TRANSPORTATION & PUBLIC SERVICE LAW

F.A.Hkinawat rani nakoat least honest ko

Chapter 1
GENERAL CONCEPTS IN TRANSPORTATION LAW

Contract of Transportation

There is contract of transportation where a person obligates himself to transport persons or property from one place to another for a consideration. The contract may therefore involve carriage of passengers or carriage of goods. The person who obligates himself to transport the goods or passengers may be a common carrier or a private carrier.

Parties in a contract of carriage

Passenger one who travels in a public conveyance by virtue of contract, express or implied, with the carrier as to the payment of fare or that which is accepted as an equivalent thereof (Nueca v. Manila
Railroad Co., G.R. 31731-R, Jan. 30, 1968)

Common Carrier one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation.
(De Guzman v. CA, G.R. L-47822, Dec. 22, 1988)

Baliwag Transit v. CA, G.R. 80447, Jan. 31, 1989

Facts: The parents of George, who is already of legal age filed a case against Baliwag for breach of contract alleging that because of the negligent manner by its driver, George was thrown off the bus as a result of which the latter sustained multiple serious physical injuries. His parents was seeking reimbursement of their medical expenses and other incidental expenses incurred by them due to hospitalization of George. While the case was pending, George signed a waiver of claim in favor of Baliwags insurer, Fortune Insurance.

Ruling: Since the suit is one for breach of contract of carriage, the release of claims executed by George, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. Significantly, the contact of carriage was actually between George, as the paying passenger, and Baliwag, as the common carrier. x x x x Since the contract may be violated only by the parties thereto, as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract. In the absence of any contract of carriage between Baliwag and Georges parents, the latter are not real parties in interest in an action for breach of that contract.

Parties in Carriage of Goods

Shipper is the person who delivers the goods to the carrier for transportation. He is the person who pays the consideration or on whose behalf payment is made. Consignee is the person to whom the goods are to be delivered. The consignee may be the shipper himself or a third person who is not actually party to the contract. Carrier (Ibid)

Everett Steamship Corp. v. CA G.R. 122494, Oct. 8, 1998

Facts: Hernandez Trading imported three crates of bus spare parts from Japan. The crates were shipped on board "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines. Upon arrival at the port of Manila, it was discovered that one of the crates was missing. The loss was confirmed and admitted by Everett.

However, Everett offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner. Hernandez rejected. The trial found in favor of Hernandez. On appeal, Everett argued that consent of the consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it .

Ruling: When Hernandez formally claimed reimbursement for the missing goods from Everett and subsequently filed a case against the it based on the very same bill of lading, it accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it. However, the liability of the carrier under the limited liability clause stands, which is limited to One Hundred Thousand (Y100,000.00) Yen.

Perfection of Contract involving Carriage In General

If contract to carry, i.e. an agreement to carry the passenger at some future date, perfection takes place upon mere consent since such contract is consensual in nature. If contract of carriage, which is a real contract, perfection takes place when the carrier is actually used and the latter has assumed its obligation as a carrier.

Specific Perfections of Contract of Carriage: AIRCRAFT

If contract to carry, there is perfection even if no tickets have been issued provided there was meeting of minds with respect to the subject matter and the consideration. If contract of carriage, there is perfection if it was established that the passenger had CHECKED IN at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft.

Specific Perfections of Contract of Carriage: BUSES, JEEPNEYS, STREET CARS

Once the bus or jeepney stops, it is in effect making a continuous offer to the passengers. Hence, it is the duty of the driver to stop their conveyances for a reasonable length of time in order to afford passengers an opportunity to board and enter. If passenger is injured upon boarding, liability based on contract of carriage already attaches to the common carrier since the passenger was deemed to be accepting the offer when he attempted to board. The contract is perfected from that precise moment.

Specific Perfections of Contract of Carriage: TRAINS

Perfection takes place when a person, with bona fide intention to use the facilities of the carrier and possessing sufficient fare with which to pay for his passage, has presented himself to the carrier for transportation in the place and manner that he will be transported. Where a person has already purchased a LRT token and while waiting on the platform designated for boarding fell thereon and hit by the train, he was deemed a passenger.

British Airways v. CA, G.R. 92288, Feb. 9, 1993

Facts: On two occasions, private respondent recruitment agency was not able to send its workers to Saudi Arabia despite the fact that its principal there had already purchased pre-paid tickets because petitioners computers broke down. Private respondent thereafter filed a case on breach of contract of carriage. Petitioner argued that there was no perfected contract.

Ruling: Petitioner's repeated failures to transport private respondent's workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. There is no dispute as to the Petitioners consent to the said contract "to carry" its contract workers from Manila to Jeddah.

The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the Petitioner's contract workers advising the appellant that it must transport the contract workers on or before the end of March, 1981 and the other batch in June, 1981. Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal obligations on both parties.

Common Carrier Defined

Art. 1732. Common carriers are persons, corporation, firms or associations engaged in the business of carrying or transporting passengers or good or both by land, water, or air, for compensation, offering their services to the public. A common carrier is also defined as one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation, (De Guzman v. CA, G.R. L-47822,

Dec. 22, 1988)

Concept of Common Carrier analogous to Public Service

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. Done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route.

Whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft. Engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services.

Sorita v. Public Service Commission, G.R. L-20965, Oct. 29, 1966

Held: In drawing the line between "steamboats, motorships, and steamship lines" on one side and pontines, ferries, and water crafts" on the other, Congress apparently means to accept the view that "boat, craft and watercraft" are usually applied to small vessels, while larger vessels are usually referred to by the terms "steamer, steamship or vessel"

Test in determining whether a party is a common carrier of goods

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 He must undertake to carry goods of the kind to which his business is confined. He must undertake to carry by the method by which his business is conducted and over his established roads.

The transportation must be for hire. [First Philippine

Industrial Corp. v. CA, G.R. 125948, Dec. 29, 1998]

Provided it has space, for all who opt to avail themselves of its transportation service for a fee

[National Steel Corp. v. CA, G.R. No. 112287, Dec. 12, 1997, quoting Mendoza v. PAL, 90 Phil. 836]

Common Carrier: Basic Rules

STILL A COMMON CARRIER: Even if hauling is only ancillary. Even if clientele is limited. Even if it has no fixed and publicly known route, maintains no terminals and issues not tickets. Even if means transportation is not through motor vehicle.

Ancillary Activity Immaterial

Art. 1732 makes no distinction between one whose principal business activity is carrying of persons or goods or both, and one who does such carrying only as an ancillary, nor does it make distinctions between one who offers the service to the general public or a narrow segment of the general population. Therefore, a party who back-hauled goods for other merchants from Manila to Pangasinan, even when such activity was only periodical or occasional and was not its principal line of business would be subject to the responsibilities and obligations of a common carrier. [See De Guzman v. CA, G.R. L-47822, Dec. 22,
1988]

Limited Clientele Not a Defense

Facts: Petitioner entered into a contract with SMC for the transfer of paper and kraft board from the port area to SMCs warehouse. Held: She is still a common carrier although she does not indiscriminately hold her services out to the public but offers the same to select parties with whom she may contract in the conduct of her business. [Virgines
Calvo v. UCPB General Insurance Co., G.R. 148496, Mar. 19, 2002]

Facts: Respondent shipping company transported the 75,000 bags of cement to Petitioner in its barge. The bags of cement perished after its barge sank while being towed by a tug boat. Held: Respondent is a common carrier because it was engaged in the business of carrying goods for others for a fee. The regularity of its activities in the area indicates more than just a casual activity on its part. Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with the patrons of the carrier. [Phil. American General Insurance Co., et al. v. PKS Shipping
Co., G.R. 149038, Apr. 9, 2003]

No fixed route, No terminal, No Ticket issued also not a Defense

Facts: Petitioner is involved in the business of carrying goods through its barges. It has no fixed and publicly known route, maintains no terminals, and issues no tickets. Held: Petitioner is still a common carrier because its principal business is that of lighterage and drayage and it offers its barges to the public for carrying or transporting by water for compensation. [Asia Lighterage
and Shipping, Inc. v. CA, G.R. 147246, Aug. 19, 2003]

Drayage service is usually provided by a national trucking/shipping company or an International shipment brokerage firm in addition to the transportation of the freight to and from the exhibit site. Drayage service provides for: - Completing inbound carrier's receiving documents; - Unloading and delivery of the goods to your booth/stand space from the receiving dock; - Storing of empty cartons/crates and extra products at a on/near-site warehouse; - Pickup of the goods from your booth/stand space to the receiving dock and loading back into the carrier; or - Completing outbound carrier's shipping documents.

Means used in transporting not material [First

Philippine Industrial Corp. v. CA, G.R. 147246, Aug. 19, 2003] Issue: Are pipeline operators common carriers as to subject them to business taxes on common carriers? Held: Yes. The Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the US, oil pipe line operators are considered common carriers. Also under the Petroleum Act of the Philippines (RA 387).

Effect when Common Carrier enters into a charter party

If only by contract of affreightment, whether voyage or time charter, it remains a common carrier. If by bareboat or demise charter, a common carrier is transformed into a private carrier.

Planters Products Inc. v. CA, G.R. 101503, Sept. 15, 1993

It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer.

Common Carrier v. Private Carrier

(National Steel Corp. v. CA, supra)

The true nature of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. As a general rule, private carriage is undertaken by special agreement and carrier does not hold himself out to carry goods for the general public. In private carriage, the rights and obligations of parties, including liabilities for damage to cargo, are determined primarily by stipulations in their contract of carriage or charter party (demise or bareboat. In such case, the burden of proof is on the other party to show that the private carrier was responsible for the loss of, or injury to the cargo.

FGU Insurance v. G.P. Sarmiento Trucking, G.R. 141910, Aug. 6, 2002

Facts: GPS, as the exclusive hauler of Conception Industries, undertook to deliver thirty (30) units of Condura refrigerators from latters plant in Alabang to Dagupan City. While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. Petitioner FGU as subrogee to Concepcion Industries filed a complaint for damages and breach of contract of carriage against GPS and its driver.

Issue No. 1: WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER. Held: GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or entity, cannot be considered a common carrier. The above conclusion nothwithstanding, GPS cannot escape from liability.

In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have
been lost or suffered.

The remedy serves to preserve the interests of the promisee that may include his: Expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed; or

Reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or Restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party

The effect of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence (normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability. .

In this case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so. Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay petitioner.

The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality or their juridical position. Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person.

Petitioners civil action against the driver can only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove negligence or fault on the part of the defendant.

Issue No. 2: WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE. Held: Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where the thing which caused the injury complained of is shown to be under the latter?s management and the accident is such that, in the ordinary course of things, cannot be expected to happen if those who have its management or control use proper care. It affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care

It is not a rule of substantive law and, as such, it does not create an independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply places on the defendant the burden of going forward with the proof.

Resort to the doctrine, however, may be allowed only when (a) the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the plaintiff. Thus, it is not applicable when an unexplained accident may be attributable to one of several causes, for some of which the defendant could not be responsible.

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the relation of the parties. Nevertheless, the requirement that responsible causes other than those due to defendants conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure (noncontractual) tort since obviously the presumption of negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure of the covenant or its tenor.

In the case of the truck driver, whose liability in a civil action is predicated on culpa acquiliana, while he admittedly can be said to have been in control and management of the vehicle which figured in the accident, it is not equally shown, however, that the accident could have been exclusively due to his negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him.

Common Carrier v. Towage

In towage, one vessel is hire to bring another vessel to another place. Thus, a tugboat may be hired by a common carrier to bring the vessel to a port. In this case, the operator of the tugboat cannot be considered a common carrier. In maritime law, towage refers to a service rendered to a vessel by towing for the mere purpose of expediting her voyage without reference to any circumstances of danger. It usually confined to vessels that have received no injury or damage.

Common Carrier v. Arrastre

An Arrastre operator performs the following functions: Receive, handle, care for, and deliver all merchandise imported and exported, upon or passing over Government-owned wharves and piers in the port; Record or check all merchandise which may be delivered to said port at shipside; In general, furnish light, and water services and other incidental services in order to undertake its arrastre service

Hence, the functions of an arrastre operator has nothing to do with the trade and business of navigation, nor to the use or operation of vessels. An arrastre operator is like a depositary or warehouseman. Even if the arrastre service depends on, assists, or furthers maritime transportation, it may be deemed merely incidental and does not make its service maritime

Common Carrier v. Stevedoring

The function of stevedores involve the loading and unloading of coastwise vessels calling at the port.

Governing Laws on Common Carrier

COASTWISE SHIPPING: - New Civil Code (Arts. 1732-1766) - Code of Commerce

CARRIAGE FROM FOREIGN PORTS TO PHIL PORTS: - New Civil Code (primary) - Code of Commerce (suppletory) - Carriage of Goods by Sea Act [COGSA] (suppletory)

CARRIAGE FROM PHIL PORT TO FOREIGN PORTS: - The laws of the country to which the goods are to be transported. laws of the country of destination. OVERLAND TRANSPORTATION: - Civil Code (primary) - Code of Commerce (suppletorily) - R.A. 4136 [The Land Transportation and Traffic Code]

AIR TRANSPORTATION: - Civil Code (primary) - Code of Commerce (suppletorily) - For international carriage Warsaw Convention [Convention for the Unification of Certain Rules Relating to the International Carriage by Air]

Nature of Business of Common Carriers, KMU V. Garcia, GR 115381, Dec. 23, 1994

Common carriers are public utilities within the contemplation of the public service law. Public utilities are privately owned and operated businesses whose services are essential to the general public.

They are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience.
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 the control by the public for the common good, to the extent of the interest he has thus created.

Salient Provisions in R.A. 4136 on Registration of Vehicles

Motor vehicle defined: Any vehicle propelled by any power other than muscular power using the public highways, but excepting road rollers, trolley cars, street-sweepers, sprinklers, lawn mowers, bulldozers, graders, fork-lifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes.
Trailers having any number of wheels, when propelled or intended to be propelled by attachment to a motor vehicle, shall be classified as separate motor vehicle with no power rating.

The distinction between "passenger truck" and "passenger automobile" shall be that of common usage: Provided, That a motor vehicle registered for more than

nine

passengers shall be classified as "truck": And Provided, further, That a "truck with seating compartments at the back not used for hire shall be registered under special "S" classifications. In case of dispute, the Commissioner of Land Transportation shall determine the classification to which any special type of motor vehicle belongs.

Articulated vehicle - means any motor vehicle with a trailer having no front axle and so attached that part of the trailer rests upon motor vehicle and a substantial part of the weight of the trailer and of its load is borne by the motor vehicle. Such a trailer shall be called as "semi-trailer."

Professional driver - means every and any driver hired or paid for driving or operating a motor vehicle, whether for private use or for hire to the public. Any person driving his own motor vehicle for hire is a professional driver. Owner -The actual legal owner of a motor vehicle, in whose name such vehicle is duly registered with the Land Transportation Commission.

The "owner" of a government-owned motor vehicle is the head of the office or the chief of the Bureau to
which the said motor vehicle belongs.

Parking or parked - A motor vehicle is "parked" or "parking" if it has been brought to a stop on the shoulder or proper edge of a highway, and remains inactive in that place or close thereto for an appreciable period of time .

A motor vehicle which properly stops merely to discharge a passenger or to take in a waiting passenger, or to load or unload a small quantity of freight with reasonable dispatch shall not be considered as "parked", if the motor vehicle again moves away without delay.

Sec. 5(a) - No motor vehicle shall be used or operated on or upon any public highway of the Philippines unless the same is properly registered for the current year in accordance with the provisions of this Act.

Sec. 5(e) Encumbrances of motor vehicles. Mortgages, attachments, and other encumbrances of motor vehicles, in order to be valid, must be recorded in the Land Transportation Commission and must be properly recorded on the face of all outstanding copies of the certificates of registration of the vehicle
concerned.

*register of deeds first before LTO

Section 16. Suspension of registration certificate. - If on

inspection, as provided in paragraph (6) of Section four hereof, any motor vehicle is found to be unsightly, unsafe, overloaded, improperly marked or equipped, or otherwise unfit to be operated, or capable of causing excessive damage to the highways, or not conforming to minimum standards and specifications, the Commissioner may refuse to register the said motor vehicle, or if already registered, may require the number plates thereof to be surrendered to him, and upon seventy-two hours notice to the owner of the motor vehicle, suspend such registration until the defects of the vehicle are corrected and/or the minimum standards and specifications fully complied with.

Section 21. Operation of motor vehicles by tourists. - Bona fide tourist and similar transients who are duly licensed to operate motor vehicles in their respective countries may be allowed to operate motor vehicles during but not after ninety Philippines.

days

of their sojourn in the

After ninety days, any tourist or transient desiring to operate motor vehicles shall pay fees and obtain and carry a license as hereinafter provided.

If any accident involving such tourist or transient occurs, which upon investigation by the Commissioner or his deputies indicates that the said tourist or transient is incompetent to operate motor vehicles, the Commissioner shall immediately inform the said tourist or transient in writing that he shall no longer be permitted to operate a motor vehicle.

Speed Restrictions

Section 35(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other condition then and there existing; and No person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead.

MAXIMUM ALLOWABLE SPEEDS

1. On open country roads, with no "blinds corners" not closely bordered by habitations

Passengers Cars and Motorcycle 80 km. per hour

Motor trucks and buses

50 km. per hour

2. On "through streets" or boulevards, clear of traffic, with no " blind corners, when so designated.

40 km. per hour

30 km. per hour

3. On city and municipal streets, with light traffic, when not designated through streets
4. Through crowded streets, approaching intersections at "blind corners," passing school zones, passing other vehicles which are stationery, or for similar dangerous circumstance

30 km. per hour

30 km. per hour

20 km. per hour

20 km. per hour

Exceptions to Rate Speed

A physician or his driver when the former responds to emergency calls;

The driver of a hospital ambulance on the way to and from the place of accident or other emergency; Any driver bringing a wounded or sick person for emergency treatment to a hospital, clinic, or any other similar place; The driver of a motor vehicle belonging to the Armed Forces while in use for official purposes in times of riot, insurrection or invasion;

The driver of a vehicle, when he or his passengers are in pursuit of a criminal;

A law-enforcement officer who is trying to overtake a violator of traffic laws; and The driver officially operating a motor vehicle of any fire department, provided that exemption shall not be construed to allow useless or unnecessary fast driving of drivers aforementioned.

Section 36. Speed limits uniform throughout the Philippines.

- No provincial, city or municipal authority shall enact or enforce any ordinance or resolution specifying maximum allowable speeds other than those provided in this Act.

Correct Driving

Pass to the right when meeting persons or vehicles coming toward him.
Pass left when overtaking persons or vehicles going the same direction. Conduct to the right of the center of the intersection of the highway when turning left. Applicable every person operating a motor vehicle or an animal-drawn vehicle. (doctrine of last clear chance)

The person who had the last oppurtunity to prevent the accident who did not act to do so, shall be held liable

Exceptions: Different course of action is required in the interest of the safety and the security of life, person or property; or

Because of unreasonable difficulty of operation in its compliance.

Overtaking a vehicle [Sec. 39]

Pass at a safe distance to the left; Not again drive to the right side of the highway until safety is clear of such overtaken vehicle.

Exceptions: Passing at right allowed On highways with two or more lanes; or

When to be overtaken vehicle is turning left.

Duty of Driver of Vehicle to be Overtaken [Sec. 40]

To give way to the overtaking vehicle on suitable and audible signal being given by the driver of the overtaking vehicle; and Not to increase the speed of his vehicle until completely passed by the overtaking vehicle.

Restrictions on overtaking and passing [Sec. 41]

Do not drive to the left side of the center line of a highway in overtaking or passing another vehicle proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traffic for a sufficient distance ahead to permit such overtaking or passing to be made in safety.

Do not overtake: when approaching the crest of a grade; upon a curve in the highway; driver's view along the highway is obstructed within a distance of five hundred feet ahead. Exception: When on a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle: Provided, Exception to exception: On a highway within a business or residential district, having two or more lanes for movement of traffic in one direction, overtaking or passing at right is allowed.

Do not overtake: at any railway grade crossing; at any intersection of highways unless such intersection or crossing is controlled by traffic signal, or unless permitted to do so by a watchman or a peace officer. Exception: On a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on the right. Nothing in this section shall be construed to prohibit a driver overtaking or passing upon the right another vehicle which is making or about to make a left turn.

Do not overtake, pass or attempt to pass: between any points indicated by the placing of official temporary warning or caution signs indicating that men are working on the highway;

in any "no-passing or overtaking zone."

Right of way [Sec. 42]

When two vehicles approach or enter an intersection at approximately the same time: Driver of the vehicle on the left to yield the right of way to the vehicle on the right; Driver of vehicle traveling at an unlawful speed forfeits right of way.

Driver of a vehicle approaching but not having entered an intersection: To yield right of way to a vehicle within such intersection or turning therein to the left across the line of travel of such first-mentioned vehicle; Provided, driver of the vehicle turning left has given a plainly visible signal of intention to turn.

Driver of any vehicle upon a highway within a business or residential district: To yield right of way to a pedestrian crossing such highway within a crosswalk; Exception: at intersections where the movement of traffic is being regulated by a peace officer or by traffic signal. Every pedestrian crossing a highway within a business or residential district, at any point other than a crosswalk shall yield the right of way to vehicles upon the highway.

When about to approach through highway or raildroad crossing: Full stop before traversing; Provided, That when it is apparent that no hazard exists, the vehicle may be slowed down to five miles per hour instead of bringing it to a full stop.

Exception to the right of way rule [Sec. 43]

Yield right of way to all vehicles approaching when entering a highway from a private road or drive; Yield to police or fire department vehicles and ambulances when such vehicles are operated on official business and the drivers thereof sound audible signal of their approach;

Yield to all vehicles approaching from either direction when entering a "through highway" or a "stop intersection. Provided, That nothing in this subsection shall be construed as relieving the driver of any vehicle being operated on a "through highway" from the duty of driving with due regard for the safety of vehicles entering such "through highway" nor as protecting the said driver from the consequence of an arbitrary exercise off such right of way.

NO PARKING

(a) Within an intersection (b) On a crosswalk (c) Within six meters of the intersection of curb lines. (d) Within four meters of the driveway entrance to and fire station. (e) Within four meters of fire hydrant (f) In front of a private driveway (g) On the roadway side of any vehicle stopped or parked at the curb or edge of the highway (h) At any place where official signs have been erected prohibiting parking.

Reckless driving [Sec. 48]

No person shall operate a motor vehicle on any highway recklessly or without reasonable caution considering the width, traffic, grades, crossing, curvatures, visibility and other conditions of the highway and the conditions of the atmosphere and weather, or so as to endanger the property or the safety or rights of any person or so as to cause excessive or unreasonable damage to the highway.

Right of way for police & other emergency vehicles [Sec. 49]

Upon the approach of any police or fire department vehicle, or of an ambulance giving audible signal, The driver of every other vehicle shall immediately drive the same to a position as near as possible and parallel to the right-hand edge or curb of the highway Clear of any intersection of highways, and Shall stop and remain in such position, unless otherwise directed by a peace officer, until such vehicle shall have passed.

Vehicle Tampering [Sec. 50]

No unauthorized person shall sound the horn, handle the levers or set in motion or in any way tamper with a damage or deface any motor vehicle.

Prohibition on Vehicle Hitching [Sec. 51]

No person shall hang on to, ride on, the outside or the rear end of any vehicle; and No person on a bicycle, roller skate or other similar device, shall hold fast to or hitch on to any moving vehicle; and No driver shall knowingly permit any person to hang on to or ride, the outside or rear end of his vehicle or allow any person on a bicycle, roller skate or other similar device to hold fast or hitch to his vehicle.

Prohibition on Sidewalk Driving or Parking [Sec. 52]

No person shall drive or park a motor vehicle upon or along any sidewalk, path or alley not intended for vehicular traffic or parking.

Driving Under The Influence [Sec.53]

No person shall drive a motor vehicle while under the influence of liquor or narcotic drug.

Obstruction of Traffic [Sec. 54]

No person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of any vehicle; Nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free passage of other vehicles on the highway.

Duty of Driver In Case of Accident [Sec. 55]

In the event that any accident should occur as a result of the operation of a motor vehicle upon a highway, the driver present, shall show his driver's license, give his true name and address and also the true name and address of the owner of the motor vehicle.

No driver of a motor vehicle concerned in a vehicular accident shall leave the scene of the accident without aiding the victim, except under any of the following circumstances: 1. If he is in imminent danger of being seriously harmed by any person or persons by reason of the accident; 2. If he reports the accident to the nearest officer of the law; or 3. If he has to summon a physician or nurse to aid the victim.

Traffic Violations

For registering later than seven days after acquiring title to an unregistered motor vehicle or after conversion of a registered motor vehicle requiring larger registration fee than that for which it was originally registered, or for renewal of a delinquent registration. For failure to sign driver's license or to carry same while driving.

Driving a vehicle with a delinquent or invalid driver's license Driving a motor vehicle with delinquent, suspended or invalid registration, or without registration or without the proper license plate for the current year Driving a motor vehicle without first securing a driver's license

Driving a motor vehicle while under the influence of liquor or narcotic drug. Violation of Section thirty-two, thirty-four (a), (b) and (b1), thirty-five and forty-six Violations of Sections forty-nine, fifty and fifty-two.

For making, using or attempting to make or use a driver's license, badge, certificate or registration, number plate, tag or permit in imitation or similitude of those issued under this Act, or intended to be used as or for a legal license, badge, certificate, plate, tag or permit or with intent to sell or otherwise dispose of the same to another, or false or fraudulently represent as valid and in force any driver's license, badge, certificate, plate, tag or permit issued under this Act which is delinquent or which has been suspended or revoked

For using private passenger automobiles, private trucks, private motorcycles, and motor wheel attachments for hire, in violation of Section seven, subsections (a), (b), and (c), of this Act For permitting, allowing, consenting to, or tolerating the use of a privately-owned motor vehicle for hire in violation of Section seven, subsections (a), (b), and (c), of this Act,

For violation of any provisions of this Act or regulations promulgated pursuant hereto, not hereinbefore specifically punished In the event an offender cannot pay any fine imposed pursuant to the provisions of this Act, he shall be made to undergo subsidiary imprisonment as provided for in the Revised Penal Code.

If, as the result of negligence or reckless or unreasonable fast driving, any accident occurs resulting in death or injury of any person, the motor vehicle operator at fault shall, upon conviction, be punished under the provisions of the Revised Penal Code.

Presumption of Negligence

Art. 2185, Civil Code It is presumed that a person driving a motor vehicle is negligent if at the time of the mishap, he was violating any traffic regulation, unless the contrary.

Registered Owner Rule

The person who is the registered owner of a vehicle is liable for any damage caused by the negligent operation of the vehicle although the same was already sold or conveyed to another person at the time of the accident. This is subject to the right of recourse by the registered owner against the transferee or buyer. The registered owner rule is applicable whenever the persons involved are engaged in what is known as the kabit system.

CLASSIFICATIONS OF MOTOR REGISTRABLE VEHICLES [Sec. 7]

a) Private passenger automobiles; b) Private trucks; c) Private motorcycles, scooters, or motor wheel attachments d) Public utility automobiles; e) Public utility trucks; f) Taxis and auto-calesas g) Garage automobiles h) Garage trucks i) Hire trucks; j) Trucks owned by contractors and customs brokers and customs agents; k) Undertakes; l) Dealers; m) Government automobiles n) Government trucks; o) Government motorcycles; p) Motor vehicles of tourists [for 90 days]; q) Special

Vehicles registered under classification under (a), (b) & (c) cannot be used for hire under any circumstances and cannot be used to solicit, accept, or be used to transport passengers or freight for pay. Laborers necessary to handle freight in private trucks may ride on it (but not to exceed 10 laborers) Dealers vehicle can be operated only for the purpose of transporting the vehicle itself from the pier or factory to the warehouse or sales room or for delivery to a prospective purchaser or for test or demonstration

CONCLUSIVE PRESUMPTION OF A VEHICLE IS FOR HIRE

A vehicle habitually used to carry freight not belonging to the registered owner thereof, or passengers not related by consanguinity or affinity within the fourth civil degree to such owner, shall be conclusively presumed to be "for hire."

KABIT SYSTEM

It is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometime for a fee or percentage of earning. Such arrangement is void for being contrary to public policy [Abelardo Lim, et al. v. CA, GR 125817, Jan. 16, 2002]

PARTIES IN KABIT SYSTEM COVERED BY IN PARI DELICTO RULE

Ex pact illicito non oritur action No action arises out of an illicit bargain. Having entered into an illegal contract, parties to the kabit system cannot seek relief from the courts, and each must bear the consequences of his acts.

Teja Marketing v. IAC, GR 65510, Mar. 9, 1987

Facts: Petitioner was constrained to file an action for damages because private respondent allegedly failed to pay the balance of the purchase price of its motorcycle sold. The motorcycle which was used for sidecar remained under the name of petitioner and operated under its franchise under an arrangement called kabit system. Held: Dismissal of case sustained. Both parties are in pari delicto. The court will not aid either party to enforce an illegal contract.

Chapter 2

OBLIGATIONS OF THE PARTIES

OBLIGATION OF CARRIER:

Duty to Accept; Duty to Deliver Goods On Time; Duty to Deliver Goods at the Place and to the person named in the BL; and Duty to Exercise Due Diligence

OBLIGATION OF SHIPPER OR PASSENGER

Duty to exercise due diligence. Duty to pay the amount of freight or passage on time.

1. Carriers Duty to Accept

A common carrier granted CPC is duty bound to accept passengers or cargo without any discrimination. Exceptions: Dangerous objects or substances including dynamites and other explosives; Unfit for transportation; Acceptance would result in overloading;

Contrabands or illegal goods; Goods are injurious to health; Good will likely be exposed to untoward danger like flood, capture by enemies and the like; Livestock with disease or exposed to disease; Strike; and Failure to tender goods on time

Rule on Hazardous and Dangerous Substances

A carrier may be granted authority to carry goods that are by nature dangerous and hazardous. A carrier specially designed to carry dangerous chemicals and goods may be granted CPC for such purpose. All other carriers may validly refuse to accept such cargoes.

MARINA Memorandum Circular No. 105, Apr. 6, 1995

Documentary Requirements for Special Permit to Carry Dangerous/Hazardous Cargoes and Goods in Packaged Form: Letter of Intent PPA Clearance on packaging, marking and labeling of cargoes or goods in packaged forms Cargo Stowage Plan

Classification of Dangerous or Hazardous Goods Under MC 105

Class 1 Explosives Class 2 Gases: Compressed, liquefied or dissolved under pressure Class 3 Inflammable Liquids Class 4 Inflammable Solids or Substances: a) Inflammable Solid; b) Inflammable Solids, or Substances liable to spontaneous combustion; and c) Inflammable Solids, or Substances which in contact with waters emit inflammable gases;

Class 5 a) Oxidizing Substances; b) Organic Peroxide Class 6 - a) Poisonous (toxic) substances; b) Infectious Substances Class 7 Radioactive Substances Class 8 Corrosives Class 9 Miscellaneous Dangerous Substances

MARINA Memorandum Circular No. 147

Rules on carriage of vehicles, animals, forest products, fish and aquatic products, minerals and mineral products & toxic and hazardous materials on board vessels: Master to accept only if these are covered by necessary clearance from appropriate agencies; Non-compliance will subject the shipowner and master administrative penalties without prejudice to criminal or civil suits

2. Carriers Duty to Deliver The Goods

General Rule: Carrier is not an insurer against delay in transportation of goods. Exception: When there is agreement as to the time of delivery

When delay is deemed reasonable

Ordinary Goods 2 months [Maersk Line v. CA, May 17, 1993] Perishable Goods 2 to 3 days [Dissenting: Tan Chiong Sian v. Inchausti, GR 6092, Mar. 8, 1912]

Rules on Delay on Overland Transportation (Code of Commerce)

Art. 358, Code of Commerce: 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 to the point of delivery; and should he not do so, the damages caused by the delay should be for his account.

Delay When Period Is Fixed

Art. 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 BL, the carrier shall be liable for the damages which the delay may have caused.

Procedure in Abandonment by Consignee In Case of Delay (Type 2)

Art. 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 the 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.

FIVE TYPES OF ABANDONMENT UNDER MERCANTILE LAW

WHEN DAMAGE IS SO GREAT [Art. 365, Code of Commerce] WHEN GOODS ARRIVE BEYOND THE DATE AGREED ON [Art. 371, Code of Commerce] ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE OF VESSEL [Art. 578, Code of Commerce] DAMAGE TO GOODS IN LIQUID FORM [Sec. 687, Code of Commerce] CONSTRUCTIVE LOSS UNDER THE INSURANCE CODE [Sec. 138, Insurance Code of the Phil.]

1st Type: WHEN DAMAGE IS SO GREAT

Where the shipper ships goods and goods arrive in damaged condition and damage is so great that shipper may not use goods for the purpose for which they have been shipped, the shipper may exercise right of abandonment. NOTICE TO THE CARRIER IS SUFFICIENT consent of carrier is not necessary and once perfected, the ownership over damaged goods passes to the carrier and carrier must pay the shipper market value of goods at point of destination.

2nd Type: WHEN GOODS ARRIVE BEYOND DATE AGREE ON

Under this set-up, shipper and carrier agreed in advance that cargo must arrive on a certain date. The date has passed but the cargo has not yet arrived due to carriers fault. Shipper/consignee may exercise the right of abandonment by NOTIFYING the carrier. Once carrier has been notified, ownership over the goods undelivered passes to carrier. But carrier must pay shipper market value of the goods at the point of destination.

3rd Type: ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE OF VESSEL

Reflects the hypothecary nature of maritime transactions. Instances when vessel carries goods and goods are damaged. Liability of the carrier over the damage goods exceeds the value of the vessel. Shipowner of ship agent may exercise right of abandonment by simply NOTIFYING TO THE SHIPPER. Liability of the shipowner is now limited to the value of the vessel.

4th Type: DAMAGE TO GOODS IN LIQUID FORM

Charterers and shippers may abandon the merchandise damaged if cargo should consist of liquids; The contents have leaked out; What remains in the container is but of its content; The cause was on account of inherent defect or fortuitous event.

5th Type: CONSTRUCTIVE LOSS UNDER THE INSURANCE CODE

Shipowners right of abandonment for constructive loss; Takes place when vessel suffers damage in excess of of its insured value; Notice to Insurer from the insured is sufficient; Thereafter, ownership over the damaged vessel passes to the insurer; and Insurer must pay insured as if it were an ACTUAL LOSS.

Characteristics of Abandonment

It is unilateral right; It is perfected by mere notice; Once perfected, ownership over damaged goods passes to carrier; and Carrier must pay the shipper market value of goods at the point of destination

Bar, Mercantile Law [1979]

Problem: A, in Manila, shipped on board a vessel of B, chairs to be used in the moviehouse of consignee C in Cebu. No date for delivery or indemnity for delay was stipulated. The chairs, however, were not claimed promptly by C and were shipped by mistake back to Manila, where it was discovered and re-shipped to Cebu. By the time the chairs arrived, the date of inauguration of the moviehouse passed by and it had to be postponed. C brings an action for damages against B claiming loss of profits during the Christmas season when he expected the moviehouse to be opened. Decide the case with reason

Suggested Answer: C may sue B for the loss of his profits provided that ample proof thereof are presented in court. The carrier is obligated to transport the goods without delay. The carrier is liable if he is guilty of delay in the shipment of cargo, causing damages to the consignee.

Mora in Civil Law distinguished from Mora in Mercantile Law

Under Art. 1169, Civil Code requires demand by the creditor in order that delay may exist. Exceptions: Obligation or law expressly so provides; Time is of the essence; and Demand would be useless.

BUT under the Code of Commerce, demand, as a general rule, is not necessary in commercial contracts in order for the obligor to incur delay [Arts. 61, 62 & 63, Code of Commerce]. Exceptions: a) When fixed by contract, b) when recognized or allowed by law. In commercial contracts, time is always of the essence.

Code of Commerce Provisions on Mora [Arts. 61, 62,& 63]

Art. 61. Day of grace, courtesy or others which under any name whatsoever defer the fulfillment of commercial obligations, shall not be recognized, except those which the parties may have previously fixed in contract or which are based on a definite provision of law. Art. 62. Obligations which do not have a period previously fixed by the parties or by the provisions of this Code, shall be demandable ten days after having been contracted if they give rise only to an ordinary action, and on the next day if they involve immediate execution.

Art. 63. The effect of default in the performance of commercial obligation shall commence: 1. In contracts with a day for performance fixed by the will of the parties or by the law, on the day following their maturity; 2. In those which do not have such day fixed, from the day on which the creditor makes judicial demand on the debtor or notifies him of protest of loss and damages made against him before a judge, notary or other public official authorized to admit the same.

SUMMARY: When Debtor incurs Delay in Commercial Contracts

If period of performance is fixed, debtor incurs delay the day following the day fixed, without need of demand; If no period fixed, ten (10) days from execution of contract and on 11th day, debtor incurs delay without need of demand; Potestative period (e.g. when the debtor desires) debtor in delay from date of demand. Note: distinguish from a potestative condition, e.g. if the debtor desires. Under the Civil Code and Code of Commerce, such condition is void.

KINDS OF DELAY UNDER CIVIL CODE

Mora solvendi Delay of an obligor to deliver or to perform an obligation: a. Mora solvendi ex re delay when the obligation is to give or to deliver; b. Mora solvendi ex persona delay when the obligation is to do or to perform a personal service. Mora accipiendi Delay of an obligee in accepting the delivery of the thing due; Compensatio morae Delay in reciprocal obligations (Art. 1169, last par.). Neither party is in default unless the other is ready to comply with his obligation.

UNDER CIVIL CODE: DEMAND NECESSARY FOR DELAY

In Compania General de Tabacos vs. Araza, 7 Phil. 455, held: The contract does not provide for the payment of any interest. There is no provision in it declaring expressly that the failure to pay when due should put the debtor in default. There was therefore no default which would make him liable for interest until a demand was made. There was no evidence of any demand prior to the presentation of the complaint. The plaintiff is therefore entitled to interest only from the commencement of the action.

DEEMED MERCHANCE UNDER THE CODE OF COMMERCE

Those who, having legal capacity to engage in commerce, habitually devote themselves thereto [Art.
1]

Legal presumption of habituality: From the moment a person who intends to engage in commerce announces through circulars, newspapers, handbills, posters exhibited to the public, or in any manner whatsoever, an establishment which has for its object some commercial operation [Art. 3]

COMMERCIAL CONTRACTS GOVERNED BY CODE OF COMMERCE

Art. 50. Commercial contracts, in everything relative to their requisites, modifications, exceptions, interpretations, and extinction and to the capacity of their contracting parties, shall be governed in all matters not expressly provided for in this Code or in special laws, by the general rules of civil law. HIERARCHICAL APPLICABILITY OF LAWS TO COMMERCIAL TRANSACTIONS: 1. Code of Commerce 2. Commercial customs (in the absence of #1); and 3. Civil Code (in the absence of 1 & 2)

PERFECTION OF COMMERCIAL CONTRACTS BY CORRESPONDENCE

Art. 54. Contracts entered into by correspondence shall be perfected from the moment an ANSWER IS MADE ACCEPTING THE OFFER OR THE CONDITIONS by which the latter may be modified. Above is in contrast to Art. 1319, NCC where negotiated contracts by correspondence are perfected only FROM THE TIME THE OFFEROR HAS ACTUAL KNOWLEDGE OF ACCEPTANCE

PERFECTION OF COMMERCIAL CONTRACTS BY AGENT OR BROKER

Art. 55. Contracts in which an agent or broker intervenes shall be perfected WHEN THE CONTRACTING PARTIES SHALL HAVE ACCEPTED HIS OFFER. Compare Art. 1989, NCC: If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principals ratification.

CONSEQUENCE OF DELAY

Art. 1740, NCC: If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility. 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 carriers liability cannot be availed of in case of the loss, destruction or deterioration of the goods

RIGHT OF PASSENGER IN CASE OF DELAY

Code of Commerce: Art. 698 In case a voyage already begun has been interrupted; Passengers to pay the fare in proportion to the distance covered; No right to recover for losses and damages if interruption is due to fortuitous event or force majeure;

Except when interruption was caused by the Captain exclusively. If interruption is due to disability of the vessel and passenger agrees to await the repair; He is not required to pay any increased price of passage; BUT HIS LIVING EXPENSES DURING THE STAY FOR HIS OWN ACCOUNT. (But see MARINA MC 112)

MARINA MEMORANDUM CIRCULAR NO. 112

In case the vessel cannot continue or complete her voyage FOR ANY CAUSE; Carrier is under obligation to transport the passenger to his/her destination AT THE EXPENSE OF THE CARRIER including FREE MEALS and LODGING before said passenger is transported to his destination.

A passenger may opt to have his ticket refunded in full if the cause of the unfinished voyage is due to the negligence of the carrier; or To an amount that will suffice to defray transportation cost at the shortest possible route towards his destination if the cause is fortuitous event.

If arrival is delayed, carrier shall provide for meals, free of charge, during mealtime. If departure is delayed due to carriers negligence, carrier is also under the obligation to provide meals, free of charge, during meal time to TICKETED PASSENGERS for the particular voyage. If departure is delayed due to fortuitous event, the carrier is under no obligation to serve free meals to the passengers.

3. CARRIERS DUY TO DELIVER GOODS AT THE PLACE DESIGNATED AND TO PERSON NAME IN BL
Art. 360 (Code of Commerce): The shipper may change the consignment of goods, without necessarily changing the place of delivery; But must, at the time of ordering the change of consignee in the BL signed by the carrier; Return the BL to the carrier in lieu of another BL containing the novated contract. Expenses of the change of consignee at the expense of the shipper.

Bar, Mercantile Law [1975]

Bar Question: If a shipper, without changing the place of delivery changes the consignment of consignee of the goods (after said goods had been delivered to the carrier), under what condition will the carrier be required to comply with the new order of the shipper?

Suggested Answer: Art. 360 of the Code of Commerce provides that if the shipper should change the consignee of the goods without changing their destination, the carrier shall comply with the new order provided the shipper RETURNS TO THE CARRIER the bill of lading and a new one is issued shoving the novation of the contract. However, all expenses for the change must be paid by the shipper.

4. CARRIER DUTY TO EXERCISE EXTRAORDINARY DILIGENCE

Art. 1733 (NCC). 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 Arts. 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Arts. 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.

The foregoing provisions in the Civil Code modify Arts. 363, 364 & 365 of the Code of Commerce: Art. 363 on the requirement of the carrier to deliver the goods shipped in the same condition where they were found at the time they were received; and Art. 364 on when damage is merely diminution in the value of the goods, carriers liability shall be reduced to the payment of the amount constituting the difference in value determined by experts.

Art. 365 on instance when goods are rendered useless for sale and consumption for the purposes they are destined, consignee may not receive them and may demand only their value at the current price of the day.

PRESUMPTION OF NEGLIGENCE

In case of loss of effects or cargo; or In case of death or injury of passenger; Common carrier is presumed to be at fault; Unless, it can prove that it had observed extraordinary diligence in the vigilance thereof.

BATANGAS TRANSPORT CO. v. CAGUIMBAL, ET AL., G.R. L-22985, Jan. 24, 1968

In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought; It is sufficient that plaintiff shows: a) there exist a contract between the passenger or the shipper and the common carrier; and b) the loss, deterioration, injury or death took place during the subsistence of the contract.

MRASOL v. THE ROBERT DOLLAR COMPANY, G.R. L-29721, Mar. 27, 1929
Facts: Mirasol is consignee of two cases of Encyclopedia Britannica books that he ordered from New York, shipped in good order and condition on board MS President Garfield, principal defendant company. The books arrived in bad order and condition. There was total loss of one case and partial loss on the other, all in all amounting to P2,080.

Held: 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. As the boxes were damaged while in transit, 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, was a matter peculiarly and exclusively within the knowledge of the defendant. To require plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendants ship. That is not the law.

The evidence for the defendant shows that the damage was largely caused by sea water, from which it contends that it is exempt. Damage by sea water, standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond defendants control. The words perils of the sea apply to all kinds of marine casualties, such as shipwreck, foundering, stranding, etc. Where the peril is the proximate cause of the loss, the shipowner is excused. But something fortuitous and out of the ordinary must be involved in both words peril or accident

DURATION OF DUTY TO EXERCISE EXTRAORDINARY DILIGENCE [Carriage of Goods]

Art. 1736, NCC: 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 the person who has a right to receive them, without prejudice to the provisions of Art. 1738.

Art. 1737 (NCC): The common carriers 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. Note: Right to stoppage in transitu is the right of the unpaid seller who has parted with the possession of the goods, when the buyer is or becomes insolvent, to stop them and resume possession while they are in transit. The unpaid seller will become entitled to the same rigths to the goods, as if he had never parted with possession. [Art. 1530, NCC]

Art. 1738 (NCC): 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.

ART. 1736 CONSTRUED [Macam v. CA, G.R. 125524, Aug. 25, 199]
Facts: Ben-Mac Enterprises shipped on board MV Nen Jiang, represented by local agent Wallem Shipping, 3,500 boxes of watermelons valued at $5,950 and 1,611 boxed of fresh mangoes valued at $14,273 with Pakistan Bank (Hongkong) as consignee and Great Prospect Co., Hongkong as Notify Party. In the BL, it was stipulated that One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order.

As per letter of credit requirement, copies of the BL and commercial invoices were submitted by Ben-Mac to SolidBank. The latter then paid Ben-Mac the total value of the shipment. Upon arrival in Hongkong, the shipment was delivered directly to GPC, not to Pakistan Bank and without the required BL having been surrendered.

GPC failed to pay Pakistan Bank. Pakistan Bank refused to pay Ben-Mac through Solidbank. Since SolidBank already pre-paid Ben-Mac the value of the shipment, it demanded payment from Wallem but was refused. Ben-Mac was forced to refund SolidBank.

Held: We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or TO THE PERSON WHO HAS A RIGHT TO RECEIVE THEM. Pakistan Bank was indicated in the BL as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Ben-Mac also referred to GPC as such in his demand letter to Wallem. This premise draws us to conclude that the delivery to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper.

DURATION OF DUTRY TO EXERCISE DILIGENCE [Carriage of Passengers]

For Trains: Starts from the moment the person who purchases the ticket (or token or card) from the carrier presents himself at the proper place and in a proper manner to be transported with bona fide intent to ride the coach. Same for Ships & Aircrafts. For jeepneys/buses: Starts from the time the person steps on the platform.

WHEN CONTRACT OF CARRIAGE ENDS

The relation of carrier does not cease at the moment the passenger alights from the carriers vehicle but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carriers premises.

La Mallorca v. CA, G.R. L-20761, July 27, 1966

Facts: Plaintiffs, as husband and wife boarded Pambusco Bus No. 352 together with their (3) minor daughters from San Fernando, Pampanga to Anao, Mexico, Pampanga. All alighted at the designated place of unloading but Mariano, the father had to return to the bus to get one of his bayong left under his seat. Unknown to him, her daughter Raquel followed him. She was ran over by the bus when it started to run again.

Held: There can be no controversy that as far as the father is concerned, when he returned to the bus for his bayong which was not unloaded, the relation of passenger and carrier does not necessarily cease where the latter, after alighting from the car, aids the carriers conductor in removing his baggage.

The issue to be determined here is whether as to the child, who was already led by the father to a place about 5 meters away from the bus, the liability of the carrier for her safety under the contract of carriage also persisted. In the present case, the father returned to the bus to get one of his baggages which was not unloaded when they alighted from the bus. Raquel, the child that she was, must have followed the father.

However, although the father was still on the running board of the bus awaiting for the conductor to hand him the bag or bayong, the bust started to run, so the even the father had to ump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carriers agent had exercised the utmost diligence required under Art. 1755. The presence of said passengers near the bus was not unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled to the protection under their contract.

ABOITIZ SHIPPING v. CA, G.R. 84458, Nov. 6, 1989

Facts: Anacleto was a passenger of MV Antonia from San Jose, Mindoro to Manila. Upon reaching Pier 4, North Harbor, he disembarked from the ship by jumping from the 3rd deck which is at level with the pier. After 1 hour when all the passengers have already disembarked and the crane started unloading the cargoes, Anacleto went back to the vessel after realizing that he left some of his cargoes there. It was while he was pointing to the crew the place where his cargoes were loaded that the crane hit him. He later died. His heir sued Aboitiz for breach of contract of carriage.

Held: In consonance with common shipping procedure as to the minimum time of 1 hr. 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. Yet, even if he had already disembarked an hour earlier, his presence in petitioners premises was not without cause. The victim had to claim his baggage which was possible only one (1) hour after the vessel arrived since it was admittedly standard procedure in the case of petitioners vessels that the unloading operations shall start only after that time. Consequently, the victim Anacleto is still deemed passenger at the time of his tragic death.

DEFENSES OF COMMON CARRIERS [Art. 1734, NCC]

Flood, storm, earthquake, lightning, or other natural disaster or calamity; 2. Act of 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; and 5. Order or act of competent public authority. Note: The enumeration is exclusive; no other defense may be raised by the CC.
1.

DEFENSE NO. 1: FORTUITOUS EVENT

Requisites: Independent of human will; Impossible to foresee or if it can be foreseen, impossible to avoid; Must be such as to render it impossible for the obligor to fulfill the obligation in a normal manner; and Obligor must be free from any participation in or the aggravation of the injury [Lasam v. Smith, No. 19495, Feb. 2, 1924]

For fortuitous event to be a valid defense: It must be the PROXIMATE AND ONLY CAUSE OF THE LOSS; Carrier must be free from any participation in causing the damage or injury; It must exercise due diligence to prevent or minimize the loss BEFORE, DURING AND AFTER the fortuitous event. [Art. 1739, NCC]

TAN CHIONG SIAN v. INCHAUSTI, G.R. No. 6092, March 8, 1921

Justice Moreland speaking: An act of God cannot be urged for the protection of a person who has been guilty of gross negligence in not trying to avert its results. One who has accepted responsibility for pay can not weakly fold his hands and say that he was prevented from meeting that responsibility by an act of God, when the exercise of the ordinary care and prudence would have averted the results flowing from that act.

One who has placed the property of another, intrusted to his care, in an unseaworthy craft, upon dangerous waters, cannot absolve himself by crying, an act of God, when every effect which a typhoon produced upon that property could have been avoided by the exercise of common care and prudence. When the negligence of the carrier concurs with an act of God producing a loss, the carrier is not expempted from liability by showing that the immediate cause of the damage was the act of God, or, as it has been expressed, when the loss is caused by the act of God, if the negligence of the carrier mingles with it as an active and cooperative cause, he is still liable.

FIRE NOT A NATURAL DISASTER OR CALAMITY [Cokaliong v. UCPB Gen.

Insurance, G.R. 146018, June 25, 2003]
Facts: M/V Tandag sank after a crack from her auxiliary engines fuel tank caused the spurt of fuel towards the heating exhaust manifold ignited a fire in the engine room

Held: Fire is not 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 lighting or by other natural disaster or
calamity.

HIJACKING NOT AN EXEMPTING CAUSE

A Common Carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggages, especially when it had received prior notice of such threat. (Fortune Express v. CA, 305 SCRA 14)

BATANGAS TRANS. v. CAGUIMBAL, 22 SCRA 171 (1967)

Problem: A BLTB Bus going north stopped on the highway because a passenger wanted to alight. Another bus was going south fast and recklessly, trying to pass a carretela. In trying to overtake the carretela, the driver of the approaching bus made a miscalculation and hit the bus of BLTB. The passenger who was then alighting was thrown out and killed. The heirs of the victim sought recovery. BLTB raised the defense of fortuitous event.

Answer: BLTB is still liable. In civil law, where a fortuitous event concurs with negligence, liability is not extinguished. The BLTB bus was then in a stop position but since it did not stop on the shoulder of the road at the time the passenger was alighting, the same can be considered negligence that concurred with fortuitous event and did not operate to extinguish the liability.

FIRECRACKERS EXPLODING FROM PASSENGER BAGGAGE: CARRIER EXCUSED (Nocum v. LTD, 30 SCRA 69)
Facts: One of the bus passengers had firecrackers inside his bag. They exploded after another passenger smoked cigarettes causing injuries to another passenger. The injure passenger sought to recover from the carrier. Held: Carrier not liable. The carrier cannot be expected to examine and search each and every piece of baggage of passengers, otherwise the bus may not all together be able to leave. This is only true so long as the cause of the accident was not apparent and the carrier or its employees are not guilty of negligence.

RULE ON MECHANICAL DEFECTS [Necesito v. Paras, 104 Phil. 75]

Facts: A Phil. Rabbit Bus was traveling fast. During the trip the driver sensed that the wheels did not respond to the movement of the steering wheel. The bus hit a rut (pothole) and it turned turtle, killing a passenger. The mechanic of the bus company discovered that the worn-out gear of the steering wheel had a crack, which could not be seen by the naked eye from the outside. The bus company proved that the defect was attributable to General Motors, manufacturer of the bus and that the defect could not have been discovered by expert mechanics.

Held: As a rule, a passenger is entitled to recover damages from a carrier for injury resulting from a defect in an appliance purchased from a manufacturer PROVIDED IT APPEARS THAT THE DEFECT WOULD HAVE BEEN DISCOVERED BY THE CARRIER IF IT HAD EXERCISED THE DEGREE OF CARE WITH REGARD TO INSPECTION AND APPLICATION OF THE NECESSARY TESTS. When the defect is LATENT, i.e. cannot be discovered by the application of any known tests, then it qualifies as a fortuitous event to exempt the common carrier from liability.

YOBIDO v. CA, G.R. 113003, Oct. 17, 1997

Held: The explosion of a new tire cannot by itself be considered a fortuitous event to exempt the common carrier from liability in the absence of showing on the part of the carrier that other human factors that could have intervened to cause the blowout of the new tire did not in fact occur. Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. It must still prove that it was not negligent in causing the death or injury resulting from the accident.

PESTANO v. SUMAUYANG, 346 SCRA 870 (2000)

Held: The fact that the driver was able to use a bus with a faulty speedometer shows that the employer was remiss in the supervision of its employees and in the proper care of its vehicles. Under Arts. 2180 and 2176 of the Civil Code, owners and managers are responsible for damages caused by their employees.

SPS. LANDINGAN v. PANTRANCO, 33 SCRA 284

Facts: A married couple with two children were passengers in a bus going to Baguio. While negotiating Kennon Road, the motor suddenly stopped and the bus backed down. The driver expertly guided the bus to rest on the mountainside of the road. But because of the noise, the two children became frightened and they jumped out of the bus and were killed. Held: The bus when it stopped, was not in perfect running condition. It is the carriers duty to see to it that the bus is always in perfect condition. Here, the defect was not latent.

TRANS-ASIA v. CA, 254 SCRA 260 (1996)

Held: Before commencing the contracted voyage, the carrier undertook some repairs on one of the vessels two engines, but even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime after it had run its course, it conked out. Plainly, the vessel was unseaworthy even before the voyage began.

For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of common carrier to maintain in seaworthy condition its vessel is clear breach of its duty prescribed under Art. 1755 of the Civil Code, which binds the carrier to carry the passengers safely as far as human care and foresight could provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances.

OTHER INVALID CAUSES

Explosion Damage to cargo from explosion of another cargo is not ordinarily attributable to peril of the sea or accidents of navigation particularly where it occurs after the vessel has ended its voyage and is finally moored to unload; Worms & rats Whenever the ship is damaged by worms resulting in damage to cargo, the same cannot be cited as an excuse. The same is true with respect to damage of cargo by rats whether the cargo was directly damaged by the rats or by water let in through holes gnawed by rats in the ship or her fixtures.

Water Damage: Damage by sea water is not a valid excuse where the water gains entrance through a port which had been left open or insufficiently fastened on sailing. Barratry: The shipowner cannot escape liability to third persons if the cause of damage is barratry. It is an act committed by the master or crew of the ship for some unlawful or fraudulent purpose, contrary to their duty to the owner. Intentional fraud or breach of trust or willful violation of law is necessary to constitute barratry. Barratry includes theft by the purser of a specie shipped on board and fraudulently running the ship ashore.

OTHER CASES/BAR PROBLEMS

Problem: P shipped a box of cigarettes to a dealer in Naga City through Bicol Bus. When the bus reached Lucena City, it developed engine trouble. The driver brought the bus to a repair shop in Lucena where he was informed by the mechanic that an extensive repair was necessary which would at least take two days. While the bus was in the repair shop, Typhoon Coring lashed at Quezon Province. The cargoes inside the bus, including Mauricios cigarettes, got wet and were totally spoiled. Mauricio sued BBC for the damage to his cargoes. (Bar 1987)

Answer: The bus company is liable. While a typhoon is a natural disaster, the same cannot be considered the only cause of the loss. The engine trouble is foreseeable and could have been detected if only the bus company exercised reasonable case. Moreover, carriers employee should have secured the cargoes while the bus was being repaired for two days.

Problem: P boarded a Victory Liner bus bound for Olongapo. He chose a seat at the front near the bus driver. P told the bus driver that he had valuable items in his bag which was placed near his feet. Since he had not slept for 24 hours, he requested the driver to keep an eye on the bag should he doze off during the trip. Upon arrival at his destination, the bag was nowhere found. Answer: P may not hold the carrier liable. The driver could not have set his eyes on the luggage as his attention was on the road during the trip.

Problem: M, a paying passenger was hit above her left eye by a stone hurled at the bus by an unidentified bystander as he bus was speeding through the National Highway. The bus owners personnel lost no time in bringing M to the provincial hospital where she was confined and treated. M wants to sue the bus company for damages and seeks your advise. (Bar 1994) Answer: M cannot legally hold the bus company if the stone throwing was entirely unforeseeable and the carrier exercised utmost diligence. However, I will also inform her that the burden is on the carrier to prove such exercise of due diligence. If she decides to file a case, all that she will prove is that she was a passenger and she was injured while on board the bus

RAYNERA v. HICENTA, 306 SCRA 102 (1999)

Held: Drivers of vehicles who bump the rear of another vehicle must be presumed to be the cause of the accident, unless contradicted by other evidence, since the rear driver is deemed to have the last clear chance of avoiding the accident, and therefore deemed negligent.

Bar Problem 1992

Facts: Marino was a passenger on a train. Another passenger, Juancho, had taken a gallon of gasoline placed in a plastic bag into the same coach where Mariano was riding. The gasoline ignited and exploded causing injury to Marino who filed a civil suit for damages against the railway company claiming that Juancho should have been subjected to inspection by its conductor.

The railway company disclaimed liability resulting from the explosion contending that it was unaware of the contents of the plastic bag and invoking the right of Juancho to privacy. A) Should the railway company be held liable for damages? B) If it were an airline company involved, would your answer be the same? Explain your answer briefly.

Held: A) No. The railway company is not liable for damages. This is subject to the qualification that the company should prove that it, through the exercise of extraordinary diligence, cannot detect the presence of gasoline. It should be noted that in overland transportation, the common carrier is not bound nor empowered to make an examination on the contents of packages or bags particularly those handcarried by passengers. B) No, my answer would not be the same. If an airline company was involved, it is duty bound to inspect each and every cargo this brought into the aircraft (R.A. 6235). Exercise of extraordinary diligence would therefore result in the discovery of the gasoline.

DEFENSE NO. 2: PUBLIC ENEMY

Presupposes the existence of an actual state of war, and refers to the government of a foreign nation at war with country to which the carrier belongs. Thieves, rioters, robbers, and insurrectionists, thought at war with social order, are not in a legal sense classed as public enemies. Reason for the defense: The exception concerning the acts of public enemies is understandable because the government itself is called upon to protect its subjects from loss or from such hazard and private citizens have no power to furnish the security and protection required. Public enemy is also an exception under COGSA.

DEFENSE NOS. 3 & 4: ACT OR OMISSION OF OWNER & IMPROPER PACKING

COGSA also provides for similar defense, i.e. carrier shall not be liable for (1) wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of goods, (2) insufficiency of packing, (3) insufficiency or inadequacy of the marks, or (4) latent defect not discoverable by due diligence. However, common carrier are still required to exercise due diligence to forestall or lessen the loss notwithstanding the existence of improper packing.

SOUTHERN LINES v. CA, G.R. No. L-16629, Jan. 31, 1962

Facts: More than a thousand sacks of rice were shipped through the vessel of petitioner Southern Lines. There was shortage when the sacks of rice were delivered to the consignee although it was alleged that the shortage in the shipment was due to shrinkage, leakage or spillage of the rice on account of the bad condition of the sacks at the time it received them. Held: Carrier still liable because it was aware of the condition of the sacks when it received the goods.

VIRGENES CALVO v. UPCB GEN. INSURANCE, G.R. 148496, Mar. 19, 2002

Held: Art. 1734 cannot apply where the carrier accepted the goods despite such defects. For this provision to apply, the rule is that if the improper packing or, in this case, the defect in the container is known to the carrier or his employees or apparent upon ordinary observation, but it nevertheless accepts the same without protest or exception notwithstanding such condition, the carrier is not relieved of liability for the resulting damage.

BELGINA OVERSEAS CHARTERING & SHIPPING v. PHIL. FIRST INSURANCE CO., G.R. 143133, June 5, 2002

Facts: Carrier tried to escape liability by citing the notation metal envelopes rust stained and slightly dented printed in the BL as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage.

Held: It cannot be reasonably concluded that the damage to the four coils was due to the condition noted on the BL. The aforecited exception refers to cases when goods are lost or damaged while in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of animals. None of these is present. Even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such condition.

DEFENSE NO. 5: ORDER OF PUBLIC AUTHORITY

Requisite: Such public authority must had power to issue the order.

GANZON v. CA & TUMAMBING, G.R. L-48757, May 30, 1988

Facts: Tumambing contracted the service of Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan to Manila on board LCT Batman. While loading about half of the total cargo, the elected Mayor arrived and demanded P5,000 from Tumambing. The latter refused hence was shot and later hospitalized. After sometime, the loading resumed. But, the Acting Mayor accompanied by 3 policemen order the captain to dump some of the scrap iron at sea and the rest were brought to by the former, which issued a receipt in behalf of the municipality.

Held: 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 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 petitioners employees. The mere difficulty in the fulfillment of the obligation is not considered force majeure.

DEFENSES IN CARRIAGE OF PASSENGERS

Art. 1759: Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the formers employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. The liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.

Art. 1763: A common carrier is responsible for the injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carriers employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission

CARRIER LIABLE FOR ACTS OF ITS EMPLOYEES

Unlike in quasi-delict, a common carrier cannot escape liability by claiming the he exercised due diligence in the selection and supervision of the employee. It is not a defense that the employee acted beyond the scope of his authority because the riding public is not expected to inquire from time to time before they board the carrier whether or not the driver or any other employee is authorized to drive the vehicle or that said driver is acting within the scope of his authority and observing the existing rules and regulations required of him. Willful acts of the employees include theft.

YU CON v. IPIL, GR No. L-10195, Dec. 29, 1916

Held: It is well and good that the shipowner be not held criminally liable for such crimes or quasi-crimes; but he cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the third parties who contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself.

In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before appointing him, and above all, they themselves are unable to make such an investigation, and even though they should do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead. The shipowner is in the same case with respect to the members of the crew, for, though he does not appoint directly, he expressly or tacitly, he contributes to their appointment.

On the other hand, if the shipowner derives profits from the results of the choice of the captain and the crew, when the choice turns out successful, it is also just that he should suffer the consequences of an unsuccessful appointment, by application of the rule of natural law contained in the Partidaz, viz., that he who enjoys the benefits derived from a thing must likewise suffer the losses that ensue therefrom.

3 REASONS UNDERLYING RULE [Art. 1759, NCC]

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 all, from the acts of the carriers own servants charged with the passengers safety;

Said liability of the carrier for the servants violation of duty to passengers, is the result of the formers confiding in the servants hands the performance of his contract to safely transport the passenger, delegating thereiwth the duty of protecting the passenger with the utmost care prescribed by law; and As between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carriers employees against passengers, since it, and not the passengers, has power to select and remove them. (Maranan v. Perez, infra.)

PAL v. CA, 275 SCRA 621 (1997)

Held: Even assuming arguendo that airline passengers have no vested right to hotel accommodation allowances in case a flight is cancelled due to force majeure, nevertheless the airline company would be liable for damages when its employees blatantly refused to accord the so-called amenities equally to all its stranded passengers, and there was no compelling or justifying reason advanced for such discriminatory and prejudicial conduct.

BACHELOR EXPRESS v. CA, G.R. 85691, July 31, 1990

Held: The act of passenger stabbing another passenger in the bus is considered as force majeure. However, to be absolved from liability in the case of force majeure, the common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. Otherwise, it would still be held liable.

BARITUA v. MERCADE (350 SCRA 86)

Held: A common carrier, by the nature of its business and for reasons of public policy, is bound to carry passengers safely as far as human care and foresight can provide. It is supposed to do so by using the utmost diligence of very cautious persons, with due regard for all the circumstances. In case of death or injuries to passengers, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence as prescribed in Arts. 1733 and 1755 of the Civil Code.

FORTUNE EXPRESS v. CA, 305 SCRA 14

Held: A common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggage, especially when it had received prior notice of such threat. Note: Compare with Nocum v. LTD, infra.

NOCUM v. LTD, G.R. L-23733, Oct. 31, 1969

Facts: One of the bus passengers had firecrackers inside his baggage, which ignited when another passenger smoked cigarettes, causing injuries to another passenger. The injured passenger sought to recover damages from the carrier. Held: Carrier is not liable. The reason is that the carrier cannot be expected to examine and search each and every piece of baggage of passengers, otherwise the bus may not altogether be able to leave. Note: This in only true so long as the cause of the accident was not apparent and the carrier or its employees are not guilty of negligence.

FABRE v. CA, 259 SCRA 426 (1996)

[on due diligence in selection and supervision of employees]
Held: For a bus company, due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional drivers license. The employer should also examine the applicant for his qualifications, experience and record of service. Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules.

CARRIER ALSO LIABLE FOR ACTS OF STRANGERS AND OTHER PASSENGERS

But subject to defense of EXERCISE BY THE CARRIER OF DUE DILIGENCE TO PREVENT OR STOP THE ACT OR OMISSION. Defense is not available if the carriers driver allowed another person who is not an employee or a regular driver to take over the task of driving the vehicle.

MARANAN v. PEREZ, 20 SCRA 413

Facts: A taxi driver tried to hold-up his passenger, who resisted and was killed. His heirs sued based on culpa contractual against the taxi company, which denied liability on the ground that the driver acted beyond the scope of his authority. Held: It may be true that the taxi driver was acting beyond the scope of his authority, but Art. 1759 of the Civil Code expressly provides that the owner is liable for negligence of the employees even if such acts are beyond the scope of his authority. Note: This case repealed the doctrine in De Gillaco v. Manila Railroad, 97 Phil. 884 which absolved the carrier for liability caused by its security guard who killed one of its passengers while already off-duty.

MANILA RAILROAD v. BALLESTEROS, 6 SCRA 641

Facts: A bust of the Manila Railroad reached one of the towns along its route. The bus driver stopped the bus and went down to answer a call of nature. While the driver was outside the bus, one of the passengers went into the drivers seat and drove off the bus. It met an accident causing injuries to other passengers.

Held: Carrier is liable. Its driver is guilty of negligence in leaving the key on the ignition. Had he taken the key with himself, the passenger could not have driven off the bus. The carrier is liable for the injuries of other passengers when the carriers employees could have prevented the injuries through the exercise of the diligence of a good father of a family.

RULES ON PASSENGER BAGGAGE

Art. 1754: The provision of Articles 1733 to 1753 shall apply to the passengers 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 travelers 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 hotelkeepers or their substitutes advised relative to the care and vigilance of their effects.

Art. 1998: The deposit of effects made by the travelers 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 hotelkeepers or their substitutes advised relative to the care and vigilance of their effects.

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 travelers 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. 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.

Art. 2002: The hotel-keeper is not liable for compensation if the loss is due to the acts of the guests, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. Art. 2003: The hotel-keeper cannot free himself from responsibility by the 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.

SARKIES TOURS PHIL. v. CA, 280 SCRA 58

Held: Where a common carrier accepts its passengers baggage for transportation and even had it placed in the vehicle by its own employee, its failure to collect the freight charge is the common carriers own lookout, and the common carrier is responsible for the consequent loss of the baggage.

PAL v. IAC, 216 SCRA 334

Held: Although the baggage of a passenger was eventually delivered to him, that did not constitute a case of mere delay in delivery since the baggage was not delivered at all to the passenger for the purpose of the trip in contravention of a common carriers undertaking to transport the goods from the place of embarkation to the ultimate point of destination. The non-delivery of luggage during the entire length of passengers stay abroad is a breach of carriers obligation.

OBLIGATION OF SHIPPER & PASSENGER

The shipper and passenger have the corresponding obligation to exercise due diligence in avoiding damage to the goods or injury to himself. However, contributory negligence on the part of the passenger is not a defense that will excuse the carrier from liability. It will only mitigate such liability. BUT IF HIS CONTRIBUTORY NEGLIGENCE IS THE SOLE AND PROXIMATE CAUSE, CARRIER IS ABSOLVED.

WHAT IS PROXIMATE CAUSE

Proximate cause is that which, in the natural and continuous sequence, unbroken by an efficient intervening cause, produces injury and without which the result would not have occurred. [Sabena Belgian World Airlines v. CA, 255 SCRA 38]

Art. 1741: If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced. Art. 1761: The passenger must observe the diligence of a good father of a family to avoid injury to himself. Art. 1762: The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced.

ISAAC v. AMMEN TRANSPORT, 101Phil. 1046 (On contributory negligence)

Facts: The road on which the bus was passing was wide enough for 2 buses only. A passenger placed his elbow outside the window railing of the bus. An oncoming bus hit the passengers elbow, injuring it in such a manner that it had to be amputated. Held: Carrier is not liable because the proximate cause of the injury was the passengers own contributory negligence. This is a complete defense to the common carrier, and absolves it from liability. Note: While contributory negligence will only serve to diminish the liability of the carrier under Art. 1761, NCC, the same will not apply if the proximate cause of his injury is his contributory negligence and not that of carriers negligence.

CERVANTES v. CA, GR 125138, Mar. 2, 1999

Facts: PAL issued a round trip ticket to Petitioner which expressly provides for an expiry date of 1-year from issuance. A separate written agreement provides that the 1-year period may be extended provided that the petitioner sends a letter to the airlines counsel asking for extension. Petitioner failed to do the terms in the agreement. Held: Petitioner cannot sue PAL for breach when he was not allowed to board. Although he was booked for the flight through PALs agent, the latter was not authorized to change the agreement.

DOCTRINE ON AVOIDABLE CONSEQUENCES

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. (Art. 2203, NCC)

DOCTRINE OF LAST CLEAR CHANCE INAPPLICABLE TO PASSENGER CLAIM

The principle of last clear chance applies in a suit between the owners and drivers of colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. It would be inequitable to exempt the negligent driver of the jeepney and its owner on the ground that the other driver was likewise guilty of negligence.

DOCTINE ON ASSUMPTION OF RISK

That passengers must take such risks incident to the mode of travel he takes since carriers are not insurers of the lives of their passengers. In air travel, adverse weather conditions or extreme climactic changers are some of the perils involved, the consequence of which the passenger must assume or expect. (Japan Airlines v. CA, GR No. 118664, Aug. 7, 1998). But there is no assumption of risk in case the passenger voluntarily boarded a carrier that was overloaded.

YOBIDO v. CA, 281 SCRA 1 (1997)

Held: As a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode of travel he has taken, since after all, a carrier is not an insurer of the safety of its passengers and is not bound absolutely and at all e vents to carry them safely and without injury. However, when a passenger is injured or dies while traveling, the law under Art. 1755 of the Civil Code presumes that the common carrier is negligent, and therefore the burden of proof is upon such common carrier to prove that it has exercised the extraordinary diligence required under the law to avoid damage or injury to the passenger.

However, when a passenger is injured or dies while traveling, the law under Art. 1755 of the Civil Code presumes that the common carrier is negligent, and therefore the burden of proof is upon such common carrier to prove that it has exercised the extraordinary diligence required under the law to avoid damage or injury to the passenger.

CALALAS v. CA, G.R. 122039, May 31, 2000

Facts: A student took a passenger jeepney operated by petitioner. As the jeepney was filled to capacity of about 24 passengers, the student was given by the conductor an extension seat. The jeepney stopped on its way to let a passenger off and the student gave way to the outgoing passenger. Just as she was doing so, a truck bumped the rear end portion of the jeepney. She suffered injuries as a result.

Held: Construing the taking of an extension seat as an implied assumption of risk is akin to arguing that the injuries to the many victims of the tragedies in our seas should not be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry.

COMPANA MARITIMA v. CA & CONCEPCION, G.R. L-31379, Aug. 29, 1988

Facts: Respondent Concepcion loaded his construction equipment aboard MV Cebu to Cagayan de Oro City. Upon arrival, one of his cargoes, a payloader fell on the pier while being unloaded and damaged. He claimed for replacement of the unit. Petitioner denied the claim contending that Respondent furnished it with inaccurate weight of his equipment. The excess weight caused the crane cables to snap.

Held: While the act of private respondent in furnishing petitioner with an inaccurate weight of the payloader cannot successfully be used as an excuse by petitioner to avoid liability, said act constitute a contributory circumstance to the damage which mitigates the liability of petitioner. We find equitable the conclusion of the CA reducing the recoverable amount of damages by 20% or 1/5 of the value of the payloader.

CANGCO v. MANILA RAILROAD CO., G.R. 12191, Oct. 14, 1918

Facts: Cangco was clerk of Manila Railroad with a monthly wage of P25. In going to his workplace daily, he rode on the trains to from his town of San Mateo, Rizal. One day while returning home and while the train was slowing down alighted from his coach but one of feet came in contact with a sack of watermelon causing him to fell violently on the platform. He sustained serious injuries.

Held: The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving railway train, is that of ordinary reasonable care. It is to be considered whether an ordinarily prudent person, of the age, sex and condition of the passenger, would have acted as the passenger acted under the circumstances disclosed by the evidence. This care has been defined to be, not the care which may or should be used by the prudent man generally, but the care which a man of ordinary prudence would use under similar circumstance, to avoid injury.

Or, if we prefer to adopt the mode of exposition used by this court in Picart v. Smith (37 Phil. 809), we may say that the test is this: Was there anything in the circumstances surrounding the plaintiff at the time he alighted from the train which would have admonished a person of average prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory negligence. 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.

Plaintiff was earning P25 a month. His expectancy of life, according to the standard mortality tables, is approximately 33-years. We are of the opinion that a fair compensation for the damage suffered by him for his permanent disability is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum of P790.25 for medical attention, etc. Note: Net Earning Capacity = Life Expectancy [2/3 x 80 less the age of the plaintiff] x Gross Annual Income less Living Expenses [computed @ 50% of Gross Annual Income]

DEL PRADO v. MANILA ELECTRIC CO., G.R. 29462, Mar. 7, 1929

Facts: Manila Electric operated a street in Manila for conveyance of passengers. While still moving, plaintiff ran across the street to catch the car, his approach being made from the left. The car was of the kind having entrance and exit at either end, and the movement of plaintiff was so timed that he arrived at the front entrance of the car at the moment when the car was passing. Upon approaching the car, plaintiff raised his hand as an indication to the motorman of his desire to board. In response, the latter eased up a little, without stopping.

Upon this the plaintiff seized, with his left hand, the front perpendicular handpost, at the same time placing his left foot upon the platform. However, before the plaintiffs position had become secure, and even before his raised right foot had reached the platform, the motorman applied power which caused plaintiffs foot to slip. He fell to the ground and his right foot crushed by the moving car.

Held: Although the motorman was not bound to stop to let the plaintiff on, it was his duty to do no act that would have the effect of increasing the plaintiffs peril while he was attempting to board the car. The premature acceleration of the car was a breach of this duty. As to contributory negligence of plaintiff, it should be treated as a mitigating circumstance. It is obvious that the plaintiffs negligence in attempting to board the moving car was not the proximate cause of the injury. The direct and proximate cause was the act of appellants motorman in putting on the power prematurely.

DUTY TO PAY FREIGHT

Rates charged by vessels for hire is now deregulated (R.A. 9295). However, on overland transportation, deregulated rates are applied only to aircon buses. Person to pay: The shipper or the consignee if carrier and shipper stipulates in the BL. Time to pay: NCC is silent but Art. 374 provides for 24-hr period to pay the freight.

CARRIERS LIEN

If consignee fails to pay the freight within the period prescribed, the carrier may exercise it lien in accordance with Art. 375 of the Code of Commerce. Art. 375: The goods transported shall be especially bound to answer for the cost of transportation and for the expenses and fees incurred for them during their conveyance and until the moment of delivery. This special right shall PRESCRIBED EIGHT (8) DAYS AFTER THE DELIVERY HAS BEEN MADE, and once prescribed, the carrier shall have no other action that that corresponding to him as an ordinary creditor.

DEMMURRAGE

In its strict sense, it is the compensation provided for in the contract of affreightment for the detention of the vessel beyond the time agreed on for loading and unloading. It is essentially a claim for damages for failure to accept delivery. In its broad sense, every improper detention of a vessel may be considered demurrage.

Liability for demurrage, viewed in its strict sense, exists only when expressly stipulated in the contract. In its broader sense, damages in the nature of demurrage are recoverable for a breach of the implied obligation to load or unload the cargo with reasonable dispatch, but only by the party to whom the duty is owed and only against one who is a party to the shipping contract. Notice of arrival of the vessel or conveyance, or their placement for purposes of unloading is CONDITION PRECEDENT to the right to collect demurrage charges.

Chapter 3

EXTRAORDINARY DILIGENCE

RATIONALE IN THE REQUIREMENT OF UTMOST DILIGENCE

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 due regard for all circumstances. 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 preciousness of human life and by the consideration that every person must in every way be safeguarded against all injury. [Report of the Code Commission, pp. 35-36]

HOW DUTY IS COMPLIED WITH

Source of common carriers legal liability is contract of carriage binding itself to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. It is not enough to exercise ordinary diligence; what is required is extraordinary diligence. There is, however no fixed definition on what extraordinary diligence means. In most cases, exercise of extraordinary diligence are given meaning by way of illustrative examples.

EXTRAORDINARY DILIGENGE APPLICALBE TO THIRD PERSONS

Primarily, the duty is owed by the common carrier to its passengers and cargoes. But, the duty also extends to: - the members of the crew or complement; - the pedestrians; and - even to the owners and passengers of other vehicles.

KAPALARAN BUS LINES v. CORONADO, GR 85331, Aug. 25, 1989

Judicial notice is made on the gross negligence and the appalling disregard of the physical safety and property of other so commonly exhibited today by the drivers of passenger buses and similar vehicles on our highways. In requiring the highest possible degree of diligence from common carriers and crating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers. While the immediate beneficiaries of the standard of extraordinary diligence are, of course the passengers and owners of cargo carried by a common carrier, they are not the only persons that the law seeks to benefit.

For if common carriers carefully observed the statutory standard of extraordinary diligence in respect of their own passengers, They cannot help BUT SIMULTANEOUSLY BENEFIT PEDESTRIANS AND THE OWNERS AND PASSENGERS OF OTHER VEHICLES who are equally entitled to the safe and convenient use of our roads and highways. The law seeks to stop and prevent the slaughter and maiming of people (whether passenger or not) and the destruction of property (whether freight or not) on our highways by buses, the very size and power of which seem often to inflame the minds of their drivers.

EFFECT ON STIPULATION LOWER THAN THE REQUIRED DEGREE

On Goods: 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.

On passengers in general: 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. On gratuitous passengers: Art. 1758: When a passenger is carried gratuitously, a stipulation LIMITING THE COMMON CARRIERS LIABILITY for negligence is valid, BUT NOT FOR WILLFUL ACTS OR GROSS NEGLIGENCE. The reduction of fare does not justify any limitation of the common carriers liability.

LARA v. VALENCIA, GR 9907, June 30, 1958

Facts: The deceased Lara was inspector of the BFD at Davao City. Defendant Valencia was engaged in the business of exporting logs from his timber concession in Cotabato. Lara went to Valencias area upon instruction of his chief to classify the logs of Defendant. After six days of work, Lara, who was then eager to return home asked Valencia if he could take him in his pick-up truck to which defendant agreed. Lara was with the five other passengers who were with Lara at the back of the pick-up. Lara was seated on a bag. While the pick-up was cruising along Km 96, Lara accidentally fell from the pick-up and died.

After six days of work, Lara, who was then eager to return home asked Valencia if he could take him in his pick-up truck to which defendant agreed. Lara was with the five other passengers who were with Lara at the back of the pick-up. Lara was seated on a bag. While the pick-up was cruising along Km 96, Lara accidentally fell from the pick-up and died.

Held: Deceased were merely accommodation passengers who paid nothing for the service and so they can be considered invited guests within the meaning of the law. 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. Note: Lara is not controlling upon common carriers since Valencia was a private carrier who accommodated Lara.

EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA

WARRANTY OF VESSELS SEAWORTHINESS

First step in complying with the required extraordinary degree of vigilance. Seaworthiness of vessel is impliedly warranted under the Insurance Code and the Carriage of the Goods by the Sea Act (COGSA). Shippers when transacting with common carriers are not expected to inquire into the vessels seaworthiness, genuineness of its license and compliance with all maritime laws. Also true with passengers. The burden of proof on seaworthiness is with the carrier.

SEAWORTHINESS DEFINED

Generally, seaworthiness is that strength, durability and engineering skill made a part of s ships construction and continued maintenance, together with a competent and sufficient crew, which would withstand the vicissitudes and dangers of the of the elements which might reasonably be expected or encountered during her voyage without loss or damage to her particular cargo. [Delsan Transport Lines v. CA, GR 127897, Nov. 15, 2001]

STATUTORY PROVISIONS ON SEAWORTHINESS

Section 116, Code of Commerce: A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and implements for the voyage.

Sec. 119, Insurance Code: A ship is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of insurance upon the cargo.

Sec. 3[1] COGSA: 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. Sec. 3[2] COGSA: The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

SUMMATION OF THE REQUIREMENT ON SEAWORTHINESS

A vessel must have such degree of fitness which an owner who is exercising extraordinary diligence would require his vessel to have at the commencement of the voyage, having regard to all the probable circumstances of it. Seaworthiness includes fitness of the vessel itself to withstand the vicissitudes of the voyage, fitness of the vessel to store the cargoes and accommodate passengers to be conveyed and adequately equipped with and properly manned with sufficient and competent officers and crew.

FITNESS OF VESSEL: HOW PROVED

It was drydocked and inspected by the PGC before it proceeded to its destination. PGC cleared it as searworthy, fitted, equipped and met all the requirement for trading. Note: A ship will not normally sink if the sea is moderate and if it is seaworthy or if the carrier and its employees were not negligent. [Loadstar Shipping v. CA, G.R. 131621, Sept. 28, 1999]

CARGOWORTHY

Ship must not only be seaworthy. IT MUST ALSO BE CARGO WORTHY. To be cargo-worthy, the ship must be an efficient storehouse for her cargo. Cargo-worthiness means that the vessel must be sufficiently strong and equipped to carry the particular kind of cargo which she has contracted to carry and her cargo must be so loaded that it is safe for her to proceed on her voyage. [Lord Chorley and O.C. Siles, Shipping Law, 6th Ed., p. 120]

ADEQUATELY EQUPPED AND PROPERLY MANNED

Competency of Masters or Captains is required. The rule is violated if a carrier embarked on a voyage with unlicensed captain or patron. It cannot claim to have exercised extraordinary diligence by placing a person whose navigational skill are questionable, at the helm of the ship. Qualifications of Masters, Captains and Crew of ships are governed by the Philippine Merchant Rules and Regulations (PMRR).

Art. 609, Code of Commerce: Captains, masters or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and proven 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 instrust the navigation to a person possessing the qualifications required by said ordinances and regulations.

OVERLOADING

Duty to exercise due diligence also includes the duty to take passengers or cargoes that are within the carrying capacity of the vessel. A carrier fails in this requirement where it allowed on 1,004 passengers when it total passenger capacity is only 864 [Negros Navigation v. CA, G.R. 110398, Nov. 7, 1997]

REQUIREMENT OF PROPER STORAGE

It is not enough that vessel must be suited for the cargo it contracted. It must also be properly stored. Hence, where it was found out that the cause of explosion was due to the improper storage of an acetylene cylinder which caught fire which was placed in the accommodation area near the engine room instead at the storage, the common carrier was held to be negligent. [Phil. Home Assurance Corp. v. CA, G.R. 106999, June 20, 1996]

LIMITED LIABILITY RULE

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. No vessel, no liability rule

NEGLIGENCE OF CAPTAIN & CREW

If the negligence of the captain or crew can be traced to the fact that they are incompetent and that the ship owner was negligent in their selection, the Limited Liability Rule will not apply. If simple negligence only by the captain or crew, who are otherwise competent to discharge their duties, at the time of the accident, the rule applies.

RULES ON PASSENGER SAFETY AND COURTESY DUE HIM

Failure to comply with MARINA rules and regulations constitutes negligence on the part of the captain and crew and of the shipowner. MARINA Memorandum Circular 112 provides that passengers have the right to be treated by the carrier and its employees with kindness, respect, courtesy and due consideration. The are entitled to be protected against personal misconduct, injurious language, indignities and abuses from the carrier and its employees.

MEMORANDUM CIRCULAR NO. 114

Provisions on: Emergency exits Handling of Handcarried Luggage Lifevests or Lifejackets Watertight doors, potholes, ramps and manholes Wearing of proper prescribed uniform by Ships officers and crew. Other safety measures

DEVIATION

Art. 359, CoC: 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 he goods he transports may suffer from any of 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.

TRANSSHIPMENT
The act of taking cargo out of one ship and loading it in another; or The transfer of goods from the vessel stipulated in the contract of affreightment to another vessel before the place of destination named in the contract has been reached; or The transfer for further transportation from one ship or conveyance to another. Notes: Improper deviation and Transshipment without consent of the shipper is violation of the required standard of care. Improper deviation may be a valid ground to deny a marine insurance claim; while transshipment of freight without legal excuse is a violation of the contract of carriage.

EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR

AIRWORTHINESS

Airworthiness means that an aircraft, it engines, propellers, and other components and accessories, are of proper design and construction, and are safe for air navigation purposes, such design and construction being consistent with accepted engineering practice and in accordance with aerodynamic laws and aircraft science. (R.A. 779)

IT MUST BE PROVIDED WITH COMPETENT AND WELL TRAINED CREW. - Assigning a pilot inflicted with a tumor for a long time fails in the requirement. IT MUST FOLLOW THE DESIGNATED ROUTE. - A plane did not take the designated route resulting to the tragic crash. The tragic crash could have been avoided had it taken said designated route. (Abeto v. PAL, 115 SCRA 489) IT MUST INSPECT ALL CARGO AND/OR BAGGAGE FOR LOADING. (R.A. 6235)

Saludo v. CA, G.R. 95536, Mar. 23, 1992

Held: Where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods.

Northwest Airlines v. Laya, G.R. 146020, May 29 2002

Held: Thorough inspection of the briefcase of Plaintiff as deemed justified pursuant to the directive of the FAA of the US brought about by the tragic event that unfolded on Sept. 11, 2001. The fact that Plaintiff was greatly inconvenienced by the fact that his attache case was subjected to further inspection does not warrant imposition of liability because he was not singled out and discriminated by the employees of the carrier.

Protection of passengers must take precedence over convenience. Nevertheless, the implementation of the security measures must be ATTENDED BY BASIC COURTESIES. Hence, the carrier was made liable not for implementing the security measure BUT FOR TREATING THE PLAINTIFF IN A RUDE, BRUSQUE, ARROGANT AND DOMINEERING manner that caused his humiliation.

PAL v. CA & ZAPATOS, GR 82619, Sept. 15, 1993

Facts: On Aug. 2 1976, Zapatos, together with 20 other passengers, boarded PAL flight 477 from CebuOzamis. The flight route was Cebu-Ozamis-Cotabato. While on flight, the pilot received a radio message that the Ozamis airport was closed due to heavy rains and inclement weather and that the plane should instead proceed to Cotabato.

Upon arrival at Cotabato, PAL agent informed the passengers of their option to return to Cebu on-board Flight 560 on the same day and take the next available flight to Ozamis City on Aug. 5, 1975. Zapatos chose the option offered but was not accommodated on the return flight to Cebu because he was checked in as passenger no. 9 on Flight 477. He insisted to be given priority over confirmed passengers but the station agent refused. He tried to stop the departure of Flight 560 as his personal belongings, including a package containing a camera was still on board.

Held: The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. PALs diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate it 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 carriers premises. 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.

ABETO v. PAL, GR L-28692, July 30, 1982

Facts: Judge Abeto boarded PAL flight from Iloilo to Manila on Nov. 23, 1960. The plane did not reach Manila. After 3 days, it was ascertained that it crashed at Mt. Baco, Mindoro. All passengers perished. Held: It is clear that the pilot did not follow the designated route for his flight between Romblon and Manila. The weather was clear and he was supposed to cross airway Amber I over Romblon. Instead, he made a straight flight to Manila in violation of any traffic rules.

Baliwag Transit Inc. v. CA (256 SCRA 746)

Held: A common carrier breaches its contract of carriage when it failed to deliver its passengers to their destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances.

In contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in Arts. 1733 and 1755 of the Civil Code.

Chapter 4

BILL OF LADING

CONCEPT OF BL

A bill of lading, like a passage ticket, is not necessary for the perfection of a contract of carriage. Art. 354, Code of Commerce: 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 transaction. Note: If involving common carrier, disputes without BL is governed by the Civil Code. In respect to electronic commerce, it is governed by R.A. 8792 of the Electronic Commerce Act.

BILL OF LADING DEFINED

A written acknowledgment, signed by the master of a vessel or other authorized agent of the carrier, that he has received the described goods from the shipper, to be transported on the expressed terms to the described place of destination, and to be delivered there to the designated consignee or parties. [70 Am Jur 2d 924]

KINDS OF BILLS OF LADING

Negotiable or Non-negotiable Bill of Lading Clean Bill of Lading or Foul Bill of Lading On-board Bill or Received-For-Shipment Bill of Lading Spent Bill of Lading Through Bill of Lading Custody Bill of Lading Port Bill of Lading

Negotiable or Non-negotiable Bill of Lading

When delivered to the Order or to bear, negotiable. Otherwise, non-negotiable.

Clean Bill of Lading or Foul Bill of Lading

When it does not contain any notation indicating any defect in the goods Clean BL Otherwise, it is Foul BL

On-board Bill or Received-ForShipment Bill of Lading

On-board BL is one in which it is stated that the goods have been received on board the vessel which is to carry the goods Received for shipment BL is one which it is stated that the goods have been received for shipment with or without specifying the vessel by which the goods are to be shipped.

Custody Bill of Lading

One which states that the goods are already received by the carrier but the vessel indicated therein has not yet arrived at port.

Port Bill of Lading

One which state that the vessel indicated in the BL that will transport the goods is already in the port.

NATURE OF BILL OF LADING

It operates both as: 1. A receipt for the goods shipped; and 2. A contract to transport and deliver the goods as stipulated therein. Being a contract, it is the law between the parties who are bound by its terms and conditions sol longs as they are not contrary to law, morals, good customs, public order and public policy. It is also a document of title.

DOCUMENT OF TITLE

Includes any bill of lading, dock warrant, quedan, or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive either by endorsement or by delivery, goods represented by such document. [Art. 1636, NCC]

EFFICACY OF BL

Upon delivery to and acceptance by the shipper. It is presumed that the stipulations of the BL were known to the shipper, in the absence of fraud, concealment or improper conduct, and he generally bound by his acceptance whether he reads the bill or not.

A shipper who receives a BL without objection after an opportunity to inspect it, and permits the carrier to act on it by proceeding with the shipment is presumed to have accepted it as correct and assented to its terms. A BL accepted without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms.

BL AS CONTRACT OF ADHESION

BLs, like tickets constitute a class of contracts of adhesion. Construed liberally in favor of the passenger or shipper. But, they are not ENTIRELY prohibited. One who adheres to the contract is in reality free to reject it entirely. If he adheres, he gives his consent. Receipt of the BL or ticket is tantamount to adherence to the stipulation embodied therein

Qua Chee Gan v. Law Union and Rock Insurance Co., 25 SCRA 70 [1968]

Held: The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital endowed with overwhelm economic power, manage to impose upon parties dealing with them cunningly prepared agreements that the weaker party may not change one with his participation in the agreement being reduced to the alternative to take it or leave it, labelled since Raymond Sleilles contracts of adherence (contracts d adhesion) in contrast (of which policies of insurance and international bill of lading are prime examples) obviously cap for greater strictness and vigilance on the part of the court with view to protecting the weaker party from abuses and imposition, and prevent their becoming traps of the unwary.

RULE ON PROTECTION OF THE DISADVANTAGED

Art. 24, NCC: In all contractual property or other relations, when one of the parties is at the disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age and other handicap, the courts must be vigilant for his protection.

Servando, et al. v. Phil. Steam Navigation

Co., G.R. No. L-36481-2 October 23, 1982
Held: While it may be true that petitioner had not signed the plane ticket (Exh. '12'), 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 what is known as a contract of 'adhesion', in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.

Magellan Manufacturing Marketing Corp. v. CA, G.R. 95529, Aug. 22, 1991

Issue 1: On the argument that there could have been no agreement in the transshipment even if the BL contained such since the same is prohibited in the Letter of Credit, and that, therefore, it had no intention to allow transshipment of the subject cargo, it was:

Held: As between such stilted thesis of petitioner and the contents of the bill of lading evidencing the intention of the parties, it is irremissible that the latter must prevail. The terms of the contract as embodied in the bill of lading are clear and thus obviates the need for any interpretation. The intention of the parties which is the carriage of the cargo under the terms specified thereunder and the wordings of the bill of lading do not contradict each other.

The terms of the contract being conclusive upon the parties and judging from the contemporaneous and subsequent actuations of petitioner, to wit: personally receiving and signing the bill of lading and paying the freight charges, there is no doubt that petitioner must necessarily be charged with full knowledge and unqualified acceptance of the terms of the bill of lading and that it intended to be bound thereby.

Issue No. 2: Can a consignee refuse a bill of lading on the ground that there was overshipment of goods than the quantity covered by the letter of credit? Held: In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyer and the seller; (2) the contract of the buyer with the issuing bank; and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and conditions stated therein.

It is clearly settled in law that the three contracts which make up the letter of credit arrangement are to be maintained in a state of perpetual separation. A transaction involving the purchase of goods may also require, apart from a letter of credit, a contract of transportation specially when the seller and the buyer are not in the same locale or country, and the goods purchased have to be transported to the latter.

Hence, the contract of carriage, as stipulated in the bill of lading must be treated independently of the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforce-ability of the contract of carriage as embodied in the bill of lading.

As a bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and the letter of credit.

Having no actual knowledge of the kind, quantity, or condition of the contents of the container, the carrier issues the corresponding bill of lading based on the declaration of the shipper, and the bill of lading simply states the contents of the container either as advised by the shipper or prefaced by the phrase said to contain. The matter of quantity, description and conditions of the cargo inside the container is the sole responsibility of the shipper.

PAROLE EVIDENCE RULE

Sec. 9, Rule 130, Rules of Court: When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. BL is covered by the parole evidence rule.

EXCEPTIONS TO PAROLE EVIDENCE RULE

However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading: a) An intrinsic ambiguity, mistake or imperfection in the written agreement; b) The failure of the written agreement to express the true intent and agreement of the parties thereto; c) The validity of the written agreement; or d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement. The term agreement includes wills.

SUBSTANTIVE PROVISIONS ON BILL OF LADING

Art. 353, Code of Commerce: 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 the 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.

Art. 709, Code of Commerce: 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. Art. 710, Code of Commerce: If the bills of lading are contradictory, 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.

Sec. 3[4] & [5], COGSA, C.A. No. 65: [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. [5] The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of the 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 to any person other than the shipper.

MATTERS TO BE ENTERED IN A BL OR AIRWAY BILL

For BL (Art. 706, Code of Commerce): Name, registry and tonnage of the vessel Name of captain and his domicile [not anymore applicable as of present] Port of loading and unloading Name of shipper Name of consignee Quantity, quality, number of packages and marks of the merchandise; and Freight and primage

For Airwaybill (Art. 3[1], Warsaw Convention on Air Transport: Place and date of issue Place of departure and destination; Agreed stopping places, provided the carrier may reserve the right to alter the stopping places in case of necessity, and that if he exercises that right, the alteration shall not have the effect of depriving the transportation of its international character; Name and address of the carrier or carriers; and Statement that the transportation is subject to the rules relating to liability in this convention.

KINDS OF STIPULATIONS IN A BILL OF LADING

First kind: One exempting the carrier from any and all liability for loss or damage occasioned by its own negligence VOID; Second kind: One providing for an unqualified limitation of such liability to an agreed valuation VOID; and Third kind: 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 VALID. [H.E. Heacock Co. v. Macondray & Co., G.R. 16598l, Oct. 3, 1991]

LIABILITY OF CARRIER UNDER COGSA

If goods are to be shipped from a foreign port to the a Philippine, COGSA is applicable suppletority to the Civil Code. Liability of the carrier is US$500 per package, in the absence of a shippers declaration of a higher value in the BL. The above condition is deemed part of the BL even if not expressly stated.

MEANING OF PACKAGE

If goods are shipped in cartons Each carton is considered a package even if they are stored in container vans. If what ordinarily considered as packages are shipped in a container supplied by the carrier and the number of such unit is disclosed in the BL Each of those units (not the container) constitutes the package referred to in COGSA.

Belgian Overseas Chartering v. Phil. First Insurance Co., G.R. 143133, June 5, 2002

Facts: Steel sheets numbering 242 coils were shipped on board a vessel of Petitioner in Germany to Manila. The coils were shipped inside the container vans provided by the carrier. The LC covering the shipment state the per metric ton price of the coils. Upon arrival, it was found out that 4 coils were damaged. Held: Each coil is considered one package. The liability of the carrier should not be based on the price declared in the Letter of Credit.

WARSAW CONVENTION ON AIR TRANSPORT

Liability to passenger P250,000 francs (passenger & carrier may agree to a higher limit of liability Liability to baggage and cargo P250 francs 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 sup- plementary sum not exceeding the declared sum, unless he proves that sum is greater than the actual value to the consignor at delivery.

In case of loss, damage or delay of part of registered baggage or cargo, or of any object contained in the waybill The weight shall be taken into consideration in determining the amount and carriers liability is limited to the TOTAL WEIGHT OF THE PACKAGE/S However, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the value of other packages covered by the same baggage check of the same airway bill, the TOTAL WIEHT OF SUCH PACKAGE/S shall also be taken into consideration in determining the limit of liability.

Liability to hand carried items 5,000 francs per passenger The above limitations are without prejudice to the local courts award in accordance to its own law, in addition, the whole or part of the court cost and other expenses of litigation incurred by plaintiff.

Not applicable if the amount of damages awarded, excluding court costs and other expenses of litigation, does not exceed the sum which the carrier has offered in writing to plaintiff within 6 months from the date of occurrence causing the damage or before commencement of the action, if that is later. If damage is caused by willful misconduct or by such default on the part of the carrier: Carrier cannot invoke the provisions in Warsaw Convention on limited liability.

HAGUE PROTOCOL AMENDMENT TO WARSA CONVENTION ON AIR TRANSPORT

Removed the provision that exculpates the airline completely if it took all necessary steps to avoid the damage. The protocol declares that the stated limits of liability are not applicable if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result. Note: Montreal Agreement of 1966 allows a passenger to recover unlimited damages upon proof of willful misconduct.

LIABILITY UNDER COGSA

If no value is state Maximum: US$500. If value is stated Rule on Qualified Liability. Qualified Liability Rule: A carrier may fix a maximum liability in the event the shipper does not declare any value or a valude up to a certain amount. Should shipper declare a higher value, and willing to pay higher freightage, the carrier shall accordingly be liable for greater damage.

CASES INVOLVING BILLS OF LADING

Maersk Line v. CA, 222 SCRA 108

Held: Bill of lading, although contracts of adhesion, are not prohibited and the terms thereof binding, since the other party is free to reject it, and yet has accepted the terms thereof. But the terms of the bill of lading which create an absurd situation as having the effect of practically leaving the date of arrival of the shipment to the sole determination and will of the carrier cannot be enforced.

Telengtan Bros. v. CA, 236 SCRA 617

Held: A bill of lading is both a receipt and a contract. As a contract, its terms and conditions are conclusive on the parties, including the consignee, as to the route, destination, freight rates or charges, and stipulates the rights and obligations assumed by the parties.

Saludo, Jr. v. CA, 207 SCRA 498

Held: A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specific place to a person named or on his order. Acceptance thereof without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper and agreed to by him and estops him thereafter from denying the same.

United States Lines v. Commissioner of Customs, 151 SCRA 189

Held: The containerization system was devised to facilitate the expeditious and economical loading, carriage and unloading of cargoes. Under that system, the shipper loads his cargoes in a specially designed container, seals the container and delivers it to the carrier for transportation. The carrier does not participate in the counting of the merchandise for loading into the container, the actual loading thereof nor the sealing of the container.

Everett Steamship v. CA, 287 SCRA 496

Held: A stipulation printed in BL limiting common carriers liability for loss or destruction of a cargo to a certain sum, unless shipper or owner declare a greater value is sanctioned by law, particularly Arts. 1749 and 1750 of the Civil Code, provided such stipulation must be reasonable and just under the circumstances and has been freely and fairly agreed upon. The printing of such limiting stipulation in a small print on the BL does not make the BL invalid nor can it be argued that the stipulation has not been fairly and freely agreed upon as to be binding on the carrier.

At most, the situation only calls for a greater vigilance on the part of courts when dealing with such contracts of adhesion in that said contracts must be carefully scrutinized in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made covenants. In this case, since the shipper is engaged in trading business, it cannot be said to be ignorant of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could have known, or should know the stipulations in the BL and there it should have declared a higher valuation of the goods shipped.

Valenzuela Hardwood v. CA, 274 SCRA 642

Held: A stipulation in a charter party that the owners shall not be responsible for loss, split, short-landing, breakages and any kind of damage to the cargo, is NOT VOID as being contrary to public policy, when it is clear from the arrangement that the carrier merely acted as private carrier under the terms of the charter party. In a contract of private carriage, the parties may validly stipulate the responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain.

PAL v. CA, 255 SCRA 48 on the period provided in Way bill

Held: Where the failure to file the formal claim within the prescriptive period contemplated in the air waybill was largely due to the fault of carriers representatives, the condition was deemed fulfilled considering the collective action of the carriers personnel in tossing around the claim and leaving it unresolved for an indefinite period of time, which was tantamount to voluntarily preventing its fulfillment, and therefore the filing of the baggage freight claim constituted substantial compliance with the requirement of the filing of a formal claim

Chapter 5

PRESCRIPTIVE PERIODS IN CLAIMS

FILING OF CLAIM IN INTER-ISLAND COMMERCE (Art. 366, Code of Commerce)

If goods arrived in damaged condition: Apparent Must file a claim immediately (oral or written) Not apparent Must file a claim within 24 hours from deliver

FILING OF ACTION IN INTERISLAND TRADE

Period to file action if claim is filed but CARRIER REFUSES TO PAY: 6 years if no BL 10 years if there is BL Note: Filing of the claim under Art. 366, CoC is CONDITION PRECEDENT for recovery. If no claim is filed, there will be no recovery, even if an action therefor is meritorious since the claim is part of the cause of action

FILING OF CLAIMS IN OVERSEAS TRADE

If damage is APPARENT CLAIM SHOULD BE FILED IMMEDIATELY. If damage is NOT APPARENT CLAIM SHOULD BE FILED WITHIN 3 DAYS.

FILING OF ACTION IN OVERSEAS TRADE

1 year from the time vessel departs from port without making delivery; or 1 year from the date the damaged cargo is delivered to arrastre. Note: the 1 year period applies also to collision cases. If mis-delivered: 10 years; If claim is based on delay: 10 years. Note: Filing of claim is NOT A CONDITION PRECEDENT in the filing of action.

Rizal Surety v. Macondray, 22 SCRA 902

Facts: A vessel arrived in Manila on Oct. 25. It left Manila on Oct. 31. The BL showed that the cargo was aboard the vessel, but it was never delivered. The shipper brought an action against the carrier for nondelivery. Held: Since there was no tally sheet AND NO DELIVERY, the 1- year prescriptive period for filing the action should be counted from the LAST DAY ON WHICH THE CARRIER HAD AN OPPORTUNITY TO MAKE THE DELIVERY, i.e. Oct. 31 when the vessel departed from port.

Union Carbide v. Manila Railrod, 77 SCRA 359

Held: In the case when the vessel docked at the pier, where the cargo has been unloaded and delivered to the arrastre, the 1-year period begins to run from the date of delivery to the arrastre operator.

Ang v. American SS Agencies, 19 SCRA 631

Held: Where there was delivery to the wrong person, the prescriptive period is (10) years because there is a violation of contract, and COGSA does not apply to misdelivery.

US Insurance v. Cia. Maritima, 21 SCRA 998

Facts: Cargo was loaded in New York for Davao City. Since most of the cargo was for Manila, the carrier unloaded all the cargo, including that for Davao City, in Manila and did not make a trip to Davao. Instead, the goods for Davao were transshipped on an interisland vessel. The cargo arrived in a damaged condition.

Held: The 1-year period provided in COGSA shall still apply since the contract of carriage is from New Yor to Davao. The inter-island vessel from Manila to Davao is considered merely a connecting vessel and the transshipment did not constitute a separate contract of carriage.

Filipino Merchants Ins. Co. v. Alejandro, 145 SCRA 42

Held: The insurer of the goods is also bound by the 1-year prescriptive period under the Carriage of Goods by Sea Act.

Dole Philippines v. Maritime Co., 148 SCRA 118

Held: The written extrajudicial demand by creditor DOES NOT TOLL the running of the 1-year prescriptive period under COGSA since an action must be filed within the period.

Mitsui O.S.K. Lines v. CA, 287 SCRA 366

Facts: Carrier undertook loading. However, while in Taiwan, goods were not transshipped immediately, with the result that goods arrived in France late during the offseason. Consignee paid only half of the value of the goods and balance was charged against loss sustained due to late arrival. Shipper now seeks to recover unpaid balance from the carrier which opposes the same since the loss or damage to goods shipped under Sec. 3(6) of the Carriage of the Goods by Sea Act has been barred by the lapse of 1-year period.

Held: Indeed, what is in issue here is not the liability of carrier of its handling of goods as provided under Sec. 3(6) of COGSA, but its liability under its contract of carriage with shipper as covered by the laws of more general application. Since the concept of loss or damage involves he deterioration of goods DUE TO DELAY in their transportation, the claims of shipper DO NOT CONSTITUTE LOSS OR DAMAGE within the meaning of COGSA which requires the suit to be brought within 1-year from the time the cause of action accrued. The 1-year prescriptive period under COGSA is inapplicable. What is applicable is Art. 1144 of the Civil Code providing for a 10-year prescriptive period.

Mayer Steel Pipe Corp. v. CA, 274 SCRA 432

Facts: The shipper has insured the merchandise against all risks with South Sea Surety. During the voyage, the merchandise were damaged. Insurer opposed claim on the ground, inter alia, that it was filed more than one (1) year from discovery of the damage to the merchandise and therefore barred by the provisions under COGSA.

Held: The provision applies only to carriers liability which is extinguished if no suit is brought within one year. The liability of the insurer is not extinguished because the insurers liability is based not on the contract of carriage but on the contract of insurance. COGSA governs relationship between carrier and shipper, the consignee and/or the insurer on the other hand and defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between shipper and insurer which is governed by Insurance Code.

MEANING OF DAMAGES

The pecuniary compensation, recompense, or satisfaction for an injury sustained; or The pecuniary consequences which the law imposes for the breach of some duty or violation of some rights.

DAMAGES RECOVERABLE

Actual Damages (dano emergente) Unrealized Profits (lucro cesante) Moral Damages Nominal Damage Temperate or Moderate Damages Liquated Damages Exemplary or Corrective Damages Other damages

ACTUAL & COMPENSATORY DAMAGES

Art. 2205, NCC: Damages may be recovered: (1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; (2) For injury to the plaintiffs business standing or commercial credit. Amount of damages in case of death: P100,000 per passenger for overland; P200,000 for marine transportation.

LOSS OF EARNING CAPACITY UNDER ART. 2206

Formula: Net Earning Capacity = Life Expectancy [2/3 x 80 age at death] x Gross Annual Income less Necessary Living Expenses [fixed at 50% of the gross income in the absence of proof]

MORAL DAMAGES (Art. 2219, Civil Code)

Include Physical suffering, Mental anguish, Fright, Serious anxiety, Besmirched reputation, Wounded feelings, Moral shock, Social humiliation, and Similar injury

PRINCIPLES INVOLVING AWARD OF MORAL DAMAGES

As a general rule, no moral damages may be awarded where the breach of contract is NOT MALICIOUS. Moral damages may be awarded if the contractual negligence is considered gross negligence. Though incapable for pecuniary estimation, moral damages may be recovered if they are the proximate result of the defendants wrongful act or omission. The award of moral damages is designed to compensate the claimant for actual injury and is not meant to enrigh the complainant at the expense of the defendant.

CASES WHEN MORAL DAMAGES MAY BE AWARDED (Arts. 2219 & 2220, NCC)

Criminal offense resulting in physical injuries; Quasi-delicts causing physical injuries Seduction, abduction, rape, or other lascivious acts Adultery or concubinage Illegal or arbitrary detention or arrest Illegal search Libel, slander or any other form of defamation Malicious prosecution Acts mentioned in Art. 309 [disrespect to the dead, or wrongful interference with a funeral] Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 [on human relations]

In culpa contractual, moral damages may be awarded: Where the mishap resulted in the death of the passenger. (Art. 1764 in relation to Art. 2206) When the carrier was guilty of fraud or bad faith, even if death did not result. (Art. 2220; Sabena Belgian World Airlines v. CA, 171 SCRA 620) Note: If the cause of action is culpa aquiliana where the passenger suffered physical injuries, there is no more need to prove that the carrier acted fraudulent or in bad faith (Art. 2210[2], Civil Code)

Lopez v. Pan Am, 16 SCRA 431 (1966)

Facts: VP Lopez with his wife, daughter and son-in-law had tickets for 1st class bound for SF. When they arrived in Tokyo, the planes crew found out that the 1st class tickets had been overold, and Lopez and his family were compelled to take the economy seats. When the plane arrived at SF, Filipino official and the Filipino community with a band waited for Lopez to appear from the 1st class section. It caused him humiliation.

Held: Pan-Am should have informed Lopez of the possible downgrading to prevent his humiliation The court award Lopez P300,000 in moral damages and P150,000 in attorneys fees. The substantial amount of damages was awarded in view of the importance of the person of the passenger

Zulueta v. Pan-Am (1972)

Facts: Zulueta was a passenger on a Pan-Am flight with his wife and children from SF to Manila. On stopover at Wake Island, the passengers were told that the plane would leave in 30 minutes. After 30 mins. Zulueta failed to show up, the crew had to look for him. When he was found, the plane captain called him a brown monkey. Bitter exchanged followed. The captain then order the crew to unload Zuluetas baggage and he was left behind. Held: Zulueta is entitled to moral damages of P500,000 and Attorneys fees of P50,000

Ong Yui v. CA, 91 SCRA 223

Held: In repealing the Shewaran Doctrine, the SC ruled that the qualified liabilityappearing on the ticket is binding even if the passenger did not sign it.

ARRASTRE

In its generic term, it refers to a contract for the unloading of goods from a vessel. In maritime law, arrastre applies only to overseas trade. When a person brings in cargo from abroad, he cannot unload and deliver the cargo by himself. This is done through the arrastre operator, which will be obligated to deliver the cargo to the importer.

Firemens Fund v. Cia. General de Tabacos, 34 SCRA 392 (1970)

Held: The Arrastre operator, for the privilege of those undertaking signs a Management Contract with the Philippine Government. But among the stipulations in the MC are provisions that adversely affect the importer. The management contract contains stipulations pour autrui and there is stamped across the Delivery Permit that the importer received the goods subject to the management contract, then he shall be bound by the same.

PARTIES IN ARRASTRE CONTRACT

The Government (RP) The Arrastre Operator being awarded the privilege of operating an arrastre service Third party beneficiary, who is the shipper or person being serviced by the arrastre.

4 STIPULATIONS IN THE REVISED MANAGEMENT CONTRACT AFFECTING THE IMPORTER OR SHIPPER

Formal claim against arrastre: - Within 30 days from date of final entry with the Bureau of Customs supported by invoices and other shipping documents. (A condition precedent) Action on claim by arrastre: 60 days from receipt. (A condition precedent)

If claim is refused: Action to be filed within 1 years. If claim is not acted upon: The 1 year period begins to run from the date of the expiry of the 60-day period. Qualified liability of arrastre: P2,000 per package unless higher value is declared. NATURE OF LIABILITY OF ARRASTRE & CARRIER: Solidary

Metro Port Services v. IAC, 213 SCRA 103 (1992)

Held: A provision limiting the liability of arrastre operator through the imposition of a requirement that a formal claim must be made within 30 days from filing of entry is complied with when the consignee filed a provisional claim within the 30-day period. As of that date, the arrastre operator was given reasonable opportunity to check the validity of the claim while the facts were still fresh in the minds of the person who took part in the transaction and while pertinent documents were still available. It did not matter that the provisional claim was for the whole amount of the invoice. It is sufficient as long as the name of the carrying vessel, its date of arrival and BL are attached.

Firemens Fund v. Tabacalers, 34 SCRA 392

Held: The adverse stipulations of the Revised Management Contract will affect the importer only if the delivery permit is stamped: subject to RMC. Where there is none, the importer cannot be bound.

DEGREE OF DILIGENCE REQUIRED IN ARRASTRE

In the performance of its obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a warehouseman, i.e. EXTRAORDINARY DILIGENCE. Being custodian of the goods discharged from a vessel, an arrastre operators duty is to take good care of the goods and to turn them over to the party entitled to their possession. [Summa Insurance v. CA, 253 SCRA 175]

BURDEN OF PROOF IN ARRASTRE CLAIMS

In a claim for loss filed by a consignee, the burden of proof to show compliance with the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator. The reason is because the safekeeping of the goods rest within its knowledge. Hence, it must prove that the losses were not due to its negligence or that of its employee. [ICTSI v. Prudential Guarantee & Assurance Co., Inc., 320 SCRA 244]

SHIPPERS LOAD & COUNT SHIPMENT

When consigned goods are shipped under shippers load and count, the shipper is solely responsible for the containers load as the carrier would then be oblivious of the contents of the shipment. Protection against pilferage of the shipment are then the consignees lookout. The arrastre operator is, like any ordinary depositary, duty-bound to take good care of the goods received from the vessel and to turn the same over to the party entitled to their possession, subject to such qualification as may have validly been imposed in the contract between the parties.

The arrastre operator is not required to verify the contents of the container received and to compare them with those declared by the shipper because the cargo was at the shippers load and count, and is expected to deliver to the consignee only the container received from the carrier.

COMMERCIAL TERMS WHEN CARRIER INTERVENES

FOB (Free on Board) Delivery to the vessel is delivery to the buyer. Carrier becomes the AGENT OF THE BUYER. FAS (Free Alongside Ship) The seller pays all charges and bears the risk until the goods are placed alongside overseas vessel and within the reach of its loading tackle. The same presumption as FOB.

CIF (Cost, Insurance & Freight) The quotation price quotation on CIF presumes that the seller shall pay the cost of rating and packaging, insurance and the freightage. Carrier is deemed the agent of the seller and ownership is retained by him throughout the trip. It passes to the buyer only upon reaching the port of destination and the cargo is discharged and delivered to the buyer. Insurable interest is with the SELLER. Taxes are not yet due since the sale is not yet deemed perfected until the cargo reaches the port of destination.

PART II MARITIME LAW

Chapter 6 GENERAL CONCEPTS

MARITIME LAW
The system of laws which particularly relates to the affairs and business of the sea, to ships, their crews and navigation, and to marine conveyance of persons and property. Includes: Book II, Code of Commerce (Maritime Commerce Act No. 2616 (The Salvage Law) C.A. No. 65 (Carriage of Goods by Sea Act) P.D. 1521 (Ship Mortgage Decree of 1978) R.A. 9295 (The Domestic Shipping Act of 2004) Other special laws relating to maritime commerce

ORIGINS OF SHIPPING

Mans first use of the sea started 3,000 years ago Fishing developed into highly organized activity. At that time, ships were used to carry large and heavy piece of cargo which neither man nor beast of burden can carry. In one account, the Queen of Ancient Egypt move her stone obelisks weighing 700 tons through the entire length of Egypt on the Nile River. Egyptians were credited in revolutionizing shipping when they invented the SAIL.

But it is the ROMANS who conceived the basic principle of marine transport on economic dimension of shipping when they found out that carting a large quantity of grain to the empires frontier 75 miles away would cost more than to ship it by sea.

CODE OF HAMURRABI

In 2000 BC, Babylonian Ruler Hamurrabi codified the following maritime laws on: - Marine Collisions - Bottomry - Reimbursement for Leased Watercraft

DEVELOPMENT OF UNIVERSAL MARITIME LAW

Phoenicians Sea Law Code of Rhodes, which regulated Greek Commerce for a very long time Roman Maritime Law

RHODIAN - ROMAN MARITIME LAW

1st Section (MARE) Deals with the sea and concerns of public law of the sea. Mare liberium did not exist yet. 2nd Section (NAVIS) Deals with the ship and enunciates the classification of watercrafts into freighter or passenger vessels and seagoing or inland crafts. 3rd Section (MERX) Deals with cargo and the admiralty principles as known today. 4th Section (OBLIGACIONES) - Deals with the responsibilities of ship owners and masters. 5th Section (ACTIONS) Deals with dispute settlement arising from shipping transactions.

EVOLUTION OF MODERN LAW ON MERCHANT SHIPPING

1896: Comite Maritime Internationale (CMI) organized for the purposed of unification of merchant marine rules. Conference Diplomatique De Droit Maritime (Brussels) 16 International Conventions and protocols approved, i.e. collision at sea, salvage, bill of lading, carriage of goods by sea, etc.

UN AGENCIES IN MARITME LAW

International Maritime Organization (IMO) established the Technical Regulation of Shipping. United Nations Conference on Trade and Development (UNCTAD) established the Economic Regulations of Shipping. International Labor Organization (ILO) established the International Merchant Labor Regulations Standards. UN Conferences Established UNCLOS (1982), Geneva Conventions on the Law of the Sea (1958/1960)

REAL AND HYPOTHECARY NATURE 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 interest which are ventured and risked in maritime expeditions. [Phil. Shipping Co. v. Vergara, G.R. No. 16000, June 1, 1906]

MEANING OF REAL AND HYPOTHECARY NATURE

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. NO VESSEL, NO LIABILITY RULE.

SUMMARY OF THE NATURE OF MARINE TRANSACTIONS

REAL A vessel is essentially a personal property because it is movable. But the Supreme Court characterized maritime transactions as having a real nature insofar as these transactions are similar to transactions over real property with respect to effectivity against third persons which are effected through registration. Registration of vessels now lodged at MARINA. HYPOTHECARY The liability of the owner of the vessels is limited to the vessel itself. If he vessel sinks, generally the liability of the owner is extinguished, although he may have other properties

EVIDENCE OF REAL NATURE OF MARITIME LAW

Limitation of the liability of the agents to the actual value of the vessel and the freight money; and Right to retain the cargo and the embargo and detention of vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. [Luzon Stevodoring v. CA, 156 SCRA 169]

Aboitiz Shipping v. General Accident Fire Ins., 217 SCRA 359

Held: The rights of 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. 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.

Monarch Insurance v. CA, 333 SCRA 71

The Limited Liability Rule in Maritime Law has not been rendered obsolete by the advances in modern technology which have considerably lessen the risks involved in maritime trade, and the courts continue to apply the said rule in appropriate cases.

ICTSI v. PRUDENTIAL GUARANTEE, 320 SCRA 244

Held: As both nature of the function and the place of their performance, an arrastre operators service are clearly not maritime in character. The legal relationship between an arrastre operator and a consignee is akin to that between a warehouseman and a depositor.

PROVISIONS ON LIMITED LIABILITY RULE

Art. 587, CoC: 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 equipment and the freight it may have earned during the voyage. Art. 590: The co-owners of the vessel shall be civilly liable in the proportion of their contribution to the common fund for the results of the acts of the captain, referred to in Art. 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part of the vessel belonging to him

Art. 643 (Ibid): 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 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 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.

Art. 837 (Ibid): The civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all her appurtenances and freight. Notes: Art. 837 applies to collision cases only.

EXCEPTIONS

Where the injury or death to a passenger is due either to the fault of the ship owner or to the CONCURRING NEGLIGENCE OF THE SHIP OWNER AND THE CAPTAIN. Where the vessel is insured. In workmens compensation claims. Where vessel is partially lost. Liability on repairs made prior to the loss of the vessel. Foreclosure of mortgage on the ship

SHIPOWNERS FAULT

The well-entrenched rule in our jurisprudence is that a ship owner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of Maritime Law, if fault can be attributed to the ship owner. [Negros Navigation v. CA, 281 SCRA 534]

CONCURRENT NEGLIGENCE OF SHIPOWNER & CAPTAIN

Although the ship agent is liable for the negligent act of the captain in the care of goods loaded on the vessel, this liability can be limited through abandonment of the vessel, its equipment and freightage as provided in Art. 387. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment as where loss or injury was due to fault OF SHIPOWNER AND CAPTAIN.

Manila Steamship v. Abdulhman, 100 Phil. 32

Facts: Abdulhaman bought a submarine chaser of WWII vintage, which he converted into a passenger ship. The chaser, being at fault collided with a new steel vessel of Manila Steamship and it sank. Manila Steamship sued to recover damanges as Adbulhaman had other properties. The latter put up the defense that his liability was extinguished by the loss of the chaser. It was proven that the chaser, being of a certain tonnage, should have been commanded by one having qualifications of captain and not a mere patron.

Held: Abdulhaman is still liable. The hypothecary nature will not apply when the ship owner is personally at fault due to: - Lack of proper equipment; or - Lack of proper technical training of the officers and crew.

PARTIAL LOSS

In the event the vessel is not entirely lost, the hypothecary nature of the maritime transaction under Art. 837 of the Code of Commerce will not apply, unless the shipowner or agent abandons the vessel. [Luzon Stevedoring v. CA, 156 SCRA 169]

REPAIRS ON VESSEL

The limited liability rule in maritime law does not apply in case where the liability was for repairs on the vessel that was completed before her loss. [Government of P.I. v. Insular Maritime Co.. 45 Phil. 805]

LOSS COVERED BY INSURANCE

Where vessel is at fault sinks but is insure, the insurance takes the place of such vessel. The liability subsists but only to the extent of the insurance proceeds. The excess is still subject to the hypothecary rule. [Pedro Vazquez v. CA, 138 SCRA 553]

Abueg v. San Diego, 77 Phil. 32

Facts: A vessel of San Diego, a shipping operator, sank and one crew member died. When the heirs of the deceased sought compensation under the Workmens Compensation Law, San Diego put up the defense of the hypothecary nature of maritime transactions to avoid liability.

Held: San Diego is still liable. Workmens compensation is an exception to the hypothecary nature of maritime transactions in view of two reason, to wit: (1) The Code of Commerce was promulgated in 1880 while the Workmens Compensation Law was enacted in 1925. In case of conflict, the latter prevails. (2) Provisions on hypothecary nature of maritime transactions contained in the Code of Commerce are general provisions while that in Workmens Compensation Law are specific. In case of conflict, specific provisions of law prevail.

Loadstar Shipping v. CA, 315 SCRA 339

Held: Failure of common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Art. 1755 of the Civil Code. The doctrine of limited liability will not apply.

ABANDONMENT OF VESSEL

Abandonment of the vessel, its appurtenances and freightage is an indispensable requirement before the shipowner can enjoy the benefits o the limited liability principle. In case of collision, abandonment of the vessel is necessary in order to limit the liability of the shipowner or the agent to the value of the vessel, its appurtenances and freightage earned in the voyage. Only instance abandonment is dispensed with is when the vessel was entirely lost. [Phil. Shipping Co. v. Garcia, 6 Phil. 281

Protest

A written statement by the master of a vessel or any authorized officer, attested by a proper officer or a notary, to the effect that damages has been suffered by the ship. Protest is required under the Code of Commerce in the following cases: 1. Arrival under stress 2. Shipwrecked 3. Gone through a hurricane or the captain believes that the cargo has suffered damage or average 4. Maritime collisions

Admiralty Jurisdiction

RTC or MTc, depending on the amount of the demand or claim. Amount determines jurisdiction of the court. The proceeding is in rem.

Chapter 7

Vessels

Ship or vessel

Ship or Vessel - means any kind, class or type of craft or artificial contrivance capable of floating in water, designed to be used, or capable of being used, as a means of floating in water transport in the domestic trade for the carriage of passengers or cargo, or both, utilizing its own motive power or that of another. [R.A. 9295]

Prescriptive Period on Vessels

Acquisitive prescription: Good faith 4 years; bad faith 8 years. Prescription doesnt run in favor the captain since he holds the position that of a trustee. [Art. 573] Right of pre-emption and legal redemption available to co-owners to be exercised within 30-days from sale of the vessel. [Art. 575]

Rules on Co-ownership of Vessel

Co-ownership of vessel gives rise to a partnership ipso jure. No agreement is needed before a partnership is created. {Note: This is one instance of a partnership coming into existence by mere operation of law. Another instance when there is commingling of similar good of fungible nature.} Majority may perform acts of administration but acts of ownership require the concurrence of all the coowners. Majority is determined in accordance to the following: 1 vote given to the co-owner who contributed the least capital, 2 votes to the one who gave double, et sequitur.

Importance of the Definition

The word vessel (Spanish: buque or nave) 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. The word nave, which is used inter-changeably with buque means a SHIP, A VESSEL WITH DECKS AND SAILS. A deck is not a feature of the smallest types of watercraft. Such type of watercraft is not contemplated in Art. 835 requiring protest in case of collision. [Lopez v.Dureolo, 52 Phil. 229]

It is therefore clear that a passenger on a boat like the Jison, in the case before us, is not required to make protest as a condition precedent to his right of action for the injury suffered by him in the collision described in the complaint. Art. 835 does not apply. Nevertheless, under Article 836, it is provided that want of protest cannot prejudice a person not in a condition to make known his wisher. An individual who has suffered a compound fracture of the femur and received other physical injuries sufficient to keep him in a hospital for many months, cannot be supposed to have been in a condition to make protest within 24-hours of such occurrence.

Peculiar nature of vessels (Philippine Refining Co. v. Jarque, G.R. 41506, Mar. 25, 1935)

Vessels are considered personal property under civil law. Similarly under the common law, vessels are personal property although referred to as a peculiar kind of personal property. Since the term personal property includes vessels, they are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law (Act No. 1508, Sec. 2).

The only difference between a chattel mortgage of a vessel and of other personalty is that it is not now necessary for a chattel mortgage of a vessel to be noted in the register of deeds, but it is essential that a record of documents affecting title to a vessel be entered in the record of the Collector of Customs (now with MARINA by virtue of M.C. 90) at the port of entry (now at the port of registry, in case of coastwise vessel). Otherwise, a mortgage on a vessel is generally like other chattel mortgages as to its requisites and validity.

Mortgage of Ship (P.D. 1521)

Sec. 3. Mortgage of Vessel of Domestic Ownership; records (a) No mortgage is valid in respect to such vessel against any person other than the mortgagor, his heir or assign, and a person with actual notice thereof unless recorded with the PCG (now MARINA) Sec. 4. Preferred Mortgages: Mortgage is preferred based on the date of recording if: - It is recorded with PCG (MARINA) - An affidavit in good faith is filed together with the record of mortgage. - No waiver of preferred status.

Suit in Admiralty (Sec. 10. P.D. 1521)

Preferred mortgage constitutes as a lien upon the vessel. In case of default, the mortgage lien may be enforced by SUIT IN REMAINING ADMIRALTY, wherein the vessel itself may be made a party defendant and be arrested in accordance with Sec. 11. Original jurisdiction: CFI (now depending on the amount of the claim) Requirement of notice by publication and actual notice to: - the master or other ranking officer, or caretaker of the vessel; and - Any person who has recorded a notice of claim of an un-discharged lien upon the vessel.

Arrest of Vessels [Sec. 11, P.D. 1521]

Upon filing of petition for judicial foreclosure of a Preferred Ship Mortgage or immediately thereafter, Applicant may apply ex-parte for an order for the arrest of the mortgaged vessel. Judge to immediately issue arrest order, if it is made to appear by affidavit of the applicant, or of some other person who personally know the facts that a default in the mortgage has occurred and that applicant files a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicants claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse part and all damages sustained.

Procedure in discharge of arrest (Sec. 12, P.D. 1521)

File counter-bond in an amount double of the claim; or Apply for order on the ground of improper or irregular issuance of order.

Extrajudicial Foreclosure of Vessel (Sec. 14, P.D. 1521)

Applicable provisions in Chattel Mortgage Law govern. For purpose of taking possession of the vessel, the foreclosing creditor to secure from RTC Judge of the province where the vessel may be our or where the creditor or debtor resides, an order for the arrest or seizure of the vessel. Upon issuance of the order, the sheriff to immediately take possession of the vessel for the purpose of foreclosure and sale.

Foreign Ship Mortgage (Sec. 15, P.D. 1521)

Preferred mortgage in foreign ship includes those duly recorded by virtue of Sec. 4 (supra) and: Preferred mortgage lien in foreign ship is subordinate to maritime liens for repairs, supplies towage, use of drydock or marine railway, or other necessaries performed or supplied in the Philippines.

How proceeds of sale disposed (Sec. 17, P.D. 1521)

Preferred mortgaged lien takes priority over all claims against the vessel. Exceptions: 1. Expenses and fees allowed and costs taxed by the court and taxes due to the government. 2. Crews wages. 3. General average. 4. Salvage, including contract salvage. 5. Maritime liens arising prior in time to the recording of the preferred mortgage. 6. Damages arising out of tort. 7. Preferred mortgaged registered prior in time.

If proceeds of the sale is not sufficient to pay all creditors included in one number or grade, the residue shall be divided among them pro rata. All credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor.

Suit in Personam in Admiralty upon Default (Sec. 18. P.D. 1521)

Allows the creditor to bring suit in personam in admiralty against the mortgagor for the amount of the outstanding mortgage indebtedness even if secured by the vessel. If the debt is also secured by other realty or personalty, the creditor may proceed upon the same.

Maritime Lien for Necessaries (Sec. 21, P.D. 1521)

Repairs, supplies, towage, use of drydock or marine railway, or other necessaries were furnished to the vessel. The work is done on orders of the ship owner or person authorized by the owner. Such credit must be alleged or proved that it was given to the vessel. Enforceable by suit in rem.

MARINA M.C. 100 (Guidelines on Annotation/Cancellation of Mortgage)

Documentary requirements: Letter of Intent & Duly accomplished application form; Duly notarized mortgage contract; Proof of payment of documentary stamp tax with the BIR; and Original copy of CO and CVR. Note: The annotation of mortgage to be reflected at the back of the CVR and CO.

Other applicable MARINA regulations on vessels

M.C. No. 48 Measure to control overcrowding/ overloading and scalping of tickets in the interisland vessels. M.C. No. 72 Guidelines on the Implementation of at least 10-minute film on safety features of each specific passenger/passenger-cargo vessels as amended by M.C. No. 136. M.C. No. 83 Guideline on the issuance of endorsement certificates in accordance with the STCW (Standards for Training, Certification and Watchkeeping) 1978 Convention. M.C. No. 89 Implementing guidelines for vessel safety regulations as amended by 89-B.

M.C. No. 114 Preventive Safety Measure and other concerns M.C. No. 123 Wearing of lifejackets during boarding and/or prior to departure by all passenger vessels with open deck accommodation. M.C. No. 135 Rules on the implementation of voice tape on the safety features of a vessel. M.C. No. 143 Rules and regulations to implement the International Safety Management (ISM) Code in Domestic Shipping ( M.C. No. 159 for NSM).

Republic Act 9295

The Domestic Shipping Development Act of 2004

State policies on shipping (Sec. 2)

(a) promote Filipino ownership of vessels operated under Philippine flag; (b) attract private capital to invest in the shipping industry by creating a healthy and competitive investment and operating environment; (c) provide necessary assistance and incentives for the continued growth of the Philippine domestic merchant marine fleet;

(d) encourage the improvement and upgrading of the existing domestic merchant marine fleet and Filipino crew to meet international standard; (e) ensure the continued viability of domestic shipping operations; and (f) encourage the development of a viable shipbuilding and ship repair industry to support the expansion and modernization of the Philippine domestic merchant marine fleet and its strict adherence to safety standards which will ensure the seaworthiness of all sea-borne structures.

Important terms in R.A. 9295 & IRR

Domestic Shipping - means the transport of passengers or cargo, or both, by ships duly registered and licensed under Philippine law to engage in trade and commerce between Philippine ports and within Philippine territorial or internal waters, for hire or compensation, with general or limited clientele, whether permanent, occasional or incidental, with or without fixed routes, and done for contractual or commercial purposes. Domestic Trade - means the sale, barter or exchange of goods, materials or products within the Philippines.

Domestic Ship Operator" or "Domestic Ship Owner" means a citizen of the Philippines, or a commercial partnership wholly owned by Filipinos, or a corporation at least sixty percent (60%) of the capital of which is owned by Filipinos, which is duly authorized by the Maritime Industry Authority (MARINA) to engage in the business or domestic shipping. Shipper - means any person, partnership or corporation who shall procure for itself the services of a domestic ship operator for the carriage of its cargo in the domestic trade upon payment of proper compensation.

Certificate of Public Convenience - means the license or authority issued by MARINA to a domestic ship operator to engage in domestic shipping. Cargo Handling Equipments - means any machinery gear or equipment used by the ship operator or a duly authorized and licensed port operator to service or handle cargo, on board the vessel, at the pier, or in the terminal or container yard such as, but not limited to, cranes, forklifts, top lift, stacker, tractor heads, containers, pallet boards, and the like, including all spare parts, replacement parts, appurtenances, accessories, articles, supplies, and material thereof.

Shipbuilding - means the design, construction, launching and outfitting of all types of ships and watercraft; Ship repair - means the overhaul, refurbishment, renovating, improvement, or alternation of the hull, machineries, equipment, outfits and components of all types of ships; Shipyard - means the shipbuilding or repair facilities which have the capability to lift vessels above the waterline in order to effect ship work vessels, appendages, structure, machinery and equipment.

Investment incentives to domestic shipping industry (Sec. 4)

(a) Exemption from value-added tax on the importation and local purchase of passenger and/or cargo vessels of one hundred fifty (150) tons and above, including engine and spare parts of said vessels. Vessels to be imported must comply with the age limit requirement, at the time of acquisition counted from the date of the vessels original commissioning, as follows: 1) For passenger and/or cargo vessels, the age limit is fifteen (15) years old, 2) For tankers, the age limit is ten (10) years old, and 3) For highspeed passenger craft, the age limit is five (5) years old;

(b) Exemption from value-added tax on the importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates, and other metal plates including marine-grade aluminum plates, used for transport operations. CONDITIONS IN THE GRANT OF (a) & (b): Not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices; Directly imported by a MARINA-registered domestic shipping operator;

Reasonably-needed and will be used exclusively by the registered domestic shipping operators in its transport operations; Approval of a MARINA was obtained prior to the importation of said articles;
Valid up to ten (10) years from effectivity.

Deregulation of the Domestic Shipping Industry (Sec. 8)

Domestic ship operators authorized to establish their own domestic shipping rates provided that effective competition is fostered and public interest is served. 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.

Safety Standards (Sec. 9)

All vessels shall at all times be in seaworthy condition, properly equipped with adequate lifesaving, communication, safety and other equipment, operated and maintained in accordance with the standards set by MARINA, and manned by duly licensed and competent vessel crew. The MARINA given the power to inspect vessels and all equipment on board vessels to ensure compliance with safety standards.

Jurisdiction of MARINA (Sec. 10)

Register vessels; 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; 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; Establish and prescribe routes, zones of areas of operations of domestic ship operators;

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; Set safety standards for vessels in accordance with applicable conventions and regulations;

Require all domestic ship operators to comply with operational and safety standards for vessels set by applicable conventions and regulations, maintain its vessels in safe and serviceable condition, 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; Inspect all vessels to ensure and enforce compliance with safety standards and other regulations;

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; Determine the impact which any new service shall have to the locality it will serve; 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 vessels safety;

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; Hear and adjudicate any compliant made in writing involving any violation of this law or the rules and regulations of the Authority; Impose such fines and penalties on, including the revocation 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;

Investigate any complaint made in writing against any domestic ship operator, or any shipper, or any group of shippers regarding any matters involving violations of the provisions of this Act; 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

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.

Prohibited Acts and Practices of Domestic Ship Operators (Sec. 16)

Operate without a valid certificate of public convenience, accreditation or other form of authority required by this Act; Refuse to accept or carry any passenger or cargo without just cause; Fail to maintain its vessels in safe and serviceable condition, or violate safety rules and regulations; Fail to obtain or maintain adequate insurance coverage; Fail to meet or maintain safe manning requirements; and Such other acts which the MARINA shall determine, after due notice and hearings, to be detrimental or prejudicial to the safety, stability and integrity of domestic shipping.

CPC Issuance (Sec. 2, Rule IV, IRR of R.A. 9295 on Deregulation)

Power of MARINA to issue CPC or any amendments/extensions/renewals. Requirements: Economic and beneficial effect which the proposed service shall have to the port, province or region which it proposes to serve; and Financial capacity of the domestic shipowner/operator to provide and sustain safe, reliable, adequate, efficient and economical service in accordance with the standards set by government regulations.

Amendment to CPC (Sec. 3, Rule IV IRR)

Permanent Addition or Deletion of a route/port/link; or, Permanent Addition/ Reduction/ Replacement of Ship/Fleet or Change in Ships Name; or, Permanent Addition/ Reduction/ Replacement of Ship/Fleet or Change in Ships Name; or, Change in name of the entity/corporation/partnership/cooperative.

Validity of CPC (Sec. 5, Rule IV IRR)

Years of Operation More than 10 years Validity of CPC 25 years

More than 5 years up to 10 15 years years 5 years and below 10 years

Qualification Requirements (Sec. 6, Rule IV, IRR)

Must be a MARINA-registered shipowner/operator per MARINA MC 79/79-A or their subsequent amendments. Must be financially capable to provide and sustain safe, reliable, adequate, efficient and economical service in undertaking the proposed shipping service. Formula on Financial Capability: Capitalization = (Equity fixed assets net of long-term liabilities) + total depreciation Must provide a service that has economic and beneficial effect on the port, province or region it proposes to serve.

Jurisdictional Requirements (Sec. 8, Rule IV, IRR)

Affidavit of publication with the newspaper clipping; Copy of the whole newspaper where the Order was published; Photographs showing proof of the required posting of Order.

Safety Standards (Sec. 1, Rule VI, IRR)

All ships shall, at all times, be in seaworthy condition as to their hull and machinery Properly outfitted with adequate navigational aids and equipment, firefighting, life-saving, communication, and other safety appliances/equipment. Operated and maintained in accordance with prescribed standards, and manned by duly licensed and competent ship crew.

Rates (Sec. 1, Rule VIII, IRR)

Domestic shipowners/operators are authorized to establish/fix their own domestic shipping rates, passenger or cargo rates or both. Limitation: Effective competition is fostered and public interest is served. Effectivity: 7 calendar days from the date of publication.

Conditions in Fixing Rates (Sec. 2, Rule VIII, IRR)

Shipowners/operators with Entity/Company CPC to submit under oath with the MARINA their Notice for the adoption of initial/ subsequent upward or downward adjustment of deregulated rates in a prescribed form. The notice shall indicate, among others, the name of covered ship(s), authorized route(s)/link(s), rate(s) per route/link and the grounds for the adjustment.

Publication Requirement of Adjusted Rates

The notice shall be published in any of the five (5) major newspapers of national circulation, if the route(s)/area(s) of operation to be served is national and/or inter-regional in scope. If the route(s)/area(s) to be served is local or intraregional in scope, publication in a newspaper of local circulation is sufficient. And, posting of the notice in in all conspicuous places at the affected port(s), vessel(s), company premises, passenger terminals and ticketing office(s).

Instances Warranting MARINA Intervention (Sec. 4, Rule VIII, IRR)

Monopoly of a route/link, lack of effective competition in a route/link, and practices which constitute combinations in restraint of trade. Any complaint against the rates charged and/or services rendered by the shipowners/operators provided sufficient basis/justification is submitted. Any adverse findings/recommendations as a result of monitoring activities undertaken by the MARINA. Other analogous instances.

Compulsory Insurance Coverage (Sec.1, Rule IX, IRR)

(1) Not less than Php 200,000.00 per manifested passenger; (2) Adequate insurance coverage for cargo, in an amount to be computed in accordance with existing laws, rules and regulations, and the total amount of such coverage shall be equivalent to the total cargo capacity being offered by the vessel. (3) If a domestic shipowner/operator should offer both passenger and cargo service, then the total insurance coverage shall be in the total sum equivalent to that stipulated in paragraphs (1.1) and (1.2) of this Section.

Amount of Insurance If Operating more than (1) ship

The amount equivalent to the total authorized number of passengers, or total cargo capacity, or both, of the largest operating ship. But must not exceed the value of such ship.

Prohibited Acts (Sec. 1, Rule XII, IRR)

Operating without a valid certificate of public convenience, accreditation or other form of authority. Refusal to accept or carry any passenger or cargo without just cause, except for tramp operations. Failure to maintain the vessels in safe and serviceable condition, or violation of the safety rules and regulations. Failure to obtain or maintain adequate insurance coverage. Failure to meet or maintain safe manning requirements.

Failure to submit the required Quarterly Report and an audited Annual Report of Operations and Finances, attaching the copy of the Official Receipt (OR) of Quarterly and Monthly Common Carriers Tax Payments to the Bureau of Internal Revenue. Other detrimental or prejudicial to the safety, stability and integrity of domestic shipping. Those prohibited acts defined in existing MARINA Circulars.

Powers of MARINA (Rule XIV, IRR)

Power to Investigate Power to Hear and Adjudicate Power to Issue Summons

Rules on Appeals to MARINA Regional Offices CPC Decisions (Rule XV, IRR)

Order, ruling, decision or resolution rendered by MARINA Regional Office relating to CPC application MR 15 days from receipt; If denied, appeal to Administrator 15 days from receipt. If denied by MARINA Administrator: - ADMINISTRATIVE APPEAL to the MARINA Board within 15 days from receipt; or - Special Civil Action on Certiorari with CA within 30 days from receipt.

All other Decisions

MR 15 days from receipt; If denied, appeal to MARINA Administrator 15 days from receipt. If denied by MARINA Administrator: ADMINISTRATIVE APPEAL to the MARINA Board within 15 days from receipt.

Perfection of Appeal

File a Notice of Appeal with the MARINA Administrator and the concerned CO/MRO Director/OIC. Copy to be served upon the adverse party. Within 15 days from receipt of the appealed from decision, etc. Payment of Docket Fee of P1,000.

Temporary Take-Over of Operations (Sec. 1, Rule IX, IRR)

In times of national emergency; When the public interest so requires; Under reasonable terms prescribed by the Flag state; Flag state may temporarily take over or direct the operations of any vessel engaged in domestic trade and commerce or prescribe its rates or routes of operation. Immediately upon the cessation of the emergency, the State shall immediately reinstate to the domestic shipowner/operator the operation of the ship under the same terms and conditions existing prior to the occurrence of the emergency.

Chapter 8 Persons Who Take Part In Maritime Commerce

Ship owner and Ship agent

Ship owner the person primarily liable for damages sustained in the operation of vessel. Ship agent the person entrusted with provisioning of the vessel, or who represents her in the port in which she happens to be. Both are civilly liable for the acts of the captain and for the obligations contracted by the him to repair, equip, and provision the vessel. [Art. 586, Code of Commerce]

Domestic Shipowner/operator

A citizen of the Philippines, or a commercial partnership wholly owned by Filipinos, or a corporation at least sixty percent (60%) of the capital of which is owned by Filipinos, which is duly accredited by the MARINA under Memorandum Circular No. 79/79-A or their subsequent amendments to engage in the business of domestic shipping, which may include cooperative or association duly registered with relevant government agency. [IRR, R.A. 9295]

Captain and Masters

Captain those who govern vessels that navigate the high seas or ships of large dimensions and importance, although they may be engaged in coastwise trade. Masters those who command smaller ships engaged exclusively in the coastwise trade. Note: For purposes of maritime commerce, both have the same meaning, i.e. they command ships.

Powers & Functions of Captains (Masters)

Nature of his position: confidential and managerial. 3 distinct roles he performs: (1) As general agent. If he is also a co-owner, his agency becomes one coupled with interest. He may not be dismissed if he is a co-owner or the partnership agreement stipulates as a condition as ship captain [see Art. 602 & 606 -607]; (2) As commander and technical director of the vessel; and (3) As representative of the country under whose flag he navigates.

Vessel Pilot

A person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. In a broad sense, the term pilot includes: - Those whose duty it is to guide vessels into or out of ports, or in particular waters; and - Those entrusted with navigation of vessels on the high seas. Compulsory pilotage is enforced in the Port of Manila, Port of Cebu, Port of Tacloban, among others.

Pro Hac Vice Nature of Position of Pilot

Under English and American authorities, generally speaking, the pilot supersedes the master for the time being in the command and navigation of the ship, and his order must be obeyed in all matters connected with her navigation. He becomes master pro hac vice and should give all directions as to speed, course, stopping and reversing, anchoring, towing and the like. And when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty to insist on having effective control of the vessel or to decline as pilot. [Far Eastern Shp., v. CA, G.R. No. 130068, Oct. 1, 1998]

Occasions When Master May Interfere or Even Displace Pilot

When Pilot is obviously incompetent or intoxicated; In cases of danger which pilot does not foresee; In all cases of great necessity. To advise or offer suggestions to the pilot considering that he is still in command of the vessel, except so far as her navigation is concerned. To see that there is sufficient watch on deck and that the men are attentive to their duties, etc. Failure on the part of the Master to comply with above duties makes him personally liable for resulting damage cause. [Ibid]

Liability of Pilot

Rule: a pilot is personally liable for damages caused by his own negligence or default to the owners of the vessel and to third parties for damages sustained in a collision. Negligence of Pilot is known as MARITIME TORT As held In Far Eastern Shipping: In the United States, the owners of a vessel are not personally liable for the negligent acts of a compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is imputable to the vessel and it may be held liable therefor in rem.

Where, however, by the provisions of the statute the pilot is compulsory only in the sense that his fee must be paid, and is not in compulsory charge of the vessel, there is no exemption from liability. Even though the pilot is compulsory, if his negligence was not the sole cause of the injury, but the negligence of the master or crew contributed thereto, the owners are liable. But the liability in rem does not release the pilot from the consequences of his own negligence. The rationale for this rule is that the master is not entirely absolved of responsibility with respect to navigation when a compulsory pilot is in charge.

Other Officers and Crew

Deck Officer an officer qualified in accordance with the provision of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW) 1978, as amended, Chapter II. Chief Engineer a senior licensed marine engine officer responsible for the mechanical propulsion and the operation and maintenance of the mechanical and electrical installations of the ship. Engineer Officer an officer qualified in accordance with the provision of (STCW) 1978, as amended, Chapter III.

Radio Officer a person holding an appropriate certificate issued and recognized by the MARINA under the provisions of the Radio regulations. Ratings a member of the ships crew other than the master or an officer. Major Patron (MAP) a marine deck officer duly registered and certificated to act as officer or master of vessel of not more than 500 GT navigating in the major coastwise trade routes within the territorial limits of the Philippines.

Minor Patron (MIP) a marine deck officer duly registered and certificated to act as officer or master of vessel of not more than 250 GT navigating within a specified body of water in the minor coastwise trade route in the Philippines. Marine Diesel Mechanic (MDM) a person authorized by MARINA to operate and maintain the ships diesel engines or the qualification/license to act as such.

Supercargoes administrative officers of the ship with duties to keep an account and record of their transaction. Powers and duties of the captain with regard to that part of the administration shall cease when thee is a supercargo. Supernumerary - a person who is not a regular member of the crew but performing functions
appropriate to the certificate possessed.

Chapter 9

Charter Party

Definition of a Charter Party

A written contract whereby the ship owner or the ship agent leases the vessel to transport passengers or cargo for a fixed price. [Art. 652, Code of Commerce] A contact by which an entire ship or some principal part thereof, is left by the owner to another person for a specified time or use. [Caltex Philippines, Inc. v. Sulpicio Lines, Inc., 315 SCRA 709]

National Union Fire Insurance v. Stolt-Nielsen Phil., 184 SCRA 682

Held: Where BL has been issued covering goods shipped aboard a vessel under a charter party, and charterer remains the holder of the BL, it operates as a receipt for the goods, and as document of title passing the property of the goods, but not as varying the contract between the charterer and ship owner. The BL becomes merely a receipt and not the contract of carriage in a charter of the entire vessel.

Ouano vs. CA, 211 SCRA 740

Held: Even if a charter party has a condition against subchartering, and the vessel was in fact sub-chartered without knowledge on the part of the sub-charterer of the prohibition, no cause of action arises in favor of the owner of the vessel against the sub-charterer. Neither does such owner have any lien against the cargo of sub-charterer. Carrier has a lien on the goods only while he retains possession of the goods

Obligation of the Charterer

Charterer, before transporting its cargo, is of no obligation to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier as it is the one engaged in public service. [Caltex v. Sulpicio Lines, infra]

Important Terms Used in Charter Party

Primage the bonus to be paid to the captain after a successful voyage. Demurrage A penal clause intended to compensate the owner of the vessel for its non-use. Lay days The period when the vessel will be delayed in port for loading and unloading. Deadfreight The portion of the cargo under a charter not loaded. It is also used as the amount recoverable by the ship owner from the charterer for that portion of the ships capacity that the latter failed to occupy despite the stipulation in the charter party.

Cases on Demurrage

In its strict sense, demurrage is the compensation provided for in the contract of affreightment for the detention of the vessel beyond the lay time or that period of time agreed on for loading and unloading of cargo and is given to compensate the ship owner for the non-use of the vessel. [National Steel v. CA, 283

SCRA 45]

Demurrage is the sum fixed in a charter party as remuneration to the ship owner for the detention of his vessel beyond the number of days allowed by the charter party for loading or unloading or for sailing.

[NFA v. CA, 311 SCRA 700]

NFA v. CA, 311 SCRA 700

The shipper or charter is liable for the payment of demurrage claims when he exceeds the period of loading or unloading as agreed upon or the agreed lay days. The period for such may or may not be stipulated in the contract. A charter party may either provide for a fixed lay days or contain general or indefinite words such as customary quick dispatch or as fast as the steamer can load. Customary quick dispatch implies that loading and unloading of the cargo should be within a reasonable period of time. Due diligence should be exercised according to the customs and usages of the port or ports of call.

The circumstances obtaining at the time of loading and unloading are to be taken into account. When the provision is for demurrage/dispatch: NONE it will be deemed a waiver of the right to claim demurrages. Delay in loading or unloading, to be deemed as demurrage, runs against the charterer as soon as the vessel is detained for an unreasonable length of time from the arrival of the vessel because no available berthing space was provided for the vessel due to the negligence of the charterer or by reason of the circumstances caused by the fault of the chartere.

Keng Hua Paper Products v. CA, 286 SCRA 257

Held: A claim for demurrage by carrier involves an obligation NOT ARISING from a loan or forbearance of money. The applicable interest rate is 6% P.A. pursuant to Art. 2209, NCC. When the BL does not specify the demurrage amount, and the total amount claimed by the carrier increased as the days went by, the total amount demanded cannot be deemed to have been established with reasonable certainty until the trial court rendered its judgment. Hence, the 6% is to be computed from the date of the trial courts decision imposing demurrage charges against the consignee.

Kinds of Charter Party

Contract of Affreightment one whereby the owner of the vessel leases a part or all of its space to haul goods for others. It is a contract for special services to be rendered by the ship owner. The ship owner RETAINS the possession, command and navigation of the ship, the charterer merely having use of the space in the vessel in return for his payment. Bare-boat or Demise Charter where the shipowner turns over possession of his vessel to the charterer, with the latter undertaking to provide the crew, victuals, supplies and fuel during the term of the charter. Charterer is owner PRO HAC VICE.

Two Classes of Contract of Affreightment

Voyage Charter The vessel is leased to the chartered for a single voyage only; Time Charter The vessel is leased for a fixed period of time.

Substantive Provisions Relating to Charter Party

If charterers cargo is not sufficient to fill up 3/5 of the capacity of the vessel, carrier has the right to unload the cargo and put it on a smaller vessel at the expense of the charterer. If cargo exceeds 3/5 of the cpacity, the carrier cannot exercise the right. [Arts. 670 & 671, CoC] If vessel has been chartered in whole by one party, the owner cannot receive the cargo of any other person as the charter party becomes an exclusive contract. [Art. 672] The owner of the vessel is liable to the charterer for damages in case the captain unduly delays the voyage. [Art. 673]

If charterer brings more than that agreed upon, the carrier may accept the increase in cargo and demand increase of freightate provided the vessel is not overloaded. [Art. 674] If vessel has been chartered to load cargo in another port and upon arrival in that port there is no cargo delivered, the captain has two options: a) Look for other cargo; or b) After expiry of lay days there is still no cargo, the captain should file a marine protest and return to home port in full ballast. The charterer should pay freightage in full. [Art. 675]

No right to freightage if charterer can prove that the vessel is not in condition to navigate. [Art. 676] Charter may sub-charter where there is no express prohibition. [Art. 679] Charterer who cannot fill the vessel is liable for full freightage. [Art. 680] Charterer is liable for damages if loaded cargo subjects the vessel to forfeiture or confiscation. Under Art. 356, carrier can open the packages of shipper to find out whether they contain items which may subject the vessel to forfeiture. [Art. 681]

If merchandise should have been shipped for purpose of illicit commerce, and were taken on board with knowledge of the person from whom the vessel was chartered or of the captain, the captain is jointly liable with the ship owner for all the losses which may cause the other shippers. [Art. 682] Where the vessel is in need of repairs, chartere must wait until vessel is repaired. [Art. 683] Before beginning of the trip, charterer may unload the cargo by paying of the freightage. [Art. 685 in relation to Art. 688]

Charterer is under obligation to pay the freightage after the discharge of the cargo. [Art. 686] Charterer and shippers cannot abandon the cargo unless it consist of liquids and leaks out due to inherent defect of the cargo and with not more than remaining in the container. [Art. 687]

Other rules affecting charter party and cargo

If merchandise sold to make necessary repairs, charterer shall still pay for the freightage. [Art. 659] If merchandise is jettisoned, lost at sea or seized by pirates, no obligation to pay freightage. Considered as general average. [Arts. 660 & 661] Merchandise damaged due to inherent defect: pay full freightage. [Art. 663]

Where payment is based on weight and the cargo increases in weight during the voyage, the charterer must pay the increase. [Art. 664] Cargo carried is subject to retaining lien by the ship owner. Retaining lien while in possession; Carriers lien subsists up to 30 days from date of release of cargo. [Arts. 665 - 667]

Valid Rescission By Charterer of Charter Party (Arts. 688 690, CoC)

Before loading by paying of the freightage agreed upon. The consent of ship owner is NOT NECESSARY. Mere notice to him is sufficient. {Note: This is the 1st distinction between charter party and in ordinary lease. In lease, none of the parties may unilaterally cancel the contract without paying the full consideration plus damages}; When the vessel is not up to the capacity agreed upon or the flag under which she sails differs from that agreed upon. No obligation to pay the freightage. When the vessel is not place at the disposal of the charterer. No obligation to pay the freightage.

When the vessel returns due to pirates or to bad weather and charterer decides to unload. He must pay the full freightage. When the vessel returns for repairs. If repairs take less than 30 days, charterer must pay in full the freightage; if it exceeds 30 days, he must pay that portion of the freightage proportionate to the distance covered.

Total Rescission by the Ship owner (Art. 689)

When the charterer fails to load the vessel and lay days have expired. In this case, charterer is under obligation to pay of the freightage. When the owner sells the vessel and the new owner, despite knowledge of the charter party, decides to load the vessel with his own cargo. There is no obligation on the part of the ship owner to compensate the charterer. But if the new owner has no cargo to load, he must respect the charter party. {Note: This is the 2nd distinction between charter party and in ordinary lease. In ordinary lease contract, if the buyer of the object of lease was aware of the lease, he must respect the contract.}

Total Rescission Due to Fortuitous Event (Art. 690)

War Blockade Prohibition to receive cargo Embargo of vessel by a Government Inability of vessel to navigate due to no fault of the captain or ship agent.

Chapter 10

Bottomry & Respondentia

Concepts of Bottomry & Respondentia

Bottomry: A maritime contract whereby the owner of a ship borrows for the use, equipment or repair of the vessel, for a definite term, and pledges the ship (or the keel or bottom of the ship pars pro toto) as security, with the stipulation that if the ship is lost during the voyage or during the limited time on account of the perils enumerated, the lender shall lose his money. Respondentia: A maritime contract where it is the goods, or some part thereof, are hypothecated as security for a loan, the repayment of which is dependent upon maritime risks.

Distinguished from Simple Loan

Firstly, in bottomry & respondentia, rate of interest is not subject to the Usury Law on account of the extraordinary risks involved while in simple loan, the rate of interest must not exceed the ceiling fixed by the Usury Law (note: read now as unconscionable). Secondly, in the former, there must necessarily be a marine risk, the existence of which must be duly established while there is no need for such risk under the latter. Thirdly, in the former, it must be executed in accordance with form and manner required in the Code of Commerce while in the latter, the formal requisites on contract apply.

Fourthly, loan on bottomry or respondentia must be recorded in the registry of vessels in order to bind third persons while no such registration is required in simple loan. Lastly, in the former, preference is extended to the last lender if there are several lenders upon the theory that were it not for the last lender, then the prior lenders would not have benefited from the preservation of the security. Whereas in the latter, the first lender, as a general rule, enjoys preference over subsequent ones. [Art. 730, CoC]

Characteristics/Common Elements of Bottomry & Respondentia

Exposure of security to marine peril. [Art. 732] Obligation of debtor conditioned only upon the safe arrival of the security at the point of destination.

Who May Contract Bottomry or Respondentia

Bottomry: General rule only the owner. If owner is absent the captain. [Art. 728] Respondentia: only the owner of the cargo.

Hypothecary Nature of Bottomry & Respondentia (Art. 731)

General Rule: The loss of the security, i.e. vessel in bottomry or cargo in respondentia, extinguishes the obligation. Exceptions: Due to inherent defect (cargo); Due to barratry on the part of the captain, i.e. malfeasance; Due to fault or malice of borrower; Vessel was engaged in contraband; and Cargo loaded different from that agreed upon.

Other Relevant Provisions on Bottomry & Respondentia

No bottomry on the salaries of the crew. [Art. 725] If loan given in excess of security through overvaluation by borrower, the excess must be returned with legal interest. [Art. 726] When respondentia loan is not all utilized for the cargo, the excess must be returned. [Art. 727] If the security in bottomry or respondentia is not subject to a marine peril, it becomes an ordinary loan. [Art. 729]

Lenders of bottomry and respondentia must contribute to the general average once jettison has made possible the safe arrival of the security. [Art. 732] Exposure to marine peril takes place from the time the anchors are a weighed at the port of departure until anchors are dropped at the port of destination. [Art. 733] In case of shipwreck and there is salvage, loan will depend on the repayment on what may be salvaged. [Art. 734]

The concurrence of bottomry loan with insurance, the insurable interest of the owner of the vessel is the value of the vessel less the loan in bottomry, in reference to Sec. 101 of the Insurance Code. [Art. 735] Failure to pay the premium on time of bottomry or respondentia loans gives rise to liablility for legal interest (delay ex re). [Art. 736]

Chapter 11

Averages

Average Defined

Any damage deliberately caused, or any expense deliberately incurred due to a marine peril and because of which the vessel and/or cargo is saved. Art. 806: All extraordinary or accidental expenses which may be incurred during the voyage in order to preserve the vessel, the cargo, or both. Excludes: Petty and ordinary expenses incident to navigation, e.g., pilotage, lighterage, towage, anchorage, inspection, health, quarantine, lazaretto [i.e., quarantine station for maritime travellers] , and other so-called port expenses, costs of barges and unloading until the merchandise is place in the wharf, and any other usual expenses in navigation.

Kinds of Average

Particular (or Simple) Average All the damages and expenses 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. The damages sustained shall be borne by the owner of the vessel or the goods only. [Art. 809] General Average All the damages and expenses which are DELIBERATELY caused in order to save the vessel, its cargo or both, AT THE SAME TIME, from REAL AND KNOW RISKS. [Art. 811]

Examples of Particular Average (Art. 809)

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. 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. Losses suffered by the merchandise LOADED ON DECK, except in coastwise navigation, if the marine ordinances allow it.

The wages and victuals of the crew when the vessel is detained or embargoed by legitimate order or force majeure, it the charter has been contracted for a fixed sum for the voyage. The necessary expenses on arrival at a port, in order to make repairs or secure provisions. The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to meet any other need of the vessel, against which the proper amount shall be charged.

The victuals and wages of the crew while the vessel is in quarantine. The loss inflicted upon the vessel or cargo by reason of an impact or collision with another, if it is accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the losses caused. Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or of the crew, without prejudice to the right of th owner to recover the corresponding indemnity from the captain, the vessel, and the freightage.

Requisites of General Average

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

Procedure in General Average

Before the loss is caused or the expenses incurred, the captain must call a meeting with the chief mate and other officers and any cargo owner who may be on board; They shall decide by voting on a resolution of the captain. If majority disagrees with the captain, the latter shall have the final decision; The minutes must be entered in the deck log book, signed by all the persons present and stating in detail all the goods jettisoned and the injuries caused to those kept on board; Copy of the minutes to be filed within 24 hours after arrival at first port of entry.

Examples of General Average

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. 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. 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.

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. 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. The expenses caused in order to float a vessel intentionally stranded for the purpose of saving it. The damage caused to the vessel which had to be opened, scuttled or broken in order to save the cargo.

The expenses for the treatment and subsistence of the members of the crew who may have been wounded or crippled in defending or saving the vessel. 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.

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. 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. The expenses of the liquidation of the average.

Who Will Contribute for the General Average

Those who benefited from the sacrifice: the ship owner and owners of the cargoes that were saved. Contribution may also be imposed on the insurers of the vessel or cargoes that were saved as well as lenders on bottomry or respondentia.

Who Are Entitled To The General Average

All the owners whose goods were sacrificed pro rata. Exceptions: Goods carried on deck unless the law or customs of the place allow such stowage. Goods that are not recorded in the books or records of the vessel. Fuel for the vessel if there is more than sufficient fuel for the voyage.

American Home Assurance v. CA, 208 SCRA 343

Held:

A particular average presupposes that the loss or damage is due to an inherent defect of the goods, an accident of the sea, or a force majuere or the negligence of the crew of the carrier governed by the Code of Commerce. The claims for damages due to the negligence of the common carrier are governed by the Civil Code provisions on common carriers.

Magsaysay Inc. vs. Agan, 96 Phil. 504

Facts: An interisland vessel of petitioner sailed from Manila to Aparri. The vessel entered the Aparri river where she stopped to load and unload. Overnight, a sand bar formed at the mouth of the river. On her way out, the vessel hit the sand bar and got stuck. A tug boat was sent by the owner to town the vessel. In Manila, the captain demanded from Agan and other cargo owners to reimburse him for the expenses of hiring the tugboat. Held: Particular average only. The cargo was not benefited since it was not perishable nor the cargo owner in a hurry. Even assuming it was general average, the captain did not call the meeting.

Philippine Home Assurance v. CA, 257 SCRA 468

Facts: A vessel, with cargo on board, caught fire due to a small flame coming from the acetylene cylinder which were stored in the accommodation area near the engine room and which exploded despite efforts to extinguish the fire. The vessel was subsequently towed to port with the expenses of having the cargo transshipped to port of destination was charged to the consignees. Petitioner sought recovery as subrogee.

Held: The consignee of the cargo cannot be made to share with the carrier for additional freight and salvage charges. Fire cannot be considered a natural disaster or calamity since it almost always arises from some act of man. It cannot be an act of God unless caused by a lightning or a natural disaster or casualty not attributable to human agency. While the facts of the case may technically fall within the purview of general average, the formalities prescribed were not complied with. Consequently, the carriers claim for contribution from the consignees cannot be enforced.

Jettison of Cargo

Cargo on deck shall be first to be jettisoned followed by those from the lower deck then those of bigger bulk but of smaller value. [Art. 815] Cargo jettisoned, to be entitled to reimbursement for general average, must be covered by a bill of lading. [Art. 816] Expenses to lighten a vessel by the transfer of goods to other vessels is general average. Also when there is fire on port and there is need to sink the vessel to save the goods. [Arts. 817 & 818]

Liquidation of Average

Whether general or particular average, the person benefited by the damage or expense incurred must contribute his proportionate share, to be determined by the amount of damages or expenses incurred and apportioned among the those benefited in proportion to the value of their property save. In particular average, it is implied that there is only one interest involved and the proportion pertains to him 100%.

The York-Antwerp Rules

Allow deck cargo on coastwise shipping but prohibits it on overseas trade. Hence, a deck cargo stowed on deck, with consent of the shipper in an overseas trade must always contribute to general average. But if it is the one jettisoned, it will not be entitled to reimbursement. On the other, a deck cargo stowed on deck in a coastwise trade with consent of the shipper while also must contribute to general average is likewise entitle to reimbursement if jettisoned.

Chapter 12

Collisions

Collision & Allision

Collision occurs when both vessels are on motion. Allision happens when one of the vessels is stationary. Rule on Collision: The guilty vessel shall pay for the damage caused by the collision. Exception: If guilty vessel sinks due to the hypothecary nature of maritime transactions. Exception to exception: When there is negligence of ship owner [see Abdulhaman case]

Five Cases Covered by Collision/ Allision

One vessel is at fault Vessel at fault is liable for the damage caused to the innocent vessel as well as to the damage suffered by the owners of cargo of both vessels. Both vessels at fault Each vessel must bear its own loss, but the shippers of both vessels may go against the ship owners, being solidarily liable to them. Vessel at fault is unknown Same rule when both vessels are at fault. Third vessel at fault Same rule as when one vessel is at fault. Fortuitous Event No liability; res perit domino.

Three stages in Collision

When the 2 vessels approach each other. When the vessel are so near each other that contact is imminent. Actual contact or collision. Note: The foregoing rule was laid down in Urrutia v. Baco River Plantation, 26 Phil. 623 to apply the doctrine of last clear chance. But this ruling was abandoned in Williams v. Yangco, 27 Phil. 68 (infra)

Williams v. Yangco, 27 Phil. 68 (1914)

Held: The doctrine of last clear chance is inapplicable for marine collision since the rule of liability in this jurisdiction for maritime accidents such as that now under consideration is clearly, definitely, and unequivocally laid down in Art. 827 of the Code of Commerce. Under the rule, the evidence disclosing that both vessels were at fault gives neither of the owners an action against the other for the loss or injury sustained by their respective vessel.

Villacarlos v. Everett Steamship, 4 CA Reports 961

Facts: A fishing vessel of Philippine registry collided with a vessel from Europe. The foreign vessel was at fault but its owner was beyond the jurisdiction of the courts. The owner, however, had a shipping agent in the Philippines who, nonetheless denied liability. Held: The agent is liable in the absence of the ship owner. The shipping agent or naviero acts as owner in the absence of the ship owner.

Code of Commerce uses the word buque in reference to collision of vessel, i.e.a draft with deck. A fishing vessel here had no deck, hence, not a buque so that Art. 835 on marine protest does not apply. Failure of the captain of the fishing vessel to file marine protest does not bar recovery.

Duty of the Overtaking or Crossing Vessel (Sulpicio Lines v. CA, 305 SCRA 478)

Under Rule 24-C of the Regulations for Preventing Collision at Sea, the duty of overtaking or crossing vessel to keep out of the way subsists even if the overtaking vessel cannot determine with certainty whether she is at forward or aft more than two points from the vessel being overtaken. In case of collision, it would be beyond cavil that the overtaking vessel must assume responsibility as she was in a better position to avoid the collision. She should have blown its horn or given signs to warn the other vessel that she was overtaking her.

When moving vessel strikes stationary object (Far Eastern Shipping v. CA, 297 SCRA 30)
Held: American evidentiary rule provided for a presumption of fault against a moving vessel that strikes a stationary object, such as a dock or navigational aid. In admiralty, this presumption does more than merely require the ship to go forward and produce some evidence on the presumptive matter. The moving vessel must show that it was without fault or that the collision (allision) was occasioned by the fault of the stationary object or was the result of inevitable accident.

Chapter 13

Arrival Under Stress & Shipwrecks

Steps To Be Taken In Determination Of Propriety Of Arrival Under Stress

Captain to determine during voyage if there is wellfounded fear of seizure, privateers or other valid grounds. He then assembles all the officers. He summons the persons interested in the cargo who are present and who may attend. They have no right to vote. Officers to be determined and agree if there is wellfounded reason after examining the circumstances. The captain has the deciding vote. Agreement to be drafted and minutes to be signed and entered in the deck log book. Also objections.

Instances of Arribada
Lack of provision or fuel Pirates Inability to navigate. Note: If the lack of fuel or provision is not due to lack of foresight, or the fear of pirates is well-founded or the inability to navigate is not attributable to fault of captain or crew, then these arrivals under stress becomes particular average of the vessel. Shippers must wait. No damage needs to be paid to the shippers. But if due to bad faith, the damages must be paid to shippers for delay and the vessel bears the loss.

Improper Arribada

If lack of provisions should rise 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. If the risk of enemies, privateers, or pirates should not have been well-known, manifest, and based on positive and provable facts. 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.

When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in the act causing the damage. Expenses. [Art. 820, Code of Commerce]

Shipwreck (Agrounding)

The demolition or shattering of a vessel caused by her driving ashore or on rocks and shoals in the midseas, or by the violence of winds and waves in tempests.

Rules on Shipwrecks (Arts. 840-845)

Losses/deterioration due to shipwreck or stranding to the account of the owners & ship owner. If caused by malice, negligence, or lack of skill of the captain or because vessel put to sea was insufficiently repaired and equipped: Shippers can demand indemnity from the captain. The goods saved from the wreck to be specially bound for the payment of the expenses of the respective salvage. If several vessels sail under convoy, and any of them should be wrecked, the cargo saved will 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 to enter a marine protest against him. 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 to be saved first. Designation to be made by the captain with concurrence of his officers. The captain taking on-board the goods saved from the wreck to continue his course to the port of destination and upon arrival he should deposit the goods for disposal to their owners.

In case the captain changes his course, and if he can unload them at the port of which they were consigned, he may make said port if the shippers or supercargoes present and the officers and passengers of the vessel consent thereto. But he is not required to do so even if he has the consent during time of war or when the port is difficult and dangerous to make. The owners of the cargo to defray all the expenses of this arrival and the payment of the freightage. If cannot be, proceed to judicial sale complying with the formalities and on publicity.

Chapter 14 Salvage

Definition and Philosophy of Salvage

Salvage is 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. Salvage Law provides for the compulsory reward to those who brave the perils of the sea to save the cargo or vessel in order to encourage such services. Whether the owner of the property save likes it or not, he must give a reward. The maximum amount is 50% of the value of the property save.

Kinds of Salvage Services

Voluntary compensation is dependent on the success. Under contract for a per diem or per horam wage, payable at all event. Under contract for compensation payable only in case of success.

Requisites For Salvage Reward

Valid object of salvage. Such object must be exposed to marine peril. Must be rendered voluntarily. Must be successful.

Derelict

A vessel or cargo badly damaged and abandoned by the crew to the mercy of the sea. Mere abandonment does not make such vessel or cargo res nullius. Proper procedure must be followed by the salvors to be entitled of the reward.

Procedure In Derelict

If vessel is abandoned, salvor must tow her to the nearest port where it will be delivered to the municipal treasurer or collector of customs who will advertise the fact of salvage. If owner of salvaged vessel or cargo appears, he may take possession of vessel or cargo and pay the reward amount not exceeding 50% of the value of the vessel. Reward is determined by considering: - the value of the property save; zeal employed; danger posed to the salvors; number of persons who took part; services render; and expenses incurred.

If no claim for the vessel is made within 3 months after publication, the municipal treasurer to sell the property salvaged at public auction. The reward and expenses will be deducted from the proceeds. The balance to be deposited with the treasury. If no one claims for the balance after 3 years, will go to the salvors and the other half to the government. If one vessel saves another: - to the ship owner of the saving vessel. - to the captain - to the crew

Honorio Barrios v. Go Thong & Co., G.R. L-17192, March 30, 1963

Facts: Go Thong is the owner of a vessel plying the route from Mindanao to Cebu. The engine of his vessel conked out while she was in the middle of the sea. The captain radioed the owner and was advised that a sister ship was on its way to tow the vessel. The sea at the time was calm. The radio message was picked up by another vessel which thereafter proceeded to the stranded vessel of Go Thong. The captain agreed that the vessel be towed. The owner of the towing vessel knew the owner of the stranded vessel. He waived charges of towing. But the captain and the crew the responding vessel complained of their respective shares in the reward.

Issue: Was there salavage or towage? Held: There was no salvage because there was no marine peril at the time. There was no danger for the stranded ship. The sea was calm and a sister ship was nearby. Hence, no reward is due. Also, there is no need for compensation for the towage because of the waiver of the towing vessel.

Chapter 15

COGSA

History of COGSA

Originally passed by Congess of the US on April 16, 1936 as Public Act No. 521. Adopted by the Phil Commonwealth on October 22, 1936 as Commonwealth Act No. 65. When the New Civil Code took effect on August 30, 1950, it became the primary law on carriage of goods by sea. Art. 1753, NCC: 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. COGSA remains suppletory law for international trade

Chapter 16

Public Service Laws

Meaning and Concept of Public Utility

A business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service. In a very real sense, a public utility is engaged in public service-- providing basic commodities and services indispensable to the interest of the general public. [Republic v. Meralco, G.R. No. 141314, April

[National Power Corporation v. Court of Appeals, G.R. No. 112702, September 26, 1997]

9, 2003]

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 the control by the public for the common good, to the extent of the interest he has thus created.

[Kilusang Mayo Uno Labor Center v. Hon. Jesus B. Garcia Jr., G.R. No. 115381, December 23, 1994 citing Pantranco v. Public Service Commission, 70 Phil.221]

Constitutional Provisions

Public utilities must be owned by Filipino citizen or 60% owned by Filipino citizens. [Art. XII, Sec. 11] Mass media must 100% Filipino. Government take-over: In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms, temporarily take over or direct the operation of any privately owned public utility or business affected with public interests. [Art. XII, Sec. 17]

Operation of vital industries: 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. [Art. XII, Sec. 18] Prohibition against monopolies: The State shall regulate or prohibit monopolies when the public interest so requires; no combination in restraint of trade or unfair competition shall be allowed. [Art. XII, Sec. 19]

Public Service

Includes every person who 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, fraction railway, subway motor vehicle, steamboat, or steamship line ferries, and water craft, shipyard, ice plant, electric light, heat and power or any other public utility. [Sec. 13(b), Act. 146]

PAL V. CAB, 270 SCRA 538

Held: The terms convenience and necessity if used together is a statute, are usually held not to be separable, but are construed together. Both words modify each other and must be construed together. The word necessity is so connected, not as an additional requirement but to modify and qualify what might otherwise be taken as the strict significance of the word necessity. 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 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 requirements for the issuance of the same. It is the law which determines the requisite for the issuance of such certification, and not the title indicating the certificates.

Public Utilities

Public utilities are privately owned and operated businesses whose services are essential to the general public. They are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation when private properties are affected with public interest, hence, they cease to be juris privati only.

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 the control by the public for the common good, to the extent of the interest he has thus created.

[Kilusang Mayo Uno Labor Center v. Hon. Jesus B. Garcia Jr., G.R. No. 115381, December 23, 1994 citing Pantranco v. Public Service Commission, 70 Phil.221]

Difference Between Operation of a Public Utility and Ownership of Facilities

While the Constitution in no uncertain terms requires a franchise for the operation of a public utility, it does not require a franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public. In law, there is clear distinction between the operation of a public utility and the ownership of the facilities and equipment used to serve the public. [Ibid]

Telecommunications

Radio Industry

Broadcasting

Broadcast is an undertaking the object of which is to transmit over-the-air commercial radio or television messages for reception of a broad audience in a geographic area.

Cable Television Operations (E.O. 436, Sept. 9, 1997)

Classified as mass media Essential components: Reception facilities which extract the broadcast signal from the air, or microwave transmission. Input equipment, which converts and amplifies the signal received; and Distribution system, which consists of feeder or trunk lines originating from the input equipment; smaller distribution cables which carry the signal to the immediate vicinity of the subscriber; and drop lines which carry the signal into the subscribers premises.

Electronic Commerce Act

Internet and Value Added-Services

Electronic Mail (Email) Bulletin Board System (BBS) World Wide Web (www)

Mass Media

Electric Power Industry Reform Act of 2001 (R.A. 9136)

Build-Operate-Transfer Law (R.A. 6957, as amended by R.A. 7718)

BOT Schemes

Build-Operate-and-Transfer (BOT Build-and-Transfer (BT) Build-Own-Operate (BOO) Build-Lease-Transfer (BLT Build-Transfer-and-Operate (BTO) Contract-Add-and-Operate (CAO) Develop-Operate-and-Transfer (DOT) Rehabilitate-Operate-and-Transfer (ROT) Rehabilitate-Own-and-Operate (ROO)

End of Subject