious conduct of other carriers
xxx
Exemplary damages may be awarded where the vehicle involved in the accident operated under the kabit system, which is a
pernicious system in violation of law and which is in fraud of the traveling public which has a right to expect that the holder of the
certificate of convenience be the one to actually operate his transport line.

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xxx
CC is liable for nominal damages for its failure to bring passengers to their destination which is in violating of their right as
passengers.
xxx
The CC is liable for the negligence of his driver in case of breach of contract and cannot avail of the defense that he exercised due
diligence in the employment of his driver. The action for breach of contract imposes on the CC a presumption of liability upon
mere proof of injury to the passenger.
xxx
An action for damages against CC for breach of contract is primary and independent and does not depend upon the previous
conviction of the driver or EE. Indemnification in a criminal prosecution is distinct from that awarded as damages in a civil
action.
Other Principles :
The offended party has the option between an action for enforcement of civil liability based on culpa criminal and an action for
recovery of damages based on culpa aquiliana. Responsibility for negligence under the Civil Code is entirely separate from
negligence under the Penal Code.
An independent civil action based on quasidelict against the ER-operator of a negligent driver cannot be suspended by the filing
of a criminal action against the driver.
Death of driver is not a hindrance to a separate quasi-delict action against the CC-employer
There is no error in awarding civil damages against a driver in a criminal case even when a separate civil action was filed
against the ER. Culpa contractual and an act or omission punishable by law are two distinct sources of obligation.

II. Code of Commerce Provisions on Overland Transportation

CLASS DISCUSSION:
• How old is the Code of Commerce? during the Commonwealth
• General name for the statute? Act
• Are provisions on transportation still good law? Yes
• Extent of applicability in the cases? If not inconsistent
• When will the apply?
• Primary law on common carrier? NCC ; suppletory: Code of Commerce (e.g. Bill of lading)
• Primary law on private carrier? contract
• When is contract of transportation deemed commercial? Article 349 examples: Article 349 (1) vegetables; Article 349 (2) bus
lines
• Commercial contract under code of commerce not always a common carrier (e.g. single transaction)
• are all contracts of transportation commercial contracts?
• What is the effect of the civil code on the definition of the commercial contract?
• "Commercial" contract; as distinguished from civil contracts of transportation.
• Does Article 349 also apply to air? Yes
• What is a bill of lading? 1) contract 2) receipt 3) document of title (symbol of the goods: title to underlying goods can be
negotiated; become holder or owner)
• GR: Bill of lading governs the relationship of the parties; XPNs: falsity and material error in the drafting
• When can a carrier refuse to transport goods?
• When do obligations commence? A363. not possible to apply suppletorily because NCC 1736 already provides the same.
• Who assumes the risk of loss? A361
• Aside from presenting a claim, can refuse to receive the goods.
• Filing of claim-- A 366: 24h
• Grounds for consignee to refuse delivery- 371

A. Scope of Overland Transportation

B. Nature of Contract
ARTICLE 349. A contract of transportation by land or water ways of any kind shall be considered commercial:
1. When it has for its object merchandise or any article of commerce.
2. When, whatever its object may be, the carrier is a merchant or is habitually engaged in transportation for the public.

AGBAYANI
Requisites for a contract of transportation by land or water to be commercial :
(1) transportation of merchandise is always commercial
(2) transportation of person or news is commercial only when the CC is a merchant or is habitually engaged in transportation
for the public
* principal requirement : the CC is a merchant or is habitually engaged in transportation for the public; the object carried is of little
importance
A contract of air transportation may be regarded as commercial since it is analogous to land and water transportation. The
reason for its noninclusion in the Code of Commerce was that at the time of its promulgation, air transportation on a
commercial basis was not yet known.
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C. Effects of Civil Code

Article 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by
the Code of Commerce and by special laws.

Article 2270. The following laws and regulations are hereby repealed:
(1) Those parts and provisions of the Civil Code of 1889 which are in force on the date when this new Civil Code becomes
effective:
(2) The provisions of the Code of Commerce governing sales, partnership, agency, loan, deposit and guaranty;
(3) The provisions of the Code of Civil Procedure on prescription as far as inconsistent with this Code; and
(4) All laws, Acts, parts of Acts, rules of court, executive orders, and administrative regulations which are inconsistent with
this Code. (n)

AGBAYANI
There is now no distinction between a transportation contract of a CC under the Civil Code and a transportation contract under
the Code of Commerce
The New Civil Code does not expressly repeal the provisions of the Code of Commerce on overland transportation; it makes such
provisions suppletory to the provisions of the Civil Code on CCs.

D. Contract of Carriage
1. Bill of Lading
a. Definition, Subject matter
ARTICLE 352. The bills of lading, or tickets in cases of transportation of passengers, may be diverse, some
for persons and others for baggage; but all of them shall bear the name of the carrier, the date of shipment,
the points of departure and arrival, the cost, and, with respect to the baggage, the number and weight of the
packages, with such other manifestations which may be considered necessary for their easy identification.
AGBAYANI
A bill of lading may defined as a written acknowledgment of the receipt of goods and an agreement to transport and to
deliver them at a specified place to a person named or on his order. It comprehends all methods of transportation.
Nature : (1) each bill is a contract in itself and the parties are bound by its terms
(2) a bill of lading is also a receipt
(3) it is also a symbol of the goods covered by
A bill of lading is also a document of title. A document of title is any document used in the ordinary course of business in the sale or
transfer of goods, as proof of the possession or control of goods, or authorizing or purporting to authorize the possessor of the
document to transfer or receive, either by indorsement or by delivery, goods represented by such document.

b. Form, Contents
ARTICLE 350. The shipper as well as the carrier of merchandise or goods may mutually demand that a bill
of lading be made, stating:
1. The name, surname and residence of the shipper.
2. The name, surname and residence of the carrier.
3. The name, surname and residence of the person to whom or to whose order the goods are to be sent or
whether they are to be delivered to the bearer of said bill.
4. The description of the goods, with a statement of their kind, of their weight, and of the external marks or
signs of the packages in which they are contained.
5. The cost of transportation.
6. The date on which shipment is made.
7. The place of delivery to the carrier.
8. The place and the time at which delivery to the consignee shall be made.
9. The indemnity to be paid by the carrier in case of delay, if there should be any agreement on this matter.

ARTICLE 351. In transportation made by railroads or other enterprises subject to regulation rate and time
schedules, it shall be sufficient for the bills of lading or the declaration of shipment furnished by the shipper
to refer, with respect to the cost, time and special conditions of the carriage, to the schedules and regulations
the application of which he requests; and if the shipper does not determine the schedule, the carrier must
apply the rate of those which appear to be the lowest, with the conditions inherent thereto, always including
a statement or reference to in the bill of lading which he delivers to the shipper.

AGBAYANI
Many of the items required in a bill of lading may be omitted with much advantage to commerce, which aims to have the greatest
number of transactions in the last possible time especially in cases where there are tariffs or regulations issued by the carrier
company. In this case, the circumstances relative to price, term and conditions of carriage may be omitted and simple reference be
made to the tariff and regulations under which the transportation is to be made. (Art. 351)
The form of the bill of lading is not material : if it contains an acknowledgment by the carrier of the receipt of goods for
transportation, it is in legal effect, a bill of lading
A ticket issued by a carrier to a passenger is not only a receipt for the fare paid but is the contract between the passenger and the
carrier, of the passenger's right to ride in the CC's vehicle
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Classes of bills of lading :
1. negotiable B/L - where it is stated that the goods will be delivered to the bearer, or to the order of any person named in such
document
2. non-negotiable B/L - where the goods are to be delivered to a specified person
3. clean B/L - does not indicate any defect in the goods
4. foul B/L - indicates that the goods covered by it are in bad condition
5. spent B/L - covers goods that have already been delivered by the CC without a surrender of a signed copy of the B/L; the
subsequent delivery of the spent B/L cannot give to the buyer of it any actual control of the goods, or anything which can fairly be
called delivery
6. through B/L - issued by the CC who is obliged to use the facilities of other carriers as well as his own facilities for the purpose of
transporting the goods from the city of the seller to the city of the buyer, which B/L is honored by the subsequent interested
carriers who do not issue their own ladings
7. on board B/L - states that the goods have been received on board the vessels which is to carry the goods
8. received for shipment B/L - states that the goods have been received for shipment with or w/o specifying the vessel by which the
goods are to be shipped; issued when conditions are not normal and there is an insufficiency of shipping space
9. custody B/L - issued by the CC to whom the goods have been delivered for shipment but the steamer indicated in the B/L
which is to carry the goods has not yet reached the port where the goods are held for shipment
10. port B/L - issued by the CC to whom the goods have been delivered and the steamer indicated in the B/L by which the goods are
to be shipped is already in the port where the goods are held for shipment
Negotiation of Bills by delivery/ by indorsement – Effect of fraud, accident on validity of negotiation : not impaired where the
person to whom the bill was negotiated paid value thereof in GF without notice of the breach of duty or loss, theft,
fraud, accident, mistake, duress or conversion
Who may negotiate? owner; any person to whom possession or custody of the bill has been entrusted by the owner
Rights acquired:
1. such title to the goods as the person negotiating the bill had or had ability to convey to a buyer in good faith for value
2. direct obligation of the CC issuing the bill to hold possession of the goods for him according to the terms of the B/L as fully as if
such CC contracted directly with him
Transfer of non-negotiable B/L
Rights acquired:
1. as against the transferor, title to the goods subject to the terms of any agreement with the transferor
2. right to notify the CC who issued the bill and thereby acquire the direct obligations of such CC to hold possession of the goods for
him accdg to the terms of the document; prior to notification of the CC, the title of the transferee may be defeated by levy upon the
goods or a subsequent purchaser from the transferor of a subsequent sale of the goods by a transferor.

c. Function
ARTICLE 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of
lading, by the contents of which the disputes which may arise regarding their execution and performance
shall be decided, no exceptions being admissible other than those of falsity and material error in the
drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the thing transported, the respective obligations and
actions shall be considered cancelled, unless in the same act the claim which the parties may wish to reserve
be reduced to writing, with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier,
because of its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt
producing the same effects as the return of the bill of lading.

AGBAYANI
B/L constitutes the legal evidence of the contract of transportation --> all disputes between the parties regarding the execution
and performance of the contract shall be decided by the contents of the B/L issued by the CC --> the law admits no exceptions
other than falsity and material error in the drafting of the B/L
As a contract expressing the terms and conditions upon which the property is to be transported, it is to be regarded as merging
all prior and contemporaneous agreements of the parties, and in the absence of fraud, concealment or mistake, its terms or legal
import, when free from ambiguity cannot be explained nor added to by parol (Parol Evidence Rule)

2. Refusal to Transport
ARTICLE 356. Carriers may refuse packages which appear unfit for transportation; and if the carriage is to
be made by railway, and the shipment is insisted upon, the company shall transport them, being exempt
from all responsibility if its objections, is made to appear in the bill of lading.

AGBAYANI
CC cannot ordinarily refuse to carry a particular class of goods to the prejudice of the traffic in those goods exception : when the goods
or packages are unfit for transportation --> if transpo is insisted upon, railroads cannot refuse to carry them, but they shall be
exempt from all responsibility if their objections are made to appear in the B/L

3. Doubtful declaration of contents

ARTICLE 357. If by reason of well-founded suspicion of falsity in the declaration as to the contents of a
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package the carrier should decide to examine it, he shall proceed with his investigation in the presence of
witnesses, with the shipper or consignee in attendance.
If the shipper or consignee who has to be cited does not attend, the examination shall be made before a
notary, who shall prepare a memorandum of the result of the investigation, for such purposes as may be
proper.
If the declaration of the shipper should be true, the expense occasioned by the examination and that of
carefully repacking the packages shall be for the account of the carrier and in a contrary case for the account
of the shipper.

AGBAYANI
If the CC has a well-founded suspicion of falsity in the declaration as to the contents of a package, he may examine it --> he must
follow the procedure under 357

4. No Bill of Lading
ARTICLE 354. In the absence of a bill of lading, disputes shall be determined by the legal proofs which the
parties may present in support of their respective claims, according to the general provisions established in
this Code for commercial contracts.

AGBAYANI
Bill not essential to contract : While under 350, the shipper and the CC may mutually demand that a B/L is made, it is not obligatory.
The fact that a B/L is not issued does not preclude the existence of a contract of transpo. Provided there is a meeting of the minds and
from such meeting arise rights and obligations, there should be no limitations as to form.
The B/L is not essential to the contract, although it may become obligatory by reason of the regulations of companies or as a
condition imposed in the contract by agreement of the parties themselves
Where no B/L is issued, the disputes between the parties shall be decided accdg. to the rules laid down in Art. 354

E. Responsibility of the Carrier

1. When it commences
ARTICLE 355. The responsibility of the carrier shall commence from the moment he receives the
merchandise, personally or through a person charged for the purpose, at the place indicated for receiving
them.

AGBAYANI
The responsibility of the CC commences from the moment he receives the merchandise --> the delivery must be made to him
personally or through his duly authorized agent, and at the place indicated for receiving the merchandise

2. Route
ARTICLE 359. If there is an agreement between the shipper and the carrier as to the road over which the
conveyance is to be made, the carrier may not change the route, unless it be by reason of force majeure; and
should he do so without this cause, he shall be liable for all the losses which the goods he transports may
suffer from any other cause, beside paying the sum which may have been stipulated for such case.
When on account of said cause of force majeure, the carrier had to take another route which produced an
increase in transportation charges, he shall be reimbursed for such increase upon formal proof thereof.

AGBAYANI
Where there is an agreed route, the CC shall be liable for losses due not only to the change of route but also to other causes, together
with the indemnity agreed upon --> the CC may not avail of the contract limiting his liability in case of unjustified change of route
Where there is no agreed route, the carrier must select one which may be the shortest, least expensive and practically passable

3. Care of Goods—
ARTICLE 361. [The merchandise shall be transported at the risk and venture of the shipper, if the contrary
has not been expressly stipulated.#As a consequence, all the losses and deteriorations which the goods may
suffer during the transportation by reason of fortuitous event, force majeure, or the inherent nature and
defect of the goods, shall be for the account and risk of the shipper.
Proof of these accidents is incumbent upon the carrier.

ARTICLE 362. Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes
mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or
by reason of his having failed to take the precautions which usage has established among careful persons,
unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality
different from what they really were.
If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being
lost, on account of their nature or by reason of unavoidable accident, there being no time for their owners to
dispose of them, the carrier may proceed to sell them, placing them for this purpose at the disposal of the
judicial authority or of the officials designated by special provisions.

AGBAYANI
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When goods are delivered on board a ship in good order and condition, and the shipper-owner delivers them to the shipper in bad
order and condition, it then devolves upon the shipowner to both allege and prove that the goods were damaged by reason of some
fact which legally exempts him from liability
The shipper will suffer losses and deteriorations arising from fortuitous event, force majeure, or inherent nature and defects of the
goods (at the risk and venture of the shipper)
It does not mean that the CC is free from liability for losses and deterioration arising from his negligence or fault, which is
presumed
Relate this with Art. 1734 and 1735 of the Civil Code

Burden of proof : the CC has the burden of proving that the injury was occasioned by one of the excepted
causes
The shipper then has the burden to prove that although the injury may have been occasioned by one of the excepted causes, yet still the
CC is responsible if the injury might have been avoided by the exercise of reasonable skill and attention on his part
Art. 362 is in consonance with Art. 1735, NCC --> except that under 1732, proof of extra-o diligence is required and not just ordinary
diligence as implied under 362
Where goods run risk of loss due to their nature, Art. 362 provides for the remedy of sale by the CC of the goods, placing them for
the purpose at the disposal of the judicial authority or of the officials designated by special provisions

Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733.

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

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

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

ARTICLE 366. Within the twenty-four hours following the receipt of the merchandise, the claim against
the carrier for damage or average be found therein upon opening the packages, may be made, provided that
the indications of the damage or average which gives rise to the claim cannot be ascertained from the
outside part of such packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in which the goods transported were delivered.

ARTICLE 367. If doubts and disputes should arise between the consignee and the carrier with respect to
the condition of the goods transported at the time their delivery to the former is made, the goods shall be
examined by experts appointed by the parties, and, in case of disagreement, by a third one appointed by the
judicial authority, the results to be reduced to writing; and if the interested parties should not agree with the
expert opinion and they do not settle their differences, the merchandise shall be deposited in a safe

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warehouse by order of the judicial authority, and they shall exercise their rights in the manner that may be
proper.

AGBAYANI
Duty to deliver goods : duty to deliver the goods in the same condition in which accdg. to the B/L they were found at the time they
were received, without damage or impairment --> otherwise, the CC is liable for damages
Partial delivery: The consignee may refuse to receive the goods delivered, if he can prove that he cannot make use of them
independently of those not delivered --> true solution depends upon the economic use which the goods transported have
(consignee cannot be arbitrary and must justify his determination)
Estoppel of shipper by laches : neglect or delay of shipper to demand immediately, or within a reasonable time, the return of the
merchandise shipped or its value in case of non-delivery constitutes estoppel by laches
Places the CC at a disadvantageous position to show that it had fulfilled what it had undertaken; makes it difficult for the CC to
prove delivery
Where all the goods are delivered but damage is to such an extent that their value is diminished, the obligation of the CC shall be
reduced to the payment of the amount which, in the judgment of experts, constitute such difference in value --> subject of
course to other damages under the NCC
Where damage renders the goods useless for sale and consumption for the purposes for which they are properly destined:
1. if the damage affects all goods, the consignee may abandon all the goods to the CC who shall pay the corresponding damages
2. if the damage affects only some of the goods, the consignee may abandon only the damaged goods --> but if the consignee can
prove that it is impossible to conveniently use the undamaged goods in that form, without the damaged goods, the law
authorizes the consignee to abandon all the goods
In case of damaged goods, the damage may either be
(1) ascertainable only by opening of the packages, or
(2) ascertainable from the outside part of the package
In Case 1, the claim against the CC for damages must be made within 24 hours following the receipt of the merchandise
In Case 2, the claim must be made at the time of receipt
The claim must be made before the payment of transportation charges
** otherwise, no action for damages may be maintained against the CC
When period begins to run : period begins to run when the consignee received possession of the goods such that he may exercise over
it the ordinary control pertinent to ownership
There must be delivery of the merchandise by the CC to the consignee at the place of destination --> Art. 366 applies only to cases of
claims for damage to goods actually turned over by the CC and received by the consignee
The conditions under Art. 366 are not limitation of action but are conditions precedent to a cause of action --> if the shipper or
consignee fails to allege and prove the conditions under 366, he shall have no right of action against the CC
The CC may require in the B/L that the goods be examined at the time of delivery thereof --> the CC may likewise waive such right
Art. 366 is modified by a B/L prescribing a longer period for filing of written claim with the CC or its agent
The unilateral action of a CC in stamping a condition in the notice of arrival, requiring examination of bad order cargo by the ship's
agent before removal from port authorities as condition precedent to an action for recovery cannot modify or add conditions to the
B/L --> unreasonable and unfair in that it allows CC to avoid responsibility for the loss of or damage to their cargo when in packages
or covered
The purpose of short period for claiming damages : to afford the CC a reasonable opportunity and facilities to check the validity of
the claims while the acts are still fresh in the minds of the person who took part in the transaction and the documents are still
available.
The consignee may file a provisional claim : it is not necessary that such claim should state a detailed list of the loss or damage;
they only have to contain descriptions of the shipments in question sufficient to have allowed the CC to make reasonable
verifications of such claim --> the determination of the specific amount of damages claimed should be done carefully and without
haste and these can be done only in a formal claim which will be filed after the provisional claim
This stipulation is in the nature of a limitation upon the owner's right to recovery --> the burden of proof is on the CC to show that
the limitation was reasonable and in proper form or within the time stated (see Southern Lines vs CA)
A a stipulation in the B/L providing for a shorter period than the statutory period within which to bring action for breach is valid
--> does not in any way defeat the right to recover but merely requires that said right be asserted by action at an earlier period
(filing of claims is different from filing of suits)
If doubts and disputes should arise between the consignee and the CC with respect to the condition of the goods transported at the
time of the delivery, Art. 367 shall govern --> expert opinion on the matter is not conclusive on the parties

b. To whom delivery made

ARTICLE 368. The carrier must deliver to the consignee, without any delay or obstruction, the goods which
he may have received, by the mere fact of being named in the bill of lading to receive them; if he does not do
so, he shall be liable for the damages which may be caused thereby.

AGBAYANI
The delivery must be made to the consignee
Where the B/L is issued to the order of the shipper, the CC is under a duty not to deliver the merchandise except upon
presentation of the B/L duly indorsed by the shipper, and where the CC delivered the goods to another person who did not present the
B/L, such CC is liable for misdelivery --> duty to transport the goods safely and to deliver them to the person indicated in the B/L
Misdelivery: Delivery to a person different from that indicated in the B/L --> different from non-delivery
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In case of conflicting orders of the shipper and the consignee (where one orders the return and the other orders the delivery of the
goods), there is no other recourse than to determine at what moment the right of the shipper to countermand the shipment
terminates --> this moment can be no other than the time when the consignee or legitimate holder of the B/L appears with such B/L
before the CC and makes himself a party to the contract (prior to that time, he is a stranger to the contract)

c. Judicial deposit
ARTICLE 369. If the consignee cannot be found at the residence indicated in the bill of lading, or if he
refuses to pay the transportation charges and expenses, or if he refuses to receive the goods, the municipal
judge, where there is none of the first instance, shall provide for their deposit at the disposal of the shipper,
this deposit producing all the effects of delivery without prejudice to third parties with a better right.

Article 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably presumed to have been negligent in case of their loss,
destruction or deterioration.

AGBAYANI
Judicial deposit as a remedy:
1. where the consignee cannot be found at the residence indicated
2. where the consignee refused to pay the transportation charges
3. where the consignee refuses to receive the goods
Judicial deposit shall produce all the effects of delivery subject to third persons with better rights
Duty to look for consignee : if consignee is not present, he is entitled to reasonable notice from the CC of their arrival and a fair
opportunity to take care of and remove them : if the consignee is unknown to the CC, the latter must use proper and reasonable
diligence to find him, and if the consignee still cannot be found, the goods may be stored in a proper place and the CC will have
performed his whole duty and shall be discharged from liability as a CC
Failure to look for consignee and to give him reasonable notice shall make the CC liable for damages resulting from the delay in the
receipt of the goods by the consignee --> apply 1738 on the liability of the CC even when the goods are deposited in its warehouse until
after the consignee has been given reasonable notice and opportunity to remove the goods

d. When to be made
ARTICLE 370. If a period has been fixed for the delivery of the goods, it must be made within such time,
and, for failure to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither the
shipper nor the consignee being entitled to anything else.
If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading, the carrier
shall be liable for the damages which the delay may have caused.

ARTICLE 358. If there is no period fixed for the delivery of the goods the carrier shall be bound to forward
them in the first shipment of the same or similar goods which he may make point where he must deliver
them; and should he not do so, the damages caused by the delay should be for his account.

AGBAYANI
Where period fixed for delivery : the CC must deliver the goods within the time fixed --> for failure to do so, the CC shall pay
indemnity stipulated in the B/L, neither the shipper nor the consignee being entitled to anything else --> however, under the CC,
damages shall be paid if the carrier refuses to pay the stipulated indemnity or is guilty of fraud in the fulfillment of his obligation (Art.
1126,NCC)
If no indemnity has been stipulated and the delay exceeds the time fixed in the B/L, the CC shall be liable for the damages that the
delay may have caused, e.g. the difference between the MV of the goods at the time when they should have been delivered,
and the price at the time when they were delivered to which may be added reasonable expenses caused by delay
A CC in GF may be held liable only for damages that were foreseen or might have been foreseen at the time the contract of
transpo was entered into --> before a CC could be held liable for special damages, such as loss of profits on account of the delay or
failure of deliver, he must have notice at the time of the delivery of the particular circumstances attending the shipment and which
would probably lead to such special loss if he defaulted (Mendoza vs PAL)
If the CC incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility; where the CC
without cause delays the transportation of the goods, the contract limiting the CC's liability cannot be availed of in case of the loss,
destruction or deterioration of the goods
Where property in the hands of a CC is not delivered within a reasonable time after it has reached its destination, the CC in the
absence of any legal exemption and after demand has been made and delivery refused, is liable for a conversion of the
property --> the consignee may waive title to the property and sue for conversion and is entitled to the value of the goods at the
time they should have been delivered to him --> subsequent tender of the goods by the CC is not available as a defense
If there has been demand and the CC tenders the goods, the consignee cannot refuse to receive the goods and sue for conversion; his
sole remedy is an action for damages on account of the delay --> there can only be conversion if there has been demand and the CC
refuses delivery
The time for delivery when no period fixed : the CC shall be bound to forward them in the first shipment of the same or similar goods
which he makes to the point where he must deliver them --> should he not do so, the damages caused by the delay shall be for his
account
Art. 358 is not violated when though the goods were not shipped on the train agreed upon, they were shipped on another train
which arrived earlier than the one agreed upon
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e. Two or more carriers

ARTICLE 373. The carrier who makes the delivery of the merchandise to the consignee by virtue of
combined agreements or services with other carriers shall assume the obligations of those who preceded
him in the conveyance, reserving his right to proceed against the latter if he was not the party directly
responsible for the fault which gave rise to the claim of the shipper or consignee.
The carrier who makes the delivery shall likewise acquire all the actions and rights of those who preceded
him in the conveyance.
The shipper and the consignee shall have an immediate right of action against the carrier who executed the
transportation contract, or against the other carriers who may have received the goods transported without
reservation.
However, the reservation made by the latter shall not relieve them from the responsibilities which they may
have incurred by their own acts.

AGBAYANI
Successive carriers shall assume the obligations of previous carriers but have a right of action against previous carriers is the
latter are directly responsible for the fault giving rise to the claim of the shipper

f. Obligation to keep registry

ARTICLE 378. Agents for transportation shall be obliged to keep a special registry, with the formalities
required by Article 36, in which all the goods the transportation of which is undertaken shall be entered in
consecutive order of number and dates, with a statement of the circumstances required in Article 350 and
others following for the respective bills of lading.

g. Compliance with administrative regulations

ARTICLE 377. The carrier shall be liable for all the consequences which may arise from his failure to
comply with the formalities prescribed by the laws and regulations of the public administration, during the
whole course of the trip and upon arrival at the point of destination, except when his failure arises from
having been led into error by falsehood on the part of the shipper in the declaration of the merchandise. If
the carrier has acted by virtue of a formal order of the shipper or consignee of the merchandise, both shall
become responsible.

AGBAYANI
The CC is exempted from responsibility where his failure to comply arises from having been led into error by the falsehood on the
part of the shipper in the declaration of the merchandise
The shipper or consignee may become liable for noncompliance with govt. rules and regulations, when the CC has acted by virtue
of a formal order of the shipper or consignee --> but the CC continues to be liable

F. Rights and Obligations of Shipper and/or Consignee

1. Rights to damages
a. Condition imposed on right
ARTICLE 366. Within the twenty-four hours following the receipt of the merchandise, the claim against
the carrier for damage or average be found therein upon opening the packages, may be made, provided that
the indications of the damage or average which gives rise to the claim cannot be ascertained from the
outside part of such packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in which the goods transported were delivered.

ARTICLE 357. If by reason of well-founded suspicion of falsity in the declaration as to the contents of a
package the carrier should decide to examine it, he shall proceed with his investigation in the presence of
witnesses, with the shipper or consignee in attendance.
If the shipper or consignee who has to be cited does not attend, the examination shall be made before a
notary, who shall prepare a memorandum of the result of the investigation, for such purposes as may be
proper.
If the declaration of the shipper should be true, the expense occasioned by the examination and that of
carefully repacking the packages shall be for the account of the carrier and in a contrary case for the account
of the shipper.
AGBAYANI
Effect of return of the B/L or giving of the receipt: The respective obligations and actions of the parties against each other shall
be considered canceled, except where in the same act of return or giving of a receipt the claims of the parties be reduced to writing
subject to the provisions of Art. 366

b. Amount of damages for loss

ARTICLE 732.Lenders on bottomry or respondentia shall suffer, in proportion to their respective interest,
the general average which may take place in the goods on which the loan is made. In particular averages, in
the absence of an express agreement between the contracting parties, the lender on bottomry or
respondentia shall also contribute in proportion to his respective interest, should it not belong to the kind of
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risks excepted in the foregoing article.

Article 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence
shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.

AGBAYANI
The value of the goods stated in the B/L is conclusive between the parties and the shipper is not allowed to prove a higher value
It is only when the CC's fault is so gross as to amount to actual fraud, that the actual amount of the losses and damages suffered may
be proved by the shipper against the carrier
Par. 2 especially binds the horses, vehicles, vessels and eqpt. and all other principal and accessory means of the CC in favor of the
shipper --> this lien is a security for the payment of the value of the goods which the CC must pay in case of loss or
misplacement

c. Amount of Damages for Delay

ARTICLE 371 (3) If the abandonment is not made, the indemnification for losses and damages by reason of
the delay cannot exceed the current price which the goods transported would have had on the day and at
the place in which they should have been delivered; this same rule is to be observed in all other cases in
which this indemnity may be due.

AGBAYANI
Damages for delay (par. 3) : Provided there is no express agreement as to indemnity in the B/L and there is no fraud on the
part of the CC, and the goods have a known current price at the place and on the day they should have been delivered, the damages
shall not exceed such value --> subject to Civil Code provisions on damages in case of delay

2. Right to abandon
ARTICLE 371. In case of delay through the fault of the carrier, referred to in the preceding articles, the
consignee may leave the goods transported in the hands of the former, advising him thereof in writing
before their arrival at the point of destination.
When this abandonment takes place, the carrier shall pay the full value of the goods as if they had been lost
or mislaid.
If the abandonment is not made, the indemnification for losses and damages by reason of the delay cannot
exceed the current price which the goods transported would have had on the day and at the place in which
they should have been delivered; this same rule is to be observed in all other cases in which this indemnity
may be due.

ARTICLE 360. The shipper, without changing the place where the delivery is to be made, may change the
consignment of the goods which he delivered to the carrier, provided that at the time of ordering the change
of consignee the bill of lading signed by the carrier, if one has been issued, be returned to him, in exchange
for another wherein the novation of the contract appears.
The expenses which this change of consignment occasions shall be for the account of the shipper.

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

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

AGBAYANI
Right of abandonment: Exceptional but limited right

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The right must be exercised during the intervening period between the moment when the fault of the CC produces a delay,
which is the generative cause of the action, until the moment just before the arrival of the goods at the place of delivery, by
communicating such abandonment to the CC in writing
Where these conditions do not concur, the refusal to accept cannot be effective
Damages for abandonment : Art. 371 (2) --> subject to Civil Code
Cases where consignee may abandon goods :
1. Art. 363, in case of partial non-delivery where the consignee proves that he cannot make use of the goods capable of delivery
independently of those not delivered
2. Art. 365, where the goods are rendered useless for sale and consumption for the purposes for which they are properly destined
3. Art. 371, where there is delay through the fault of the carrier

3. Right to change consignment

ARTICLE 360. The shipper, without changing the place where the delivery is to be made, may change the
consignment of the goods which he delivered to the carrier, provided that at the time of ordering the change
of consignee the bill of lading signed by the carrier, if one has been issued, be returned to him, in exchange
for another wherein the novation of the contract appears.
The expenses which this change of consignment occasions shall be for the account of the shipper.

4. Obligation to pay transportation charges

ARTICLE 376. The preference of the carrier to the payment of what is owed him for the transportation and
expenses of the goods delivered to the consignee shall not be cut off by the bankruptcy of the latter,
provided it is claimed within the eight days mentioned in the preceding article.

Article 2241. With reference to specific movable property of the debtor, the following claims or liens shall be
preferred: (9) Credits for transportation, upon the goods carried, for the price of the contract and incidental
expenses, until their delivery and for thirty days thereafter;

AGBAYANI
Railroad corporations have the power to detain freight, goods or luggage, to answer for the freight, storage and other transportation
charges
In case of failure of the shipper, owner or consignee to pay for such charges, the CC has the power to sell such freight, goods, or
luggage at public auction following the procedure under the law
Two sanctions for the enforcement by the CC of the payment of expenses and transpo charges :
1. Art. 374 - judicial sale of the goods transported
2. Art. 375 - creating a lien in favor of the CC on the goods transported --> 8 day period has been increased to 30 days by the NCC
The purpose of the lien and time limit: Reciprocal to that established in favor of the shipper under Art. 372(par. 2); time limit rests
on the necessity which the consignee must have for alienation of the goods, by which the CC is given a period relatively urgent
pertaining to the said goods transported --> after the time has prescribed, his preference prescribes and his only remedy is by ordinary
action
The mere fact that the goods remain in the possession of the CC because they have not been removed by the consignee, and the
right of the CC to demand the sale of the goods to satisfy the cost of transportation and other expenses, do not deprive the
CC of its right to demand in a proper action the amounts owing to it by reason of the contract of transpo
The bankruptcy of the consignee shall not cut off the preference of the CC, provided that the claim is made w/in 30 days from date of
delivery (NCC)

5. Obligation to return bill of lading

ARTICLE 353. (2) After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by virtue of the exchange of this title with the thing transported, the respective
obligations and actions shall be considered cancelled, unless in the same act the claim which the parties may
wish to reserve be reduced to writing, with the exception of that provided for in Article 366.

AGBAYANI
Under par. 2, Art. 353, after the contract of transpo has been complied with, the B/L shall be returned to the issuing CC in exchange
for the goods transported which are delivered to the shipper or consignee
Where the consignee upon receiving the goods cannot return the B/L to the CC by reason of its loss or any other cause, par. 3, Art. 353
provides that he must give the CC a receipt of the goods delivered
Effect of return of the B/L or giving of the receipt: The respective obligations and actions of the parties against each other shall
be considered canceled, except where in the same act of return or giving of a receipt the claims of the parties be reduced to writing
subject to the provisions of Art. 366

G. Applicability of Provisions

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ARTICLE 379. The provisions contained in Articles 349 and following shall be understood as
equally applicable to those who, although they do not personally effect the transportation of the
merchandise, contract to do so through others, either as contractors for a particular and definite
operation, or as agents for transportations and conveyances.
In either case they shall be subrogated in the place of the carriers themselves, with respect to the
obligations and responsibility of the latter, as well as with regard to their rights

III. Admiralty and Maritime Commerce

A. Concept of Admiralty; Jurisdiction over admiralty cases

BP 129, as amended by RA 7691

Sec. 19. Jurisdiction in civil cases. – Regional Trial Courts shall exercise exclusive original jurisdiction.
"(3) In all actions in admiralty and maritime jurisdiction where the demand or claim exceeds One hundred
thousand pesos (P100,000.00) or, in Metro Manila, where such demand or claim exceeds Two hundred
thousand pesos (P200,000.00);

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts
in Civil Cases. – Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall
exercise:
"(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate,
including the grant of provisional remedies in proper cases, where the value of the personal property, estate,
or amount of the demand does not exceed One hundred thousand pesos (P100,000.00) or, in Metro Manila
where such personal property, estate, or amount of the demand does not exceed Two hundred thousand
pesos (P200,000.00), exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and
costs, the amount of which must be specifically alleged: Provided, That interest, damages of whatever kind,
attorney's fees, litigation expenses, and costs shall be included in the determination of the filing fees:
Provided, further, That where there are several claims or causes of actions between the same or different
parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims in all
the causes of action, irrespective of whether the causes of action arose out of the same or different
transactions;
CASE:
• Admiralty jurisdiction; test: subject matter—Admiralty has jurisdiction over all maritime contracts, in whatever form,
wherever they were executed or are to be performed, but not over non-maritime contracts. Whether or not a contract is
maritime depends not on the place where the contract is made and is to be executed, making the locality the test, but on the
subject-matter of the contract (i.e. the nature and character of the contract) making the true criterion a maritime service or a
maritime transaction. Specifically, admiralty has jurisdiction of a proceeding in rem or in personam for the breach of a contract
of affreightment, whether evidenced by a bill of lading or a charter party (International Harvester v Aragon—American rule:
subject matter:: English rule: locality; SC chooses American)
CLASS DISCUSSION:
• What cases courts have jurisdiction over maritime commerce?
• IF W/IN MMLA-Not exceeding 400,000-MTC (exactly 400,000 and below); Above 400,000- RTC
• What if exactly 400,000 and there's additional interest?
• Exactly 300,000, outside MMLA- MTC
• What is the contemporary counterpart of the municipal court? MTC MeTC MTCC; Counterpart of CFI? RTC
• INTERNATIONAL HARVESTER--
o will not be ruled the same against today's framework; amounts determine jurisdiction;
o why is this case still important? test/criterion whether a particular matter is on the admiralty: subject matter;
o how did SC define admiralty? has jurisdiction over maritime contracts;
o what do you mean by locality?-place where contract was executed;
o what be considered as admiralty matters? maritime service/transaction- collision; loss of goods; death or injury to
passengers
o what would not fall under admiralty? construction of the ship
B. Vessels
1) Meaning (Lopez v Duruelo)
CASE:
• Vessels; defined—Vessels intended in that Book are such as are run by masters having special training, with the elaborate
apparatus of crew and equipment indicated in the Code. The word "vessel" (Spanish "buque," "nave"), used in the section
referred to was not intended to include all ships, craft or floating structures of every kind without limitation, and the
provisions of that section should not be held to include minor craft engaged only in river and bay traffic. Vessels which are
licensed to engage in maritime commerce, or commerce by sea, whether in foreign or coastwise trade, are no doubt regulated
by Book III of the Code of Commerce. Other vessels of a minor nature not engaged in maritime commerce, such as river boats
and those carrying passengers from ship to shore, must be governed, as to their liability to passengers, by the provisions of the
Civil Code or other appropriate special provisions of law.

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o
According to Estasen—refers solely and exclusively to merchant ships (engaged in the transportation of passengers
and freight from one port to another or from one place to another), not including war ships; almost always refer to
craft which are not accessory to another as in the case of launches, lifeboats, etc.
o According to the Spanish-English Dictionary complied by Edward R. Bensley and published at Paris in the year
1896—"Ship, a vessel with decks and sails." Particularly significant in this definition is the use of the word "decks"
since a deck is not a feature of the smallest types of water craft.
o According to Dufour—relate exclusively to maritime and not to fluvial navigation; and that consequently the word
'ship' when it is found in these provisions, ought to be understand in the sense of a vessel serving the purpose of
maritime navigation of seagoing vessel, and not in the sense of a vessel devoted to the navigation of rivers
• Not vessels—Not applicable to small which are subject to administrative (customs) regulations in the matter of port service
and in the fishing industry.
o According to Estasen—In no way can they or should they be understood as referring to pleasure craft, yachts,
pontoons, health service and harbor police vessels, floating storehouses, warships or patrol vessels, coast guard
vessels, fishing vessels, towboats, and other craft destined to other uses, such as for instance coast and geodetic
survey, those engaged in scientific research and exploration, craft engaged in the loading and discharge of vessels
from same to shore or docks, or in transshipment and those small craft which in harbors, along shore, bays, inlets,
coves and anchorages are engaged in transporting passengers and baggage.
o According to Mamie—Not applicable to vessels in inland navigation, which are esp designated by the name of the
boats
CLASS DISCUSSION:
• What do you understand by the word vessel? merchant ship-engaged in maritime commerce
• What would not be a vessel? warships, dragon boat
• Is a common carrier that travels via water always a vessel (in other words, is a sea-faring common carrier always a vessel)? No
• Where are vessels registered? MARINA (Maritime Industry Authority)
• Is registration necessary for any sale? as between parties: binding nonetheless :: as between third parties: yes

2) Nature and Acquisition of

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 the registry of vessels. The ownership of
a vessel shall likewise be acquired by possession in good faith, continued for three years, with a just title
duly recorded .In the absence of any of these requisites, continuous possession for ten years shall be
necessary in order to acquire ownership. A captain may not acquire by prescription the vessel of which he is
in command.

ARTICLE 583.If while on a voyage the captain should find it necessary to contract one or more of the
obligations mentioned in subdivisions 8 and 9 of Article 580, he shall apply to the judge or court if he is in
Philippine territory, and otherwise to the consul of the Republic of the Philippines, should there be one, and,
in his absence, to the judge or court or proper local authority, presenting the certificate of the registration
sheet treated of in Article 612 and the instruments proving the obligation contracted. The judge or court, the
consul, or the local authority, as the case may be, in view of the result of the proceedings instituted, shall
make a temporary memorandum of their result in the certificate, in order that it may be recorded in the
registry when the vessel returns to the port of its registry, or so that it can be admitted as a legal and
preferred obligation in case of sale before its return, by reason of the sale of the vessel on account of a
declaration of unseaworthiness .The omission of this formality shall make the captain personally liable for
the credits prejudiced on his account.

Article 712. Ownership is acquired by occupation and by intellectual creation.

Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate
and intestate succession, and in consequence of certain contracts, by tradition.
They may also be acquired by means of prescription.

AGBAYANI
Vessels: Those engaged in navigation , whether coastwise or on the high seas, including floating docks, pontoons, dredges,
scows and any other floating apparatus destined for the services of the industry or maritime commerce
Vessels engaged in the business of carrying or transporting passengers or goods for compensation, offering their services to the
public are common carriers --> governed primarily by the Civil Code provisions on common carriers and subsidiarily by the
Code of Commerce and special laws
The Code of Commerce regulates merchant ships or those engaged in the transportation of passengers and freight from one
port to another or from place to another
The Code of Commerce does not refer to pleasure ships, yachts, pontoons, health service and harbor police vessels, floating
storehouses, warships or patrol vessels, coast guard vessels, fishing vessels, towboats and other craft destined to other uses, such as
coast and geodetic survey, scientific research and exploration, crafts engaged in the loading and the discharge of vessels, or
transhipments from one vessel to another
Vessels of a minor nature not engaged in maritime commerce, such as, river boats and those carrying passengers from ship to
shore, must be governed as to their liability to passengers, by the provisions of the Civil Code
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Modes of acquisition: (1) purchase and sale, (2) prescription, (3) construction, (4) capture, (5) donation, (6) succession, and (7) other
means, such as barter
Possession in GF will ripen into ownership in 3 years; if the possession is otherwise, it will ripen into ownership in 10 years
There can be no prescription in favor of the captain because the nature of the possession of the captain is such that he is only an agent
of the owner, a depositary of the vessel
The acquisition of a vessel must appear in a written instrument and such instrument must be registered in order that the transfer
may affect third persons
The business of constructing and repairing vessels or parts thereof shall not be considered a public utility and no CPC shall be required
thereof
Vessels are considered personal or movable property; but they partake to a certain extent, of the nature and conditions of real
property, on account of their value and importance in the world of commerce

3) Registration; certificates issued; distinctions

RA 9295 SEC. 10. Jurisdiction; Power; and Duties of MARINA. - The MARINA shall have the power and
authority to:
(1) Register vessels;

Tariff and Customs Code, Sec. 802

(1) vessels - every sort of boat, craft or other artificial contrivance used, or capable of being used, as a means of transportation
on water
(2) duly registered - person, natural or juridical, registered with the proper govt. agencies, as Bureau of Commerce, SEC,
NACIDA, BOI, Export Incentives Board or Oil Commission, as now or may hereafter be required by law.

PD 761 as amended by PD 1064, 1521

Sec. 806. Upon registration of a vessel of domestic ownership, and of more than 15 tons gross, a certificate of Philippine registry
shall be issued for it. If the vessel is of domestic ownership and of 15 tons gross or less, the taking of the certificate of
Philippine registry shall be optional with the owner.
Domestic ownership means ownership vested in the citizens of the Philippines or corporations or association organized
under the laws of the Philippines at least 60% of the C/S or capital of which is wholly owned by citizens of the Philippines, and in
the case of corporations or associations which will engage in coastwise trade the president and managing directors thereof shall
be such citizens xxx
xxx an enterprise duly registered with the Board of Investments WON entirely owned by foreign nationals, may register its
own vessels xxx if such vessels are to be used exclusively to transport its own raw materials and finished products in
Philippine waters as an incident to its manufacturing, processing or business activity registered with the BOI and certified
to by said Board as an essential element in the operation of the registered project.

Rule III, Marina Rules and Regulations:

Subjects of Registration:
1) All vessels used in Phil. waters, not being transients of foreign registry, shall be registered with the MARINA. To this
end, it shall be the duty of the master, owner and agent of every such vessel to make application to the proper MARINA
district office for registration thereof within 15 days after the vessel becomes subject to such registration.
2) A vessel of 3 tons gross or less shall not be registered unless the owner shall so desire, nor shall documents licenses of any
kind be required for such vessel, but the proper fee shall be charged for measurement when measurement is necessary, except
when the same is engaged in towing or carrying of articles and passengers for hire.
3) All undocumented vessels shall be numbered in such form as may be prescribed by the Administrator.
Vessels exempt from Registration :
AFP vessels, vessels owned and/or operated by the AFP or by foreign govt. for military purposes, and bancas, sail boats
and other water craft which are not motorized of less than 3 gross tons shall not be subject to the requirements of these rules
and regulations relative to registration and navigation, except in so far as may be prescribed by regulations of MARINA.

The Phil. Coast Guard is vested with exclusive authority over the registration and documentation of Phil. vessels, as well as the
issuance of all certificates, licenses, or other documents necessary or incident to such registration
The registration shall be effected at its home port or at the nearest Coast Guard district or station when the home port does not have
such
Certificates of Philippine register: upon registration of a vessel of domestic ownership and of more than 15 tons gross, a certificate
of Phil. Register shall be issued for it
The purpose of certificates of register of vessels : to declare the nationality of a vessel engaged in trade with foreign nations and
to enable her to assert that nationality wherever found
Privileges of certificate: It confers upon the vessel the right to engage, consistently with law, in the Philippines coastwise trade and
entitles it to the protection of the authorities and the flag of the Philippines in all ports and on the high seas, and at the same time
secures to it the same privileges and subjects it to the same disabilities as, under the laws of the Philippines, pertain to foreign
built vessels transferred abroad to citizens of the Philippines
Certificates of ownership : upon registration of a vessel of more than 5 tons gross, a certificate of ownership shall be issued for it

4) Significance of Registration of transactions affecting vessels

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•Registration; Ratio—Ships or vessels, whether moved by steam or by sail, partake, to a certain extent, of the nature and
conditions of real property, on account of their value and importance in the world commerce; and for this reason the
provisions of article 573 of the Code of Commerce are nearly identical with those of article 1473 of the Civil Code.
• Registration; Documents Affecting Title of a Vessel—It is clear that section 1171 of the Administrative Code1 has modified the
provisions of the Chattel Mortgage Law, Act No. 1508, particularly section 4 thereof. It is now not necessary for a chattel
mortgage of a vessel to be noted in the registry of the register of deeds. On the other hand, it is essential that a record of
documents affecting the title of a vessel be entered in the office of the collector of customs, at a port of entry. The law as now
existing is designed to protect persons who deal with a vessel on the strength of the record title. Mortgages on vessels,
although not recorded, are good as between the parties. But as against creditors of the mortgagor, an unrecorded mortgage is
invalid. (Arroyo v Yu)
o Registration; by Collector of Customs—The requisite of registration in the registry, of the purchase of a vessel, is
necessary and indispensable in order that the purchaser's rights may be maintained against a claim filed by a third
person. Such registration is required both by the Code of Commerce (Article 5732) and by Act No. 19003. The
amendment solely consisted in charging the Insular Collector of Customs, as at present, with the fulfillment of the
duties of the commercial register concerning the registering of vessels; so that the registration of a bill of sale of a
vessel shall be made in the office of the insular Collector of Customs, who, since May 18, 1909, has been performing
the duties of the commercial register in place of this latter official. The legal rule set down in the Mercantile Code
subsists, inasmuch as the amendment solely refers to the official who shall make the entry; but, with respect to the
rights of the two purchasers, whichever of them first registered his acquisition of the vessel is the one entitled to
enjoy the protection of the law, which considers him the absolute owner of the purchased boat, and this latter to be
free of all encumbrance and all claims by strangers for, pursuant to article 582 of the said code, after the bill of the
judicial sale at auction has been executed and recorded in the commercial registry, all the other liabilities of the vessel
in favor of the creditors shall be considered#canceled
• Constructive Registration; example—Consolidating the facts, we find the mortgage of the Philippine National Bank dated
November 28, 1919, but not recorded in the office of the collector of customs until March 5, 1929. The execution sued out by
Maria Corazon Yu de Sane was dated December 6, 1928, and noted at the port of entry two days prior thereto. Under these
facts, the execution holder would have a prior right over the unrecorded mortgage. However, in the decision of the trial court
we find an explanation of the delay which appears to have been proved at the trial, and which we must accept since there is
nothing in the record to the contrary. His Honor states that the fact that the mortgage was not registered in the office of the
collector of customs of Iloilo until March 5, 1929, was because of the doubts entertained by the collector relative to the
applicability of Act No. 3324 to a mortgage executed in 1918 in favor of a Chinese subject. This uncontradicted fact must be
taken as curing the bank's defective title. That the collector of customs did not perform his duty was no fault of the bank.
Constructive registration of the mortgage must, therefore, be accepted. (Arroyo v Yu)
CLASS DISCUSSION:
• ARROYO--if you have a valid reason, constructive registration suffices
• RUBISO--classic illustration of the rule
• Distinguish shipowner and ship agent
• Are the liabilities of a shipowner and ship agent the same? What are they liable for?
• Example-not liable (within authority): jettison:
• How do you reconcile NCC and Code of Commerce wrt liability for acts of employees? Code of Commerce is a special law
applicable to maritime commerce

AGBAYANI
Presumption of ownership from registration : the presumption is that the person in whose name a vessel is registered has legal
title thereto --> but such is not conclusive proof against the real owners It is essential that a record of documents
affecting the title of a vessel be entered in the Philippine Coast Guard

C. Persons Participating in Maritime Commerce

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
!Section!1171.!Record!of!documents!affecting!title.!—!In!the!record!of!transfers!and!incumbrances!of!vessels,!to!be!kept!at!each!principal!
port!of!entry,!shall!be!recorded!at!length!all!transfers,!bills!of!sale,!mortgages,!liens,!or!other!document!which!evidence!ownership!or!
directly! or! indirectly! affect! the! title! of! registered! vessels,! and! therein! shall! be! recorded! all! receipts,! certificates,! or! acknowledgments!
canceling!or!satisfying,!whole!or!in!part,!any!such!obligation.!No!other!record!of!any!such!document!or!paper!shall!be!required!than!
such!as!is!affected!hereunder.!
2
!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!be!included!in!a!written!instrument,!which!shall!not!produce!any!effect!with!regard!to!third!persons!if!
not!recorded!in!the!commercial!registry.!
3
!SECTION!2.!The!documenting,!registering,!enrolling,!and!licensing!of!vessels!in!accordance!with!the!Customs!Administrative!Act!and!
customs!rules!and!regulations!shall!be!deemed!to!be!a!registry!of!vessels!within!the!meaning!of!the!title!two!of!the!Code!of!Commerce,!
unless!otherwise!provided!in!said!Customs!Administrative!Act!or!in!said!customs!rules!and!regulations,!and!the!Insular!Collector!of!
Customs! shall! perform! the! duties! of! commercial! register! concerning! the! registering! of! vessels,! as! defined! in! title! two! of! the! Code! of!
Commerce.!
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1) Ship owners and ship agents
ARTICLE 586.The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed
was invested for the benefit of the same. By ship agent is understood the person entrusted with provisioning or
representing the vessel in the port in which it may be found.

ARTICLE 587.The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise
from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all her equipments and the freight it may have earned during the voyage.

ARTICLE 588.Neither the shipowner nor the ship agent shall be liable for the obligation scontracted by the captain, if
the latter exceeds the powers and privileges pertaining to him by reason of his position or conferred upon him by the
former. Nevertheless, if the amounts claimed were invested for the benefit of the vessel, the responsibility therefor shall
devolve upon its owner or agent.

ARTICLE 589.If two or more persons should be part owners of a merchant vessel, a partnership shall be presumed as
established by the co-owners. This partnership shall be governed by the resolutions of the majority of the members .If
the part owners should not be more than two, the disagreement of views, if any, shall be decided by the vote of the
member having the largest interest. If the interests are equal, it should be decided by lot. The person having the smallest
share in the ownership shall have one vote; and proportionately the other part owners as many votes as they have parts
equal to the smallest one. A vessel may not be detained, attached or levied upon in execution in its entirety, for the
private debts of a part owner, but the proceedings shall be limited to the interest which the debtor may have in the
vessel, without interfering with the navigation.

ARTICLE 590.The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund, for
the results of the acts of the captain, referred to in Article 587.Each co-owner may exempt himself from this liability by
the abandonment, before a notary, of the part of the vessel belonging to him.

ARTICLE 591.All the part owners shall be liable, in proportion to their respective ownership, for the expenses for
repairing the vessel, and for other expenses which are incurred by virtue of are solution of the majority. They shall
likewise be liable in the same proportion for the expenses for the maintenance, equipment ,and provisioning of the
vessel, necessary for navigation.

ARTICLE 592.The resolution of the majority with regard to the repair, equipment, and provisioning of the vessel in the
port of departure shall bind the minority, unless the minority members renounce their interests, which must be acquired
by the other co- owners, after a judicial appraisement of the value of the portion or portions assigned. The resolutions of
the majority relating to the dissolution of the partnership and sale of the vessel shall also be binding on the minority.
The sale of the vessel must be made at public auction, subject to the provisions of the law of civil procedure, unless the
co- owners unanimously agree otherwise, saying always the right of repurchase and redemption provided for in Article
575.

ARTICLE 593.The owners of a vessel shall have preference in her 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 interest shall be preferred; and
should they have equal interests, the matter shall be decided by lot.
ARTICLE 594.The co-owners shall elect the manager who is to represent them in the capacity of ship agent. The
appointment of director or ship agent shall be revocable at the will of the members.
ARTICLE 595.The ship agent, whether he is at the same time the owner of the vessel, ora manager for an owner or for an
association of co-owners, must have the capacity to trade and must be recorded in the merchant's registry of the
province. The ship agent shall represent the ownership of the vessel, and may, in his own name and in such capacity,
take judicial and extrajudicial steps in matters relating to commerce.

ARTICLE 596.The ship agent may discharge the duties of captain of the vessel, subject in every case to the provision of
Article 609.If two or more co-owners apply for the position of captain, the disagreement shall be decided by a vote of the
members; and ifthe vote should result in a tie, it shall be decided in favor of the co-owner having the larger interest in
the vessel. If the interests of the applicants should be equal, and there should be a tie, the matter shall be decided by lot.

ARTICLE 597.The ship agent shall designate and come to terms with the captain, and shall contract in the name of the
owners, who shall be bound in all that refer to repairs, details of equipment, armament, provisions of food and fuel, and
freight of the vessel, and, in general, in all that relate to the requirements of navigation.

ARTICLE 598.The ship agent may not order a new voyage, or make contracts for a new charter, or insure the vessel,
without the authorization of its owner or resolution of the majority of the co-owners, unless these powers were granted
him in the certificate of his appointment. If he insures the vessel without authorization therefore, he shall be subsidiarily
liable for the solvency of the insurer.

ARTICLE 599.The ship agent managing for an association shall render to his associates an account of the results of each
voyage of the vessel, without prejudice to always having the books and correspondence relating to the vessel and to its

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voyages at their disposal.

ARTICLE 600.After the account of the managing agent has been approved by a relative majority, the co-owners shall
pay the expenses in proportion to their interest, without prejudice to the civil or criminal actions which the minority
may deem fit to institute afterwards. In order to enforce the payment, the managing agent shall be entitled to an
executory action ("accion ejecutiva"), which shall be instituted by virtue of a resolution of the majority, and without
further proceedings than the acknowledgment of the signatures of the persons who voted for the resolution.

ARTICLE 601.Should there be any profits, the co-owners may demand of the managing
agent the amount corresponding to their interests by means of an executory action ("accion ejecutiva"),without any other
requisite than the acknowledgment of the signatures on the instrument approving the account.

ARTICLE 602.The ship agent shall indemnify the captain for all the expenses he may have incurred with funds of his
own or of others, for the benefit of the vessel.

ARTICLE 603.Before the vessel sets out to sea the ship agent may at his discretion discharge the captain and members of
the crew whose contracts are not for a definite period or voyage, paying them the salaries earned according to their
contracts, and without any indemnity whatsoever, unless there is an express and specific agreement in respect thereto.

ARTICLE 604.If the captain or any other member of the crew should be discharged during the voyage, they shall receive
their salary until they return to the port where the contract was made, unlessthere should be just cause for the
discharge, all in accordance with Article 636 and following of this Code.

ARTICLE 605.If the contracts of the captain and members of the crew with the ship agent should be for a definite period
or voyage, they may not be discharged until after the fulfillment of their contracts, except by reason of insubordination
in serious matters, robbery, theft, habitual drunkenness, or damage caused to the vessel or to its cargo through malice or
manifest or proven negligence.

ARTICLE 606.If the captain should be a co-owner of the vessel, he 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 parties, shall be appraised by
experts appointed in the manner established in the law of civil procedure.

ARTICLE 607.If the captain who is a co-owner should have obtained the command of the vessel by virtue of a special
agreement contained in the articles of association, he may not be deprived of his office except for the causes mentioned
in Article 605.

ARTICLE 608.In case of the voluntary sale of the vessel, all contracts between the ship agent and the captain shall
terminate, reserving to the latter his right to the indemnity which may pertain to him, according to the agreements made
with the ship agent. They vessel sold shall remain subject to the security of the payment of said indemnity if, after the
action against the vendor has been instituted, the latter is found to be insolvent.

ARTICLE 618. The captain shall be civilly liable to the agent and the latter to the third persons who may have made
contracts with the former —
1. For all the damages suffered by the vessel and its cargo by reason of want of
skill or negligence on his part, If a misdemeanor or crime has been committed he shall be liable in accordance with the
Penal Code.
2. For all the thefts committed by the crew, reserving his right of action against the guilty parties.
• Shipowner; Liability for acts of master—It is universally recognized that the captain is primarily the representative of the
owner; and article 586 of the Code of Commerce expressly declares that both the owner of the vessel and the naviero, or
charterer, shall be civil liable for the acts of the master. In this connection, it may be noted that there is a discrepancy between
the meaning of naviero, in articles 586 of the Code of Commerce, where the word is used in contradistinction to the term
"owner of the vessel" (propietario), and in article 587 where it is used alone, and apparently in a sense broad enough to include
the owner. Fundamentally the word "naviero" must be understood to refer to the person undertaking the voyage, who in one
case may be the owner and in another the charterer. But this is not vital to the present discussion. The real point to which we
direct attention is that, by the express provision of the Code, the owner of the vessel is civilly liable for the acts of the captain;
and he can only escape from this civil liability by abandoning his property in the ship and any freight that he may have earned
on the voyage (arts. 587, 588, Code of Comm.) (Standard Oil v Castelo)
• Shipowner; Liability for acts of master; legislative intent—The evident intention of the Code, taken in all of its provisions, is to
place the primary liability upon the person who has actual control over the conduct of the voyage and who has most capital
embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from other
individuals who have been drawn into the venture as shippers. (Standard Oil v Castelo)
• Shipowner; Liability for acts of master; ratio—In considering the question now before us it is important to remember that the
owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper of cargo.
Moreover, the owner of the ship, in the person of the captain, has complete and exclusive control of the crew and of the
navigation of the ship, as well as of the disposition of the cargo at the end of the voyage. It is therefore proper that any person
whose property may have been cast overboard by order of the captain should have a right of action directly against the ship's

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owner for the breach of any duty which the law may have imposed on the captain with respect to such cargo. (Standard Oil v
Castelo)
• Shipowner; Right to indemnification—It is true that if the captain does not comply with the article relating to the adjustment,
liquidation, and distribution of the general average, the next article (852) gives to those concerned — whether shipowner
(naviero) or shipper — the right to maintain an action against the captain for indemnification for the loss; but the recognition
of this right of action does not by any means involve the suppression of the right of action which is elsewhere recognized in
the shipper against the ship's owner. The shipper may in our opinion go at once upon the owner and the latter, if so minded,
may have his recourse for indemnization against his captain. (Standard Oil v Castelo)
CLASS DISCUSSION:
• STANDARD OIL--act of captain: non-liquidation; ratio for liability- has control over selection and supervision; must necessarily rely on
such
a) Responsibilities and liabilities
• Liabilities; under the Code of Commerce—The Code of Commerce in force omits the declaration of non-liability contained in
the old code, and clearly makes the shipowner liable civilly for the loss suffered by those who contracted with the captain, in
consequence of the misdemeanors and crimes committed by the latter or by the members of the crew. (Yu Con v Ipil)
• Liabilities; under the Penal Code—Penal Code contains a general principle that resolves the question under consideration, for
it declares that such persons as undertake and carry on any industry shall be civilly liable, in default of those who may be
criminally liable, for the misdemeanors and crimes committed by their subordinates in the discharge of their duties. (Yu Con v
Ipil)
• Liabilities; nature; solidary—A maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of
Commerce. Under Article 827 of the Code of Commerce, in case of collision between two vessels imputable to both of them,
each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. The
characteristic language of the law in making the “vessels” solidarily liable for the damages due to the maritime collision
emphasizes the direct nature of the responsibilities on account of the collision incurred by the shipowner under maritime law,
as distinguished from the civil law and mercantile law in general. This direct responsibility is recognized in Article 618 of the
Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one liable to third
persons. (Manila Steamship v Abdulhaman)
o Liabilities; nature; solidary; bonus paterfamilias not a defense—It is easy to see that to admit the defense of due
diligence of a bonus paterfamilias (in the selection and vigilance of the officers and crew) as exempting the
shipowner from any liability for their faults, would render nugatory the solidary liability established by Article 827 of
the Code of Commerce for the greater protection of injured parties. Shipowners would be able to escape liability in
practically every case, considering that the qualifications and licensing of ship masters and officers are determined by
the State, and that vigilance is practically impossible to exercise over officers and crew of vessels at sea. To compel
the parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy for almost always
its members are, from captains down, mere wage earners. (Manila Steamship v Abdulhaman)
• Liabilities; nature; direct—In fact, it is a general principle, well established maritime law and custom, that shipowners and
ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the indemnities due the third
persons (Article 587); so that injured parties may immediately look for reimbursement to the owner of the ship, it being
universally recognized that the ship master or captain is primarily the representative of the owner (Standard Oil Co. vs. Lopez
Castelo, 42 Phil. 256, 260). This direct liability, moderated and limited by the owner’s right of abandonment of the vessel and
earned freight (Article 587), has been declared to exist, not only in case of breached contracts, but also in cases of tortious
negligence (Manila Steamship v Abdulhaman)
• Liabilities; ratio—In maritime commerce, the shippers and passengers in making contracts with the captain do so through the
confidence they have in the shipowner who appointed him; they presume that the owner made a most careful investigation
before appointing him, and, above all, they themselves are unable to make such an investigation, and even though they
should do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another
captain instead. The shipowner is in the same case with respect to the members of the crew, for, though he does not appoint
directly, yet, expressly or tacitly, he contributes to their appointment. On the other hand, if the ship owner derives profits from
the results of the choice of the captain and the crew, when the choice turns out successful, it is also just that he should suffer
the consequences of an unsuccessful appointment, by application of the rule of natural law contained in the Partidas, viz., that
he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue therefrom. (Yu Con v Ipil)
• Liabilities; example—the defendant Narciso Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the
master and in which, through the fault and negligence of the latter and of the supercago Justo Solamo, there occurred the loss,
theft, or robbery of the P450 that belonged to the plaintiff and were delivered to said master and supercargo, a theft which, on
the other hand, as shown by the evidence, does not appear to have been committed by a person not belonging to the craft,
should, for said loss or theft, be held civilly liable xto the plaintiff, who executed with said defendant Lauron the contract for
the transportation of the merchandise and money aforementioned between the port of Cebu and the town of Catmon, by
means of the said craft. (Yu Con v Ipil: Master and supercargo as carriers and depositaries of money were negligent because
they failed to take precautions to guard the money and did not expressly station some person inside to guard the money)
CLASS DISCUSSION:
• YU CON-- legal bases: A 587 & 618
• What is the real and hypothecary nature of maritime law?
• What does hypothecary mean? from the dictionary: a right established by law over a debtor's property that remains in the
debtor's possession; What does hypothecate mean? pledge (money) by law to a specific purpose; Difference between pledge
and REM? possession

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• MANILA STEAMPSHIP- exception to doctrine of limited liability
• YANGCO- Is doctrine of limited liability limited to carriage of goods? No. Court said it doesn't only apply to goods

AGBAYANI
Liability of shipowner and shipagent :
(1) under Art. 857, for the acts of the captain
(2) for contracts entered into by the captain to repair, equip and provision the vessel, provided that the amount claimed was invested
for the benefit of the vessel
(3) for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods transported, as
well as for the safety of passengers transported
(4) for damages to third persons for tort or quasi-delict committed by the captain, except collision with another vessel
(5) under Art. 826, for damages in case of collision due to the fault, negligence, or want of skill of the captain, sailing mate, or any
other member of the complement
The agent is liable to the shippers and owners of the cargo transported by it, for losses and damages occasioned to such cargo
without prejudice to his rights against the owner of the ship, to the extent of the value of the vessel, its equipment and the freight
Under 588, the shipowner and the shipagent are not liable for the obligations contracted by the captain if he exceeds his authority,
unless the amounts claimed were invested for the benefit of the vessel --> however under Art. 1759, NCC, the ship owner is liable for
the death of or injuries to the passengers which are caused by the negligence or wilful acts of his EEs although such EEs may
have acted beyond the scope of their authority or in violation of the orders of the shipowner
Art. 618 provides for the direct responsibility of the shipowner and shipagent to third persons; the captain shall be civilly liable to
the ship agent and the latter is the one liable to third persons This article applies to breaches of contract and tortious negligence of
the captain
But where the vessel is totally chartered for use of a single party, the shipowner and that party may validly stipulate that the
latter shall be exempt from liability for the negligence of the captain and crew
Reason for imposition of liability on owner for damages suffered by third persons occasioned by the acts of the captain: To place
the primary liability upon the person who has actual control over the conduct of the voyage and who has the most capital
embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, from other individuals who have been drawn
into the venture as shippers
The shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who
appointed him --> they presume that the owner made a most careful investigation before appointing him
Distinction between liability for lawful and unlawful acts :
The lawful acts and obligations of the captain beneficial to the vessel may be enforced as against the agent/owner for the reason that
such obligations arise from the contract of agency ( provided that the captain does not exceed his authority)
As to any liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily liable
Liabilities of captain: the responsibility of the captain extends to every fraudulent or negligent act of any person in the
complement, in the execution of his employment --> he does not respond for personal injuries of the crew arising from personal
quarrels but
he is liable for damages to persons or property occasioned by a maneuvering of the vessel, for failure to follow international rules
and regulations, for failure to take the precautions to prevent every damage possible to the vessel which has suffered an average

b) The doctrine of limited liability

ARTICLE 587. The agent shall be civilly liable for the indemnities in favor of third persons which arise from the
conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight he may have earned during the trip.
CASES:
• Doctrine of limited liability; provisions—principle of limited liability of a shipowner or agent is provided for in but three
articles of the Code of Commerce — article 587, article 590 and 837. (Yangco v Laserna)
• Doctrine of limited liability; based on real and hypothecary nature of maritime law— If the shipowner or agent may in
any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases
of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction. The exclusively "real and hypothecary nature" of maritime law operates to limit such liability to
the value of the vessel, or to the insurance thereon, if any. (Yangco v Laserna)
o The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with
losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which
stands as the guaranty for their settlement. It has its origin by reason of the conditions and risks attending
maritime trade in its earliest years when such trade was replete with innumerable and unknown hazards since
vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such adverse
conditions and to encourage people and entities to venture into maritime commerce despite the risks and the
prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of
such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation
served to induce capitalists into effectively wagering their resources against the consideration of the large profits
attainable in the trade. (Aboitiz v GAFLAC)
• Doctrine of limited liability; not needed in case of total loss— The vessel having totally perished, any act of abandonment
would be an idle ceremony. (Yangco v Laserna)
• Doctrine of limited liability; ratio—The policy which the rule is designed to promote is the encouragement of
shipbuilding and investment in maritime commerce. (Yangco v Laserna)
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• Doctrine of limited liability; exceptions—
o (1) The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a
shipowner’s liability, does not apply to cases where the injury or the average is due to shipowner’s own fault
(Manila Steamship v Abdulhaman)
! Example—By operating with an unlicensed master, Lim Hong To deliberately increased the risk to
which the passengers and shippers of cargo aboard the “Consuelo V” would be subjected. In his desire
to reap greater benefits in the maritime trade, Lim Hong To willfully augmented the dangers and
hazards to his vessel’s unwarry passengers, who would normally assume that the launch officers
possessed the necessary skill and experience to evade the perils of the sea. (Manila Steamship v
Abdulhaman)
o (2) If an accident is compensable under the Workmen's Compensation Act, it must be compensated even when
the workman's right is not recognized by or is in conflict with other provisions of the Civil Code or the Code of
Commerce. The reason behind this principle is that the Workmen's Compensation Act was enacted by the
Legislature in abrogation of the other existing laws. (Abueg v San Diego)
! Workmen's Compensation Act—seeks to improve, and aims at the amelioration of, the condition of
laborers and employees. It is not the liability for the damage or loss of the cargo or injury to, or death of,
a passenger by or through the misconduct of the captain or master of the ship; nor the liability for the
loss of the ship as result of collision; nor the responsibility for wages of the crew, but a liability created
by a statute to compensate employees and laborers in cases of injury received by or inflicted upon them,
while engaged in the performance of their work or employment, or the heirs and dependents and
laborers and employees in the event of death caused by their employment. Such compensation has
nothing to do with the provisions of the Code of Commerce regarding maritime commerce. (Abueg v
San Diego)
• Doctrine of limited liability; rights involved—
o Rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of shareholders
to limited liability under our corporation law. Both are privileges granted by statute, and while not absolute,
must be swept aside only in the established existence of the most compelling of reasons. (Aboitiz v GAFLAC)
o Rights of parties to claim against an agent or owner of a vessel may be compared to those of creditors against an
insolvent corporation whose assets are not enough to satisfy the totality of claims as against it. While each
individual creditor may, and in fact shall, be allowed to prove the actual amounts of their respective claims, this
does not mean that they shall all be allowed to recover fully thus favoring those who filed and proved their
claims sooner to the prejudice of those who come later. In such an instance, such creditors too would not also be
able to gain access to the assets of the individual shareholders, but must limit their recovery to what is left in the
name of the corporation. In both insolvency of a corporation and the sinking of a vessel, the claimants or
creditors are limited in their recovery to the remaining value of accessible assets. In the case of an insolvent
corporation, these are the residual assets of the corporation left over from its operations. In the case of a lost
vessel, these are the insurance proceeds and pending freightage for the particular voyage. (Aboitiz v GAFLAC)
! Example—There is a need to collate all claims preparatory to their satisfaction from the insurance
proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant
can be given precedence over the others by the simple expedience of having filed or completed its
action earlier than the rest. Thus, execution of judgment in earlier completed cases, even those already
final and executory, must be stayed pending completion of all cases occasioned by the subject sinking.
Then and only then can all such claims be simultaneously settled, either completely or pro-rata should
the insurance proceeds and freightage be not enough to satisfy all claims. In fairness to the claimants,
and as a matter of equity, the total proceeds of the insurance and pending freightage should now be
deposited in trust. (Aboitiz v GAFLAC)

YANGCO V LASERNA:
The spirit of our code s accurately set forth in a treatise on maritime law:
"That which distinguishes the maritime from the civil law and even from the mercantile law in general is the real
and hypothecary nature of the former, and the many securities of a real nature that maritime customs from time
immemorial, the laws, the codes, and the later jurisprudence, have provided for the protection of the various and
conflicting interests which are ventured and risked in maritime expeditions, such as the interests of the vessel and of
the agent, those of the owners of the cargo and consignees, those who salvage the ship, those who make loans upon
the cargo, those of the sailors and members of the crew as to their wages, and those of a constructor as to repairs
made to the vessel.
"As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the
actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention
of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the
debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can
exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking
his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself
to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third
person.
"This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no personal
action lies against the
owner or agent of the vessel. For instance, where the vessel is lost the sailors and members of the crew cannot
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recover their wages; in case of collision, the liability of the agent is limited as aforesaid, and in case of shipwreck,
those who loan their money on the vessel and cargo lose all their rights and cannot claim reimbursement under the
law.
"There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which the thing is
exposed, and (2)#the real nature of the maritime law, exclusively real, according to which the liability of the parties is
limited to a thing which is at the mercy of the waves. If the agent is only liable with the vessel and freight money and
both may be lost through the accidents of navigation it is only just that the maritime creditor have some means to
obviating this precarious nature of his rights by detaining the ship, his only security, before it is lost.

CLASS DISCUSSION:
• ABUEG- Workman's compensation: not for damages but for amelioration; not part of risks premised upon by the doctrine of
limited liability
• ABOITIZ- Analogy: traced to a statute; are both doctrines absolute? No. can be swept aside bec of compelling reasons
• What is the difference between a captain and a master? as to area of operation- captain: high seas:: master: inter island; inland

AGBAYANI
A shipagent is liable notwithstanding the insolvency of the principal/owner
BUT the ship agent may exempt himself from liability by abandoning the vessel with all her equipment and the freight it may have
earned during the voyage --> the effect of abandonment is to extinguish the liability of the shipagent
The ship agent's liability is confined to that which he is entitled as a matter of right to abandon : the vessel with all her eqpt. and
the freight it may have earned during the voyage and to the insurance thereof
Limited liability is not applicable when no abandonment of vessel is made
Effect of abandonment: An abandonment amounts to an offer of the value of the vessel, of her equipment, and freight money earned -
-> results in the cessation of the responsibility of the owner/agent
Abandonment cannot be refused by creditors
This applies to all cases where the owner/agent may be held liable for the negligent or illicit acts of the captain
Effect of loss or destruction of vessel: The shipagent's liability is merely co-extensive with his interest in the vessel such that
the total loss thereof results in its extinction --> the total destruction of the vessel extinguishes a maritime lien as there is no longer
any res to which it can attach.
Three (3) cases where the loss of the vessel extinguishes the liability of the shipowner:
(1) under 587, liability arising from the conduct of the captain in the vigilance of the goods and for the safety of the passengers
and for any liability arising from the negligent or illicit acts of the captain for which the shipowner or ship agent may be held liable
(2) under 643, liability for the wages of the captain and the crew and for advances made by the shipagent if the vessel is lost by
shipwreck or capture
(3) under 837, liability for collision
Exceptions:
(1) Doctrine does not apply where shipowner is at fault : the doctrine is premised on the condition that the death or injury to the
passenger occurred by reason of the fault or negligence of the captain only
(2) Doctrine does not apply in cases of Workmen's Compensation --> such compensation has nothing to do with maritime
commerce; it is an item in the cost of production which must be included in the budget of any well-managed industry
(3) Total destruction of the vessel does not affect the liability of the owner for repairs on the vessel completed before its loss -->
owners of a vessel are liable for necessary repairs; its liability for repairs remains unaffected by the loss of the thing
Reason for limited liability: This doctrine had its origin when maritime trade and sea voyage was attended by innumerable
hazards and perils --> to offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was
deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, eqpt. and freight or
insurance, if any
Limited liability is evidence of the real and hypothecary nature of maritime law:
(1) limitation of liability to the actual value of the vessel and freight; (2) right to retain the cargo and the embargo and detention of
the vessel in cases where the ordinary civil law would not allow more than a personal action against the debtor or personal liable -
> the maritime creditor may attach the vessel itself to secure his claim without waiting for a settlement of his
rights by a final judgment, even to the prejudice of a third person

c) Specified rights and prerogatives

ARTICLE 575.Co-owners of vessels shall have the right of repurchase and redemption in sales made to strangers,
but they may exercise the 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 593.The owners of a vessel shall have preference in her 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 interest shall be
preferred; and should they have equal interests, the matter shall be decided by lot.

ARTICLE 594.The co-owners shall elect the manager who is to represent them in the capacity of ship agent. The
appointment of director or ship agent shall be revocable at the will of the members.

ARTICLE 595.The ship agent, whether he is at the same time the owner of the vessel, or
a manager for an owner or for an association of co-owners, must have the capacity to trade and must be recorded in

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the merchant's registry of the province. The ship agent shall represent the ownership of the vessel, and may, in his
own name and in such capacity, take judicial and extrajudicial steps in matters relating to commerce.

ARTICLE 601.Should there be any profits, the co-owners may demand of the managing
agent the amount corresponding to their interests by means of an executory action ("accion ejecutiva"),without any
other requisite than the acknowledgment of the signatures on the instrument approving the account.

2) Captains and Master

• Captain—Captains are those who govern vessels that navigate the high seas or ships of large dimensions and importance,
although they be engaged in the coastwise trade. (Yu Con v Ipil)
• Master—Masters are those who command smaller ships engaged exclusively in the coastwise trade. (Yu Con v Ipil)
• For the purposes of maritime commerce, the words "captain" and "master" have the same meaning; both being the chiefs or
commanders of ships (Yu Con v Ipil)

a) Qualifications and licensing

RA 5173 Section 3. Specific Functions. The Philippine Coast Guard shall perform the following functions:
(a) To prevent and suppress illegal entry, smuggling, other customs frauds and violations of other maritime
laws that may be committed within the waters subject to the jurisdiction of the Republic of the Philippines,
and for the purpose surveillance by the Philippine Coast Guard may be made on vessels entering and/or
leaving the Philippine territory;
(b) To assist in the suppression of fishing by means of dynamite, explosives or toxic substances or other
methods as may be declared destructive by proper authorities;
(c) To promulgate and enforce rules for lights, signals, speed, steering, sailing, passing, anchorage,
movement and towlines of vessels and lights and signals on bridges;
(d) To approve plans for the construction, repair, or alteration of vessels; approve materials, equipment and
appliances of vessels; approved the classification of vessels; inspect vessels and their equipment and
appliances; register all types of motorized watercraft plying in Philippine waters; issue certificates of
inspection and of permits indicating the approval of vessels for operation; issue certificates of Philippine
registry of vessels; administer load line requirements; promulgate and enforce other provisions for the
safety of life and property on vessels; and determine the numbering of undocumented vessels: Provided,
That certification and approval of any plans, equipment and any vessel by internationally known
classification societies which are recognized by the Philippine Government shall be deemed to have
complied with this section;
(e) To issue licenses and certificates to officers, pilots, major and minor patrons and seamen, as well as
suspend and revoke such licenses and certificates;
(f) To investigate marine casualties and disasters including those arising from marine protests filed with the
Bureau of Customs relative to the liability of shipowners and officers;
(g) To enforce laws, rules and regulations governing manning, citizenship and mustering and drilling of
crews requirements, control of logbooks, shipment, discharge, protection, and welfare merchant seamen;
(h) To enforce laws requiring the performance of duties of shipowners and officers after accidents;
(i) To prescribe and enforce regulations for outfitting and operation of motorboats and the licensing of
motorboat operators;
(j) To regulate regattas and marine parades;
(k) To render aid to distressed persons or vessels on the high seas and on waters subject to the jurisdiction of
the Philippines, and, in this connection, the Philippine Coast Guard may perform any and all acts necessary
to rescue and aid persons; furnish clothing, food, lodging, medicine and other necessary supplies and
services to persons succored; protect, save, and take charge of all property saved from marine disasters until
such property is delivered to persons authorized to receive it or is otherwise disposed of in accordance with
law or applicable regulations; and collect and take charge of bodies of those who may perish in such
disasters;
(l) To develop, establish, maintain, and operate aids to maritime navigation. In the performance of these
functions, the Philippine Coast Guard is authorized to destroy or tow in port sunken of floating dangers to
navigation;
(m) To supervise nautical schools with reference to activities relative to navigation, seamanship, marine
engineering and other allied matters, in coordination with the Department of Education;
(n) To perform functions pertaining to maritime communications which are not specifically delegated to
some other office or department; and
(o) To assist, within its capabilities and upon request of the appropriate authorities, other Government
agencies in the performance of their functions, within the waters subject to the jurisdiction of the
Philippines, relating to matters and activities not specifically mentioned in this section: Provided, That in the
exercise of these functions, personnel of the Philippine Coast Guard shall be deemed to be acting as agents
of the particular departments, bureau, office, agency or instrumentality charged with the enforcement and
administration of the particular law. Members of the Philippine Coast Guard are peace officers for all
purposes of this Act and shall be, and shall act, as law enforcement agents of the Bureau of Customs, and
the Bureau of Immigration, the Bureau of Internal Revenue, the Fisheries Commission, and such other
departments, bureaus or offices in the enforcement of pertinent laws, rules and regulations.

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ARTICLE 609.Captains, masters or patrons of vessels must be Filipinos, have legal capacity to contract in
accordance with this code, and prove the skill, capacity, and qualifications necessary to command and direct
the vessel, as established by marine or navigation laws, ordinances, or regulations, and must not be
disqualified according to the same for the discharge of the duties of the position. If the owner of a vessel
desires to be the captain thereof, without having the legal qualifications therefor, he shall limit himself to the
financial administration of the vessel, and shall in trust the navigation to a person possessing the
qualifications required by said ordinances and regulations.

b) Powers and Duties

ARTICLE 610.The following powers shall be inherent in the position of captain, master or patron of a vessel:
1.To appoint or make contracts with the crew in the absence of the ship agent, and to propose said crew,
should said agent be present; but the ship agent may not employ any member against the captain's express
refusal.
2.To command the crew and direct the vessel to the port of its destination, in accordance with the
instructions he may have received from the ship agent.
3.To impose, in accordance with the contracts and with the laws and regulations of the merchant marine,
and when on board the vessel, correctional punishment upon those who fail to comply with his orders or
are wanting in discipline, holding a preliminary hearing on the crimes committed on board the vessel on the
seas, which crimes shall be turned over to the authorities having jurisdiction over the same at the first port
touched.
4.To make contracts for the charter of the vessel in the absence of the ship agent or of its consignee, acting in
accordance with the instructions received and protecting the interests of the owner with utmost care.
5.To adopt all proper measures to keep the vessel well supplied and equipped, purchasing all that may be
necessary for the purpose, provided there is no time to request instruction from the ship agent.
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, which are absolutely necessary to enable it to continue and finish its voyage; but
if he should arrive at a point where there is a consignee of the vessel, he shall act in concurrence with the
latter.

ARTICLE 611.In order to comply with the obligations mentioned in the preceding article, the captain, when
he has no funds and does not expect to receive any from the ship agent, shall obtain the same in the
successive order stated below:
1.By requesting said funds from the consignee of the vessel or correspondents of the ship agent.
2.By applying to the consignees of the cargo or to those interested therein.
3.By drawing on the ship agent.
4.By borrowing the amount required by means of a loan on bottomry.
5.By selling a sufficient amount of the cargo to cover the sum absolutely indispensable for the repair of the
vessel and to enable it to continue its voyage.
In these two last cases he must apply to the judicial authority of the port, if in the Philippines, and to the
consul of the Republic of the Philippines if in a foreign country,
and where there is none, to the local authority, proceeding in accordance with the provisions of Article 583,
and with the provisions of the law of civil procedure.

ARTICLE 612.The following obligations shall be inherent in the office of captain:

1.To have on board before starting on a voyage a detailed inventory of the hull, engines, rigging, spare-
masts, tackle, and other equipment of the vessel; the royal or the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts entered into with them; the lists of
passengers; the bill of health; the certificate of the registry proving the ownership of the vessel and all the
obligations which encumber the same up to that date; the charter parties or authenticated copies thereof; the
invoices or manifests of the cargo, and the memorandum of the visit or inspection by experts, should it have
been made at the port of departure.
2.To have a copy of this code on board.
3.To have three folioed and stamped books, placing at the beginning of each one a memorandum of the
number of folios it contains, signed by the maritime authority, and in his absence by the competent
authority. In the first book, which shall be called "log book," he shall enter day by day the condition of the
atmosphere, the prevailing winds, the courses taken, the rigging carried, the power of the engines used in
navigation, the distances covered, the maneuvers executed, and other incidents of navigation; he shall also
enter the damage suffered by the vessel in her hull, engines, rigging, and tackle, no matter what its cause
may be, as well as the impairment and damage suffered by cargo, and the effect and importance of the
jettison, should there be any; and in cases of serious decisions which require the advice or a meeting of the
officers of the vessel, or even of the crew and passengers, he shall record the decisions adopted. For the
information indicated he shall make use of the binnacle book and of the steam of engine book kept by the
engineer. In the second book called the "accounting book," he shall record all the amounts collected and paid
for the account of the vessel, entering specifically article by article, the source of the collection and the
amounts spent for provisions, repairs, acquisitions of equipment or goods, fuel, food, outfits, wages ,and
other expenses of whatever nature they may be. He shall furthermore enter therein a list of all the members
of the crew, stating their domiciles, their wages and salaries, and the amounts they may have received on
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account, directly or by delivery to their families. In the third book, called "freight book," he shall record the
loading and discharge of all the goods ,stating their marks and packages, names of the shippers and of the
consignees, ports of loading and unloading, and the freightage they give. In this same book he shall record
the names and places of sailing of the passengers, the number of packages in their baggage, and the price of
passage.
4.Before receiving cargo, to make with the officers of the crew and two experts, if required by the shippers
and passengers, an examination of the vessel, in order to ascertain whether it is water-tight, with the rigging
and engines in good condition, and with the equipment required for good navigation, preserving under his
responsibility a certificate of the memorandum of his inspection, signed by all those who may have taken
part therein. The experts shall be appointed, one by the captain of the vessel and another by those who
request its examination, and in case of disagreement a third shall be appointed by the marine authority of
the port or by the authority, exercising his functions.
5.To remain constantly on board the vessel with the crew while the cargo is being taken on board and to
carefully watch the stowage thereof; not to consent to the loading of any merchandise or matter of a
dangerous character, such as inflammable or explosive substances, without the precautions which are
recommended for their packing, handling and isolation; not to permit the carriage on deck of any cargo
which by reason of its arrangement, volume, or weight makes the work of the sailors difficult, and which
might endanger the safety of the vessel; and if, on account of the nature of the merchandise, the special
character of the shipment, and principally the favorable season in which it is undertaken, merchandise may
be carried on deck, he must hear the opinion of the officers of the vessel and have the consent of the
shippers and of the ship agent.
6.To demand a pilot at the expense of the vessel whenever required by the navigation, and principally when
he has to enter a port, canal, or river, or has to take a roadstead or anchoring place with which neither he nor
the officers and crew are acquainted.
7.To be on deck on reaching land and to take command on entering and leaving ports, canals, roadsteads,
and rivers, unless there is a pilot on board discharging his duties. He shall not spend the night away from
the vessel except for serious causes or by reason of official business.
8.To present himself, when making a port in distress, to the maritime authority if in the Philippines and to
the consul of the Republic of the Philippines if in a foreign country, before twenty-four hours have elapsed,
and to make a statement of the name registry, and port of departure of the vessel, of its cargo, and the cause
of arrival which declaration shall be visaed by the authority or the consul, if after examining the same it is
found to be acceptable, giving the captain the proper certificate proving his arrival in distress and the
reasons therefor. In the absence of the maritime authority or of the consul, the declaration must be made
before the local authority.
9.To take the necessary steps before the competent authority in order to record in the certificate of the vessel
in the registry of vessels the obligations which he may contract in accordance with Article 583.
10.To place under good care and custody all the papers and belongings of any members of the crew who
might die on the vessel, drawing up a detailed inventory, in the presence of passengers, or, in their absence,
of members of the crew as witnesses.
11.To conduct himself according to the rules and precepts contained in the instructions of the ship agent,
being liable for all that which he may do in violation thereof.
12.To inform the ship agent from the port at which the vessel arrives, of the reason of his arrival, taking
advantage of the semaphore, telegraph, mail, etc., as the case may be; to notify him of the cargo he may have
received, stating the names and domiciles of the shippers, freightage earned, and amounts borrowed on
bottomry loan; to advise him of his departure, and of any operation and date which may be of interest to
him.
13.To observe the rules with respect to situation, lights and maneuvers in order to avoid collisions.
14.To remain on board, in case the vessel is in danger, until all hope to save it is lost, and before abandoning
it, to hear the officers of the crew, abiding by the decision of the majority; and if the boats are to be taken to,
he shall take with him, before anything else, the books and papers, and then the articles of most value, being
obliged to prove, in case of the loss of the books and papers, that he did all he could to save them.
15.In case of wreck, to make the proper protest in due form at the first port of arrival, before the competent
authority or the Philippine consul, within twenty-four hours, specifying therein all the incidents of the
wreck, in accordance with subdivision 8 of this article.
16.To comply with the obligations imposed by the laws and regulations on navigation, customs, health, and
others.

ARTICLE 622.If while on a voyage the captain should learn of the appearance of privateers or men of war
against his flag, he shall be obliged to make the nearest neutral port, inform his agent or shippers, and await
an occasion to sail under convoy, or until the danger is over or he has received express orders from the ship
agent or the shippers.

ARTICLE 624.A captain whose vessel has gone through a hurricane or who believes that the cargo has
suffered damages or averages, shall make a protest thereon before the competent authority at the first port
he touches, within twenty-four hours following his arrival and shall ratify it within the same period when
he arrives at his destination, immediately proceeding with the proof of the facts, and he may not open the
hatches until after this has been done. The captain shall proceed in the same manner, if, the vessel having

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been wrecked; he is saved alone or with part of his crew, in which case he shall appear before the nearest
authority, and make a sworn statement of facts. The authority or the consul shall verify the said facts
receiving sworn statements of the members of the crew and passengers who may have been saved; and
taking such other steps as may assist in arriving at the facts he shall make a statement of the result of the
proceedings in the log book and in that of the sailing mate, and shall deliver to the captain the original
record of the proceedings, stamped and folioed, with a memorandum of the folios, which he must rubricate,
in order that it may be presented to the judge or court of the port of destination. The statement of the captain
shall be accepted if it is in accordance with those of the crew and passengers; if they disagree, the latter shall
be accepted, always saying proof to the contrary.

ARTICLE 625.The captain, under his personal responsibility as soon as he arrives at the port of destination,
should get the necessary permission from the health and customs officers, and perform the other formalities
required by the regulations of the administration, delivering the cargo without any defalcation, to the
consignee, and in a proper case, the vessel, rigging, and freightage to the ship agent. If by reason of the
absence of the consignee or on account of the nonappearance of a legal holder of the bills of lading, the
captain should not know to whom he is to legally make the delivery of the cargo, he shall place it at the
disposal of the proper judge or court or authority, in order that he may determine what is proper with
regard to its deposit, preservation and custody.
• Captain; managerial EE; 3 roles—The captain of a vessel is a confidential and managerial employee within the
meaning of the above doctrine. A master or captain, for purposes of maritime commerce, is one who has
command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the
shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the
country under whose flag he navigates. Of these roles, by far the most important is the role performed by the
captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive
Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel
during its voyage and the protection of the passengers (if any) and crew and cargo. In his role as general agent of
the shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight
earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal
authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable
limitations established by statute, contract or instructions and regulations of the shipowner. (Inter Orient v
NLRC)
• Captain; discretion—It is a basic principle of admiralty law that in navigating a merchantman, the master must
be left free to exercise his own best judgment. Indeed, if the ship captain is convinced, as a reasonably prudent
and competent mariner acting in good faith that the shipowner's or ship agent's instructions (insisted upon by
radio or telefax from their offices thousands of miles away) will result, in the very specific circumstances facing
him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek absolution
from his responsibility, if a marine casualty occurs, in such instructions. (Inter Orient v NLRC)
o Example—Petitioners were angered at Captain Tayong's decision to wait for delivery of the needed
supplies before sailing from Singapore, and may have changed their estimate of their ability to work
with him and of his capabilities as a ship captain. Assuming that to be petitioners' management
prerogative, that prerogative is nevertheless not to be exercised, in the case at bar, at the cost of loss of
Captain Tayong's rights under his contract with petitioners and under Philippine law. (Inter Orient v
NLRC)
CLASS DISCUSSION:
• INTER ORIENT- what are the 3 hats of a captain? what are the duties of a captain? does a captain and master have the same
duties? yes;
• Who are the other officers? Sailing mate/first mate
• What is the difference between complement and crew?

c) Prohibited acts and transactions

ARTICLE 613.A captain who navigates for freight in common or on shares may not make any separate
transaction for his own account; and should he do so, the profit which may accrue shall belong to the other
persons interested, and the losses shall be borne by him exclusively.

ARTICLE 614.A captain who, having made an agreement to make a voyage, fails to perform his undertaking,
without prevented by fortuitous accident or force majeure, shall indemnify for all the losses which he may cause
without prejudice to the criminal penalties which may be proper.

ARTICLE 615.Without the consent of the agent, the captain cannot have himself substituted by another person;
and should he do so, besides being liable for all the acts of the substitute and bound to the indemnities
mentioned in the foregoing articles, the captain as well as the substitute may be discharged by the ship agent.

ARTICLE 617.The captain may not contract loans on respondentia secured by the cargo; and should he do so, the
contracts shall be void. Neither may he borrow money on bottomry for his own transactions, except on the
portion of the vessel he owns, provided no money has been previously borrowed on the whole vessel, and there
does not exist any other kind of lien or obligation chargeable against the vessel. If he may do so, he must state

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what interest he has in the vessel. In case of violation of this article, the principal, interest, and costs shall be for
the personal account of the captain, and the ship agent may furthermore discharge him.

ARTICLE 622.If while on a voyage the captain should learn of the appearance of privateers or men of war
against his flag, he shall be obliged to make the nearest neutral port, inform his agent or shippers, and await an
occasion to sail under convoy, or until the danger is over or he has received express orders from the ship agent
or the shippers.

ARTICLE 624.A captain whose vessel has gone through a hurricane or who believes that the cargo has suffered
damages or averages, shall make a protest thereon before the competent authority at the first port he touches,
within twenty-four hours following his arrival and shall ratify it within the same period when he arrives at his
destination, immediately proceeding with the proof of the facts, and he may not open the hatches until after this
has been done. The captain shall proceed in the same manner, if, the vessel having been wrecked; he is saved
alone or with part of his crew, in which case he shall appear before the nearest authority, and make a sworn
statement of facts. The authority or the consul shall verify the said facts receiving sworn statements of the
members of the crew and passengers who may have been saved; and taking such other steps as may assist in
arriving at the facts he shall make a statement of the result of the proceedings in the log book and in that of the
sailing mate, and shall deliver to the captain the original record of the proceedings, stamped and folioed, with a
memorandum of the folios, which he must rubricate, in order that it may be presented to the judge or court of
the port of destination. The statement of the captain shall be accepted if it is in accordance with those of the crew
and passengers; if they disagree, the latter shall be accepted, always saying proof to the contrary.

ARTICLE 625.The captain, under his personal responsibility as soon as he arrives at the port of destination,
should get the necessary permission from the health and customs officers, and perform the other formalities
required by the regulations of the administration, delivering the cargo without any defalcation, to the consignee,
and in a proper case, the vessel, rigging, and freightage to the ship agent. If by reason of the absence of the
consignee or on account of the nonappearance of a legal holder of the bills of lading, the captain should not
know to whom he is to legally make the delivery of the cargo, he shall place it at the disposal of the proper judge
or court or authority, in order that he may determine what is proper with regard to its deposit, preservation and
custody.

3) Other Officers and Crew

a) Contracts and formalities
ARTICLE 634.The captain may make up the crew of his vessel with such number of men as he may consider
proper, and in the absence of Filipino sailors, he may take on foreigners residing in the country, the number
thereof not to exceed one-fifth of the crew. If in foreign ports the captain should not find a sufficient number
of Filipino sailors, he may complete the crew with foreigners, with the consent of the consul or marine
authorities. The agreement which the captain may make with the members of the crew and others who go to
makeup the complement of the vessel, to which reference is made in Article 612, must be reduced to writing
in the account book, without the intervention of a notary public or clerk of court ("escribano"), signed by the
parties thereto and visaed by the marine authority if they be executed in Philippine territory or by the
consuls or consular agents of the Republic of the Philippines if executed abroad, stating therein all the
obligations which each one contracts and all the rights he acquires said authorities taking care that these
obligations and rights are recorded in a clear and definite manner which give no room for doubts or claims.
The captain shall take care to read to them the articles of this Code which concern them, stating in said
document that they were read. If the book contains the requisites prescribed in Article 612, and there should
not appear any signs of alterations in its entries, it shall be admitted as evidence in questions which may
arise between the captain and the crew with respect to the agreements contained therein and the amounts
paid on account of the same. Every member of the crew may demand of the captain a copy, signed by the
latter, of the agreement and of the liquidation of his wages, as they appear in the book.

b) Duties and liabilities

ARTICLE 635.A seaman who has been contracted to serve on a vessel may not rescind his contract or fail to
comply therewith except by reason of a legitimate impediment which may have happened to him. Neither
may he transfer from the service of one vessel to another without obtaining the written permission of the
captain of the vessel on which he may be. If, without obtaining said permission, the seaman who has signed
for one vessel should sign for another one, the second contract shall be void, and the captain may choose
between forcing him to fulfill the service to which he first bound himself, or at his expense to look for a
person to substitute him. Furthermore, he shall lose the wages earned on his first contract, to the benefit of
the vessel for which he had signed. A captain who, knowing that a seaman is in the service of another
vessel, should have made a new agreement with him without having required of him the permission
referred to in the preceding paragraphs, shall be subsidiarily responsible to the captain of the vessel to
which the seaman first belonged, for that part of the indemnity, referred to in the third paragraph of this
article, which the seaman may not be able to pay.

c) Rights
ARTICLE 636.If there is no fixed period for which a seaman has been contracted he may not be discharged
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until the end of the return voyage to the port where he enlisted.

ARTICLE 637.Neither may the captain discharge a seaman during the time of his contract except for just
cause, the following being considered as such:
1.The perpetration of a crime which disturbs order on the vessel.
2.Repeated insubordination, want of discipline, or non-fulfillment of the service.
3.Repeated incapacity and negligence in the fulfillment of the service he should render.
4.Habitual drunkenness.
5.Any occurrence which incapacitates the seaman to perform the work entrusted to him, with the
exception of that provided in Article 644.
6.Desertion.The captain may, however, before getting out on a voyage and without giving any reason,
refuse to permit a seaman whom he may have engaged to go on board, and leave him on land, in which
case he will be obliged to pay him his wages as if he had rendered services. This indemnity shall be paid
from the funds of the vessel if the captain should have acted for reasons of prudence and in the interest of
the safety and good services of the farmer. Should this not be the case, it shall be paid by the captain
personally. After the voyage has begun, during the same, and until the conclusion thereof, the captain
may not abandon any member of his crew on land or on sea, unless, by reason of some crime, his
imprisonment and delivery to the competent authority in the first port touched should be proper, a matter
obligatory for the captain.

ARTICLE 638.If, after the crew has been engaged, the voyage is revoked by the will of the ship agent or of
the charterers before or after the vessel has put to sea, or if the vessel is for the same reason given a
destination different from that fixed in the agreement with the crew, the latter shall be indemnified on
account of the rescission of the contract, according to the cases follows:
1.If the revocation of the voyage should be decided upon before the departure of the vessel from the port,
each sailor engaged shall be given one month's salary, besides what may be due him, in accordance with
his contract, for the services rendered to the vessel up to the date of the revocation.
2. If the agreement should have been for a fixed amount for the whole voyage, that which may be due for
said month and days shall be determined in proportion to the approximate number of days the voyage
should have lasted, in the judgment of experts, in the manner established in the law of Civil Procedure;
and if the proposed voyage should be of such short duration that it is calculated at approximately one
month, the indemnity shall be fixed for fifteen days, discounting in all cases the sums advanced.
3. If the revocation should take place after the vessel has put to sea, the seamen engaged for a fixed
amount for the voyage shall receive in full the salary which may have been offered them as if the voyage
had terminated; and those engaged by the month shall receive the amount corresponding to the time they
might have been on board and to the time they may require to arrive at the port of destination, the captain
being obliged, furthermore, to pay the seamen in both cases, the passage to the said port or to the port of
sailing of the vessel, as may be convenient for them.
4.If the ship agent or the charterers of the vessel should give it a destination different from that fixed in
the agreement, and the members of the crew should not agree thereto, they shall be given by way of
indemnity half the amount fixed in case No. 1, besides what may be owed them for the part of the
monthly wages corresponding to the days which have elapsed from the date of their agreements. If they
accept the change, and the voyage, on account of the greater distance or of other reasons, should give rise
to an increase of wages, the latter shall be adjusted privately or through amicable arbitrators incase of
disagreement. Even though the voyage should be shortened to a nearer point, this shall not give rise to a
reduction in the wages agreed upon. If the revocation or change of the voyage should come from the
shippers or charterers, the agent shall have a right to demand of them the indemnity which may be justly
due.

ARTICLE 639.If the revocation of the voyage should arise from a just cause independent of the will of the
ship agent and charterers, and the vessel should not have left the port,
the members of the crew shall have no other right than to collect the wages earned up to the day on which
the revocation took place.

ARTICLE 640.The following shall be just causes for the revocation of the voyage:
1.A declaration of war or interdiction of commerce with the power to whose territory the vessel was
bound.
2.The blockade of the port of its destination, or the breaking out of an epidemic after the agreement.
3.The prohibition to receive in said port the goods which make up the cargo of the vessel.
4.The detention or embargo of the same by order of the government, or for any other reason independent
of the will of the ship agent.
5.The inability of the vessel to navigate.

ARTICLE 641.If, after a voyage has been begun, any of the first three causes mentioned in the foregoing
article should occur, the sailors shall be paid at the port which the captain may deem advisable to make for
the benefit of the vessel and cargo, according to the time they may have served thereon; but if the vessel is to
continue its voyage, the captain and the crew may mutually demand the enforcement of the contract. In case
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of the occurrence of the fourth cause, the crew shall continue to be paid half wages, if the agreement is by
month; but if the detention should exceed three months, the contract shall be rescinded and the crew shall
be paid what they should have earned according to the contract if the voyage had been concluded. And if
the agreement should be for a fixed sum for the voyage, the contract must be complied within the terms
agreed upon. In the fifth case, the crew shall have no other right than to collect the wages earned; but if the
disability of the vessel should have been caused by the negligence or lack of skill of the captain, engineer, or
sailing mate, they shall indemnify the crew for the damages suffered, always without prejudice to the
criminal liability which may be proper.

ARTICLE 642.If the crew have been engaged on shares, they shall not be entitled, by reason of the
revocation, delay, or greater extension of the voyage, to anything but the proportionate part of the
indemnity which way be paid into the common funds of the vessel by the persons liable for said
occurrences.

ARTICLE 643.If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rights shall
be extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship agent
to recover the advances made. If a portion of the vessel or of the cargo, or of both, should be saved, the crew
engaged on wages, including the captain, shall retain their rights on the salvage, so far as they go, on the
remainder of the vessel as well as on the amount of the freightage of the cargo saved; but sailors who are
engaged on shares shall not have any right whatsoever on the salvage of the hull, but only on the portion of
the freightage saved. If they should have worked to recover the remainder of the shipwrecked vessel they
shall be given from the amount of the salvage an award in proportion of the efforts made and to the risks,
encountered in order to accomplish the salvage.

ARTICLE 644.A seaman who falls sick shall not lose his right to wages during the voyage, unless the
sickness is the result of his own fault. At any rate, the costs of the attendance and cure shall be defrayed
from the common funds, in the form of a loan. If the sickness should come from an injury received in the
service or defense of the vessel, the seaman shall be attended and cured at the expense of the common funds
deducting, before anything else, from the proceeds of the freightage the cost of the attendance and cure.

ARTICLE 645.If a seaman should die during the voyage, his heirs will be given the wages earned and not
received according to his contract and the cause of his death, namely — If he died a natural death and was
engaged on wages, that which may have been earned up to the date of his death shall be paid. If the contract
was for a fixed sum for the whole voyage, half the amount earned shall be paid if the seamen died on the
voyage out, and the whole amount if he died on the return voyage. And if the contract was on shares and
death occurred after the voyage was begun, the heirs shall be paid the entire portion due the seaman; but if
the latter died before the departure of the vessel from the port, the heirs shall not be entitled to claim
anything. If death occurred in the defense of the vessel, the seaman shall be considered as living, and his
heirs shall be paid, at the end of the voyage, the full amount of wages or the integral part of the profits
which may be due him as to others of his class. In the same manner, the seaman captured while defending
the vessel shall be considered present so as to enjoy the same benefits as the rest; but should he have been
captured on account of carelessness or other accident not related to the service, he shall only receive the
wages due up to the day of his capture.

ARTICLE 646.The vessel with her engines, rigging, equipment, and freightage shall he liable for the wages
earned by the crew engaged per month or for the trip, the liquidation and payment to take place between
one voyage and the other. After a new voyage has been undertaken, credits of such kind pertaining to the
preceding voyage shall lose their right of preference.

ARTICLE 647.The officers and the crew of the vessel shall be free from all obligations if they deem it proper,
in the following cases:
1.If, before beginning the voyage, the captain attempts to change it, or a naval war with the power to which
the vessel was destined occurs.
2.If a disease should break out and be officially declared an epidemic in the port of destination.
3.If the vessel should change owner or captain.

4) Supercargoes
ARTICLE 649.Supercargoes shall discharge on board the vessel the administrative duties which the ship agent or the
shippers may have assigned to them; they shall keep an account and record of their transactions in a book which
shall have the same conditions and requisites as required for the accounting book of the captain, and they shall
respect the latter in his capacity as chief of the vessel.
The powers and responsibilities of the captain shall cease, when there is a supercargo, with regard to that part of the
administration legitimately conferred upon the latter, but shall continue in force for all acts which are inseparable
from his authority and office.

ARTICLE 650.All the provisions contained in the second section of Title III, Book II, with regard to capacity, manner
of making contracts, and liabilities of factors, shall be applicable to supercargoes.

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ARTICLE 651.Supercargoes may not, without special authorization or agreement, make any transaction for their
own account during the voyage, with the exception of the ventures which, in accordance with the custom of the port
of destination, they are permitted to do. Neither shall they be permitted to invest in the return trip more than the
profits from the ventures, unless there is an express authorization from the principals.

D. Accidents and Damages in Maritime Commerce

1) Averages
ARTICLE 806.For the purposes of this code the following shall be considered averages:
1.All extraordinary or accidental expenses which may be incurred during the voyage in order to preserve the vessel,
the cargo, or both.
2.Any damages or deteriorations which the vessel may suffer from the time it puts to sea from the port of departure
until it casts anchor in the port of destination, and those suffered by the merchandise from the time they are loaded in
the port of shipment until they are unloaded in the port of their consignment.

ARTICLE 807.The petty and ordinary expenses incident to navigation, such as those of pilotage of coasts and ports,
those of lighterage and towage, anchorage, inspection, health, quarantine, lazaretto, and other so-called port
expenses, costs of barges and unloading until the merchandise is placed on the wharf, and any other usual expenses
of navigation, shall be considered ordinary expenses to be defrayed by the shipowner, unless there is an express
agreement to the contrary.

ARTICLE 808. Averages shall be: 1.Simple or particular. 2.General or gross.

AGBAYANI
Averages consist of 2 items :
1. Expenses : to constitute an average, an expense must be:
a. extraordinary or accidental
b. incurred during the voyage
c. incurred in order to preserve the vessel, cargo or both
2. Damages or deterioration : to constitute an average, it must be:
a. have been suffered from the time the vessel puts to sea from the port of departure until it casts
anchor in the port of destination
b. have been suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the
port of consignment

a) Nature and Kinds

1. Simple or Particular
a. Defined
ARTICLE 809.As a general rule, simple or particular averages shall include all the expenses and damages
caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the persons
interested in the vessel and her cargo, and especially the following:
1.The losses suffered by the cargo from the time of its embarkation until it is unloaded, either on account of
inherent defect of the goods or by reason of an accident of the sea or force majeure, and the expenses incurred to
avoid and repair the same.
2.The losses and expenses suffered by the vessel in its hull, rigging, arms, and equipment, for the same causes
and reasons, from the time it puts to sea from the port of departure until it anchors and lands in the port of
destination.
3.The losses suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine
ordinances allow it.
4.The wages and victuals of the crew when the vessel is detained or embargoed by legitimate order or force
majeure, if the charter has been contracted for a fixed sum for the voyage.
5.The necessary expenses on arrival at a port, in order to make repairs or secure provisions.
6.The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in
order to save the crew, or to meet any other need of the vessel, against which the proper amount shall be
charged.
7.The victuals and wages of the crew while the vessel is in quarantine.
8.The loss inflicted upon the vessel or cargo by reason of an impact or collision with another, if it is accidental
and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be
liable for all the losses caused.
9.Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or of the crew, without
prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the
freightage.

b. Effects
ARTICLE 810.The owner of the goods which gave rise to the expense or suffered the damage shall bear the
simple or particular averages.

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2. Gross or General
a. Defined
ARTICLE 811.As a general rule, general or gross averages shall include all the damages and expenses which
are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known
risk, and particularly the following:
1.The goods or cash invested in the redemption of the vessel or of the cargo captured by enemies, privateers,
or pirates, and the provisions, wages, and expenses of the vessel detained during the time the settlement or
redemption is being made.
2.The goods jettisoned to lighten the vessel, whether they belong to the cargo, to the vessel, or to the crew,
and the damage suffered through said act by the goods which are kept on board.
3.The cables and masts which are cut or rendered useless, the anchors and the chains which are abandoned,
in order to save the cargo, the vessel, or both.
4.The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place it
in condition to enter a port or roadstead, and the damage resulting therefrom to the goods removed or
transferred.
5.The damage suffered by the goods of the cargo by the opening made in the vessel in order to drain it and
prevent its sinking.
6.The expenses caused in order to float a vessel intentionally stranded for the purpose of saying it.
7.The damage caused to the vessel which had to be opened, scuttled or broken in order to save the cargo.
8.The expenses for the treatment and subsistence of the members of the crew who may have been wounded
or crippled in defending or saying the vessel.
9.The wages of any member of the crew held as hostage by enemies, privateers, or pirates, and the necessary
expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile,
should he prefer it.
10.The wages and victuals of the crew of a vessel chartered by the month, during the time that it is
embargoed or detained by force majeure or by order of the government, or in order to repair the damage
caused for the common benefit.
11.The depreciation resulting in the value of the goods sold at arrival under stress in order to repair the
vessel by reason of gross average.
12.The expenses of the liquidation of the average.

ARTICLE 817.If in lightening a vessel on account of a storm, in order to facilitate its entry into a port or
roadstead, part of the cargo should be transferred to lighters or barges and be lost, the owner of said part
shall be entitled to indemnity, as if the loss had originated from a gross average, the amount thereof being
distributed between the vessel and cargo from which it came. If, on the contrary, the merchandise
transferred should be saved and the vessel should be lost, no liability may be demanded of the salvage.

ARTICLE 818.If, as a necessary measure to extinguish a fire in a port, roadstead, creek, or bay, it should be
decided to sink any vessel, this loss shall be considered gross average, to which the vessels saved shall
contribute.

AGBAYANI
Distinguishing feature: Expense or damage suffered deliberately in order to save the vessel, its cargo or both from a real and
known risk --> it is the deliverance from an immediate peril, by a common sacrifice, that constitutes the essence of general
average
Requisites for general average:
1. there must be a common danger --> the ship and cargo are subject to the same danger and that the danger arises from accidents
of the sea, dispositions of the authorities or faults of men, provided that the circumstances producing the peril should be
ascertained and imminent
2. for the common safety, part of the vessel or the cargo or both is sacrificed deliberately
3. from the expenses or damages caused follows the successful saving of the vessel and cargo
4. the expenses or damages should have been incurred or inflicted after taking legal steps and authority

b. Essential Requirements
ARTICLE 813.In order to incur the expenses and cause the damages corresponding to gross average, there
must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the
vessel, and after hearing the persons interested in the cargo who may be present. If the latter shall object,
and the captain and officers or a majority of them, or the captain, if opposed to the majority, should consider
certain measures necessary, they may be executed under his responsibility, without prejudice to the right of
the shippers to proceed against the captain before the competent judge or court, if they can prove that he
acted with malice, lack of skill, or negligence. If the persons interested in the cargo, being on board the
vessel, have not been heard, they shall not contribute to the gross average, their share being chargeable
against the captain, unless the urgency of the case should be such that the time necessary for previous
deliberations was wanting.

ARTICLE 814.The resolution adopted to cause the damages which constitute general average must
necessarily be entered in the log book, stating the motives and reasons for the dissent, should there be any,

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and the irresistible and urgent causes which impelled the captain if he acted of his own accord. In the first
case the minutes shall be signed by all the persons present who could do so before taking action, if possible;
and if not, at the first opportunity.
In the second case, it shall be signed by the captain and by the officers of the vessel. In the minutes, and after
the resolution, shall be stated in detail all the goods jettisoned, and mention shall be made of the injuries
caused to those kept on board. The captain shall be obliged to deliver one copy of these minutes to the
maritime judicial authority of the first port he may make, within twenty-four hours after his arrival, and to
ratify it immediately under oath.
CASES: (Magsaysay v Agan)
• Averages; kinds—Simple or particular averages include all expenses and damages caused to the vessel
or cargo which have not inured to the common benefit (Art. 809), and are, therefore, to be borne only by
the owner of the property gave rise to same (Art. 810); while general or gross averages include "all the
damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the
same time, from a real and known risk" (Art. 811). Being for the common benefit, gross averages are to
be borne by the owners of the articles saved (Art. 812).
• General average; requisites—First, there must be a common danger. This means, that both the ship and
the cargo, after has been loaded, are subject to the same danger, whether during the voyage, or in the
port of loading or unloading; that the danger arises from the accidents of the sea, dispositions of the
authority, or faults of men, provided that the circumstances producing the peril should be ascertained
and imminent or may rationally be said to be certain and imminent. This last requirement exclude
measures undertaken against a distant peril. Second, that for the common safety part of the vessel or of
the cargo or both is sacrificed deliberately. Third, that from the expenses or damages caused follows the
successful saving of the vessel and cargo. Fourth, that the expenses or damages should have been
incurred or inflicted after taking proper legal steps and authority.
• General average; essence—It is the deliverance from an immediate, impending peril, by a common
sacrifice, that constitutes the essence of general average.
• General average; true foundation—it is the safety of the property, and not of the voyage, which
constitutes the true foundation of the general average.
o Example; requisites not met—#1: vessel had to be salvaged to proceed to its port of
destination; vessel ran aground in find weather inside the port at the mouth of a river (very
shallow); if left indefinitely would run the risk of being destroyed does not constitute
imminent danger or danger which might rationally be sought to be certain and imminent. #2:
cargo would, without need of expensive salvage operation, have been unloaded by owners if
required to do so #3:success but sacrifice was for the benefit of the vessel, not to save the cargo
#4: not shown that expenses were incurred after following procedure in Art 813.

AGBAYANI
Formalities for incurring gross average :
1. there must be an assembly of the sailing mate and other officers with the captain including those with interests in the cargo
2. there must be a resolution of the captain
3. the resolution shall be entered in the log book, with the reasons and motives and the votes for and against the resolution
4. the minutes shall be signed by the parties
5. within 24 hours upon arrival at the first port the captain makes, he shall deliver one copy of these minutes to the maritime
judicial authority thereat

The goods that were not sacrificed shall not be liable for the indemnification of those sacrificed - One of the requisites of general
average is lacking, that is, success in saving the vessel and remaining cargo

c. Effects
ARTICLE 812.In order to satisfy the amount of the gross or general averages, all the persons having an
interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute.

d. Jettison
ARTICLE 815.The captain shall direct the jettison, and shall order the goods cast overboard in the following
order:
1.Those which are on deck, beginning with those which embarrass the maneuver or damage of the vessel,
preferring, if possible, the heaviest ones with the least utility and value.
2.Those which are below the upper deck, always beginning with those of the greatest weight and smallest
value, to the amount and number absolutely indispensable.

ARTICLE 816.In order that the goods jettisoned may be included in the gross average and the owners
thereof be entitled to indemnity, it shall be necessary insofar as the cargo is concerned that their existence on
board be proven by means of the bill of lading; and with regard to those belonging to the vessel, by means
of the inventory prepared before the departure in accordance with the first paragraph of Article 812.

e. Jason Clauses

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

• A clause in American bills of lading which permits the carrier to collect general average contributions
from cargo owners in situations where the carrier is at fault, but is not responsible for the cargo loss or
damage under the Harter Act 1893 (supra) or COGSA (supra). The name originates in the U.S. Supreme
Court's decision in The Jason 225 U.S. 32 (1912), where the clause was upheld under the Harter Act. The
clause evolved into the "New Jason clause" with the advent of COGSA in 1936.
(www.juridicaldictionary.com)

2) Arrival Under Stress

a) Causes
ARTICLE 819.If during the voyage the captain should believe that the vessel cannot continue the trip to the port of
destination on account of the lack of provisions, well- founded fear of seizure, privateers, or pirates, or by reason of
any accident of the sea disabling it to navigate, he shall assemble the officers and shall summon the persons
interested in the cargo who may be present, and who may attend the meeting without the right to vote; and if, after
examining the circumstances of the case, the reason should be considered well-founded, the arrival at the nearest and
most convenient port shall be agreed upon, drafting and entering the proper minutes, which shall be signed by all, in
the log book. The captain shall have the deciding vote, and the persons interested in the cargo, may make the
objections and protests they may deem proper, which shall be entered in the minutes in order that they may make
use thereof in the manner they may consider advisable.

ARTICLE 820.An arrival shall not be considered lawful in the following cases:
1.If the lack of provisions should arise from the failure to take the necessary provisions for the voyage according to
usage and customs, or if they should have been rendered useless or lost through bad stowage or negligence in their
care.
2.If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based on positive and
provable facts.
3.If the defect of the vessel should have arisen from the fact that it was not repaired, rigged, equipped, and prepared
in a manner suitable for the voyage, or from some erroneous order of the captain.
4.When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in the act causing the
damage.

Arrival under stress: Arrival of a vessel at the nearest and most convenient port, if during the voyage the vessel cannot continue
the trip to the port of destination due to : (1) lack of provisions, (2) well-founded fear of seizure, privateers, or pirates, (3) by
reason of any accident of the sea disabling it to navigate

b) Formalities
ARTICLE 819 (supra)

ARTICLE 822.If in order to make repairs to the vessel or because there is danger that the cargo may suffer damage, it
should be necessary to unload, the captain must request authorization from the competent judge or court for the
removal, and carry it out with the knowledge of the person interested in the cargo, or his representative, should there
be any. In a foreign port, it shall be the duty, of the Philippine Consul, where there is one, to give the authorization.
In the first case, the expenses shall be for the account of the ship agent or owner, and in the second, they shall be
chargeable against the owners of the merchandise for whose benefit the act was performed. If the unloading should
take place for both reasons, the expenses shall be divided proportionately between the value of the vessel and that of
the cargo.

Formalities : 1. assembly of the officers including all interested parties

2. drafting and entering in the log book the proper minutes, which shall be signed by all
3. entry in the log book of the objections and protests of the persons interested in the cargo

c) Expenses
ARTICLE 822 (SUPRA)

ARTICLE 821.The expenses of an arrival under stress shall always be for the account of the shipowner or agent, but
they shall not be liable for the damages which may be caused the shippers by reason of the arrival provided the latter
is legitimate. Otherwise, the ship agent and the captain shall be jointly liable.

Requisites for the captain to unload the cargo arriving under stress:
1. the unloading must be necessary to make repairs or there must be danger that the cargo may suffer damage
2. the captain must be authorized by either a competent court or the Phil. consul, depending on the port of arrival

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d) Responsibility of Captain
ARTICLE 823.The custody and preservation of the cargo which has been unloaded shall be intrusted to the captain,
who shall be responsible for the same, except in cases of force majeure.

ARTICLE 824.If the entire cargo or part thereof should appear to be damaged, or there should be imminent danger of
its being damaged, the captain may request of the competent judge or court, or of the consul in a proper case, the sale
of all or of part of the former, and the person taking cognizance of the matter shall authorize it, after an examination
and declaration of experts, advertisements, and other formalities required by the case, and an entry in the book, in
accordance with the provisions of Article 624.The captain shall, in a proper case, justify the legality of his conduct,
under the penalty of answering to the shipper for the price the merchandise would have brought if they had arrived
in good condition at the port of destination.

ARTICLE 825.The captain shall be responsible for the damages caused by his delay, if after the cause of the arrival
under stress has ceased, he should not continue the voyage. If the cause of arrival should have been the fear of
enemies, privateers, or pirates, a deliberation and resolution in a meeting of the officers of the vessel and persons
interested in the cargo who may be present, in accordance with the provisions contained in Article 819, shall precede
the departure.

The captain has the duty to continue the voyage without delay after the cause of the arrival under stress has ceased-->
otherwise, he shall be liable for damages caused by the delay
3) Collisions
AGBAYANI
Collision: impact of two vessels both of which are moving
Allision: striking of a moving vessel against one that is stationary
Cases of collision :
1. due to the fault, negligence or lack of skill of the captain, sailing mate or the complement of the vessel
--> under 826, the shipowner shall be liable for the losses and damages
2. due to the fault of both vessels --> under 827, each vessel shall suffer its own losses, but as regards the owners of the cargoes, both
vessels shall be jointly and severally liable
3. where it cannot be determined which of the 2 vessels is at fault --> under 828, each vessel shall suffer its own losses, and
both shall also be solidarily responsible for the losses and damages caused to their cargoes
4. collision due to fortuitous event or force majeure --> under 830, each vessel shall bear its own damages
5. where two vessels collide with each other without their fault but by reason of the fault of a third vessel -> Under 831, the owner of
the third vessel causing the collision shall be liable for the losses and damages
6. a vessel which is properly anchored and moored may collide with those nearby by reason of a storm or other cause of force majeure
--> under 832, the vessel run into shall suffer its own damages and expenses
Nautical Rules to determine negligence:
1. When 2 vessels are about to enter a port, the farther one must allow the nearer to enter first; if they collide, the fault is presumed to
be imputable to the one who arrived later, unless it can be proved that there was no fault on its part.
2. When 2 vessels meet, the smaller should give the right of way to the larger one.
3. A vessel leaving port should leave the way clear for another which may be entering the same port.
4. The vessel which leaves later is presumed to have collided against one who has left earlier.
5. There is also a presumption against the vessel which sets sail at night.
6. The presumption also works against the vessel with spread sails which collides with another which is at anchor, and cannot
move, even when the crew of the latter has received word to lift anchor, when there was not sufficient time to do so or there was
fear of a greater damage or other legitimate reason.
7. The vessel which is not properly moored or does not observe the proper distances, has the presumption against itself.
8. The vessel which is moored at a place not used for the purpose, or which is improperly moored or does not have sufficient cables, or
which has been left without watch, has also against itself the presumption.
9. The same rule applies to those vessels which do not have buoys to indicate the location of its anchors to prevent damage to
these vessels which may approach it.
Zones in time of collisions (3 time zones):
1. all the time up to the moment when the risk of collision may have said to have begun --> within this zone, no rule is applicable
because none is necessary. Each vessel is free to direct its course as it deems best with reference to the movements of the other
vessel.
2. the time between the moment when the risk of collision begins and the moment when it has become a practical necessity.
3. the time between the moment when collision has become a practical certainty and the moment of actual contact
Effect of fault of privileged vessel during third zone :
If a vessel having a right of way suddenly changes its course during the third zone, in an effort to avoid an imminent collision due
to the fault of another vessel, such act may be said to be done in extremis, and even if wrong, cannot create responsibility on the part of
said vessel with the right of way. Thus, it has been held that fault on the part of the sailing vessel at the moment preceding a collission,
that is, during the third division of time, does not absolve the steamship which has suffered herself and a sailing vessel to get into such
dangerous proximity as to cause inevitable harm and confusion, and a collision results as a consequence. The steamer having a far
greater fault in allowing such proximity to be brought about is chargeable with all the damages resulting from the collision; and the act
of the sailing vessel having been done in extremis and even wrong, is not responsible for the result.

a) Classes and Effects

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1. Fortuitous
ARTICLE 830.If a vessel should collide with another, through fortuitous event or force majeure, each vessel and
its cargo shall bear its own damages.

ARTICLE 832.If by reason of a storm or other cause of force majeure, a vessel which is properly anchored and
moored should collide with those nearby, causing them damages, the injury occasioned shall be considered as
particular average of the vessel run into

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

ARTICLE 827.If the collision is imputable to both vessels, each one shall suffer its own damages, and both shall
be solidarily responsible for the losses and damages occasioned to their cargoes.

ARTICLE 831.If a vessel should be forced by a third vessel to collide with another, the owner of the third vessel
shall indemnify the losses and damages caused, the captain thereof being civilly liable to said owner.

Where the obligation arises from tortious act and not from contract, both the owner and the shipagent should be declared liable

Defense of due diligence of a good father of a family in the selection and vigilance of the officers and crew cannot be used to render
nugatory the solidary liability under 827
Under the express provisions of 827, the shipowners cannot successfully maintain an action against the other for the loss or injury
to his vessel

3. Inscrutable Fault
ARTICLE 828.The provisions of the preceding article are applicable to the use in which it cannot be determined
which of the two vessels has caused the collision.

Relation of Art. 827 to Art. 828

Art. 828 must be considered an extension of Art. 827
The rule of liability under Art. 827 is applicable not only to the case where both vessels may be shown to be actually blameworthy but
also to the case where it is obvious that only one was at fault but the proof does not show which
Under Arts. 827 and 828, in case of collision between two vessels at sea, both are solidarily liable for the loss of cargo carried by either
to the full extent of the value thereof, not only in the case where both vessels may be shown to be actually blameworthy but also in the
case where it is shown that only one was at fault but the proof does not show it --> it makes no difference that the negligence
imputable to the two vessels may have differed somewhat in character and degree and that the negligence of the sunken ship was
somewhat more marked than that of the ther
The doctrine of last clear chance cannot be raised --> under the express provisions of Art. 827, under which the evidence disclosing
that both vessels are blameworthy, the owners of neither can successfully maintain an action against the other for the loss or injury
to his vessel

b) Presumption of loss by collision

ARTICLE 823.The custody and preservation of the cargo which has been unloaded shall be intrusted to the captain,
who shall be responsible for the same, except in cases of force majeure.

c) Liabilities
1. Shipowner or agent
ARTICLE 837.The civil liability incurred by the shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage earned during the
voyage.

ARTICLE 838.When the value of the vessel and her appurtenances should not be sufficient to cover all the
liabilities, the indemnity due by reason of the death or injury of persons shall have preference.

Limited liability : limited to the value of the vessel and the freight earned during the voyage [provided for in Arts. 587, 590 and 837]
Damages may be recovered to the extent of what may be salvaged or of the freightage received or of the value of the insurance
recoverable

2. Captain, pilot or others

ARTICLE 829.In the cases above mentioned the civil action of the owner against the person causing the injury as
well as the criminal liabilities, which may be proper, are reserved.

ARTICLE 834.If the vessels colliding with each other should have pilots on board discharging their duties at the
time of the collision, their presence shall not exempt the captains from the liabilities they incur, but the latter
shall have the right to be indemnified by the pilots, without prejudice to the criminal liability which the latter
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may incur.

3. Conditions; protests
ARTICLE 835.The action for the recovery of losses and damages arising from collisions cannot be admitted if a
protest or declaration is not presented within twenty-four 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
consul of the Republic of the Philippines if it occurred in a foreign country.

ARTICLE 836.With respect to damages caused to persons or to the cargo, the absence of protest may not
prejudice the persons interested who were not on board or were not in a condition to make known their wishes.

ARTICLE 839.If the collision should take place between Philippine vessels in foreign waters, or if having taken
place in the open seas, and the vessels should make a foreign port, the Consul of the Republic of the Philippines
in said port shall hold a summary investigation of the accident, forwarding the proceedings to the Secretary of
the Department of Foreign Affairs for continuation and conclusion.

Art. 835 establishes a condition precedent before any action for the recovery of damages arising from collisions may be admitted
--> presentation of a protest or declaration within 24 hours before the proper authorities [competent authority at the point
where the collision took place or of the first port of arrival of the vessel or to the consul of the Philippines if it occurred in a foreign
country]
The requirement of protest is not necessary with respect to small boats engaged in river and bay traffic and boats manned by a
group of fishermen
Reason for requiring protest: Necessity of preventing fictitious collisions and improper indemnities
Summary of cases where protest is required:
1. under 612, when the vessel makes an arrival under stress
2. under 612, 624 and 843, where the vessel is shipwrecked
3. under 624, where the vessel has gone through a hurricane or when the captain believes that the cargo has suffered damages or
averages
4. under 835, in case of maritime collisions

4) Shipwrecks
ARTICLE 840.The losses and deteriorations suffered by a vessel and her cargo by reason of shipwreck or stranding
shall be individually for the account of the owners, the part which may be saved belonging to them in the same
proportion.

ARTICLE 841.If the wreck or stranding should be caused by the malice, negligence, or lack of skill of the captain, or
because the vessel put to sea was insufficiently repaired and equipped, the ship agent or the shippers may demand
indemnity of the captain for the damages caused to the vessel or to the cargo by the accident, in accordance with the
provisions contained in Articles 610, 612, 614, and 621.

ARTICLE 842.The goods saved from the wreck shall be specially bound for the payment of the expenses of the
respective salvage, and the amount thereof must be paid by the owners of the former before they are delivered to
them, and with preference over any other obligation if the merchandise should be sold.

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

Shipwreck: Loss of a vessel at sea, either by being swallowed up by the waves, by running against another vessel or thing at sea,
or on coast --> renders the ship incapable of navigation
Under 841, in case the wreck or stranding is due to the (1) malice, negligence, or lack of skill of the captain, or (2) because the vessel
put to sea was insufficiently repaired and equipped, the captain shall be liable

Where a ship and its cargo are saved together, the salvage allowance should be charged against the ship and cargo in proportion of
their respective values, the same as in general averages and neither is liable for the salvage due from the other
Where a personal action is brought by the salvor against the owner of the ship, the liability of the latter is limited to such part of
the salvage compensation due for the entire service as is proportionate to the value of the ship

a) Salvage Law
ACT NO. 261—THE SALVAGE LAW
Section 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been
abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward
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for the salvage.
Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be
entitled to a like reward.
Sec. 2. If the captain of the vessel, or the person acting in his stead, is present, no one shall take from the sea, or from the
shores or coast merchandise or effects proceeding from a shipwreck or proceed to the salvage of the vessel, without the
consent of such captain or person acting in his stead.
Sec. 3. He who shall save or pick up a vessel or merchandise at sea, in the absence of the captain of the vessel, owner, or a
representative of either of them, they being unknown, shall convey and deliver such vessel or merchandise, as soon as
possible, to the Collector of Customs, if the port has a collector, and otherwise to the provincial treasurer or municipal
mayor.
Sec. 4. After the salvage is accomplished, the owner or his representative shall have a right to the delivery of the vessel or
things saved, provided that he pays, or gives a bond to secure, the expenses and the proper reward.
The amount and sufficiency of the bond, in the absence of agreement, shall be determined by the Collector of Customs or
by the Judge of the Court of First Instance of the province in which the things saved may be found.
Sec. 5. The Collector of Customs, provincial treasurer, or municipal mayor, to whom a salvage is reported, shall order:
a. That the things saved be safeguard and inventoried.
b. The sale at public auction of the things saved which may be in danger of immediate loss or of those whose conservation
is evidently prejudicial to the interests of the owner, when no objection is made to
such sale.
c. The advertisement within the thirty days subsequent to the salvage, in one of the local newspapers or in the nearest
newspaper published, of all the details of the disaster, with a statement of the mark and number of the effects requesting
all interested persons to make their claims.
Sec. 6. If, while the vessel or things saved are at the disposition of the authorities, the owner or his representative shall
claim them, such authorities shall order their delivery to such owner or his representative, provided that there is no
controversy over their value, and a bond is given by the owner or his representative to secure the payment of the expenses
and the proper reward. Otherwise, the delivery shall nor be made until the matter is decided by the Court of First Instance
of the province.
Sec. 7. No claim being presented in the three months subsequent to the publication of the advertisement prescribed in sub-
section (c) of Section five, the things save shall be sold at public auction, and their proceeds, after deducting the expenses
and the proper reward shall be deposited in the insular treasury. If three years shall pass without anyone claiming it, one-
half of the deposit shall be adjudged to him who saved the things, and the other half to the insular government.
Sec. 8. The following shall have no right to a reward for salvage or assistance:
a. The crew of the vessel shipwrecked or which was is danger of shipwreck;
b. He who shall have commenced the salvage in spite of opposition of the captain or his representative; and
c. He who shall have failed to comply with the provisions of Section three.
Sec. 9. If, during the danger, an agreement is entered into concerning the amount of the reward for salvage or assistance, its
validity may be impugned because it is excessive, and it may be required to be reduced to an amount proportionate to the
circumstances.
Sec. 10. In a case coming under the last preceding section, as well as in the absence of an agreement, the reward for salvage
or assistance shall be fixed by the Court of First Instance of the province where the things salvaged are found, taking into
account principally the expenditures made to recover or save the vessel or the cargo or both, the zeal demonstrated, the
time employed, the services rendered, the excessive express occasioned the number of persons who aided, the danger to
which they and their vessels were exposed as well as that which menaced the things recovered or salvaged, and the value
of such things after deducting the expenses.
Sec. 11. From the proceeds of the sale of the things saved shall be deducted, first, the expenses of their custody,
conservation, advertisement, and auction, as well as whatever taxes or duties they should pay for their entrance; then there
shall be deducted the expenses of salvage; and from the net amount remaining shall be taken the reward for the salvage or
assistance which shall not exceed fifty per cent of such amount remaining.
Sec. 12. If in the salvage or in the rendering of assistance different persons shall have intervened the reward shall be
divided between them in proportion to the services which each one may have rendered, and, in case of doubt, in equal
parts.
Those who, in order to save persons, shall have been exposed to the same dangers shall also have a right to participation in
the reward.
Sec. 13. If a vessel or its cargo shall have been assisted or saved, entirely or partially, by another vessel, the reward for
salvage or for assistance shall be divided between the owner, the captain, and the remainder of the crew of the latter vessel,
so as to give the owner a half, the captain a fourth, and all the remainder of the crew the other fourth of the reward, in
proportion to their respective salaries, in the absence of an agreement to the contrary. The express of salvage, as well as the
reward for salvage or assistance, shall be a charge on the things salvaged on their value.
Sec. 14. This Act shall take effect on its passage.
CASES:
• Salvage; defined—salvage may be defined as a service which one person renders to the owner of a ship
or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with
the care of them have either abandoned in distress at sea, or are unable to protect and secure. (Erlanger
& Galinger v Swedish East Asiatic Co Ltd)
o The compensation allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part,
from impending peril on the sea, or in recovering such property from actual loss, as in case of shipwreck, derelict,
or recapture (Barrios v Go Thong)
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o Abandonment of a vessel by all on board, when the vessel is in peril, will justify third parties in taking possession
with the bona fide intention of saving the vessel and its cargo for its owners. The mental hope of the master and
the crew will in no way affect the possession nor the right to salvage. (Erlanger)
• Salvage; principle—A claim for salvage rests on the principle that, unless the property be in fact saved
by those who claim the compensation, it can not be allowed, however benevolent their intention and
however heroic their conduct. (Erlanger)
• Salvage; requisites—(1) A marine peril. (2) Service voluntarily rendered when not required as an
existing duty or from a special contract. (3) Success, in whole or in part, or that the service rendered
contributed to such success. (Erlanger & Galinger v Swedish East Asiatic Co Ltd)
• Salvage; reckoning point—The question whether or not a particular ship and her cargo is a fit object of
salvage depends upon her condition at the time the salvage services are performed. (Erlanger)
• Salvage; derelict—ship or her cargo which is abandoned and deserted at sea by those who were in
charge of it, without any hope of recovering it (sine spe recuperandi), or without any intention of
returning to it (sine animo revertendi). Whether property is to be adjudged derelict is determimed by
ascertaining what was the intention and expectation of those in charge of it when they quitted it.
o When a vessel is found at sea, deserted, and has been abandoned by the master and crew without the intention of
returning and resuming the possession, she is, in the sense of the law, derelict, and the finder who takes the possession
with the intention of saving her, gains a right of possession, which he can maintain against the true owner. The owner
does not, indeed, renounce his right of property. This is not presumed to be his intention, nor does the finder acquire
any such right. But the owner does abandon temporarily his right of possession, which is transferred to the finder,
who becomes bound to preserve the property with good faith, and bring it to a place of safety for the owner's use; and
he acquired a right to be paid for his services a reasonable and proper compensation, out of the property itself.
(Erlanger)
• Salvage; compensation defined—Compensation as salvage is not viewed by the admiralty courts merely as pay on the
principle of quantum meruit or as a remuneration pro opere et labore, but as a reward given for perilous services,
voluntarily rendered, and as an inducement to mariners to embark in such dangerous enterprises to save life and
property. (Erlanger)
o Salvage; compensation; amount—The expenses incurred by the plaintiffs must be borne by them. It is true that
the award should be liberal enough to cover the expenses and give an extra amount as a reward for the services
rendered but the expenses are used in no other way as a basis for the final award. A part of the risk that the
plaintiffs incurred was that the goods salved would not pay them for the amount expended in salving them. The
plaintiffs knew this risk and they should not have spent more money than their reasonable share of the proceeds
would amount to under any circumstances (Erlanger)
! A salvor, in the view of the maritime law, has an interest in the property; it is called a lien, but it never
goes, in the absence of a contract expressly made, upon the idea of a debt due by the owner to the
salvor for services rendered, as at common law, but upon the principle that the service creates a
property in the thing saved. He is, to all intents and purposes, a joint owner, and if the property is lost
he must bear his share like other joint owners. This is the governing principle here. The libelant and the
owners must mutually bear their respective share of the loss in value by the sale. If the libelant has been
unfortunate and has spent his time and money in saving a property not worth the expenditure he
made, or if, having saved enough to compensate him, it is lost by the uncertainties of a judicial sale for
partition, so to speak, it is a misfortune not uncommon to all who seek gain by adventurous
speculations in values. The libelant says in his testimony that he relied entirely on his rights as a salvor.
This being so he knew the risk he ran and it was his own folly to expend more money in the service
than his reasonable share would have been worth under all circumstances and contingencies. He can
rely neither on the common law idea of an implied contract to pay for work on and about one's
property what the work is reasonably worth with alien attached by possession for satisfaction, nor upon
any notion of an implied maritime contract for the service, with a maritime lien to secure it, as in the
case of repairs, or supplies furnished a needy vessel, or the like. In such a case the owner would lose all
if the property did not satisfy the debt, when fairly sold. But this doctrine has no place in the maritime
law of salvage. It does not proceed upon any theory of an implied obligation, either of the owner or the
res, to pay a quantum meruit, nor actual expenses incurred, but rather on that of a reasonable
compensation or reward, as the case may be, to one who has rescued the res from danger of total loss. If
he gets the whole, the property had as well been lost entirely, so far as the owner is concerned. (Smith
vs. The Joseph Stewart, Fed. Cas. No. 13070.) I think the public policy of encouragement for such service
does not, of itself, furnish sufficient support for a rule which would exclude the owner from all benefit
to be derived from the service. (Erlanger)
! There is no fixed rule for salvage allowance. The old rule in cases of a derelict was 50 per cent of the
property salved; but under modern decisions and practice, it may be less, or it may be more. The
allowance rests in the sound discretion of the court or judge, who hears the case, hears the witnesses
testify, looks into their eyes, and is acquainted with the environments of the rescue. . . . An allowance
for salvage should not be weighed in golden scales, but should be made as a reward for meritorious
voluntary services, rendered at a time when danger of loss is imminent, as a reward for such services so
rendered, and for the purpose of encouraging others in like services. (Erlanger)
• Salvage; distinguished from towage—Tug which put line aboard liberty ship which was not in danger or peril but which
had reduced its engine speed because of hot grounds, and assisted ship over bar and, thereafter, dropped towline and
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stood by while ship proceeded to dock under own power, was entitled, in absence of written agreement as to amount to
be paid for services, to payment for towage services, and not for salvage services. (Barrios v Go Thong)
• Salvage; distinguished from towage; importance of distinction—The distinction between salvage and towage is of
importance to the crew of the salvaging ship, for the following reasons: If the contract for towage is in fact towage, then
the crew does not have any interest or rights in the remuneration pursuant to the contract. But if the owners of the
respective vessels are of a salvage nature, the crew of the salvaging ship is entitled to salvage, and can look to the
salvaged vessel for its share. (Barrios v Go Thong)

AGBAYANI
Salvage.-- The compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved
in whole or in part from impending sea peril, or such property recovered from actual peril or loss, as in cases of shipwrecks, derelict
or recapture -- a service which one person, renders to the owner of a ship or goods by his own labor, preserving the goods or ship
which the owner or those entrusted with the care of them either abandoned in distress at sea or are unable to protect and secure ---> a
permit is required to engage in salvage business
Shipwreck-- means a ship which has received injuries rendering her incapable by navigation; loss of a vessel at sea, either by being
swallowed up by the waves, running against a thing at sea, or on the coast
Derelict.-- A ship or her cargo which is abandoned and deserted at sea by those who are in charge of it, without any hope of
recovering it, or without any intention of returning it --> if those in charge of the property left it with the intention of finally leaving
it, it is a derelict and the change of their intention and an attempt to return to it will not change its nature ex. a schooner which has
capsized in the high seas, deserted by her captain with no intention to return, is a derelict a vessel, though not abandoned, may be the
subject of salvage, if at the time the services were rendered, there was a probable, threatening danger to the vessel or its cargo --> if
the vessel towed is aided in escaping present or prospective danger, the service is one of salvage and the towage is merely incidental
Rights of finder of derelict: The finder who takes possession with the intention of saving her, gains a right of possession which
he can maintain against the true owners. The owner does not renounce his right of property. This is not presumed to be
intentional, nor does the finder acquire any such right. But the owner thus abandons temporarily, his right of possession, which is
transferred to the finder who becomes bound to preserve the property with GF and bring it to a place of safety for the owner's use;
in return, he acquires a right to be paid for his service a reasonable and proper compensation out of the property itself. He is not
bound to part with the possession until he is paid or the property is taken into the possession of the law preparatory to the amount of
salvage being legally asserted
Elements of a valid salvage:
1. a marine peril
2. service voluntarily rendered when not required as an existing duty or from special contract
3. success, in whole or in part, or that the services rendered contributed to such success
Distinction between salvage and towage is of importance to the crew of the salvaging ship : if the contract for towage is in fact
towage, then the crew does not have any interest or rights with the remuneration pursuant to the contract; BUT if the
owners of the respective vessels are of a salvage nature, the crew of the salvaging ship is entitled to salvage, and can look to the
salvaged vessel for its share
Captain towing vessel cannot invoke equity in quasi-contract of towage --> there is an express provision of law (Art. 2142, NCC)
applicable to the relationship of quasi-contract of towage, where the crew is not entitled to compensation separate from that of the
vessel

Salvor has an interest in the property; this is called a lien, but it is not a debt due by the owner to the salvor for services rendered but
upon the principle that the service creates a property in the thing saved --> he is, to all intents and purposes, a joint owner and if, the
property is lost he must bear his share like other joint owners.
Payment of compensation where vessel and cargo salvage : where a ship and its cargo are saved together, the salvage
allowance should be charged against the ship and cargo in the proportion of their respective values, as in the case of general average

Kinds of salvage service:

(1) voluntary - wherein the compensation is dependent upon success
(2) rendered under a contract for a pier diem or per horam wage, payable at all events
Where the compensation is dependent upon success, it may be very much larger than mere quantum meruit --> as a reward for
perilous services Such contracts for salvage will not be set aside unless corruptly entered into, or made under fraudulent
representations, a clear mistake or suppression of important facts, under compulsion or contrary to equity and good conscience

Reasons for allowing salvage compensation to salving vessel:

(1) to reward promptness, energy, efficiency, and heroic endeavor in saving life and property in peril;
(2) to compensate the use and service of the vessel as an indispensable instrument for the salvage;
(3) recognizes the danger and risk to which the crew and the vessel were exposed to in saving the ship and property and life.

The amount should be liberal enough to cover the expenses and to give an extra sum as a reward for the services rendered; should
be liberal enough to offer an inducement to others to render like services in similar emergencies in the future; BUT should not be so
high as to cause vessels in need of assistance to hesitate because of ruinous cost

"Public policy encourages the hardy and adventurous mariner to engage in these laborious and sometimes dangerous enterprises,
and with a view to withdraw from him every temptation to embezzlement and dishonesty, the law allows him, in case he is
successful, a liberal compensation."

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No other person has the right to interfere with the salvage of a vessel or cargo if the salvor is able to effect the salvage with fidelity
and vigor --> if their means are inadequate, they are bound to accept additional assistance if offered
Taking passengers from a sinking ship, without rendering any service in rescuing the vessel, is not a salvage service, being a duty
of humanity and not for reward --> the Salvage Act, giving salvors of human life a fair share or remuneration offered to salvors of the
vessel, refers to a situation where both lives and property were simultaneously imperiled and both are rescued at the same time

The owner of the salving vessel has always been considered as entitled to salvage reward for the use of his vessel in rendering
salvage services, though he was not present when the salvage service was rendered --> remuneration is awarded on account of the
danger to which the service exposes their property and the risk which they run of loss in suffering their vessels engaged in such
perilous undertaking.

E. Special Contracts of Maritime Commerce

1) Charter Parties
a) Definition
A charter party is a contract by virtue of which the owner or agent of a vessel binds himself to transport
merchandise or persons for a fixed price. It is a contract by which the owner or agent of the vessel leases for a certain
price the whole or a portion of the vessel for the transportation of goods or persons from one port to another.
Towage is not a charter party; instead it is a contract for the hire of services by virtue of which a vessel is engaged to
tow another vessel from one port to another for a consideration (AGBAYANI)
b) Kinds
• Charter Parties; Kinds—Under the demise or bareboat charter of the vessel, the charterer will generally be regarded
as the owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes
the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner
of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer,
anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a
charter party at all. On the other hand a contract of affreightment is one in which the owner of the vessel leases part
or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel
and under such contract the general owner retains the possession, command and navigation of the ship, the charterer
or freighter merely having use of the space in the vessel in return for his payment of the charter hire. An owner who
retains possession of the ship though the hold is the property of the charterer, remains liable as carrier and must
answer for any breach of duty as to the care, loading and unloading of the cargo. Although a charter party may
transform a common carrier into a private one, the same however is not true in a contract of affreightment on account
of the aforementioned distinctions between the two. (Coastwise Lighterage Corp v CA)
• PPI v CA, supra

AGBAYANI
Classes of charter party:
(1) as to extent of vessel hired
(a) total
(b) partial - the charterer does not as a rule acquire the right to fix the date when the vessel should depart, unless such right is
expressly granted in the contract
(2) as to time
(a) until a fixed day or for a determined number of days or month
(b) for a voyage
(3) as to freightage
(a) for a fixed amount for the whole cargo
(b) for a fixed rate per ton
(c) for so much per month

c) Forms and Effects

ARTICLE 652.A charter party must be drawn in duplicate and signed by the contracting parties, and when either
does not know how or is not able to do so, by two witnesses at his request. The charter party shall contain, besides
the conditions freely stipulated, the following circumstances:
1.The kind, name, and tonnage of the vessel.
2.Its flag and port of registry.
3.The name, surname, and domicile of the captain.
4.The name, surname, and domicile of the ship agent, if the latter should make the charter party.
5.The name, surname, and domicile of the charterer; and if he states that he is acting by commission, that of the
person for whose account he makes the contract.
6.The port of loading and unloading.
7.The capacity, number of tons or the weight or measurement which they respectively bind themselves to load and to
transport, or whether the charter party is total.
8.The freightage to be paid, stating whether it is to be a fixed amount for the voyage or so much per month, or for the
space to be occupied, or for the weight or measure of the goods of which the cargo consists, or in any other manner
whatsoever agreed upon.
9.The amount of primage to be paid to the captain.
10.The days agreed upon for loading and unloading.
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11.The lay days and extra lay days to be allowed and the demurrage to be paid for each of them.

ARTICLE 653.If the cargo should be received without the charter party having been signed, the contract shall be
understood as executed in accordance with what appears in the bill of lading, the sole evidence of title with regard to
the cargo for determining the rights and obligations of the ship agent, of the captain, and of the charterer.

ARTICLE 654.The charter parties executed with the intervention of a broker, who certifies to the authenticity of the
signatures of the contracting parties because they were signed in his presence, shall be full evidence in court; and if
they should be conflicting, that which accords with one which the broker must keep in his registry, if kept in
accordance with law, shall govern. The contracts shall also be admitted as evidence, even though a broker has not
taken part therein, if the contracting parties acknowledge the signatures to be the same as their own. If no broker has
intervened in the charter party and the signatures are not acknowledged, doubts shall be decided by what is
provided for in the bill of lading and in the absence thereof, by the proofs submitted by the parties.

ARTICLE 655.Charter parties executed by the captain in the absence of the ship agent shall be valid and effective,
even though in executing them he should have acted in violation of the orders and instructions of the ship agent or
shipowner; but the latter shall have a right of action against the captain for indemnification of damages.

ARTICLE 656.If in the charter party the time in which the loading and unloading are to take place is not stated, the
usages of the port where these acts take place shall be observed. After the stipulated or the customary period has
passed, and there is no express proviso in the charter party fixing the indemnity for the delay, the captain shall be
entitled to demand demurrage for the lay days and extra lay days which may have elapsed in loading and unloading.

ARTICLE 657.If during the voyage the vessel should be rendered unseaworthy, the captain shall be obliged to charter
at his expense another one in good condition to receive the cargo and carry it to its destination, for which purpose he
shall be obliged to look for a vessel not only at the port of arrival but also in the neighborhood within distance of 150
kilometers. If the captain, through indolence or malice, should not furnish a vessel to its destination, the shippers,
after requiring the captain to charter a vessel within an inextendible period, may charter one and petition the judicial
authority to summarily approve the charter party which they may have made. The same authority shall judicially
("por la via de appremio") compel the captain, to carry out, for his account and under his responsibility, the charter
made by the shippers. If the captain, notwithstanding his diligence, should not find a vessel for the charter, he shall
deposit the cargo at the disposal of the shippers, to whom he shall communicate the facts on the first opportunity
which presents itself, the freight being adjusted in such cases by the distance covered by the vessel, with no right to
any indemnification whatsoever.

AGBAYANI
If the cargo is received without a charter party, the B/L shall be considered the contract of the parties
Q: If there is no charter party and B/L, would there be a valid contract?
A: Taking Art. 653 literally, the answer is no. However, if we take into account the fact that delivery of the cargo does not
constitute the making of a contract but rather the partial performance thereof, the mere fact of delivery and receipt of such cargo,
the GF and mutual consent with which they have been made, should be a better substitute for the charter party than is the B/L
which is nothing more than the proof of such delivery.
Primage.-- Formerly, a small allowance or compensation payable to the master and marines of a ship; to the former for the use of his
cables and ropes to discharge the goods of the merchant; to the latter for lading and unlading in any port of haven. Primage, at present,
it is no longer a gratuity to the master, unless especially stipulated; but it belongs to owners or freighters and is nothing but an
increase of the freight rate.
Demurrage.-- Sum which is fixed by the contract of carriage, or which is allowed, as remuneration to the owner of a ship for the
detention of his vessel beyond the number of days allowed by the charter party for loading and unloading or for sailing; it is an
extended freight or reward to the vessel in compensation for the earnings she is improperly caused to lose
Lay days.-- Days allowed to charter parties for loading and unloading the cargo

Articles 659 to 664 : Some of the goods being transported may : (1) be sold by the captain to pay for necessary repairs; (2) be
jettisoned for the common safety; (3) be lost by reason of shipwreck or stranding; (4) be seized by pirates or enemies; (5) suffer
deteriorations or dimunitions; or (6) increase by natural cause in weight or size
** Goods that shall not pay freightage:
(1) Art. 660 - goods jettisoned for the common safety but the amount of freightage that should have been paid shall be considered as
a general average and shall be computed in proportion to the distance covered when they were jettisoned
(2) Art. 661 - merchandise lost by reason of shipwreck or stranding; if freight had been paid in advance, it shall be returned
(3) Art. 661 - goods seized by pirates or enemies; freight paid in advance shall be returned
** Goods required to pay freightage:
(1) Art. 659 - goods sold by the captain to pay for the necessary repairs to the hull, machinery or equipment or for unavoidable and
urgent needs --> but the freight may not be required to be paid in full
(2) Art. 663 - goods which suffer deterioration or diminution on account of (a) inherent defects or bad quality of packing, or of (b)
fortuitous event
(3) Art. 644 - goods that increase in size or weight by natural cause

d) Rights and Obligations of Shipowners

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ARTICLE 669.The shipowner or the captain shall observe in charter parties the capacity of the vessel or that expressly
designated in its registry, a difference greater than 2 per cent between that stated and her true capacity not being
permissible. If the shipowner or the captain should contract to carry a greater amount of cargo than the vessel can
carry in view of her tonnage, they shall indemnify the shippers whose contracts they do not fulfill for the losses they
may have caused when by reason of their default, according to the following cases, viz:
If the vessel has been chartered by one shipper only, and there should appear to be an error or fraud in her capacity,
and the charterer should not wish to rescind the contract, when he has a right to do so, the freightage shall he
reduced in proportion to the cargo which the vessel cannot receive, the person from whom the vessel is chartered
being furthermore obliged to indemnify the charterer for the losses he may have caused him.
If, on the contrary there should be several charter parties, and by reason of want of space all the cargo contracted for
cannot be loaded, and none of the charterers desires to rescind the contract, preference shall be given to the person
who has already loaded and arranged the freight in the vessel, and the rest shall take the places corresponding to
them in the order of the dates of their contracts. Should there be no priority, the charterers may load, if they wish, in
proportion to the amounts of weight or space for which each may have contracted, and the person from whom the
vessel was chartered shall he obliged to indemnify them for losses and damages.

ARTICLE 670.If the person from whom the vessel is chartered, after receiving a part of the freight, should not find
sufficient to make up at least three-fifths of the amount which the vessel may hold, at the price he may have fixed, he
may substitute for the transportation another vessel inspected and declared suitable for the same voyage, the
expenses of transfer and the increase in the price of the charter, should there be any, being for his account. Should he
not be able to make this change, he shall undertake the voyage at the time agreed upon; and should no time have
been fixed, within fifteen days from the time the loading began, unless otherwise stipulated. If the owner of the part
of the freight already loaded should procure some more at the same price and under similar or proportionate
conditions to those accepted for the freight received, the person from whom the vessel is chartered or the captain can
not refuse to accept the rest of the cargo; and should he do so, the shipper shall have a right to demand that the vessel
put to sea with the cargo which it may have on board.

ARTICLE 671.After three-fifths of the vessel has been loaded, the person from whom she is chartered may not,
without the consent of the charterers or shippers, substitute the vessel designated in the charter party by another one,
under the penalty of making himself thereby liable for all the losses and damages occurring during the voyage to the
cargo of those who did not consent to the change.

ARTICLE 672.If the vessel has been chartered in whole, the captain may not, without the consent of the charterer,
accept cargo from any other person; and should he do so, said charterer may oblige him to unload it and to
indemnify him for the losses suffered thereby.

ARTICLE 673.The person from whom the vessel is chartered shall he liable for all the losses caused to the charterer
by reason of the voluntary delay of the captain in putting to sea, according to the rules prescribed, provided he has
been requested, notarially or judicially, to put to sea at the proper time.

ARTICLE 674.If the charterer should carry to the vessel more cargo than that contracted for, the excess may be
admitted in accordance with the price stipulated in the contract, if it can be well stowed without injuring the other
shippers; but if in order to load it, the vessel would be thrown out of trim, the captain must refuse it or unload it at
the expense of its owner. In the same manner, the captain may, before leaving the port, unload merchandise
clandestinely placed on board, or transport them, if he can do so with the vessel in trim, demanding by way of
freightage the highest price which may have been stipulated for said voyage.

ARTICLE 675.If the vessel has been chartered to receive the cargo in another port, the captain shall appear before the
consignee designated in the charter party; and, should the latter not deliver the cargo to him, he shall inform the
charterer and wait his instructions, the lay days agreed upon or those allowed by custom in the port beginning to run
in the meantime, unless there is an express, agreement to the contrary. Should the captain not receive an answer
within the time necessary therefor, he shall make efforts to find freight; and should he not find any after the lay days
and extra lay days have elapsed, he shall make a protest and return to the port where the charter was made. The
charterer shall pay the freightage in full, discounting that which may have been earned on the merchandise which
may have been carried on the voyage out or on the return trip, if carried for the account of third persons. The same
shall be done if a vessel, having been chartered for the round trip, should not be given any cargo on its return.

ARTICLE 676.The captain shall lose the freightage and shall indemnify the charterers if the latter should prove, even
against the certificate of inspection, if one has been made at the port of departure, that the vessel was not in a
condition to navigate at the time of receiving the cargo.

ARTICLE 677.The charter party shall subsist if a declaration of war or a blockade should take place during the
voyage, the captain not having any instructions from the charterer. In such case the captain must proceed to the
nearest safe and neutral port, requesting and awaiting orders from the shipper, and the expenses and salaries paid
during the detention shall be paid as general average. If, by orders of the shipper, the cargo should be discharged at
the port of arrival, the freightage for the voyage out shall be paid in full.

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ARTICLE 678.If the time necessary, in the opinion of the judge or court, to receive the orders of the shipper should
have elapse, without the captain having received any instructions, the cargo shall be deposited, and it shall be liable
for the payment of the freightage and expenses on its account during the delay, which shall be paid from the
proceeds of the part first sold.

AGBAYANI
Obligations of shipowner:
1. Art. 669 - to observe in the charter parties, the capacity of the vessel, and to indemnify the shippers whose contracts are not
fulfilled for the losses they may have suffered by the failure of the shipowner to observe the capacity of the vessel
2. Art. 670 - to undertake a voyage at the time agreed upon or within 15 days from loading if no time is stipulated, even if the
shipowner should not find cargo sufficient to make up at least 3/5 of the amount which the vessel may hold, where he fails to
exercise his right to change vessel
3. Art. 670 - where the shipowner should not find cargo sufficient to make up at least 3/5 of the amount which the vessel may hold, to
accept other cargo procured by the owner of the freight already loaded under the same price and conditions
4. Art. 671- not to change the vessel after 3/5 of the vessel has been loaded, without the consent of the charterers or shippers
5. Art. 672 - if the vessel has been chartered in whole, not to accept cargo from any other person without the consent of the charterer
6. Art. 673 - to answer for losses arising from delay in putting to sea
7. Art. 676 - to have the vessel in a condition to navigate at the time of receiving the cargo
8. Art. 677 - in case of declaration of war or blockade during the voyage, where the captain has not received any instructions from the
charterer, for the captain to proceed to the nearest safe and neutral port, requesting and awaiting orders from the shippers
Rights of Shipowner:
1. Art. 670 - where the cargo is not sufficient to make up at least 3/5 of the amount which the vessel may hold, he may substitute
another vessel inspected and declared suitable for the voyage --> expenses of transfer and increase in price of the charter shall be
paid by him
2. Art. 674 - to collect the freight in accordance with the price stipulated for cargo in excess of that agreed upon is such excess can be
properly stowed 3. Art. 674 - to refuse and unload at the expense of the owner excess cargo that cannot be properly stowed
4. Art. 674 - to unload merchandise clandestinely placed on board, or to transport them if he can do so, demanding the highest
freightage
5. Art. 675- to find freight to take place of freight not received, if the vessel has been chartered to receive cargo in another port, after he
receives no cargo from the consignee and after he receives no answer from the charterer
6. Art. 675 - to receive freight in full, discounting that which may have been earned on the merchandise carried as substitute
7. Art. 677 - to have the charter party subsist notwithstanding the declaration of war or a blockade during the voyage, and to
receive in such cases, the freightage in full where the shipper orders that the cargo should be discharged at the port of arrival

e) Obligations of Charterers
ARTICLE 679.The charterer of an entire vessel may sub-charter the whole or part thereof on such terms as he may
consider most convenient, the captain not being allowed to refuse to receive on board the freight delivered by the
second charterers, provided that the conditions of the first charter are not change, and that the price agreed upon is
paid in full to the person from whom the vessel is chartered, even though the full cargo is not embarked, with the
limitation established in the next article.

ARTICLE 680.A charterer who does not complete the full cargo he bound himself to ship shall pay the freightage of
the amount he fails to ship, if the captain does not take other freight to complete the load of the vessel, in which case
the first charterer shall pay the difference, should there be any.

ARTICLE 681.If the charterer should load goods different from those stated at the time of executing the charter party,
without the knowledge of the person from whom the vessel was chartered or of the captain, and should thereby give
rise to losses, by reason of confiscation, embargo, detention, or other causes, to the person from whom the vessel was
chartered or to the shippers, the person giving rise thereto shall be liable with the value of his shipment and
furthermore with his property, for the full indemnity to all those injured through his fault.

ARTICLE 682.If the merchandise should have been shipped for the purpose of illicit commerce, and were taken on
board with the knowledge of the person from whom the vessel was chartered or of the captain, the latter, jointly with
the owner of the same, shall be liable for all the losses which may be caused the other shippers; and even though it
may have been stipulated, they cannot demand any indemnity whatsoever from the charterer for the damaged
caused to the vessel.

ARTICLE 683.In case of making a port to repair the hull, machinery, or equipment of the vessel, the shippers must
await until the vessel is repaired, being permitted to unload it at their own expense should they deem it proper. If, for
the benefit of the cargo subject to deterioration, the shippers or the court, or the consul, or the competent authority in
a foreign country, should order the merchandise to be unloaded, the expenses of unloading and reloading shall be for
the account of the former.

ARTICLE 684.If the charterer, without the occurrence of any of the cases of force majeure mentioned in the foregoing
article, should wish to unload his merchandise before arriving at the port of destination, he shall pay the full
freightage, the expenses of the arrival made at his request, and the losses and damages caused the other shippers,
should there be any.

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ARTICLE 685.In charters for transportation of general freight, any of the shippers may unload the merchandise
before the beginning of the voyage, paying one-half of the freightage, the expense of stowing and restowing the
cargo, and any other damage which for his reason he may cause the other shippers.

ARTICLE 686.After the vessel has been unloaded and the cargo placed at the disposal of the consignee, the latter
must immediately pay the captain the freightage due and the other expenses for which said cargo may be liable. The
primage must be paid in the same proportion and at the same time as the freightage, all the changes and
modifications to which the latter should be subject also governing the former.

ARTICLE 687.The charterers and shippers may not abandon merchandise damaged on account of inherent defect or
fortuitous event, for the payment of the freightage and other expenses. The abandonment shall be proper, however, if
the cargo should consist of liquids and they have leaked out, nothing remaining in the containers but one-fourth part
of their contents.
• Obligation of charterers—If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the
owner. The charterer is free from liability to third persons in respect of the ship. The charter of a vessel has no
obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements
(implied warranty of seaworthiness (COGSA S3(1)(a)): adequately equipped for voyage and manner with a
sufficient number of competent officers and crew; failure to do so is a breach of duty under NCC 1755; ratio:
business is impressed with a special public duty; the public must of necessity rely on the care and skill of
common carriers in the vigilance over goods and safety of the passengers.). The duty rests upon the common
carrier simply for being engaged in public service. (Caltex v Sulpicio)

AGBAYANI
Obligations of the charterer:
1. Art. 680 - to pay the freight in full even if the charterer does not complete the full cargo he bound himself to ship
2. Art. 681- to answer with the value of his shipment and other property for the losses suffered by the shipowner, captain or other
shippers arising from confiscation, embargo, detention, or other causes, where the charterer loads goods different from those stated
at the time of the execution of the charter party
3. Art. 682 - to be jointly liable with the captain for losses which may be caused to the other shippers where the charterer ships
goods for illicit commerce with the knowledge of the shipowner or captain
4. Art. 682 - in case of making a port to repair the hull, machinery or equipment of the vessel, to wait until the vessel is repaired or to
pay for the expenses of unloading should the charterer choose to unload
5. Art. 684 - where the charterer unloads goods before arriving at port of destination without any force majeure occurring, to pay (1)
expenses of arrival, (2) full freight and (3) for the damages and losses caused to other shippers, if any
6. Art. 685 - where the charterer unloads before the beginning of the voyage, (1) to pay 1/2 of the freight, (2) to pay for the expenses of
stowing and restowing the cargo, (3) to pay any other damage which he may have caused other shippers
7. Art. 686 - to pay for freight, other expenses and the primage after the vessel has been unloaded and the cargo placed at the disposal
of the consignee
8. Art. 687 - not to abandon merchandise damaged on account of inherent defect or fortuitous event, for the payment of the freight
and other expenses

f) Rescission
ARTICLE 688.A charter party may be rescinded at the request of the charterer:
1.If before loading the vessel he should not agree with that stated in the certificate of tonnage, or if there should be an
error in the statement of the flag under which she sails.
2.If the vessel should not be placed at the disposal of the charterer within the period and in the manner agreed upon.
3.If after the vessel has put to sea, she should return to the port of departure, on account of risk from pirates, enemies,
or bad weather, and the shippers should agree to unload her.
In the second and third cases the person from whom the vessel was chartered shall indemnify the charterer for the
voyage out.
4.If the charter should have been made by the months, the charterers shall pay the full freightage for one month, if
the voyage is for a port in the same waters, and for two months, if for a port indifferent waters. From one port to
another of the Philippines and adjacent islands, the freightage for one month only shall be paid.
5.If the vessel should make a port during the voyage in order to make urgent repairs, and the charterers should
prefer to dispose of the merchandise. When the delay does not exceed thirty days, the shippers shall pay the full
freightage for the voyage out. Should the delay exceed thirty days, they shall only pay the freightage in proportion to
the distance covered by the vessel.

ARTICLE 689.At the request of the person from whom the vessel is chartered the charter party may be rescinded:
1.If the charterer, at the termination of the extra lay days, does not place the cargo alongside the vessel. In such case
the charterer must pay half the freight stipulated, besides the demurrage due for the lay days and extra lay days.
2.If the person from whom the vessel was chartered should sell it before the charterer has begun to load it, and the
purchaser should load it for his own account. In such case the vendor shall indemnify the charterer for the losses he
may suffer. If the new owner of the vessel should not load it for his own account, the charter party shall be respected,
and the vendor shall indemnify the purchaser if the former did not inform him of the charter pending at the time of
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making the sale.

ARTICLE 690.The charter party shall be rescinded and all actions arising there from shall be extinguished, if, before
the vessel puts to sea from the port of departure, any of the following cases should occur:
1.A declaration of war or interdiction of commerce with the power to whose ports the vessel was to make its voyage.
2.A condition of blockade of the port of destination of said vessel, or the breaking out of an epidemic after the
contract was executed.
3.The prohibition to receive at the said port the merchandise constituting the cargo of the vessel.
4.An indefinite detention, by reason of an embargo of the vessel by order of the government, or for any other reason
independent of the will of the ship agent.
5.The inability of the vessel to navigate, without fault of the captain or ship agent. The unloading shall be made for
the account of the charterer.

ARTICLE 691.If the vessel cannot put to sea on account of the closing of the port of departure or any other temporary
cause, the charter shall remain in force, with neither one of the contracting parties having a right to claim damages.
The subsistence and wages of the crew shall be considered as general average. During the interruption, the charterer
may at the proper time and for his own account, unload and load the merchandise, paying demurrage if he delays
the reloading after the cause for the detention has ceased.

ARTICLE 692.A charter party shall be partially rescinded, unless there is an agreement to the contrary, and the
captain shall only be entitled to the freightage for the voyage out, if, by reason of a declaration of war, closing of
ports, or interdiction of commercial relations during the voyage, the vessel should make the port designated for such
a case in the instructions of the charterer.

2) Loans on Bottomry and Respondentia

a) Loan on Bottomry, defined - A contract in the nature of a mortgage, by which the owner of the ship borrows
money for the use, equipment and repair of the vessel and for a definite term, and pledges the ship (or the
keel or bottom of the ship) as a security for its repayment, with maritime or extraordinary interest on account of
the maritime risks to be borne by the lender, it being stipulated that if the ship be lost in the course of the specific
voyage or during the limited time, by any of the perils enumerated in the contract, the lender shall also lose his
money.
b) Loan on Respondentia, defined - One made on the goods laden on board the ship, and which are to be sold or
exchanged in the course of the voyage, the borrower's personal responsibility being deemed the principal
security for the performance of the contract, which is therefore called respondentia. The lender must be paid his
principal and interest, thought the ship perishes, provided that the goods are saved.
c) Character of Loan
ARTICLE 719.A loan in which under any condition whatever, the repayment of the sum loaned and of the premium
stipulated depends upon the safe arrival in port of the goods on which it is made, or of the price they may receive in
case of accident, shall be considered a loan on bottomry or respondentia.
Real, unilateral, aleatory contract:
1. delivery of the amount loaned is necessary for the perfection of the contract
2. although there are reciprocal benefits, the contract produces obligations only for one party, the borrower who
must return the amount borrowed plus premium
3. lender really runs known risks

Ordinary loan Loan on bottomry and respondentia

first lender has preference over subsequent lenders
must be paid absolutely at all events, WON thing given as
security is lost or destroyed
subject to Usury Law
last lender has preference over previous ones
loan is required to be paid only upon safe arrival of the thing
given as security at port of destination
no limit as to rate of interest in view of diff. classes and
various risks in a maritime voyage

Marine insurance vs Bottomry and Respondentia Loans: The borrower is in effect indemnified for his loss, at
least, to the extent of the loan --> in case of loss of the thing given as security, the borrower is under no
obligation to pay the loan

Marine insurance bottomry/respondentia loans

indemnity is paid after the loss has occurred
when marine peril occurs, the obligation of the insurer
becomes absolute
consensual contract * governed by Insurance Act
indemnity is paid in advance by way of loan
when marine peril causes the loss of the vessel
or cargo, the obligation of the borrower to pay is
extinguished
real contract --perfected from the moment of delivery of the
thing loaned

When loss does not extinguish loan: (Art. 731)

1. where the loss is caused by inherent defect of the thing
2. where the loss is caused by fault or malice of borrower
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3. where loss is caused by barratry on the part of the captain
4. where loss is caused by damage to the vessel as a consequence of its engaging in contraband
5. where loss arose from having loaded the merchandise on a vessel different from that designated in the
contract, except if change is due to force majeure

d) Forms and Requisites

ARTICLE 720.Loans on bottomry or respondentia may be executed:
1.By means of a public instrument.
2.By means of a policy signed by the contracting parties and the broker taking part therein.
3.By means of a private instrument.
Under whichever of these forms the contract is executed, it shall be entered in the certificate of the registry of the
vessel and shall be recorded in the registry of vessels, without which requisites the credits of this kind shall not have,
with regard to other credits, the preference which, according to their nature, they should have, although the
obligation shall be valid between the contracting parties. The contracts made during a voyage shall be governed by
the provisions of Articles 583 and 611, and shall be effective with regard to third persons from the date of their
execution, if they should be recorded in the registry of vessels of the port of registry of the vessel before the lapse of
eight days following its arrival. If said eight days should elapse without the record having been made in the
corresponding registry, the contracts made during the voyage of a vessel shall produce no effect with regard to third
persons, except from the day and date of their inscription. In order that the policy of the contracts executed in
accordance with No. 2 may have binding force, they must conform to the registry of the broker who took part
therein. With respect to those executed in accordance with No. 3 the acknowledgment of the signature shall be
required. Contracts which are not reduced to writing shall not give rise to judicial action.

ARTICLE 721.In a contract on bottomry or respondentia the following must be stated:

1.The kind, name, and registry of the vessel.
2.The name, surname, and domicile of the captain.
3.The names, surnames, and domiciles of the person giving and the person receiving the loan.
4.The amount of the loan and the premium stipulated. 5.The time for repayment.#6.The goods pledged to secure
repayment.#7.The voyage during which the risk is run.

ARTICLE 722.The contract may be made to order, in which case they shall be transferable by indorsement, and the
indorsee shall acquire all the rights and shall incur all the risks corresponding to the indorser.

Effect of registration:
1. the loan shall have, with regard to other credits, the preference which, according to its nature, it should have
(Art. 580 - 8th in the order of preference)
2. effective against third persons from the time of execution/registration

e) On What Constituted
ARTICLE 724.The loans may be constituted jointly or separately:
1.On the hull of the vessel.#
2.On the rigging.
#3.On the equipment, provisions, and fuel.
4.On the engine, if the vessel is a steamer.
5.On the merchandise loaded.
If the loan in constituted on the hull of the vessel, the rigging, equipment and other goods, provisions, fuel, steam
engines, and the freightage earned during the voyage on which the loan is made shall also be considered as included
in the liability for the loan.
If the loan is made on the cargo, all that which constitutes the same shall be subject to the repayment; and if on a
particular object of the vessel or of the cargo, only the object concretely and specifically mentioned shall be liable.

ARTICLE 725.No loans on bottomry may be made on the salaries of the crew or on the profits expected.

f) Amount
ARTICLE 723.Loans may be made in goods and in merchandise, fixing their value in order to determine the principal
of the loan.

ARTICLE 726.If the lender should prove that he loaned an amount larger than the value of the object liable for the
bottomry loan, on account of fraudulent measures employed by the borrower, the loan shall be valid only for the
amount at which said object is appraised by experts. The surplus principal shall be returned with legal interests for
the entire time required for repayment.

ARTICLE 727.If the full amount of the loan contracted in order to load the vessel should not be used for the cargo, the
balance shall be returned before clearing.
The same procedure shall be observed with regard to the goods taken as loan, if they were not loaded.

g) By Whom
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ARTICLE 728.The loan which the captain takes at the point of residence of the owners of the vessel shall only affect
that part thereof which belongs to the captain, if the other owners or their agents should not have given their express
authorization therefor or should not have taken part in the transaction. If one or more of the owners should be
requested to furnish the amount necessary to repair or provision the vessel, and they should not do so within twenty-
four hours, the interest which the parties in default may have in the vessel shall be liable for the loan in the proper
proportion. Outside of the residence of the owners the captain may contract loans in accordance with the provisions
of Articles 583 and 611.

ARTICLE 583.If while on a voyage the captain should find it necessary to contract one or more of the obligations
mentioned in subdivisions 8 and 9 of Article 580, he shall apply to the judge or court if he is in Philippine territory,
and otherwise to the consul of the Republic of the Philippines, should there be one, and, in his absence, to the judge
or court or proper local authority, presenting the certificate of the registration sheet treated of in Article 612 and the
instruments proving the obligation contracted. The judge or court, the consul, or the local authority, as the case may
be, in view of the result of the proceedings instituted, shall make a temporary memorandum of their result in the
certificate, in order that it may be recorded in the registry when the vessel returns to the port of its registry, or so that
it can be admitted as a legal and preferred obligation in case of sale before its return, by reason of the sale of the
vessel on account of a declaration of unseaworthiness .The omission of this formality shall make the captain
personally liable for the credits prejudiced on his account.

ARTICLE 611.In order to comply with the obligations mentioned in the preceding article, the captain, when he has no
funds and does not expect to receive any from the ship agent, shall obtain the same in the successive order stated
below:
1.By requesting said funds from the consignee of the vessel or correspondents of the ship agent.
2.By applying to the consignees of the cargo or to those interested therein.
3.By drawing on the ship agent.
4.By borrowing the amount required by means of a loan on bottomry.
5.By selling a sufficient amount of the cargo to cover the sum absolutely indispensable for the repair of the vessel and
to enable it to continue its voyage.
In these two last cases he must apply to the judicial authority of the port, if in the Philippines, and to the consul of the
Republic of the Philippines if in a foreign country,
and where there is none, to the local authority, proceeding in accordance with the provisions of Article 583, and with
the provisions of the law of civil procedure.

ARTICLE 617.The captain may not contract loans on respondentia secured by the cargo; and should he do so, the
contracts shall be void. Neither may he borrow money on bottomry for his own transactions, except on the portion of
the vessel he owns, provided no money has been previously borrowed on the whole vessel, and there does not exist
any other kind of lien or obligation chargeable against the vessel. If he may do so, he must state what interest he has
in the vessel. In case of violation of this article, the principal, interest, and costs shall be for the personal account of
the captain, and the ship agent may furthermore discharge him.

h) Effects of Contract
ARTICLE 719.A loan in which under any condition whatever, the repayment of the sum loaned and of the premium
stipulated depends upon the safe arrival in port of the goods on which it is made, or of the price they may receive in
case of accident, shall be considered a loan on bottomry or respondentia.

ARTICLE 726.If the lender should prove that he loaned an amount larger than the value of the object liable for the
bottomry loan, on account of fraudulent measures employed by the borrower, the loan shall be valid only for the
amount at which said object is appraised by experts. The surplus principal shall be returned with legal interests for
the entire time required for repayment.

ARTICLE 727.If the full amount of the loan contracted in order to load the vessel should not be used for the cargo, the
balance shall be returned before clearing.
The same procedure shall be observed with regard to the goods taken as loan, if they were not loaded.

ARTICLE 729.Should the goods on which money is taken not be subjected to risk, the contract shall be considered a
simple loan, with the obligation on the part of the borrower to return the principal and interest at the legal rate, if that
agreed upon should not be lower.

ARTICLE 730.Loans made during the voyage shall have preference over those made before the clearing of the vessel,
and they shall be graduated in the inverse order of their dates. The loans for the last voyage shall have preference
over prior ones. Should several loans have been made at the same port of arrival under stress and for the same
purpose, all of them shall be paid pro rata.

F. Bill of Lading
B/L operates both as a receipt and as a contract; it is a receipt for the goods shipped and a contract to transport and
deliver the same as stipulated

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A stipulation that a CC's liability is limited to the value of the goods appearing in the B/L, unless the owner declares a greater
value, is valid and binding
Bill of Lading vs Charter party
1. Charter party - entire or complete contract
B/L - private receipt which the captain gives to accredit that such goods belong to such persons
2. Charter party - consensual party, which can be dissolved by means of indemnity for losses and damages
B/L - real contract; exists only after delivery of the goods to be transported is made

1) Contents
ARTICLE 706.The captain of the vessel and the shipper shall have the obligation of drawing upthe bill of lading in
which shall be stated:
1.The name, registry, and tonnage of the vessel. 2.The name of the captain and his domicile. 3.The port of loading and
that of unloading. 4.The name of the shipper.
5.The name of the consignee, if the bill of lading is issued in the name of a specified person.
6.The quantity, quality, number of packages and marks of the merchandise.
7.The freightage and the primage stipulated. The bill of lading may be issued to bearer, to order, or in the name of a
specified person, and must be signed within twenty-four hours after the cargo has been received on board, the shipper
being entitled to demand the unloading at the expense of the captain should the latter not sign it, and, in every case, the
losses and damages suffered thereby.

ARTICLE 707.Four true copies of the original bill of lading shall be made, and all of them shall be signed by the captain
and the shipper. Of these, the shipper shall keep one and send another to the consignee; the captain shall take two, one
for himself and another for the ship agent. There may also be drawn up as many copies of the bill of lading as may be
considered necessary by the person interested; but when they are issued to order or to bearer, they shall be stated in all
the copies, be they the first four or the subsequent ones, the destination of each one, stating whether it is for the agent,
for the captain, for the shipper, or for the consignee. If the copy sent to the latter should have a duplicate, this
circumstance and the fact that it is not valid except in default of the first one must be stated therein.

ARTICLE 713.If before the delivery of the cargo a new bill of lading should be demanded of the captain, on the
allegation that the failure to present the previous ones is due to their loss or to any other just cause, he shall be obliged
to issue it, provided that security for the value of the cargo is given to his satisfaction, but without changing the
consignment, and stating therein the circumstances prescribed in the last paragraph of Article 707, under penalty,
should he not so state, of being held liable for said cargo if improperly delivered through his fault.

ARTICLE 714.If before the vessel puts to sea the captain should die or should cease to hold his position through any
cause, the shippers shall have the right to demand of the new captain the ratification of the first bills of lading, and the
latter must do so, provided that all the copies previously issued be presented or returned to him, and it should appear
from all examination of the cargo that they are correct. The expenses arising from the examination of the cargo shall be
defrayed by the ship agent, without prejudice to the right of action of the latter against the first captain if he ceased to be
such through his own fault. Should said examination not be made, it shall be understood that the new captain accepts
the cargo as it appears from the bills of lading issued.

2) Probative Value
ARTICLE 709.A bill of lading drawn up in accordance with the provisions of this title shall be proof as between all
those interested in the cargo and between the latter and the insurers, proof to the contrary being reserved for the
latter.

ARTICLE 710.If the bills of lading do not agree, and no change or erasure can be observed in any of them, those
possessed by the shipper or consignee signed by the captain shall be proof against the captain or ship agent in favor
of the consignee or shipper; and those possessed by the captain or ship agent signed by the shipper shall be proof
against the shipper or consignee in favor of the captain or ship agent.

B/L - proof of the agreement between the parties

Issuance of B/L is merely prima facie evidence of the receipt of the merchandise by the carrier or his agent; not conclusive
evidence
Defective and irregular B/L may be cured by other complementary documents

G. Passenger on Sea Voyage

1) Nature of Contracts
ARTICLE 695.The right to passage, if issued to a specified person, may not be transferred without the consent of the
captain or of the consignee.

2) Obligations of Passengers
ARTICLE 693.If the passage price has not been agreed upon, the judge or court shall summarily fix it, after a
declaration of experts.

ARTICLE 699.If the contract is rescinded, before or after the commencement of the voyage, the captain shall have a
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right to claim payment of what he may have furnished the passengers.

ARTICLE 704.The captain, in order to collect the passage-money and expenses of sustenance, may retain the goods
belonging to the passenger, and in case of the sale of the same he shall be given preference over other creditors acting
the same way as in the collection of freightage.

ARTICLE 694.Should the passenger not arrive on board at the time fixed, or should leave the vessel without
permission from the captain when the latter is ready to leave the port, the captain may continue the voyage and
demand the full passage price.

ARTICLE 700.In all matters pertaining to the preservation of order and discipline on board the vessel passengers
shall be subject to the orders of the captain, without any distinction whatsoever.

3) Rights of Passengers
ARTICLE 697.If before the voyage is begun it is suspended through the exclusive fault of the captain or ship agent,
the passengers shall have the right to a refund of their fares and to recover losses and damages; but if the suspension
is due to fortuitous events, or to force majeure, or to any other cause independent of the captain or ship agent, the
passengers shall only be entitled to the return of the fare.

ARTICLE 698.In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare
in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to
fortuitous event or to force majeure, but with a right to indemnity if the interruption should have been caused by the
captain exclusively. If the interruption should be caused by the disability of the vessel, and a passenger should agree
to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the
stay shall be for his own account. In case of delay in the departure of the vessel, the passengers have the right to
remain on board and to be furnished with food for the account of the vessel unless the delay is due to fortuitous
events or to force majeure. If the delay should exceed ten days, passengers requesting the same shall be entitled to the
return of the fare; and if it is due exclusively to the fault of the captain or ship agent, they may also demand
indemnity for losses and damages. A vessel exclusively devoted to the transportation of passengers must take them
directly to the port or ports of destination, no matter what the number of passengers may be, making all the stops
indicated in its itinerary.
• ART 698; construction—Article 698 must then be read together with Articles 2199, 2200, 2201, and 2208 in
relation to Article 21 of the Civil Code. So read, it means that the petitioner is liable for any pecuniary loss or loss
of profits which the private respondent may have suffered by reason thereof. For the private respondent, such
would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not for
the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its
voyage; but he did not. Any further delay then in the private respondent's arrival at the port of destination was
caused by his decision to disembark. Thus, failed to prove actual and compensatory damages. However, it is
liable for moral damages by asserting that private respondent mas merely over-reacting because safety or the
vessel and passengers was never at stake because the sea was "calm" in the vicinity where it stopped as faithfully
recorded in the vessel's log book. Such a claim demonstrates beyond cavil the petitioner's lack of genuine
concern for the safety of its passengers. It was, perhaps, only providential then the sea happened to be calm.
Even so, the petitioner should not expect its passengers to act in the manner it desired. The passengers were not
stoics. (Trans-Asia Shipping v CA)
• Example—Private respondents' complaint is directed not at the delayed departure the next day but at the by-
passing of Catbalogan, their destination. Had petitioner notified them previously, and offered to bring them to
their destination at its expense, or refunded the value of the tickets purchased, perhaps, this controversy would
not have arisen. The voyage to Catbalogan was "interrupted" by the captain upon instruction of management (to
enable the vessel to catch up with its schedule for the next week. The record also discloses that there were 50
passengers for Tacloban compared to 20 passengers for Catbalogan, so that the Catbalogan phase could be
scrapped without too much loss for the company. The "interruption" was not due to fortuitous event or for
majeure nor to disability of the vessel. Having been caused by the captain upon instruction of management, the
passengers' right to indemnity is evident. The owner of a vessel and the ship agent shall be civilly liable for the
acts of the captain (Sweet Lines v CA)

4) Responsibilities of Captain
ARTICLE 701.The convenience or the interest of the passengers shall not obligate or empowers the captain to stand in
shore or enter places which may take the vessel out of her course, or to remain in the ports he must or in under necessity
of touching for a period longer than that required by the needs of navigation.

ARTICLE 702.In the absence of an agreement to the contrary, it shall be understood that the subsistence of the
passengers during the voyage is included in the price of the passage; but should it be for the account of the latter, the
captain shall be under obligation, in case of necessity, to furnish the supply of food necessary for their sustenance at a
reasonable price.

ARTICLE 705.In case of the death of a passenger during the voyage, the captain shall be authorized, with regard to the
body, to take the steps required by the circumstances, and shall carefully take care of the papers and goods which may
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be on board belonging to the passenger, observing the provisions of case No. 10 of Article 612 with regard to members
of the crew.

ARTICLE 612 (SUPRA)— Obligations inherent in the office of captain

ARTICLE 703.A passenger shall be considered a shipper insofar as the goods he carries on board are concerned, and the
captain shall not be responsible for what the former may keep under his immediate and special custody, unless the
damage arises from an act of the captain or of the crew.

NCC 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage which is not in his personal
custody or in that of his employee. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable. #

H. Carriage of Goods by Sea Act

COMMONWEALTH ACT No. 65
IN ACT TO DECLARE THAT PUBLIC ACT NUMBERED FIVE HUNDRED AND TWENTY-ONE, KNOWN AS
"CARRIAGE OF GOODS BY SEA ACT," ENACTED BY THE SEVENTY-FOURTH CONGRESS OF THE UNITED STATES,
BE ACCEPTED, AS IT IS HEREBY ACCEPTED BY THE NATIONAL ASSEMBLY
WHEREAS, the Seventy-fourth Congress of the United States enacted Public Act Numbered Five hundred and twenty-one,
entitled:
"Carriage of Goods by Sea Act";
WHEREAS, the primordial purpose of the said Acts is to bring about uniformity in ocean bills of lading and to give effect to
the Brussels Treaty, signed by the United States with other powers;
WHEREAS, the Government of the United States has left it to the Philippine Government to decide whether or not the said
Act shall apply to carriage of goods by sea in foreign trade to and from Philippine ports;
WHEREAS, the said Act of Congress contains advanced legislation, which is in consonance with modern maritime rules and
the practices of the great shipping countries of the world;
WHEREAS, shipping companies, shippers, and marine insurance companies, and various chambers of commerce, which are
directly affected by such legislation, have expressed their desire that said Congressional Act be made applicable and
extended to the Philippines; therefore,
Be it enacted by the National Assembly of the Philippines:!
Section 1. That the provisions of Public Act Numbered Five hundred
and twenty-one of the Seventy-fourth Congress of the United States, approved on April sixteenth, nineteen hundred and
thirty-six, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade: Provided, That nothing in the Act shall be construed as repealing any existing
provision of the Code of Commerce which is now in force, or as limiting its application.
Section 2. This Act shall take effect upon its approval. Approved: October 22,1936.
An Act Relating to the Carriage of Goods by Sea.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That every bill of
landing or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the
United States, in foreign trade, shall have effect subject to the provisions of the Act.
TITLE I
Section 1. When used in this Act —
(a) The term "carrier" includes the owner or the charterer who enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to contracts of carriage covered by a bill of lading or any similar document of
title, insofar as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as
aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of
title regulates the relations between a carrier and a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and articles of every kind whatsoever, except live animals and
cargo which by the contract of carriage is stated as being carried on deck and is so carried.
(d) The term "ship" means any vessel used for the carriage of goods by sea.
(e) The term "carriage of goods" covers the period from the time when the goods are loaded on to the time when they are
discharged from the ship.
RISKS
Section 2. Subject to the provisions of section 6, under every contract of carriage of goods by sea, the carrier in relation to the
loading handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities hereinafter set forth.
RESPONSIBILITIES AND LIABILITIES
!Section 3. (1) The carrier shall be bound, before and at the beginning
of the voyage, to exercise due diligence to — (a) Make the ship seaworthy;#(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe
for their reception carriage and preservation.
(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on demand of the shipper,
issue to the shipper a bill of lading showing among other things —
(a) The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the
loading of such goods starts, provided such marks are stamped or otherwise
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shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a
manner as should ordinarily remain legible until the end of the voyage.
(b) Either the number of packages or pieces, or the quantity or weight, as the case may be, as furnished in writing by the
shipper.
(c) The apparent order and condition of the goods: Provided, That no carrier, master, or agent of the carrier, shall be bound
to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting
not accurately to represent the goods actually received, or which he has had no reasonable means of checking.
(4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in
accordance with paragraphs (3) (a), (b), and (c) of this section: Provided, That nothing in this Act shall be construed as
repealing or limiting the application of any part of the Act, as amended, entitled "An Act relating to bills of lading in
interstate and foreign commerce," approved August 29, 1916 (U. S. C. title 49, secs. 81-124), commonly known as the
"Pomerene Bills of Lading Act."
(5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number,
quantity, and weight, as furnished by him; and the shipper shall indemnify the carrier against all loss damages, and
expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way
limit his responsibility and liability under the contract of carriage or to any person other than the shipper.
(6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his
agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of
the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days
of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey
or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought
within one year after delivery of the goods or the date when the goods should have been delivered: Provided, That if a
notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or
prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods
should have been delivered
In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all reasonable facilities to each
other for inspecting and tallying the goods.
(7) After the goods are loaded the bill of lading to be issued by the carrier, master, or agent of the carrier to the shipper shall,
if the shipper so demands, be a "shipped" bill of lading Provided, That if the shipper shall have previously taken up any
document of title to such goods, he shall surrender the same as against the issue of the "shipped" bill of lading, but at the
option of the carrier such document of title may be noted at the port of shipment by the carrier, master, or agent with name
or name the names of the ship or ships upon which the goods have been shipped and the date or dates of shipment, and
when so noted the same shall for the purpose of this section be deemed to constitute a "shipped" bill of lading.
(8) 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, arising from negligence, fault, or failure in the duties and obligations provided
in this section, or lessening such liability otherwise than as provided in this Act, shall be null and void and of no effect. A
benefit of insurance in favor of the carrier, or similar clause, shall be deemed to be a clause relieving the carrier from liability.
RIGHTS AND IMMUNITIES
Section 4. (1) Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness
unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is
properly manned, equipped, and supplied, and to make to the holds, refrigerating and cool chambers, and all other parts of
the ship in which goods are carried fit and safe for their reception, carriage, and preservation in accordance with the
provisions of paragraph (1) of section 3. Whenever loss or damage has resulted from unseaworthiness, the burden of
proving the exercise of due diligence shall be on the carrier or other persons claiming exemption under the section.
(2) Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from —
(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management
of the ship;
(b) Fire, unless caused by the actual fault or privity of the carrier;
(c) Perils, dangers, and accidents of the sea or other navigable waters;
(d) Act of God;
(e) Act of war,
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or seizure under legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the goods, his agent or representative;
(j) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general; Provided, That
nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier's own acts;
(k) Riots and civil commotions#(l) Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods;
(n) Insufficiency of packing;#(o) Insufficiency of inadequacy of marks;#(p) Latent defects not discoverable by due diligence;
and
(q) Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or
servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that

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neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to
the loss or damage.
(3) The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising from any cause
without the act, fault, or neglect of the shipper, his agents, or servants.
(4) Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to
be an infringement or breach of this Act or of the contract of carriage, and the carrier shall not be liable for any loss or
damage resulting therefrom: Provided, however, That if the deviation is for the purpose of loading cargo or unloading cargo
or passengers it shall, prima facie, be regarded as unreasonable.
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $600 per package lawful money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value
of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In
no event shall the carrier be liable for more than the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the
transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in
the bill of lading.
(6) Goods of an inflammable, explosive, or dangerous nature to the shipment whereof the carrier, master or agent of the
carrier, has not consented with knowledge of their nature and character, may at any time before discharge be landed at any
place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable
for all damages and expenses directly or indirectly arising out of or resulting from such shipment. If any such goods shipped
with such knowledge and consent shall become a danger to the ship or cargo, they may in like manner be landed at any
place, or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to general average,
if any.
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF RESPONSIBILITIES AND LIABILITIES
Section 5. A carrier shall be at liberty to surrender in whole or in part all or any of his rights and immunities or to increase
any of his responsibilities and liabilities under this Act, provided such surrender or increase shall be embodied in the bill of
lading issued to the shipper.
The provisions of this Act shall not be applicable to charter parties; but if bills of lading are issued in the case of a ship under
charter party, they shall comply with the terms of this Act. Nothing in this Act shall be held to prevent the insertion in a bill
of lading of any lawful provision regarding general average.
SPECIAL CONDITIONS
Section 6. Notwithstanding the provisions of the preceding sections, a carrier, master or agent of the carrier, and a shipper
shall, in regard to any particular goods be at liberty to enter into any agreement in any terms as to the responsibility and
liability of the carrier for such goods, and as to the rights and immunities of the carrier in respect of such goods, or his
obligation as to seaworthiness (so far as the stipulation regarding seaworthiness is not contrary to public policy), or the care
or diligence of his servants or agents in regard to the loading, handling stowage, carriage, custody, care, and discharge of the
goods carried by sea: Provided, That in this case no bill of lading has been or shall be issued and that the terms agreed shall
be embodied in a receipt which shall be a non-negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal effect: Provided, That this section shall not apply to ordinary commercial
shipments made in the ordinary course of trade but only to other shipments where the character or condition of the property
to be carried or the circumstances, terms, and conditions under which the carriage is to be performed are such as reasonably
to justify a special agreement.
Section 7. Nothing contained in this Act shall prevent a carrier or a shipper from entering into any agreement, stipulation,
condition, reservation, or exemption as to the responsibility and liability of the carrier or the ship for the loss or damage to or
in connection with the custody and care and handling of goods prior to the loading on and subsequent to the discharge from
the ship on which the goods are carried by sea.
Section 8. The provisions of this Act shall not affect the rights and obligations of the carrier under the provisions of the
Shipping Act, 1916, or under the provisions of section 4281 to 4289, inclusive, of the
Revised Statutes of the United States, or of any amendments thereto; or under the provisions of any other enactment for the
time being in force relating to the limitation of the liability of the owners of seagoing vessels.
TITLE II
Section 9. Nothing contained in this Act shall be construed as permitting a common carrier by water to discriminate between
competing shippers similarly place in time and circumstances, either (a) with respect to the right to demand and receive bills
of lading subject to the provisions of this Act; or (b) when issuing such bills of lading, either in the surrender of any of the
carrier's rights and immunities or in the increase of any of the carrier's responsibilities and liabilities pursuant to section 6,
title I, of this Act or (c) in any other way prohibited by the Shipping Act, 1916, s amended.
Section 10. Section 25 of the Interstate Commerce Act is hereby amended by adding the following proviso at the end of
paragraph 4 thereof: "Provided, however, That insofar as any bill of lading authorized hereunder relates to the carriage of
goods by sea, such bill of lading shall be subject to the provisions of the Carriage of Goods by Sea Act."
Section 11. Where under the customs of any trade the weight of any bulk cargo inserted in the bill of lading is a weight
ascertained or accepted by a third party other than the carrier or the shipper, and the fact that the weight is so ascertained or
accepted is stated in the bill of lading, then, notwithstanding any thing in this Act, the bill of lading shall not be deemed to
be prima facie evidence against the carrier of the receipt of goods of the weight so inserted in the bill of lading, and the
accuracy thereof at the time of shipment shall not be deemed to have been guaranteed by the shipper.
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Section 12. Nothing in this Act shall be construed as superseding any part of the Act entitled "An act relating to navigation
of vessels, bills of lading, and to certain obligations, duties, and rights in connection with the carriage of property," approved
February 13,1893, or of any other law which would be applicable in the absence of this Act, insofar as they relate to the
duties, responsibilities, and liabilities of
the ship or carrier prior to the time when the goods are loaded on or after the time they are discharged from the ship.
Section 13. This Act shall apply to all contracts for carriage of goods by sea to or from ports of the United States in foreign
trade. As used in this Act the term "United States" includes its districts, territories, and possessions: Provided, however, That
the Philippine legislature may by law exclude its application to transportation to or from ports of the Philippine Islands. The
term "foreign trade" means the transportation of goods between the ports of the United States and ports of foreign countries.
Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between any port of the United States or
its possessions, and any other port of the United States or its possession: Provided, however, That any bill of lading or similar
document of title which is evidence of a contract for the carriage of goods by sea between such ports, containing an express
statement that it shall be subject to the provisions of this Act, shall be subjected hereto as fully as if subject hereto as fully as
if subject hereto by the express provisions of this Act: Provided, further, That every bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea from ports of the United States, in foreign trade, shall contain
a statement that it shall have effect subject to the provisions of this Act.
Section 14. Upon the certification of the Secretary of Commerce that the foreign commerce of the United States in its
competition with that of foreign nations is prejudiced the provisions, or any of them, of Title I of this Act, or by the laws of
any foreign country or countries relating to the carriage of goods by sea, the President of the United States, may, from time
to time, by proclamation, suspend any or all provisions of Title I of this Act for such periods of time or indefinitely as may be
designated in the proclamation. The President may at any time rescind such suspension of Title I hereof, and any provisions
thereof which may have been suspended shall thereby be reinstated and again apply to contracts thereafter made for the
carriage of goods by sea. Any proclamation of suspension or rescission of any such suspension shall take effect on a date
named therein, which date shall be not less than ten days from the issue of the proclamation.
Any contract for the carriage of goods by sea, subject to the provisions of this Act, effective during any period when title I
hereof, or any part thereof, is suspended, shall be subject to all provisions of law now or hereafter applicable to that part of
Title I which may have thus been suspended.
Section 15. This Act shall take effect ninety days after the date of its approval; but nothing in this Act shall apply during a
period not to exceed one year following its approval to any contract for the carriage of goods by sea, made before the date on
which this Act is approved, nor to any bill of lading or similar document of title issued, whether before or after such date of
approval in pursuance of any such contract as aforesaid.
Section 16. This Act may be cited as the "Carriage of Goods by Sea Act."
Approved, April 16, 1936.

• Sec 3(6) par.4; loss as non-delivery, not misdelivery—As defined in the Civil Code and as applied to Section 3 (6) paragraph 4
of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper
of the goods because the same had perished, gone out of commerce, or disappeared that their existence is unknown or they
cannot be recovered. It does not include a situation where there was indeed delivery — but delivery to the wrong person, or a
misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered. According
to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a duty not to deliver
the merchandise mentioned in the bill of lading except upon presentation of the bill of lading duly endorsed by the shipper.
• Sec 3(6) par. 4; one-year limitation—one-year period of limitation is designed to meet the exigencies of maritime hazards. In a
case where the goods shipped were neither last nor damaged in transit but were, on the contrary, delivered in port to someone
who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of
loss or damage caused by maritime perils does not obtain. (Ang v American Steamship)
o Renewal of period from dismissal of the case: (FH Stevens v Nordeutscher)
! NCC 1155. The prescription of actions is interrupted when they filed before the court, when there is a
written extrajudicial command by the creditors, and when there is any written acknowledged judgment of
the debt by the debtor.
! Act No. 190 section 49—If, in an action commenced, in due time, a judgment for the plaintiff be reversed, or
if the plaintiff fail otherwise than upon the merits, and the time limited for the commencement of such
action has, at the date of such reversal or failure, expired, the plaintiff, or, if he die and the cause of action
survive, his representatives may commence a new action within one year after such date, and this provision
shall apply to any claim asserted in any pleading by a defendant.
! Example—The action commenced by the plaintiff in the Municipal Court of Manila, on April 27, 1960, was
dismissed June 13, 1960, or over twenty (20) days after the expiration of the period of one (1) year, beginning
from May 21, 1959, within which plaintiff's action could be brought pursuant to Commonwealth Act No. 65,
in relation to the Carriage of Goods by Sea Act. Under said section of Act No. 190, the period within which
plaintiff could initiate the present case was renewed, therefore, for another year, beginning from June 14,
1960 (Tolentino Vitug, 39 Phil., 126; Smith vs. McNeal, 100 U.S. 426, 27 L. ed. 986). The case at bar was
commenced on June 24, 1960, or within the period last mentioned.
CLASS DISCUSSION:
• What transactions are subject to COGSA? contracts of carriage of goods by sea to and from PH ports in foreign trade (COGSA
S1)
• All carriage/transport of goods subject to carriage? No. only foreign trade (COGSA S13)
• Is COGSA the applicable law? No.

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• Foreign port to the PH? priority of these laws?
• When shall you notify? depends if apparent (upon receipt) or not apparent (upon delivery)
• From when is the one-year period counted?
• What can common carrier invoke to cut his losses? stipulation on limitation of liability- COGSA: max=$500/package
• What if Bill of Lading is silent, can common carrier avail of this limitation? the law will apply even if there's no stipulation
• ANG-- Misdelivery not covered by COGSA. NCC applies; 10y written contract or 4y if QD
• FH STEVENS-not tolled, it is stopped bec filing of new action so in effect, you refreshed it.

Notes: In relation to Civil Code :

Art. 1753 - governed by law of place of destination, if shipped to a foreign country, governed by law of foreign country
Art. 1766 - goods from foreign country shipped to the Philippines, governed by the Civil Code
COGSA - applicable to all transportation of goods by sea in foreign trade to and from Philippine ports
- does not apply to purely domestic transport
- Laws applicable to a contract for the carriage of goods by sea:
1. Distinguish - common carrier (Civil Code)
- private carrier
2. Where is the vessel going?
a. Common carrier coming to the Phils. = what law applies?
1st: Civil Code
2nd: COGSA (it's more specific than Code of Commerce)
- in foreign trade
3rd: Code of Commerce
b. Private carrier coming to the Phils. in foreign trade
1st: COGSA (because it's more specific)
2nd: Code of Commerce
3rd: Civil Code (provisions not on common carriers e.g. torts, contracts)
c. From the Phils. to a foreign country: apply laws of such foreign country (Art. 1753)
- with respect to vessels destined for foreign ports, the COGSA doesn't apply unless parties make it
applicable.
Q: In what situations does COGSA primarily apply?
A: Where the parties expressly stipulate that COGSA shall govern their respective rights and obligations.
Q: Can the COGSA apply in domestic shipping?
A: Generally, NO.
EXCEPTION: when parties agree to make it apply.
Q: What application does COGSA have in carriage of passengers?
A: None. Applies only to carriage of goods.

IV. International Air Transport

A. Constitutionality
CASES:
• Warsaw Convention; History—The Republic of the Philippines is a party to the Convention for the Unification of Certain
Rules Relating to International Transportation by Air, otherwise known as theWarsaw Convention. It took effect on February
13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine
instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish
government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September
23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that
the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines
and the citizens thereof." The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and,
as such, has the force and effect of law in this country. (Santos v Northwest)
• Constitutional case; requisites—1)there must be an actual case or controversy involving a conflict of legal rights susceptible of
judicial determination; 2) the constitutional question must have been opportunely raised by the proper party; and 3) the
resolution of the question is unavoidably necessary to the decision of the case itself. (Santos v Northwest)
o Example; existence of other grounds to resolve the case—The petitioner's allegations are not convincing enough to
overcome this presumption. Apparently, the Convention considered the four places designated in Article 28 the most
convenient forums for the litigation of any claim that may arise between the airline and its passenger, as
distinguished from all other places. At any rate, we agree with the respondent court that this case can be decided on
other grounds without the necessity of resolving the constitutional issue. (Santos v Northwest)
• Constitutional case; presumption of constitutionality—Courts generally avoid having to decide a constitutional question. This
attitude is based on the doctrine of separation of powers, which enjoins upon the departments of the government a becoming
respect for each other's acts. The treaty which is the subject matter of this petition was a joint legislative-executive act. The
presumption is that it was first carefully studied and determined to be constitutional before it was adopted and given the force
of law in this country. (Santos v Northwest)

B. When applicable
ART 1

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1. This Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward.
It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking.
2. For the purposes of this Convention the expression “international carriage” means any carriage in which,
according to the agreement between the parties, the place of departure and the place of destination, whether or not
there be a break in the carriage or#a transshipment, are situated either within the territories of two High Contracting
Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place within the
territory of another State, even if the State is not a High Contracting party. Carriage between two points within the
territory of a single High Contracting Party without an agreed stopping place within the territory of another State is
not international carriage for the purposes of this Convention.
CASES:

• Warsaw Convention; Scope—applies to all international transportation of persons performed by aircraft for hire. (Santos v
Northwest)
o International Transportation—Whether the transportation is "international" is determined by the contract of the
parties, which in the case of passengers is the ticket. When the contract of carriage provides for the transportation of
the passenger between certain designated terminals "within the territories of two High Contracting Parties," the
provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and
its passenger. (Santos v Northwest)
• Warsaw Convention; does not preclude other laws—We ruled that the Warsaw Convention was a treaty commitment
voluntarily assumed by the Philippine government; consequently, it has the force and effect of law in this country. But, in the
same token, We are also aware of jurisprudence that the Warsaw Convention does not operate as an exclusive enumeration of
the instances for declaring an airline liable for breach of contract of carriage or as an absolute limit of the extent of that
liability. The Convention merely declares the carrier liable for damages in the enumerated cases, if the conditions therein
specified are present. For sure, it does not regulate the liability, much less exempt, the carrier for violating the rights of others
which must simply be respected in accordance with their contracts of carriage. The application of the Convention must not
therefore be construed to preclude the operation of the Civil Code and other pertinent laws. (Luna v CA)

C. Liabilities under the Convention

Chapter III - Liability of the Carrier

Article 17—The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other
bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft
or in the course of any of the operations of embarking or disembarking.

Article 18 –
1. The carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered
baggage, if the occurrence which caused the damage so sustained took place during the carriage by air.
2. The carriage is liable for damage sustained in the event of the destruction or loss of, or damage to, cargo upon condition
only that the coccurence which caused the damage so sustained took place during the carriage by air.
3. However, the carrier is not liable if he proves that the destruction, loss of, or damage to the cargo resulted solely from one
or more of the following:
a) inherent defect, quality or vice of that cargo;
b) defective packing of that cargo performed by a person other than the carrier or his servants or agents;
c) an act of war or an armed conflict
d) an act of public authority carried out in connexion with entry, exit or transit of the cargo
4. The carriage by air within the meaning of the preceding paragraphs of this Article comprises the period during which the
baggage or cargo is in the charge of the carrier, whether in an airport or on board an aircraft, or , in the case of a landing
outside an airport, in any place whatsoever.
5. The period of the carriage by air does not extend to any carriage by land, by sea, or by river performed outside an airport.
If, however, such carriage takes place in the performance of a contract for carriage by air, for the purpose of loading, delivery
or transshipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took
place during the carriage by air.

Article 19—The carrier is liable for damage occasioned by delay in the carriage by air of passengers,
baggage or goods.
CASES:
• Warsaw Convention; Liabilities of an air carrier—
1) the death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or in
the course of its operations of embarking or disembarking; (Art 17)
2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place during
the carriage by air;" (Art 18) and
3) delay in the transportation by air of passengers, luggage or goods. (Art 19)
o In these cases, it is provided in the Convention that the "action for damages, however, founded, can only be brought
subject to conditions and limits set out" therein.
! Example—No bad faith or otherwise improper conduct may be ascribed to the employees of petitioner
airline. Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be
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restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage. She is not
entitled to be compensated for loss or damage to her luggage because her baggage was ultimately delivered
to her in Manila, tardily but safely. She is however entitled to nominal damages. (Alitalia v CA: In short, SC
awarded ND, provisions of Convention notwithstanding)
o Warsaw Convention; Liabilities of an air carrier; proper construction—Petitioner argues that pursuant to those
provisions, an air "carrier is liable only" in the event of death of a passenger or injury suffered by him, or of
destruction or loss of, or damage to any checked baggage or any goods, or of delay in the transportation by air of
passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely
declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. Neither
said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of
contract by the carrier. Under petitioner's theory, an air carrier would be exempt from any liability for damages in the
event of its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd. (Northwest v
Cuenca)

D. Limitations on Liability
Article 22 4
1. In the carriage of persons the liability of the carrier for each passenger is limited to the sum of 250,000 francs (16, 600
Special Drawing Rights). Where, in accordance with the law of the Court seised of the case, damages may be awarded in
the form of periodical payments, the equivalent capital value of the said payments shall not exceed 250,000 francs.
Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability.
2. a) In the carriage of registered baggage, the liability of the carrier is limited to a sum of 250 francs (17 SDRs) per kg,
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 has paid a supplementary sum if the case so requires. In that case the
carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that the sum is greater than the
passenger’s or consignor’s actual interest in delivery at destination.
b) In the carriage of cargo, the liability of the carrier is limited to a sum of 17 SDRs per kg, unless the consignor has made, a
the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and
has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the
declared sum, unless he proves that the sum is greater than the consignor’s actual interest in delivery at destination.
c) In the case of loss, damage or delay of part of registered baggage or cargo or any object contained therein, the weight to
be taken into consideration in determining the amount to which the carrier’s liability is limited shall be only the total
weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered
baggage or cargo, or of an objected contained therein, affects the value of other packages covered by the same baggage
check or the same air waybill, the total weight of such package or packages shall also be taken into consideration in
determining the limit of liability.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5000 francs (332
SDRs) per passenger
4.The limits prescribed in this article shall not prevent the court from awarding, in accordance with its own law, in
addition, the whole or part of the court costs and of the other expenses of the litigation incurred by the plaintiff. The
foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and the other expenses of
litigation, does not exceed the sum which the carrier has offered in writing to the plaintiff within a period of 6 months from
the date of the occurrence causing the damage or before the commencement of the action, if that is alter.
5. The sums mentioned in francs in this Article shall be deemed to refer to a currency unit consisting of 65 ½ mg of gold of
millesimal fineness 900. The sums may be converted into national currencies in round figures. Conversion of the sums into
national currencies other than gold shall, in case of judicial proceedings, be made according to the gold value of such
currencies at the date of the judgment.
6. The sums mentioned in terms of the SDRs in this Article shall be deemed to refer to SDR as defined by the IMF.
Conversion of the sums into national currencies shall, in case of judicial proceedings, be made according to the value of
such currencies in terms of the SDR at the date of the judgment. The value of a national currency, in terms of the SDR, of a
High Contracting Party, which is a Member of the IMF, shall be calculated in accordance with the method of valuation
applied by the IMF, in effect at the date of judgment, for its operations and transactions. The value of a national currency,
in terms of the SDR, of a High Contracting Party which is not a Member of the IMF, shall be calculated in a manner
determined by that High Contracting Party.
Nevertheless, those States which are not Members of the IMF and whose law does not permit the application of the
provisions of par 2 (b) of Article 22 may, at the time of ratification or accession or at any time thereafter, declare that the
limit of liability of the carrier in judicial proceedings in their territories is fixed at a sum of 250 monetary units per kg. This
monetary unit corresponds to 65 ½ mg of gold of millesimal fineness 900. This sum may be converted into the national
currency concerned in round figures. The conversion of this sum into the national currency shall be made according to the
law of the State concerned.
CASES:
• Warsaw Convention; ART 22—Article 22 merely fixes the monetary ceiling for the liability of the carrier in cases covered by
the Convention. (Santos v Northwest)
• Warsaw Convention; Limitations on liability of an air carrier—(Alitalia v IAC)5
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
4
!Montreal!Additional!Protocol!No.!2!amends!pars!1,!2,!and!3!of!Article!22!by!replacing!the!amounts!expressed!in!francs!by!amounts!
expressed!in!Special!Drawing!Rights!as!indicated!in!italics.!This!Protocol!also!amends!paragraph!5.!(For!amended!text,!see!Section!5.7)!
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o Example—The Warsaw Convention was applied as regards the limitation on the carrier's liability, there being a
simple loss of baggage without any otherwise improper conduct on the part of the officials or employees of the
airline or other special injury sustained by the passenger. (Pan Am v IAC)

E. When limitations unavailable

Section I - Passenger Ticket
Article 3
1. In respect of the carriage of passengers a ticket shall be delivered containing:
a) An indication of the places of departure and destination;
b) If the places of departure and destination are within the territory of a single High Contracting Party, one or
more agreed stopping places being within the territory of another State, an indication of at least one such
stopping place;
c) A notice to the effect that, if the passenger’s journey involves an ultimate destination or stop in a country other
than the country of departure, the Warsaw Convention may be applicable and that the Convention governs
and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage
to baggage.
2. The passenger ticket shall constitute prima facie evidence of the conclusion and conditions of the contract of carriage. The
absence, irregularity or loss of the passenger ticket does not affect the existence or the validity of the contract of carriage
which shall, none the less, be subject to the rules of this Convention. Nevertheless, if, with the consent of the carrier, the
passenger embarks without a passenger ticket having been delivered or if the ticket does not include the notice required by
paragraph 1 c) of this Article, the carrier shall not be entitled to avail himself of the provisions of Article 22.

Article 25
In the carriage of passengers and baggage, the limits of liability specified in Article 22 shall not apply if it is proved that the
damage resulted form an act or omission of the carrier, his servants or agents done with intent to cause damage or recklessly
and with knowledge that damage would probably result; provided that, in the case of such act or omission of a servant or
agent, it is also proved that he was acting within the scope of his employment

Article 25 A
1. If the action is brought against a servant or agent of the carrier arising out of damage to which this Convention relates,
such servant or agent, if he proves that he acted within the scope of his employment, shall be entitled to avail himself of the
limits of liability which that carrier himself is entitled to invoke under Article 22.
2. The aggregate of the amounts recoverable form the carrier, his servants and agents, in that case, shall not exceed the said
limits
3. In the carriage of passengers and baggage, the provisions of paragraphs 1 and 2 of this Article shall not apply if it is
proved that the damage resulted form an act or omission of the servant or agent done with intent to cause damage or
recklessly and with knowledge that damage would probably result.
CASES:
• Warsaw Convention; Limitations on liability of air carrier; Exception—The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an absolute limit of the extent of that liability. Art 25 is deemed a
limit of liability only in those cases where the cause of the death or injury to person, or destruction, loss or damage to property
or delay in its transport is not attributable to or attended by any willful misconduct, bad faith, recklessness, or otherwise
improper conduct on the part of any official or employee for which the carrier is responsible, and there is otherwise no special
or extraordinary form of resulting injury. The Convention's provisions, in short, do not "regulate or exclude liability for other
breaches of contract by the carrier" or misconduct of its officers and employees, or for some particular or exceptional type of
damage. Otherwise, "an air carrier would be exempt from any liability for damages in the event of its absolute refusal, in bad
faith, to comply with a contract of carriage, which is absurd." Nor may it for a moment be supposed that if a member of the
aircraft complement should inflict some physical injury on a passenger, or maliciously destroy or damage the latter's property,
the Convention might successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither
may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a passenger and
preclude recovery therefor beyond the limits set by said Convention. It is in this sense that the Convention has been applied,
or ignored, depending on the peculiar facts presented by each case. (Alitalia v IAC)
o Art. 25 refers only to the monetary ceiling on damages found in Art. 22 should damage be caused by the carrier's
willful misconduct. Hence, only the provisions of Art. 22 limiting the carrier's liability and imposing a monetary
ceiling in case of willful misconduct on its part that the carrier cannot invoke. (Luna v CA)
o Examples—an air carrier was sentenced to pay not only compensatory but also moral and exemplary damages, and
attorney's fees, for instance, where its employees rudely put a passenger holding a first- class ticket in the tourist or
economy section, or ousted a brown Asiatic from the plane to give his seat to a white man, or gave the seat of a
passenger with a confirmed reservation to another, or subjected a passenger to extremely rude, even barbaric
treatment, as by calling him a "monkey." (Alitalia v IAC)
! TWA was sentenced to pay MD & ED because it sacrificed the comfort of its first class passengers including
private respondent Vinluan for the sake of economy. Such inattention and lack of care for the interest of its
passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
5
Alitalia v IAC— ART. 22, as amended by the Hague Protocol, supra; the Montreal Agreement of 1966 set the limitation of damages at $75,000 per
passenger; the Guatemala Protocol, 1971, boosted the limit to $100,000 per passenger, liability for baggage was increased to $1,000, and the right to bring
suit was expanded.!
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faith which entitles the passenger to the award of moral damages. More so in this case where instead of
courteously informing private respondent of his being downgraded under the circumstances, he was
angrily rebuffed by an employee of TWA. (TWA v CA)
• Warsaw Convention; ART 25; in relation to ART28(1)—If the carrier is indeed guilty of willful misconduct, it can avail itself of
the limitations set forth in this article. But this can be done only if the action has first been commenced properly under the
rules on jurisdiction set forth in Article 28(1). (Santos v Northwest)
o Example—The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is
insufficient to exclude the case from the comprehension of the Warsaw Convention. The petitioner has apparently
misconstrued the import of Article 25(l) of the Convention.
F. Conditions on Imposition of Liability
Article 26
1. Receipt by the person entitled to delivery of baggage or cargo without complaint is prima facie evidence that the
same have been delivered in good condition and in accordance with the document of carriage.
2. In the case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of
the damage, and, at the latest, within seven days from#the date of receipt in the case of baggage and fourteen days
from the date of receipt in# the case of cargo. In the case of delay the complaint must be made at the latest within
twenty one days from the date on which the baggage or cargo have been placed at his disposal.
3. Every complaint must be made in writing upon the document of carriage or by separate notice in writing
dispatched within the times aforesaid.
4. Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his
part.

Article 28
1. An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the Court having jurisdiction where#the carrier is ordinarily resident, or has his
principal place of business, or has an establishment by which the contract has been made or before the Court having
jurisdiction at the place of destination.
2. Questions of procedure shall be governed by the law of the Court seised of the case.

Article 29
1. The right to damages shall be extinguished if an action is not brought within two years, reckoned from the date of
arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the
carriage stopped.
2. The method of calculating the period of limitation shall be determined by the law of the Court seised of the case.
• Warsaw Convention; ART 28—where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual
concept. Art 28 (1): jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only
after the question of which court has jurisdiction is determined will the issue of venue be taken up. Art 28 (2): venue shall
be governed by the law of the court to which the case is submitted (Santos v. Northwest)
o ART28 (1); Jurisdictional provision—In Aranas v United Airlines, the court held that Art 28(1) is a jurisdictional
provision. Complaint could be instituted before: 1) court of the domicile of the carrier 2) court of its principal
place of business 3) court where it has a place of business through which the contract had been made 4) court of
the place of destination
! First, the wording of Article 32, which indicates the places where the action for damages "must" be
brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent
with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions
of international transportation by air." Third, the Convention does not contain any provision
prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to
jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32
specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such,
cannot be left to the will of the parties regardless of the time when the damage occurred.
! Domicile of the carrier—The domicile of a corporation is customarily regarded as the place where it is
incorporated, and the courts have given the meaning to the term as it is used in article 28(1) of the
Convention. The meaning of domicile cannot be extended to includeany country where the airline
carries on its business on "a regular and substantial basis”. It would obviously introduce uncertainty
into litigation under the article because of the necessity of having to determine, and without standards
or criteria, whether the amount of business done by a carrier in a particular country was "regular" and
"substantial."
! Place of destination—in a trip consisting of several parts, it is the ultimate destination that is accorded
treaty jurisdiction. It is determined by the terms of the contract of carriage (i.e. ticket bet passenger and
carrier).
• Place of destination; distinguished from intermediate place—It is the destination and not an
“agreed stopping place” that controls for purposes of ascertaining jurisdiction under the
Convention. The contract is a single undivided operation, beginning with the place of
departure and ending with the ultimate destination. The use of the singular in this expression
indicates the understanding of the parties to the Convention that every contract of carriage has

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one place of departure and one place of destination. An intermediate place where the carriage
may be broken is not regarded as a "place of destination."
• Place of destination; Return portion of the ticket—Whether the return portion of the ticket is
characterized as an option or a contract, the carrier was legally bound to transport the
passenger back to the place of origin within the prescribed time and. the passenger for her part
agreed to pay the fare and, in fact, did pay the fare. If the parties did not contemplate the
return leg of the journey, the passenger would not have paid for it and the carrier would not
have issued a round trip ticket.
o Example—Examination of the petitioner's ticket shows that his ultimate destination is
San Francisco. Although the date of the return flight was left open, the contract of
carriage between the parties indicates that NOA was bound to transport the
petitioner to San Francisco from Manila. Manila should therefore be considered
merely an agreed stopping place and not the destination.
o Article 28(2) provides that "questions of procedure shall be governed by the law of the court to which the case is
submitted". It thus may be read to leave for domestic decision questions regarding the suitability and location of
a particular Warsaw Convention case.
• Warsaw Convention; ART 28; in relation to ART 326—Waiver cannot be lightly inferred. In case of doubt, it must be
resolved in favor of non-waiver if there are special circumstances justifying this conclusion. Legally, lack of proper venue
is deemed waived by failure to invoke it in the original MTD but motivation of the respondent must be taken into
account.
• Warsaw Convention; Effect of failure to file a claim as mandated—Private respondent maintains that it did not receive
any demand letter from petitioners within the 21-day reglementary period, as provided in par. 7 of the Conditions of
Contract appearing in the plane ticket. Since Art. 26. par. (4), of the Warsaw Convention provides that "[f]ailing complaint
within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part," the carrier
consequently cannot be held liable for the delay in the delivery of the baggage. In other words, non-observance of the
prescribed period to file a claim bars claimant's action in court for recovery. HELD: Petitioners' alleged failure to file a
claim with the common carrier as mandated by the provisions of the Warsaw Convention should not be a ground for the
summary dismissal of their complaints since private respondent may still be held liable for breach of other relevant laws
which may provide a different period or procedure for filing a claim. Considering that petitioners indeed filed a claim
which private respondent admitted having received on 21 June, 1989, their demand may have very well been filed within
the period prescribed by those applicable laws. Consequently, respondent trial courts, as well as respondent appellate
court, were in error when they limited themselves to the provisions of the Warsaw Convention and disregarding
completely the provisions of the Civil Code. (Luna v CA)
CLASS DISCUSSION:
• To what transactions does Warsaw Convention apply? A1
• Not subject to Warsaw Convention? not international carriage-- domestic flights; origin or destination is not a party to the Convention
• Definition of International carriage? A1 (2)
• Both countries must be parties to Warsaw Convention
• If flight starts and ends in the PH, would it be subject to Warsaw Convention? if there is a stopover, which is a party to Warsaw
Convention
• Which is superior, Warsaw Convention or NCC? NCC 1766; but no instances when SC did not decide on these side by side
• SANTOS-key criteria if one undivided transaction: it had been regarded by the parties as a single operation
• What is an air carrier liable for? A 17-19; but not the only instances when carrier is liable (e.g. tort by ER: discourteous conduct;
downgrade)
• NORTHWEST- not an exhaustive list
• ALITALIA- amendments
• New limitation- edit the provisions
• 250 Francs; 160 SDR
• Drawing Rights- based on 4 currencies: Euro, US $, Pounds and Yen; set by IMF
• Forwarder-- Air21, FedEx
• Limitation (250/kg): does it apply to all baggage? no. if hand-carried. (5000 francs per passenger)
• 3 diff limitations: would they all apply?
• Ticket- A3 par 3 (if ticket does not specify, limitation will not apply)
• Written complaint: note the procedure (baggage and cargo have diff periods), prescriptive period

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Art. 32. Any clause contained in the contract and all special agreements entered into before the damage occurred by which the parties purport to
infringe the rules laid down by this convention, whether by deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null and
void. Nevertheless for the transportation of goods, arbitration clauses shall be allowed, subject to this convention, if the arbitration is to take place
within one of the jurisdictions referred to in the first paragraph of Article 28.!
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