COMPILATION OF BAR QUESTIONS AND

SUGGESTED ANSWERS UNDER COMMERCIAL

LAW
(TRANSPORTATION LAW)

SUBMITTED BY:
CLASS 4-E, SCHOOL YEAR 2019-2020
SAN BEDA UNIVERSITY, COLLEGE OF LAW

SUBMITTED TO:
ATTY. TIMOTEO B. AQUINO
 CONCEPT OF COMMON CARRIERS
1987

During the elections last May, AB, a congressional candidate in Marinduque, chartered the
helicopter owned by Lode Mining Corporation (LMC) for use in the election campaign. AB
paid LMC the same rate normally charged by companies regularly engaged in the plane
chartering business. In the charter agreement between LMC and AB, LMC expressly
disclaimed any responsibility for the acts or omissions of its pilot or for the defective
condition of the plane’s engine. The helicopter crashed killing AB. Investigations disclosed
that pilot error was the cause of the accident. LMC now consults you on its possible
liability for AB’s death in the light of the above findings.

How would you reply to LMC’s query?

SUGGESTED ANSWER:
I would advise LMC that it may not be held liable for the death of AB. According to Art.
1732 of the New civil Code, common carriers are persons, corporations, firms, and associations
engaged in the business of carrying or transporting passengers or goods or both, by land, water,
or air, for compensation, offering their services to the public. Based on the aforesaid definition,
LMC is not a common carrier. As ruled in Valenzuela Hardwood and Industrial Supply Inc. vs CA,
in a contract of private carriage, the parties may freely stipulate their duties and obligations, which
perforce would be binding on them. By the foregoing, the stipulation where LMC would disclaim
responsibility for the simple negligence of its employee is valid. However, such a stipulation will
not hold in cases of liability for gross negligence or bad faith.

1996

What is the test for determining whether or not one is a common carrier?

SUGGESTED ANSWER:
As enunciated by the Supreme Court in the case of Sps. Perena v. Sps. Nicolas the test
for determining whether or not one is a common carrier is whether the undertaking is a part of the
activity engaged in by the carrier that he has held out to the general public as his business or
occupation.

1996

AM Trucking, a small company, operates two trucks for hire on selective basis. It caters
only to a few customers, and its trucks do not make regular or scheduled trips. It does not
even have a certificate of public convenience. On one occasion, Reynaldo contracted AM
to transport for a fee, 100 sacks of rice from Manila to Tarlac. However, AM failed to deliver
the cargo, because its truck was hijacked when the driver stopped in Bulacan to visit his
girlfriend.
a) May Reynaldo hold AM liable as a common carrier?
b) May AM set up the hijacking as a defense to defeat Reynaldo’s claim?

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SUGGESTED ANSWER:
a) Reynaldo may hold AM Trucking liable as a common carrier.

The facts that AM Trucking operates only two trucks for hire on a selective basis, caters
only to a few customers, does not make regular or scheduled trips, and does not have a certificate
of public convenience are of no moment as the law does not distinguish between one whose
principal business activity is the carrying of persons or goods or both and anyone who does such
carrying only as an ancillary activity.

The law refrains from making a distinction between a carrier offering its services to the
general public and one who offers services or solicits business only from a narrow segment of the
general population.

b) No, AM Trucking may not set up the hijacking as a defense to defeat Reynaldo’s claim as
the facts given do not indicate that the same was attended by the use of grave or irresistible
threat, violence, or force. It would appear that the truck was left unattended by its driver and was
taken while he was visiting his girlfriend.

1996

Define a common carrier?

SUGGESTED ANSWER:
A common carrier as defined under Article 1732 of the Civil Code, is a person, corporation,
firm or association engaged in the business of carrying or transporting passengers or goods or
both, by land, water or air for compensation, offering its services to the public.

2000

X has a Tamaraw FX among other cars. Every other day during the workweek, he goes to
his office in Quezon City using his Tamaraw FX and picks up friends as passengers at
designated points along the way. His passengers pay him a flat fee for the ride, usually
P20 per person, one way. Although a lawyer, he never bothered to obtain a license to
engage in this type of income-generating activity. He believes that he is not a common
carrier within the purview of the law. Do you agree with him? Explain.

SUGGESTED ANSWER:
No. I do not agree with X.

The Supreme Court has held that a common carrier holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.

Here, the fact that X has a limited clientele does not exclude him from the definition of a
common carrier. The law does not make any distinction between one whose principal business
activity is the carrying of persons or goods or both, and the one who does such carrying only as
an ancillary activity or in the local idiom, as a “sideline.”

Hence, X is a common carrier within the purview of the law.

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 2002

1. Name 2 characteristics which differentiate a common carrier from a private carrier

2. Why is the defense of due diligence in the selection and supervision of an employee
not available to a common carrier?

SUGGESTED ANSWER:
1. Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance over the goods
they carry. In the case of private carriers, however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted negligently, and the burden
of proving otherwise rests on them. On the contrary, no such presumption applies
to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the
onus of proving that the cause was the negligence of the carrier (Planters Products Inc. v. Court
of Appeals, G.R. No. 101503, September 15, 1993).

2. The defense of due diligence in the selection and supervision of an employee is not
available to a common carrier because the Civil Code imposes upon a common carrier the
obligation to exercise not merely ordinary diligence of a good father of a family but the higher
degree of extraordinary diligence. Article 1733 of the Civil Code provides that 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. Furthermore, Article 1759
of the Civil Code provides that common carriers are liable for the death of or injuries to passengers
through the negligence or wilful acts of the former's employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the common carriers
and this liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.

2003

Vivian was booked by PAL, which acted as a ticketing agent of Far East Airlines, for a
round trip flight on the latter’s aircraft, from Manila-Hongkong-Manila. The ticket was cut
by an employee of PAL. The ticket showed that Vivian was scheduled to leave Manila at
5:30 p.m. on 05 January 2002 aboard Far East’s Flight F007. Vivian arrived at the Ninoy
Aquino International Airport an hour before the time scheduled in her ticket, but was told
that Far East’s Flight F007 had left at 12:10 p.m. It turned out that the ticket was
inadvertently cut and wrongly worded. PAL employees manning the airport’s ground
services nevertheless scheduled her to fly two hours later aboard their plane. She agreed
and arrived in Hongkong safely. The aircraft used by Far East Airlines developed engine
trouble and did not make it to Hongkong but returned to Manila. Vivian sued both PAL and
Far East, for damages because of her having been unable to take the Far East flight. Could
either or both airlines be held liable to Vivian? Why? (6%)

SUGGESTED ANSWER:
Vivian may hold Far East Airlines liable, but may not hold PAL liable.

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 The law imposes to common carriers a strict liability, as long as it is shown that there exists
a contract between the passenger and the common carrier and that the loss, deterioration, injury,
or death took place during the existence of the contract. The carrier may be held liable for breach
of obligation, through fraud, negligence, delay or through any other manner which contravenes
the tenor of the obligation.

In an agent-principal relationship, the personality of the principal is extended through the

facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to
perform acts which the latter would have him do. In the case at hand, PAL is the agent of Far East
Airlines. As such agent, the acts and omissions of PAL, is imputable to Far East Airlines.

As PAL is the agent of Far East Airlines, the negligence of the PAL employee which
caused Vivan to miss her flight is imputable to Far East Airlines.

Far East Airlines is therefore liable for damages.

2019

LMN, Inc. operates a beach resort in a secluded island off the coast of Puerto Princesa
City, Palawan. It operates three (3) motorized boats to ferry its guests from the city proper
to the island resort and vice-versa. During one rainy morning, the guests were informed
that the ferry services for that day were cancelled due to a storm forecast. In order to
appease the apparent dismay of most of the guests who will miss their flight back to
Manila, the boat captain of one of LMN, Inc.'s motorized boats decided to push through
with its trip back to the city. Shortly after the boat sailed, the storm hit and the winds and
waves became stronger, causing engine trouble to the boat. Unfortunately, the boat
capsized and sank, resulting in the death of one of the passengers, Mr. X.

This prompted Mr. X's heirs to file a complaint for damages against LMN, Inc., which they
alleged to be a common carrier. In its defense, LMN, Inc. maintained that it is not a common
carrier because its boats are not available to the general public but only ferry resort guests
and employees.

(a) May LMN, Inc. be considered a common carrier? Explain. (3%)

(b) Assuming LMN, Inc. is a common carrier, may it be absolved from liability on the
ground of fortuitous event? Explain. (2%)

SUGGESTED ANSWER:
(a) Yes. Article 1732 of the Civil Code provides that common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation, offering their services to
the public.

In the case of Sps. Cruz vs. Sun Holidays, Inc., the Supreme Court explained that the
above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person
or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or

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population, and one who offers services or solicits business only from a narrow segment of the
general population.

The fact that LMN Inc. offers its boat only to ferry resort guests and employees does not
make it a private carrier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondent’s ferry services in its resort
operations is underscored by its having its own Coco Beach boats. And the tour packages it offers,
which include the ferry services, may be availed of by anyone who can afford to pay the same.
These services are thus available to the public.

(b) No. Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not
be foreseen, is inevitable. In Yobido v. Court of Appeals, the Supreme Court held that to
considered as force majeure, it is necessary that (1) the cause of the breach of the obligation
must be independent of the human will; (2) the event must be either unforeseeable or
unavoidable; (3) the occurence must be render it impossible for the debtor to fulfill the obligation
in a normal manner; and (4) the obligor must be free of participation in, or aggravation of, the
injury to the creditor. The absence of any of the requisites mentioned above would prevent the
obligor from being excused from liability.

Thus, in Vasquez v. Court of Appeals, it was held that the common carrier was liable for
its failure to take the necessary precautions against an approaching typhoon, of which it was
warned, resulting in the loss of the lives of several passengers.

In the case at bar, LMN, Inc. knew of the impending storm through a storm forecast. The
event was forseeable, and, thus, the second requisite mentioned above was not fulfilled. Failing
to comply with the requisites mentioned, LMN, Inc. cannot be absolved from liability.

DILIGENCE AND PRESUMPTION OF

NEGLIGENCE OF COMMON CARRIERS
1983

A and his classmates take a bus from UP to Quiapo. On the way, another Quiapo-bound
bus tries to overtake them. A and his classmates dare the bus driver to run faster and race
with the other bus. The driver takes their dare, to the delight of A and his friends who
cheered him. On rounding the curve, the bus driver fails to slow down and the bus turns
turtle, resulting in the death of A and injuries to the other passengers.

The bus carried the following sign: “Do not talk to driver while bus is on motion, otherwise
the company will not assume liability for any accident.”

Explain briefly the extent of the liability, if any, of the bus company, giving the legal
provisions and principles involved.

SUGGESTED ANSWER:
The bus company is liable for damages to A’s heirs and to all the injured passengers.
Article 1756 of the Civil Code provides: in case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted negligently, unless they prove that

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they observed extraordinary diligence as prescribed in Articles 1733 and 1755. Furthermore,
under Article 1759 of the Civil Code, common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former’s employees, although such
employees may have acted beyond the scope of their authority or in violation of the orders of the
common carriers. In the present case, although it may be urged that A was guilty of contributory
negligence, such an argument loses its force in the face of the driver’s recklessness in taking the
dare. And even if such argument would be accepted, at most it can only mitigate the amount of
damages, since the proximate cause of the accident was the driver’s willful and reckless act in
running a race with the other bus.

Lastly, as provided in Article 1757 of the Civil Code, the responsibility of common carrier
for the safety of passengers as required in Articles 1733 and 1755 cannot be dispensed with or
lessened by stipulation, by posting of notices, by statement on tickets, or otherwise.

Thus, the liability of the common carrier cannot be eliminated by the mere posting the
aforementioned sign.

1987

Philip Mauricio shipped a box of cigarettes to a dealer in Naga City through Bicol Bus
Company (BBC). When the bus reached Lucena City, the bus 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 take at least 2 days. While
the bus was in the repair shop, Typhoon Coring lashed Quezon Province. The cargoes
inside the bus, including Mauricio’s cigarettes, got wet and were totally spoiled. Mauricio
sued BBC for damage to his cargoes. Decide.

SUGGESTED ANSWER:
The BBC is liable for damages to the cargoes lost by Mauricio. According to Art. 1733 of
the New Civil Code, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each case.
In addition, under Art. 1734, common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the exempted circumstance. In the
case at bar, the negligence of the common carrier is proximate cause of the loss. The mechanical
defect of the vehicle was so extensive that it needed two days to repair the necessary damage. If
only the roadworthiness of the bus was maintained, then, the goods would not have been exposed
to the typhoon which resulted to the loss. Hence, BBC is liable.

1989

X shipped through M/V Kalayaan, spare parts worth P500,000.00. The bill of lading limits
the liability of the carrier to P500.00 and contains a notation indicating the amount of the
letter of credit (i.e., P500,000.00) which X obtained from bank to import the spare parts. The
spare parts were not delivered to X so X sued the carrier for P500,000.00. Decide.

SUGGESTED ANSWER:
The case should be ruled in favor of X. In the case of NDC v. CA, common carriers cannot
limit its liability for injury to a loss of goods where such injury or loss was caused by its own

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negligence. Accordingly, under Article 1735 of the Civil Code, in all other than those mentioned
is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed the extraordinary diligence required by
law. Having failed to deliver the spare parts in this case, the carrier should be held liable for the
amount of the loss despite the limitation on the bill of lading.

1989

X, an 80-year old epileptic, boarded the S/S Tamaraw in Manila going to Mindoro. To
disembark, the passengers have to walk thru a gangplank. While negotiating the
gangplank, X slipped and fell into the waters. X was saved from drowning and was brought
to a hospital but after a month died from pneumonia. Except for X, all passengers were
able to walk thru the gangplank. What is the liability of the owner of S/S Tamaraw?

SUGGESTED ANSWER:
The owner of S/S Tamaraw is liable for the death of X. Failure to exercise utmost diligence
in the safety of passengers is presumed the moment the passenger did not reach his destination.
In the present case, X was still a passenger when he fell into the waters because he was only
disembarking from the vessel. Hence, the presumption against the carrier is operative. It is up to
the carrier to prove its exercise of utmost diligence.

Moreover, it is well settled that if, in the use of a gangplank, a passenger falls off and is
injured, the carrier is liable for the injuries sustained irrespective of the cause of the fall if a
sufficient gangplank would have prevented the injury.

1992

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 Marino 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
briefly

SUGGESTED ANSWER:
a) The railway company is liable for damages. Under the Civil Code, common carriers, from
the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case. Also, the Supreme Court, in numerous cases,
ruled that in case of injury or damage while aboard the common carrier, there arise a presumption
of negligence on the part of said common carrier; to be exonerated, the burden of proving
extraordinary diligence or of legal defenses must be proved by the common carrier. In this case,
the damage occurred while Marino, the injured party, was aboard the train, which was owned and

8
operated by the railway company. Unless the railway company would be able to prove that it
exercised extraordinary diligence, it will still be liable due to the damage occurred.

b) My answer will be the same but the reason will be different. The prevailing law in this case
would not be the Civil Code but a special law, Republic Act No. 6235. Under Sec. 3 thereof, it
shall be unlawful for any person, natural or juridical, to ship, load or carry in any passenger aircraft
operating as a public utility within the Philippines, and explosive, flammable, corrosive or
poisonous substance or material. Intent to cause damage is immaterial as the same is mala
prohibita—the act itself is already punishable. As such, in case the airline company fails to inspect,
and the same causes damage, the airline company will be liable for damages.

1997

In a court case involving claims for damages arising from death and injury of bus
passengers, counsel for the bus operator files a demurrer to evidence arguing that the
complaint should be dismisses because the plaintiffs did not submit any evidence that the
operator or its employees were negligent. If you were the judge, would you dismiss the
complaint?

SUGGESTED ANSWER:
No. In the carriage of passengers, the failure of the common carrier to bring the
passengers safely to their destination immediately raises the presumption that such failure is
attributable to the carrier’s fault or negligence.

Under Art. 1755 of the Civil Code, 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. Furthermore, Art. 1756 provides that in case
of death of or injuries to passengers, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in Articles 1733 and 1755.

In this case, the court need not make an express finding of fault or negligence of common
carriers, the law imposes to common carriers strict liability, as long as it is shown that there exist
a contract between the passenger and the common carrier and that the loss, deterioration, injury
or death took place during the existence of the contract. Art. 1735 provides that, if the goods are
lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733.

Thus, the fact of death and injury of the bus passengers raises the presumption of fault or
negligence on the part of the carrier. The carrier must rebut such presumption. Otherwise, the
conclusion can be properly made that the carrier failed to exercise extraordinary diligence as
required by law.

2001

Suppose A was riding on an airplane of a common carrier when an accident happened and
A suffered injuries. In an action by A against the common carrier, the latter claimed that:

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1. There was a stipulation in the ticket issued to A absolutely exempting the carrier from
liability from the passenger’s death or injuries and notices were posted by the common
carrier dispensing with the extraordinary diligence of the carrier, and
2. A was given a discount on his plane fare thereby reducing the liability of the common
carrier with respect to A in particular.

Are those valid defenses?

SUGGESTED ANSWER:
No, these are not valid defenses because they are contrary to law as they are in violation
of the extraordinary diligence required of common carriers. Article 1757 provides that
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.

The defenses available to any common carrier to limit or exempt it from liability as provided
under Article 1734, 1735, and 1755 of the New Civil Code is an exclusive or a closed list. If not
one of those enumerated is present, the carrier is liable.

The stipulations in the case at hand are not one of those mentioned in the aforementioned
provisions, hence these are not valid to limit or exempt the liability.

1977

X, a businessman boarded a PANTRANCO bus bound for Dagupan City where he would
meet Y, to arrange a business transaction. Somewhere in San Fernando, Pampanga, Z, the
Deputy Sheriff of Pampanga, intercepted and seized the PANTRANCO but at the instance
of W who had earlier obtained from the court a writ of attachment. As a result of the seizure
by the Sheriff, X failed to reach Dagupan City where he was supposed to transact business.
Feeling aggrieved by the loss of an otherwise juicy transaction, sued PANTRANCO for
breach of contract. Decide with reasons.

SUGGESTED ANSWER:
It is undeniable that there is a pre-existing contractual relation of carriage between X and
the PANTRANCO Bus and that X failed to reach his destination in breach of the PANTRANCO
Bus’ obligation to transport him to the same. However, it is notable that there was no fraud, bad
faith, malice or wanton attitude on the part of the carrier.

In contracts and quasi-contracts, the damages for which the obligor who acted in good
faith is liable shall be those that are the natural and probable consequences of the breach of the
obligation and which the parties have foreseen at the time the obligation was constituted.

In the case at bar, it can reasonably be assumed that the claim for damages refers to the
profits which X failed to obtain. In determining the extent of the liability of PANTRANCO Bus the
first paragraph of Art. 2201 of the Civil Code is applicable. Under this provision, the company is
liable for all the natural and probable consequences of the breach of the obligation which the
parties have foreseen or could have reasonably foreseen at the time the obligation was
constituted. In this regard the loss of profits from the would-be business transaction is not only a
natural and probable consequences of the breach; it could have been reasonably foreseen by the
parties at the time X boarded the bus. At that time he was bound for Dagupan City to arrange a

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business transaction and we can very well assume that the said transaction would be
consummated and that he could have possibly gained from the said transaction. Therefore, the
claim for damages will prosper.

2008

City Railways, Inc. (CRI) provides train services, for a fee, to commuters from Manila to
Calamba, Laguna. Commuters are required to purchase tickets and then proceed to
designated loading ang unloading facilities to board the train. Ricardo Santos purchased
a ticket for Calamba and entered the station. While waiting, he had an altercation with the
security guard of CRI leading to a fistfight. Ricardo Santos fell on the railway just as a train
was entering the station. Ricardo Santos was run over by the train. He died. In the action
for damages filed by the heirs of Ricardo Santos, CRI interposed lack of cause of action,
contending that the mishap occurred before Ricardo Santos boarded the train and that it
was not guilty of negligence. Decide. (5%)

SUGGESTED ANSWER:
No. The contention of CRI is not tenable.

Under the law, the degree of care required of a common carrier is extraordinary diligence
or the obligation to carry the passenger safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons with due regard to all the consequences.
Thus, in case of death or injury to passengers, the common carrier is presumed negligent and
upon him rests the burden of proof of exercise of extraordinary diligence. The duty to exercise
extraordinary diligence attaches from the moment the person who purchases the ticket from the
carrier presents himself at the proper place and in a proper manner to be transported.

In the given case, there is no doubt that CRI is a common carrier for the reason that it is
engaged in the business of transporting passengers by land, for compensation, offering its
services to the public. As such, it is required to exercise extraordinary diligence and this
responsibility attached from the moment Ricardo Santos purchased the ticket and entered the
station. When Ricardo died while he was within the premises of CRI, the latter is presumed to be
at fault. This is true even if Ricardo has not yet boarded the train, so long as he has presented
himself to the carrier at the proper place and in a proper manner.

Hence, CRI, as a common carrier, is liable to the heirs of Ricardo Santos.

2008

Nelson owned and controlled Sonnel Construction Company. Acting for the company,
Nelson contracted the construction of a building. Without first installing a protective net
atop the sidewalks adjoining the construction site, the company proceeded with the
construction work. One day a heavy piece of lumber fell from the building. It smashed a
taxicab which at that time had gone offroad and onto the sidewalk in order to avoid the
traffic. The taxicab passenger died as a result.

a.) Assume that the company had no more account and property in its name. As
counsel for the heirs of the victim, whom will you sue for damages, and what theory
will you adopt? (3%)

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 b.) If you were the counsel for Sonnel Construction, how would you defend your client?
What would be your theory? (2%)
c.) Could the heirs hold the taxicab owner and driver liable? Explain. (2%)

SUGGESTED ANSWER:
a.) As counsel for the heirs of the victim, I will sue Nelson as owner of Sonnel Construction
Company using the Doctrine of Piercing the Veil of Corporate Fiction.

As a general rule, the liability of a corporation is separate and distinct from that of the
persons comprising it. However, as an exception to the rule, the veil of corporate fiction may be
pierced when the separate personality of the corporation is used as a shield to avoid a clear legal
obligation. In such an event, it is treated as a mere association of persons upon whom liability
attaches.

In the given case, Sonnel Construction Company has a clear legal obligation to the heirs
of the victim for its negligence in not installing a protective net atop the sidewalk before beginning
construction. Nelson, as owner of the company, cannot use the separate entity rule in order to
avoid liability. This is especially true when the company had no more account and property under
its name.

b.) If I were the counsel of Sonnel Construction, I would raise the defense of due diligence in
the selection and supervision of its employees.

Under the doctrine of vicarious liability of employers, the employer may be relieved of
responsibility for the negligent acts of their employees if they can show that they observed all the
diligence of a good father of a family to prevent damage.

In the given case, Sonnel Construction, as employer, may prove due diligence in the
selection and supervision of its employees by establishing that prior to hiring, it examined them
as to their qualifications, experience and service records and during the course of employment, it
formulated standard operating procedures, monitored their implementation and imposed
disciplinary measures for breaches thereof.

I shall also raise the affirmative defense of contributory negligence. The proximate cause
of death is the violation of the taxi driver of traffic rules and regulations when it drove offroad to
avoid heavy traffic. The lumber that fell from the building was only the immediate cause of death
of the victims.

c.) Yes, the heirs may hold the taxicab owner and the driver liable.

As regards the taxicab owner, the heirs have two concurrent causes of action based on
the vicarious liability of an employer and based on contractual breach. In the first, the negligence
of the driver gives rise to the presumption of negligence of the taxicab owner as its employer. In
the second, there is a contract of carriage between the taxicab owner and its passenger and the
breach thereof by the former gives rise to the presumption that it failed to exercise extraordinary
diligence.

In addition, the heirs also have two concurrent causes of action against the driver. First,
they may hold the driver criminally liable for reckless imprudence resulting in homicide. In which
case, the taxicab owner is also subsidiarily liable in case the driver becomes insolvent. Second,
the heirs may likewise sue the driver for damages based on tort.

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 All four cases may be pursued separately and simultaneously for they are independent of
each other. The only caveat is that the plaintiff may not recover twice for the same negligent act.

2011

B, while drunk, accepted a passenger in his taxicab. B then drove the taxi recklessly, and
inevitably, it crashed into an electric post, resulting in serious physical injuries to the
passengers. The latter then filed a suit for tort against B's operator, A, but A raised the
defense of having exercised extraordinary diligence in the safety of the passenger. Is his
defense tenable?
(A) Yes, as a common carrier can rebut the presumption of negligence by raising such a
defense.
(B) No, as in tort actions, the proper defense is due diligence in the selection and
supervision of the employee by the employer.
(C) No, as B, the common carrier's employee, was obviously negligent due to his
intoxication.
(D) Yes, as a common carrier can invoke extraordinary diligence in the safety of
passengers in tort cases.

SUGGESTED ANSWER:
(B) No, as in tort actions, the proper defense is due diligence in the selection and supervision of
the employee by the employer.

2011

In a contract of carriage, the common carrier is liable for the injury or death of a passenger
resulting from its employee’s fault although the latter acted beyond the scope of his
authority. This is based on the
(A) rule that the carrier has an implied duty to transport the passenger safely.
(B) rule that the carrier has an express duty to transport the passenger safely
(C) Doctrine of Respondeat Superior.
(D) rule in culpa aquiliana.

SUGGESTED ANSWER:
(A) rule that the carrier has an implied duty to transport the passenger safely.

2015

Are common carriers liable for injuries to passengers even if they have observed ordinary
diligence and care? Explain. (2%)

SUGGESTED ANSWER:
Yes. Art. 1733 provides that “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.”

13
 Also, Art. 1755 provides that “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.”

What the law requires is for common carriers to exercised extraordinary diligence. Thus,
in case of injuries to passengers, the common carrier shall be liable notwithstanding the exercise
of ordinary diligence.

2018

Ysidro, a paying passenger, was on board Bus No. 904 owned and operated by Yatco
Transportation Company (“Yatco”). He boarded the bus at Munoz, Nueva Ecija with Manila
as his final destination. He was seated on the first row, window seat on the left side of the
bus. As the bus was negotiating the national highway in front of the public market of
Gerona, Tarlac, the bus came to a full stop because of the traffic. The driver of the bus took
this opportunity to check on the tires of the bus and to relieve himself. As he was alighting
from the bus to do these, an unidentified man standing along the highway hurled a huge
rock at the left side of the bus and hit Ysidro between his eyes. He lost consciousness and
immediately the driver, with the conductor, drove the bus to bring him to the nearest
hospital. He expired before the bus could reach the hospital.

Ysidro’s wife and children brought a civil action to collect damages from Yatco, alleging
that, as a common carrier, it was required to exercise extraordinary diligence in ensuring
the safety of its passengers. They contended that in case of injuries and/or death on the
part of any of its passengers, the common carrier is presumed to be at fault. In its defense,
Yatco alleged that it is not an absolute insurer of its passengers and that Ysidro’s death
was not due to any defect in the means of transport or method of transporting passengers,
or the negligent acts of its employees. Since the accident was due to the fault of a stranger
over whom the common carrier had no control, or of which it did not have any prior
knowledge to be able to prevent it, the cause of Ysidro’s death should be considered a
fortuitous event and not the liability of the common carrier.

a.) Is a common carrier presumed to be at fault whenever there is death or injury to its
passengers, regardless of the cause of death or injury? (2.5%)
b.) What kind of diligence is required of common carriers like Yatco for the protection
of its passengers? (2.5%)
c.) Will your answer be the same as your answer in (b) above, if the assailant was
another paying passenger who boarded the bus and deliberately stabbed Ysidro to
death? (2.5%)

SUGGESTED ANSWER:
a.) Yes. As expressly provided under Article 1756 of the Civil Code, in case of death or injuries
to passengers, common carriers are presumed to have been at fault or to have acted negligently.
However, such presumption is rebuttable by proof that the common carrier had exercised
extraordinary diligence as required by law in the performance of its contractual obligation, or that
the injury suffered by the passenger was solely due to a fortuitous event.

b.) Article 1755 of the Civil Code provides that, a common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of
a very cautious person with a due regard for all the circumstances or simply put, with extraordinary

14
diligence. However, as held in the case of Pilapil v. Court of Appeals (G.R. No. 52159, December
22, 1989), while as a general rule, common carriers are bound to exercise ordinary diligence in
the safe transport of their passengers, it would seem that it is not the standard by which its liability
is to be determined when intervening acts of strangers is to be determined directly cause the
injury. Under Article 1763 of the Civil Code, it is to be noted that when the violation of the contract
is due to the willful acts of strangers, as in the instant case where an unidentified man hurled a
huge rock at the bus, the degree of care essential to be exercised by the common carrier for the
protection of its passenger is only that of a good father of a family.

c.) No. My answer will be different. Article 1763 of the Civil Code states that a common carrier
is responsible for death or injuries caused by willful acts of other passengers or strangers, only if
the common carrier’s employees through the exercise of the diligence of a good father of a family
could have prevented the act. As held in the case of G.V. Florida Transport v. Heirs of Romeo
Battung, Jr. (G.R. No. 208802, October 14, 2015), the law provides a lesser degree of diligence,
i.e., diligence of a good father of a family, in assessing the existence of any culpability on the
common carrier’s part.

DEFENSES OF COMMON CARRIERS

1978

V-B. Because of spillage of the rice during the trip from Davao to Manila due to the bad
condition of the sacks, there was a shortage in the rice delivered by the Provident Lines
Inc. to the consignee XYZ Import and Export Corporation. The carrier accepted the
shipment, knowing that the sacks had holes and some had broken strings. When sued,
Provident Lines, Inc. alleged that the loss was caused by the spillage of the rice on account
of the defective condition of the sacks at the time it received the shipment, and therefore,
it cannot be held liable. Decide. Give reasons.

SUGGESTED ANSWER:
Provident Lines Inc. is liable for the loss.

Common carriers are liable for any loss, destruction, deterioration of the goods. This rule
is subject to exceptions. One such exception is when the loss is due to the character of the goods
or defects in the packing or in the containers. However, in Southern Lines, Inc. v CA, it was held
that the carrier knowing the fact of improper packing of the goods upon ordinary observation, still
accepts the goods notwithstanding such condition, is not relieved of liability or loss or injury
resulting therefrom.

In the case at hand, the defective state of the sacks was known by Provident Lines, Inc..
Despite knowing that the sacks had holes and some had broken strings, Provident Lines Inc. still
proceeded to accept the shipment.

It is therefore liable for the loss.

15
 1985

Archipelago Lines, Inc., a carrier, accepted for shipment from Iloilo to Manila a cargo
consisting of 800 sacks of rice, knowing that some sacks had big holes and others had
their openings just loosely tied with strings. Due to spillage of the rice during the trip, there
was shortage in the rice delivered by the carrier to the consignee. When sued, Archipelago
Lines, Inc. interposed the defense that the carrier was not liable because the spillage was
due to the defective condition of the sacks.

As a judge, how would you rule on the liability of the carrier? Reasons.

SUGGESTED ANSWER:
As a judge, I would rule that the Archipelago Lines, Inc., the carrier, is liable for the
shortage in the rice delivered to the consignee. In a Supreme Court decide case, it was ruled that
if the carrier accepts the goods, knowing the fact of improper packing of the goods upon ordinary
observation or notwithstanding such condition, it is not relieved of liability for loss or injury resulting
therefrom. In this case, Archipelago Lines undertook to ship the sacks, notwithstanding
knowledge of defect in its packaging. Hence, the company should be held liable for the loss
(Southern Lines, Inc. v. Court of Appeals, January 31, 1962; 4 SCRA 259).

1986

Pasahero, a paying passenger, boarded a Victory Liner bus bound for Olongapo. He chose
a seat at the front near the bus driver. Pasahero told the bus driver that he had valuable
items in his bag which was placed near his feet. Since he had not slept 24 hours, he
requested the driver to keep an eye on the bag should he doze off during the trip.

a) While Pasahero was asleep, another passenger took the bag away and alighted at
Guagua, Pampanga. Is Victory Liner liable to Pasahero? Explain.
b) Supposing the two armed men staged a hold-up while the bus was speeding along
the North Expressway. One of them pointed a gun at Pasahero and stole not only
his bag but also his wallet as well. Is Victory Liner liable to Pasahero? Explain.
c) There have been incidents of unknown persons throwing stones at passing
vehicles from the overpasses in the North Expressway. While the bus was
traversing the superhighway, a stone hurled from the Sto. Domingo overpass
smashed the front windshield and hit Pasahero in the face. Pasahero lost an eye
and suffered other injuries. Can Pasahero hold the bus company liable for
damages? Explain.

SUGGESTED ANSWER:
a) Yes, the common carrier is liable for the loss of Pasahero’s bag. The responsibility of
common carriers in the case of loss or damage to hand-carried baggage is governed by the rule
on necessary deposits. Under Art. 2000 of the Civil Code, the responsibility of the depositary
shall among other causes, include the loss of property of the guest caused by strangers but not
that which may proceed from force majeure. The common carrier is liable for the loss of the
personal property of Pasahero.

b) No, Art. 2001 of the Civil Code considers an act of a thief as not one of force majeure
unless done with the use of arms or through an irresistible force, which was now present in the

16
case. The use of arms (in the staging of the holdup) is force majeure under the rule on necessary
deposits. Accordingly, Pasahero may not hold Victory Liner liable.

c) Yes, Art. 1733 of the Civil Code states that 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.

Since there have been incidents of unknown persons throwing stones at passing vehicles
from the overpasses in the North Expressway, stone throwing was foreseeable. Hence, the bus
company should have employed adequate precautionary measures for its passengers. Failing in
such, the common carrier is thus liable.

1991

Alejandro Camaling of Alegria, Cebu, is engaged in buying copra, charcoal, firewood, and
used bottles and in reselling them in Cebu City. He uses two (2) big Isuzu trucks for the
purpose; however, he has no certificate of public convenience or franchise to do business
as a common carrier. On the return trips to Alegria, he loads his trucks with various
merchandise of other merchants in Alegria and the neighboring municipalities of Badian
and Ginatilan. He charges them freight rates much lower than the regular rates. In one of
the return trips, which left Cebu City at 8:30 p.m., one (1) cargo truck was loaded with
several boxes of sardines, valued at P100,000.00, belonging to one of his customers, Pedro
Rabor. While passing the zigzag road between Carcar and Barili, Cebu, which is midway
between Cebu City and Alegria, the truck was hijacked by three (3) armed men who took
all the boxes of sardines and kidnapped the driver and his helper, releasing them in Cebu
City only two (2) days later.

Pedro Rabor sought to recover from Alejandro the value of the sardines. The latter
contends that he is not liable therefore because he is not a common carrier under the Civil
Code, and, even granting for the sake of argument that he is, he is not liable for the
occurrence of the loss as it was due to a cause beyond his control. If you were the Judge,
would you sustain the contention of Alejandro?

SUGGESTED ANSWER:
No, as to his first contention that he is not a common carrier. If I were the Judge, I would
hold Alejandro as having engaged as a common carrier. A person who offers his services to carry
passengers or goods for a fee is a common carrier, regardless of whether he has a certificate of
public convenience or not, whether it is his main business or incidental to such business, whether
it is scheduled or unscheduled service, and whether he offers his services to the general public
or to a limited few (De Guzman vs. CA, G.R. No. 47822, 27 Dec 1988). As stated in the facts,
Alejandro offers his services to merchants in several municipalities and charges them freight
rates. Hence, he is a common carrier.

I will, however, sustain the contention of Alejandro that he is not liable for the loss of the
goods. The law provides that in case of loss of effects of passengers or death or injuries to
passengers, the common carrier is presumed to be at fault or have acted negligently unless it can
prove that it had observed extraordinary diligence in the vigilance thereof. Hijacking of the carrier,
if attended by grave irresistible threat, violence, or force, has been held to exempt the common
carrier from liability, subject to showing of proof that extraordinary diligence was exercised (De

17
Guzman vs. CA, G.R. No. 47822, 27 Dec 1988). In the case, the truck was hijacked by three (3)
armed men, and the driver and helper were even kidnapped. These facts show that irresistible
threat, violence, or force attended the hijacking. Hence, Alejandro is not liable for the loss of the
goods.

1994

Marites, a paying bus passenger, was hit above her left eye by a stone hurled at the bus
by an unidentified bystander as the bus was speeding through the National Highway. The
bus owner’s personnel lost no time in bringing Marites to the provincial hospital where
she was confined and treated.

Marites wants to sue the bus company for damages and seeks your advice whether she
can legally hold the bus company liable. What will you advise her?

SUGGESTED ANSWER:
Marites cannot legally hold the bus company liable. The facts of the problem is similar to
the case of Pilapil vs. Court of Appeals where the Supreme Court ruled that a common carrier is
not charged with the duty of providing or maintaining vehicles as to absolutely prevent any and
all injuries to passengers. The bus company is not an insurer.

Furthermore, there is no showing that any such incident previously happened so as to

impose an obligation on party of the personnel of the bus company to warn the passengers and
to take the necessary precaution. Such hurling of a stone constitutes fortuitous event in this case.
Thus, the bus company cannot be held liable.

1995

M. Dizon trucking entered into a hauling contract with Fairgoods Co whereby the former
bound itself to haul the latter’s 2000 sacks of Soya Bean meal from Manila Port Area to
Calamba, Laguna. To carry out faithfully its obligation Dizon subcontracted with Enrico
Reyes the delivery of 400 sacks of the Soya Bean meal. Aside from the driver, three male
employees of Reyes rode on the truck with the cargo. While the truck was on its way to
Laguna, two strangers suddenly stopped the truck and hijacked the cargo. Investigation
by the police disclosed that one of the hijackers was armed with a bladed weapon while
the other was unarmed. For failure to deliver the 400 sacks, Fairgoods sued Dizon for
damages. Dizon in turn set up a 3rd party complaint against Reyes which the latter
registered on the ground that the loss was due to force majeure.

Did the hi-jacking constitute force majeure to exculpate Reyes from any liability to Dizon.
Discuss fully?

SUGGESTED ANSWER:
No, it does not constitute force majeure so as to exculpate Reyes from liability.

In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in
the provisions of Article 1734, must be dealt with under the provisions of Article 1735 and thus,
the common carrier is presumed to have been at fault or negligent. To exculpate the carrier from
liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or

18
irresistible threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which
provides:

"Art. 1745. Any of the following or similar stipulations shall be considered

unreasonable, unjust and contrary to public policy;

xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers
who do not act with grave or irresistible threat, violence or force, is dispensed with
or diminished;"

Hence, to consider the acts of thieves or robbers as force majeure to exculpate the
common carrier, the latter must establish that such thieves or robbers acted with grave or
irresistible threat, violence or force.

Here, there are only two hijackers with only one of them having a bladed weapon as
against the four male employees of Reyes. Such circumstances do not bring about a grave or
irresistible threat, violence or force.

Therefore, the hijacking does not constitute force majeure.

2001

What are the defenses available to any common carrier to limit or exempt it from liability?

SUGGESTED ANSWER:
Article 1734 provides the following defenses available to limit or exempt carrier from
liability:
1. Flood, storm, earthquake, lightning, or other natural disaster or calamity
2. Act of the public enemy in war, whether international or civil
3. Act or omission of the shipper or owner of the goods
4. The character of the goods or defects in the packing or in the containers
5. Order or act of competent public authority

Articles 1735 and 1755 also limits or exempts a common carrier to any liability if there is
an exercise of extraordinary diligence.

2009

One of the passenger buses owned by Continental Transit Corporation (CTC), plying its
usual route, figured in a collision with another bus owned by Universal Transport, Inc.
(UTI). Among those injured inside the CTC bus were: Romeo, a stow away; Samuel, a
pickpocket then in the act of robbing his seatmate when the collision occurred; Teresita,
the bus driver’s mistress who usually accompanied the driver on his trips for free; and
Uriel, holder of a free riding pass he won in a raffle held by CTC.

What, if any, are the valid defenses that CTC and UTI can raise in the respective actions
against them? Explain. (3%)

19
SUGGESTED ANSWER:
With respect to Romeo, Samuel and Teresita, Continental Transit Company may argue that
there was no perfected contract of carriage. A contract of carriage is defined as one whereby a
certain person or association of persons obligate themselves to transport persons, things, or
goods from one place to another for a fixed price (Spouses Fernando v Northwest Airlines, Inc.,
G.R. No. 212038).

On the other hand, Continental Transit Corporation may validly stipulate the limiting of
carrier’s liability for negligence for passengers carried gratuitously under Article 1758 of the Civil
Code. Continental Transit Corporation may therefor raise this defense against Uriel, if there was
stipulation in his free riding pass exempting the carrier’s liability for simple negligence.

Universal Transit Corporation may raise the defense that it has exercised the diligence of a
good father of a family in the selection and supervision of its driver. Since there is no contract of
carriage between the passengers of Continental Transit Corporation and Universal Transit
Corporation, Universal Transit Corporation is not liable for the passengers of Continental Transit.

2012

X, while driving his Toyota Altis, tried to cross the railway tract of Philippine (xxx line 2
unread text xxx) approached Blumentritt Avenida Ext., applied its horn as a warning to all
the vehicles that might be crossing the railway tract, but there was really nobody manning
the crossing. X was listening to his lpod touch, hence, he did not hear the sound of the
horn of the train and so his car was hit by the train. As a result of the accident, X suffered
some injuries and his car was totally destroyed as a result of the impact. Is PNR liable?
(A) PNR is not liable because X should have known that he was crossing a place
designated as crossing for train, and therefore should have been more careful.
(B) PNR is liable because Railroad companies owe to the public a duty of exercising a
reasonable degree of care to avoid injury to person and property at railroad crossings
which means a flagman or a watchman should have been posted to warn the public at
all times.
(C) PNR is not liable because it blew its horn when it was about to cross the railway along
Blumentritt Avenida Ext.
(D) PNR is not liable because X was negligent, for listening to his lpod touch while driving.

SUGGESTED ANSWER:
(A) PNR is not liable because X should have known that he was crossing a place designated as
crossing for train, and therefore should have been more careful.

2012

The AAA Bus Company picks up passengers along EDSA. X, the conductor, while on board
the bus, drew his gun and randomly shot the passengers inside. As a result, Y, a
passenger, was shot and died instantly. Is AAA Bus Company liable?
(A) The bus company is not liable for as long as the bus company can show that when they
hired X, they did the right selection process.
(B) The bus company cannot be held liable because what X did is not part of his
responsrbility.

20
(C) The bus company is liable because common carriers are liable for the negligence or
willful act of its employees even though they acted beyond the scope of their
responsibility.
(D) The bus company is not liable because there is no way that the bus company can
anticipate the act of X.

SUGGESTED ANSWER:
(C) The bus company is liable because common carriers are liable for the negligence or willful act
of its employees even though they acted beyond the scope of their responsibility.

Article 1759. Common carriers are liable for the death of or injuries to passengers through
the negligence or willful acts of the former’s employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common carriers.

This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.

DURATION AND EXTENT OF LIABILITY OF

COMMON CARRIERS
1989

X brought seven (7) sacks of palay to the PNR. He paid its freight charges and was issued
Way Bill No. 1. The cargo was loaded on the freight wagon of the train. Without any
permission, X boarded the freight wagon and not the passenger coach. Shortly after the
train started, it was derailed. The freight wagon fell on its side, killing X. There is no
evidence that X bought a ticket or paid his fare at the same time that he paid the freight
charges for his cargo. Is X a passenger of PNR?

SUGGESTED ANSWER:
X is not a passenger of PNR. In the case of Nueva v. Manila Railroad Company, with
respect to carriage of passengers by trains, the extraordinary responsibility of common carriers
commences the moment the person who purchases the ticket from the carrier presents himself
at the proper place and in a proper manner to be transported with a bona fide intent to ride the
coach. X should have stayed at the station, ticket office, waiting room, or even inside the
passenger coach, but not beside the baggage car or inside it, the latter place not being used for
conveying passengers. Neither is it stated in the bill of lading that X is authorized to accompany
the shipment nor was given special arrangement by the carrier to ride in the freight wagon. PNR
then, did not owe to the deceased the extraordinary diligence that is required of carriers regarding
their passengers.

1989

X took the Benguet Bus from Baguio going to Manila. He deposited his maleta in the
baggage compartment of the bus common to all passengers. He did not declare his
baggage nor pay its charges contrary to the regulations of the bus company. When X got

21
off, he could not find his baggage which obviously was taken by another passenger.
Determine the liability of the bus company.

SUGGESTED ANSWER:
The bus company is liable for the loss of the maleta. When it comes to baggage in the
custody of the common carrier, Article 1754 of the Civil Code provides the duty of extraordinary
diligence in the vigilance over the goods is due on such goods as are deposited or surrendered
to the common carrier for transportation. The fact that the maleta was not declared nor the
charges paid thereon, would not be consequential so long as it was received by the carrier for
transportation. Hence, the carrier Benguet Bus is still liable.

1989

X boarded an airconditioned Pantranco Bus bound for Baguio. X was given notice that the
carrier is not liable for baggage brought in by passengers. X kept in his custody his attaché
case containing $10,000.00. In Tarlac, all the passengers, including X, were told to get off
and to take their lunch, the cost of which is included in the ticket. X left his attaché case
on his seat as the door of the bus was locked. After lunch and when X returned to the bus,
he discovered that his attaché case was missing. A vendor said that a man picked the lock
of the door, entered the bus and ran away with the attaché case. What, if any, is the liability
of the carrier?

SUGGESTED ANSWER:
The carrier Pantranco bus should be held liable in this case. Baggage in the custody of
the passengers or their employees are governed by the rules on necessary deposits. Article 2000
of the Civil Code provides that the responsibility of the depositary shall, among other cases,
include the loss of property of the guest caused by strangers but not that which may proceed from
force majeure. Article 2001 of the same Code considers an act of a thief as not one of force
majeure unless done with the use of arms or through an irresistible force. Therefore, given the
factual setting in the problem, the common carrier is still liable to X.

1997

Antonio, a paying passenger, boarded a bus bound for Batangas City. He chose a seat at
the front row, near the bus driver, and told the bus driver that he had valuable items in his
hand-carried bag which he then placed beside the driver’s seat. Not having slept for 24
hours, he requested the driver to keep an eye on the bag should he doze off during the
trip. While Antonio was asleep, another passenger took the bag away and alighted at
Calamba, Laguna. Could the common carrier be held liable by Antonio for the loss?

SUGGESTED ANSWER:
Yes. Ordinarily, the common carrier is not liable for acts of other passengers. But the
common carrier cannot relieve itself from liability if the common carrier’s employees could have
prevented the act or omission by exercising due diligence.

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

22
 In this case, the rule that the common carrier is always responsible for the passenger's
baggage during the voyage needs to be emphasized. Article 1754 of the Civil Code does not
exempt the common carrier from liability in case of loss, but only highlights the degree of care
required of it depending on who has the custody of the belongings. Hence, the law requires the
common carrier to observe the same diligence as the hotel keepers in case the baggage remains
with the passenger; otherwise, extraordinary diligence must be exercised. Furthermore, the
liability of the common carrier attaches even if the loss or damage to the belongings resulted from
the acts of the common carrier's employees, the only exception being where such loss or
damages is due to force majeure.

Thus, the passenger asked the driver to keep an eye on the bag which was placed beside
the driver’s seat. If the driver exercised due diligence, he could have prevented the loss of the
bag.

2009

One of the passenger buses owned by Continental Transit Corporation (CTC), plying its
usual route, figured in a collision with another bus owned by Universal Transport, Inc.
(UTI). Among those injured inside the CTC bus were: Romeo, a stow away; Samuel, a
pickpocket then in the act of robbing his seatmate when the collision occurred; Teresita,
the bus driver’s mistress who usually accompanied the driver on his trips for free; and
Uriel, holder of a free riding pass he won in a raffle held by CTC.

Will a suit for breach of contract of carriage filed by Romeo, Samuel, Teresita, and Uriel
against CTC prosper? Explain. (3%)

SUGGESTED ANSWER:
In the case of Jesusa Bda. De Nueca, et al v. Manila Railroad Company ( CA-No. 31731,
January 30, 1968) the Court held that, a passenger is one who travels in a public conveyance by
virtue of a contract, express or implied, with the carrier as to the payment of the fare, or that which
is accepted as an equivalent. The relation of passenger and carrier commences when one puts
himself in the care of the carrier, or directly under its control, with the bona fide intention
of becoming a passenger, and is accepted as such by the carrier – as where he makes a contract
for transportation and presents himself at the proper place and in a proper manner to
be transported

In this case, Romeo- a stow away, Teresita- the bus driver’s mistress, and Samuel- the
pickpocket cannot sue for breach of contract because they cannot be considered as passengers
of the bus owned by Continental Transit Corporation. There is no express or implied contract of
carriage in the case of Romeo and Teresita. On the other hand, Samuel cannot sue for breach of
contract because he had no bona fide intention of becoming a passenger of the bus.

On the other hand, Uriel may sue for breach of contract. Article 1758 of the Civil Code
provides that a reduction of the fare does not justify. Any limitation of the common carrier’s liability.
In this case, despite boarding the bus for free because of his free riding pass, Continental Transit
Corporation is still liable for breach of contract with regard to Uriel because he is considered a
passenger.

23
 2011

P rode a Sentinel Liner bus going to Baguio from Manila. At a stop-over in Tarlac, the bus
driver, the conductor, and the passengers disembarked for lunch. P decided, however, to
remain in the bus, the door of which was not locked. At this point, V, a vendor, sneaked
into the bus and offered P some refreshments. When P rudely declined, V attacked him,
resulting in P suffering from bruises and contusions. Does he have cause to sue Sentinel
Liner?
(A) Yes, since the carrier's crew did nothing to protect a passenger who remained in the
bus during the stop-over.
(B) No, since the carrier's crew could not have foreseen the attack.
(C) Yes, since the bus is liable for anything that goes wrong in the course of a trip.
(D) No, since the attack on P took place when the bus was at a stopover.

SUGGESTED ANSWER:
(A) Yes, since the carrier's crew did nothing to protect a passenger who remained in the bus
during the stop-over.

2011

The liability of a common carrier for the goods it transports begins from the time of
(A) conditional receipt.
(B) constructive receipt.
(C) actual receipt.
(D) either actual or constructive receipt.

SUGGESTED ANSWER:
(D) either actual or constructive receipt.

2011

P, a sales girl in a flower shop at the Ayala Station of the Metro Rail Transit (MRT) bought
two tokens or tickets, one for her ride to work and another for her ride home. She got to
her flower shop where she usually worked from 8 a.m. to 5 p.m. At about 3 p.m., while P
was attending to her duties at the flower shop, two crews of the MRT got into a fight near
the flower shop, causing injuries to P in the process. Can P sue the MRT for contractual
breach as she was within the MRT premises where she would shortly take her ride home?
(A) No, since the incident took place, not in an MRT train coach, but at the MRT station.
(B) No, since P had no intention to board an MRT train coach when the incident occured.
(C) Yes, since she already had a ticket for her ride home and was in the MRTs premises at
the time of the incident.
(D) Yes, since she bought a round trip ticket and MRT had a duty while she was at its
station to keep her safe for her return trip.

SUGGESTED ANSWER:
(B) No, since P had no intention to board an MRT train coach when the incident occured.

24
 CERTIFICATE OF PUBLIC CONVENIENCE/
KABIT-SYSTEM/REGISTERED OWNER RULE
1983

Acme Transportation Co. has a certificate of public convenience to operate buses in

Southern Luzon and Eastern Visayas, including the Manila-Bicol-Samar-Leyte route. In
order to get to Samar, its buses take a ferry from Matnog, Sorsogon, across the babuyan
Channel, an 8-Km ride more or less to the coastal town of Allen in Samar. Acme
Transporation Co. finds that the fees it pays for the ferry come to a quite substantial
amount each year and it calculates that it will be more economical to have its own ferry to
transport its buses. It therefore applies for an authorization to operate such a ferry as an
additional unit of equipment for the exclusive use of its buses on the Manila-Leyte route.

X Lighterage Service Co. which has been operating a ferry service on said route for the
past 6 years, objects on the following grounds: (a) the certificate of public convenience of
Acme is to operate land transportation and this does not include ferry service which is
already inter-island shipping. It therefore needs a new certificate of public convenience to
operate inter-island transportation, a mere authority to acquire and operate an additional
unit not being sufficient, and (b) granting that the operation of said ferry is within Acme’s
certificate of public convenience, X Lighterage Service Co. is a prior operator, and since it
is giving adequate service, there is no need for an additional ferry service on said route.
In fact, Acme Transportation Co. has been availing itself of the ferry service of X Lighterage
Service Co. for several years.

Decide with reasons.

SUGGESTED ANSWER:
Acme may be given the permit it seeks. As to the first objection, in the case of San Pablo
vs Pantranco South Express, Inc. (citing the case of U.S. vs Pudget Sound Nev. Co. DC
Washington), it is held that a ferry service, in law, is treated as a continuation of the highway
from one side of the water over which passes to the other side for transportation of passengers
or of travelers with their teams vehicles and such other property as, they may carry or have with
them. Therefore, the ferry service in question may still be considered land transportation within
the scope of Acme’s present certificate of public convenience. There is no need for Acme to obtain
another certificate for inter-island transportation.

As to the second objection, under the prior or old operator rule, the law contemplates
that the first licensee will be protected in his investments and will not be subjected to ruinous
competition. It is not therefore the policy of the law for the Public Service Commission to issue a
certificate of public convenience to a second operator when a prior operator is rendering sufficient,
adequate and satisfactory service.

In the present case, even assuming that X, a prior operator, is rendering adequate service
and there is no need for a new ferry operator on said route, Acme’s petition is to use the ferry for
its purposes exclusively, and therefore will not compete with X. The fact that X will lose Acme as
a customer is no justification to prevent the latter from ferrying its own buses to lessen its
expenses, as long as it does not offer its services to others.

25
 1986

Mr. Mangasiwa applied for a certificate of public convenience to operate 5 jeepneys from
Batasang Pambansa area to Cubao, Quezon City. The application was opposed by
Hallelujah Transit and Kingdom Bus Co., which were already serving the area. They
invoked the “prior or old operator rule” in their opposition. Mangasiwa, in turn, invoked
the “prior applicant rule”.

Discuss the “prior or old operator rule” and the limitations or provisos on its application.
In case of conflict between the “prior or old operator rule” and the “prior applicant rule”,
which rule shall prevail? Explain.

SUGGESTED ANSWER:
The “prior or old operator rule” allows an existing franchised operator to invoke preferential
right to render the public service within the authorized territory as long as he does so satisfactorily
and economically. In case of conflict between the “prior or old operator rule” and the “prior
applicant rule”, the former will apply as long as again the operator is able to render satisfactory
and economically service.

1988

Mr. Villa, a franchise holder and the registered owner of a truck for hire, entered into a
lease contract with Mrs. Santos for the lease by the latter of said truck. The lease contract
was not brought to the knowledge of the Land Transportation, Franchising, and Regulatory
Board and was therefore not approved by the Land Transportation, Franchising, and
Regulatory Board. One stormy night, the said truck which was speeding along EDSA,
skidded and ran over X who died on the spot. The parents of X brought an action for
damages against Mr. Villa for the death of their son.

a) Will the action against Mr. Villa prosper? Reasons.

b) What recourse, if any, does X have?

SUGGESTED ANSWER:
a) Yes, the action against Mr. Villa will prosper pursuant to the Registered Owner Rule.

In the case of Erezo v. Jepte, the Supreme Court stated that the rule in our jurisdiction is
that 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. The registered owner shall be liable to the injured party subject to his right of
recourse against the transferee or buyer. Such pronouncement was also applied by the Supreme
Court in the case of BA Finance Corporation v. Court of Appeals, applying the registered owner
rule when the vehicle was leased to another person.

In this case, both the registered owner, Mr. Villa and the actual user or operator of the
motor vehicle, Mrs. Santos are liable for damages sustained in the operation thereof. Mr. Villa
shall be held liable to the heirs of X. Thereafter, Mr. Villa may recover from Mrs. Santos.

Hence, the action against Mr. Villa will prosper.

26
b) Aside from an action against Mr. Villa, the heirs of X may likewise bring an action based
on quasi-delict against Mrs. Santos and/or the driver of the vehicle. The driver may also be
charged criminally.

A person injured may file an action based on culpa aquiliana when the requisites provided
in Article 2176 are present, to wit: (a) that there be an act or omission causing damage to another;
(b) there is fault or negligence; (c) there is no pre-existing contractual relations between the
parties. In addition, Article 2180 also provides that the obligations provided in Article 2176 is
demandable not only for onw’s own acts or omissions, but also for those of persons for whom one
is responsible. Thus, employers shall be liable for the damages caused by their employees acting
within the scope of their assigned tasks.

The heirs of X may file an action against Mrs. Santos on the basis of culpa aquiliana. The
driver, being an employee, shall be subsidiarily liable. Furthermore, he may also be criminally
prosecuted for the negligent operation of the vehicle.

2005

Discuss the “kabit system” in land transportation and its legal consequences. (2%)

SUGGESTED ANSWER:
The “kabit system” 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, sometimes for a fee or percentage of the earnings. Although the parties to such
an agreement are not outrightly penalized by law, the kabit system is invariably recognized as
being contrary to public policy and therefore void and inexistent under Article 1409 of the Civil
Code. The “registered owner” rule is applicable whenever the persons involved are engaged in
the “kabit system”. (Aberlardo Lim, et al v. CA GR No. 125817, January 16, 2002)

The owner of the certificate of public convenience and the actual owner of the motor
vehicle should be held jointly and severally liable for damages to third persons as a consequence
of the negligent operation of the motor vehicle.

2012

X owns a passenger jeepney covered by Certificate of Public Convenience. He allowed Y

to use its Certificate of Convenience for a consideration. Y therefore was operating the
passenger jeepney under the same Certificate of Public Convenience (Kabit System) under
the name of X. The passenger jeepney met an accident. Who will be liable?
(A) Y, the one actually operating the jeepney, will be liable to the injured party.
(B) X will be the one liable to the injured party despite the fact that it is Y who is actually
operating the jeepney, because while the Kabit System is tolerated, the public should
not be inconvenienced by the arrangement.
(C) X will not be held liable if he can prove that he is not the owner anymore.
(D) Public Policy dictates that the real owner, even not the registered one, will be held
liable.

27
SUGGESTED ANSWER:
(B) X will be the one liable to the injured party despite the fact that it is Y who is actually operating
the jeepney, because while the Kabit System is tolerated, the public should not be
inconvenienced by the arrangement.

The kabit system 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, sometimes for a fee or percentage of the earnings. Although the parties to such an
agreement are not outrightly penalized by law, the kabit system is invariably recognized as being
contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code. So
for the safety of passengers and the public who may have been wronged and deceived through
the baneful kabit system, the registered owner of the vehicle is not allowed to prove that another
person has become the owner so that he may be thereby relieved of responsibility (Dizon v.
Octavio).

2012

X owns a fleet of taxicabs. He operates it through what is known as boundary system. Y

drives one of such taxicabs and pays X a fixed amount of Php1 ,000 daily under the
boundary system. This means that anything above Php1 ,000 would be the earnings of Y.
Y, driving recklessly, hit an old lady crossing the street. Which statement is most accurate?
(A) X as the owner is exempt from liability because he was not the one driving.
(B) X as the owner is exempt from liability because precisely the arrangement is one under
the "boundary system".
(C) X will not be exempt from liability because he remains to be the registered owner and
the boundary system will not allow the circumvention of the law to avoid liability.
(D) Y is the only one liable because he drove recklessly.

SUGGESTED ANSWER:
(C) X will not be exempt from liability because he remains to be the registered owner and the
boundary system will not allow the circumvention of the law to avoid liability.

BILL OF LADING AND OTHER FORMALITIES

1985

Dona Buding checked in at the PAL counter of the Manila Domestic Airport on a flight to
Bacolod. Noticing that Dona Buding had two big baggages being checked in, the counter
clerk called her attention to the stipulation in the plane ticket and asked if she was going
to make any declaration on the value of the same, but Dona Buding just looked at him and
did not say anything. The plane arrived in Bacolod, but the two baggages could nowhere
be found. PAL promised to deliver the two baggages the next day, but it never did.

Dona Buding sued PAL, claiming P10,000 damages for the loss of the two baggages. PAL
answered that it was liable only for P200 for the plane ticket clearly stipulated that: “That
total liability of the carrier for lost or damaged baggage is limited to P100 per baggage,
unless the passenger declares a higher valuation in excess of P100 but not in excess,

28
however, of a total valuation of P1,000, and unless additional charges are paid pursuant to
Carrier’s Tariffs.” The trial court ruled in favor of PAL.

Comment on the legality of the court’s decision.

SUGGESTED ANSWER:
The lower court’s decision must be sustained.

Under the Civil Code provisions on common carriers, a stipulation limiting the common
carrier’s liability to the value of the goods appearing on the Bill of Lading, unless the shipper or owner
declares a greater value, is binding In a decided case by the Supreme Court, the validity of a limiting
stipulation which was printed in reasonably and fairly big letters, is valid. Such provision have been
held to be a part of the contract of carriage, and is considered binding on the passenger.

In this case, notwithstanding the opportunity for Dona Buding to declare a higher valuation
for her baggages, she nevertheless omitted to do the same. Hence, the lower court’s decision should
be upheld (Ong Yiu v Philippine Airlines, G.R. No. L-20099, July 7, 1966).

1987

Martin Nove shipped an expensive video equipment to a friend in Cebu. Martin had bought
the equipment from Hong Kong for U.S. $5,000. The equipment was shipped through M/S
Lapu-Lapu under a bill of lading which contained the following provision in big bold letters:

“The limit of the carrier’s liability for any loss or damage to cargo shall be P200 regardless
of the actual value of such cargo, whether declared by shipper or otherwise.”

The cargo was totally damaged before reaching Cebu. Martin Nove claimed for the value
of his cargo ($5,000 or about P100,000) instead of just P200 as per the limitation on the bill
of lading.

Is there any legal basis for Nove’s claim?

SUGGESTED ANSWER:
There is legal basis for the claim of Martin Nove. According to Art. 1750 of the New Civil
Code, a contract fixing the sum that may be recovered by the owner of the shipper for the loss,
destruction, or deterioration of the good is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon. In the case at bar, the stipulation in
the bill of lading is invalid because it denies to the shipper the right to declare the actual value of
his cargoes and to recover, in case of loss or damage, on the basis thereof. Hence, Martin Nove
may file a claim to recover the actual value of the video equipment.

1993

JRT Inc entered into a contract with C Co of Japan to export anahaw fans valued at $23,000.
As payment thereof, a letter of credit was issued to JRT by the buyer. The letter of credit
required the issuance of an on-board bill of lading and prohibited the transshipment. The
President of JRT then contracted a shipping agent to ship the anahaw fans through O
Containers Lines, specifying the requirements of the letter of credit. However, the bill of

29
lading issued by the shipping lines bore the notation “received for shipment” and
contained an entry indicating transshipment in Hongkong. The President of JRT personally
received and signed the bill of lading and despite the entries, he delivered the
corresponding check in payment of the freight. The shipment was delivered at the port of
discharge but the buyer refused to accept the anahaw fans because there was no on-board
bill of lading, and there was transshipment since the goods were transferred in Hongkong
from MV Pacific, the feeder vessel, to MV Oriental, a mother vessel. JRT argued that the
same cannot be considered transshipment because both vessels belong to the same
shipping company.

1) Was there transshipment? Explain.

2) JRT further argued that assuming that there was transshipment, it cannot be
deemed to have agreed thereto even if it signed the bill of lading containing such
entry because it was made known to the shipping lines from the start that
transshipment was prohibited under the letter of credit and that, therefore, it had no
intention to allow transshipment of the subject cargo. Is the argument tenable?
Reason.

SUGGESTED ANSWER:
1) Yes. Transhipment, in maritime law, is defined as "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."
Clearly, either in its ordinary or its strictly legal acceptation, there is transhipment whether or not
the same person, firm or entity owns the vessels. In other words, the fact of transhipment is not
dependent upon the ownership of the transporting ships or conveyances or in the change of
carriers, as the petitioner seems to suggest, but rather on the fact of actual physical transfer of
cargo from one vessel to another (Magellan Manufacturing Marketing Corp. v. CA, G.R. No.
95529, August 22, 1991).

2) No. JRT is bound by the terms of the bill of lading when it accepted the bill of lading with
full knowledge of its contents which included transshipment in Hongkong. Acceptance under such
circumstances makes the bill of lading a binding contract (Magellan Manufacturing Marketing
Corp. v. CA, G.R. No. 95529, August 22, 1991).

2012

X is a trader of school supplies in Calapan, Oriental Mindoro. To bring the school supplies
to Calapan, it has to be transported by a vessel. Because there were so many passengers,
the two (2) boxes of school supplies were loaded but the shipping company was not able
to issue the Bill of Lading. So, on board, the Ship Captain issued instead a "shipping
receipt" to X indicating the two (2) boxes of school supplies being part of the cargo of the
vessel. Which phrase therefore, is the most accurate?
(A) the owner of the vessel is not liable because no bill of lading was issued to X hence,
no contract of carriage was perfected.
(B) it is possible to have a contract of carriage of cargo even without a bill of lading, and
the "shipping receipt" would be sufficient.
(C) the only acceptable document of title is a Bill of Lading.
(D) None of the above.

30
SUGGESTED ANSWER:
(B) it is possible to have a contract of carriage of cargo even without a bill of lading, and the
"shipping receipt" would be sufficient.

A bill of lading is a written acknowledgment of the receipt of the goods and an agreement
to transport and deliver them at a specified place to a person named or on his order. Such
instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. (13
Am. Jur. 2d, Carriers 771)

BREACH OF CONTRACT OF CARRIAGE

1990

Peter So hailed a taxicab owned and operated by Jimmy Cheng and driven by Hermie
Cortez. Peter asked Cortez to take him to his office in Malate. On the way to Malate, the
taxicab collided with a passenger jeepney, as a result of which Peter was injured, i.e., he
fractured his left leg. Peter sued Jimmy for damages, based upon a contract of carriage,
and Peter won. Jimmy wanted to challenge the decision before the Supreme Court on the
ground that the trial court erred in not making an express finding as to whether or not
Jimmy was responsible for the collision and, hence, civilly liable to Peter. He went to see
you for advice. What will you tell him? Explain your answer.

SUGGESTED ANSWER:
I would advice Jimmy to desist from challenging the decision. The basis of the cause of
action of a passenger against the common carrier is culpa contractual, while the basis of the
liability on the part of the driver is either culpa delictual of culpa aquiliana. The Supreme Court
held in one case that the action for the breach of contract imposes on the defendant carrier a
presumption of liability upon mere proof of injury to the passenger; the latter is relieved from the
duty to establish the fault of the carrier or of his employees; and the burden is placed on the carrier
to prove that it was due to an unforeseen event or to force majeure. Applying it to the given
situation, Jimmy is already presumed to be at fault due to the injury caused to Peter. Thus, what
Jimmy can do is to prove that the accident happened due to a fortuitous event.

1990

Johnny owns a Sarao jeepney. He asked his neighbor Van if he could operate the said
jeepney under Van’s certificate of public convenience. Van agreed and, accordingly,
Johnny registered his jeepney in Van’s name.

On June 10, 1990, one of the passenger jeepneys operated by Van bumped Tomas. Tomas
was injured and in due time, he filed a complaint for damages against Van and his driver
for the injuries he suffered. The court rendered judgment in favor of Tomas and ordered
Van and his driver, jointly and severally, to pay Tomas actual and moral damages,
attorney’s fees, and cost.

The Sheriff levied on the jeepney belonging to Johnny but registered in the name of Van.
Johnny filed a third-party claim with the Sheriff alleging ownership of the jeepney levied

31
upon and stating that the jeepney was registered in the name of Van merely to enable
Johnny to make use of Van’s certificate of public convenience.

May the Sheriff proceed with the public auction of Johnny’s jeepney? Discuss the reasons.

SUGGESTED ANSWER:
Yes. The rule in this jurisdiction as upheld by the Supreme Court in numerous cases is
that the person who is the registered owner of a vehicle is liable for any damages 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. The rationale for the rule according to Filcar Transport Services
vs. Espinas is to identify the owner so that if any accident happens, or that any damage or injury
is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other vehicles without positive
identification of the owner or drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for
damages or injuries caused on public highways.

Since the registered owner of the jeepney is Van, in the eyes of the law, he is deemed to
be the true owner of said vehicle. Thus, said jeepney may be the valid subject of the public auction
by the sheriff as this will prevent inconvenience and prejudice to the public.

1992

Antonio was granted a Certificate of Public Convenience (CPC) in 1986 to operate a ferry
between Mindoro and Batangas using the motor vessel “MV Lotus.” He stopped
operations in 1988 due to unserviceability of the vessel. In 1989, Basilio was granted a CPC
for the same route. After a few months, he discovered that Carlos was operating on his
route under Antonio’s CPC. Because Basilio filed a complaint for illegal operations with
the Maritime Industry Authority, Antonio and Carlos jointly filed an application for sale and
transfer of Antonio’s CPC and substitution of the vessel “MV Lotus” with another owned
by Carlos.

Should Antonio’s and Carlos’ joint application be approved? Give your reasons.

SUGGESTED ANSWER:
Antonio’s and Carlos’ joint application should not be approved. In a case decided by the
Supreme Court, it ruled that the Certificate of Public Convenience and the vessel covered by the
said cetificate are inseparable. The unserviceability of the vessel makes the Certificate of Public
Convenicne ineffective and the holder of such certificate is not allowed to transfer ownership or
possession to another.. Thus, the unavailability of the vessel “MV Lotus” makes Antonio’s
Certificate of Public Convenience ineffective. As for Carlos, he must procure his own Certificate
of Public Convenience from the State. As such, their joint application must be denied.

2003

Bayan Bus Lines had been operating satisfactorily a bus service over the route Manila to
Tarlac and vice versa via the McArthur Highway. With the upgrading of the new North

32
Expressway, Bayan Bus Lines service became seemingly inadequate despite its efforts of
improving the same. Pasok Transportation, Inc., now applies for the issuance to it by the
Land Transportation Franchising and Regulatory Board of a certificate of public
convenience for the same Manila-Tarlac-Manila route. Could Bayan Bus Lines, Inc. invoke
the “prior operator” rule against Pasok Transportation, Inc.? Why? (6%)

SUGGESTED ANSWER:
No, Bayan Bus Lines, Inc. cannot invoke the “prior operator” rule against Pasok
Transportation, Inc.

It is not the policy of the Public Service Commission to issue a certificate of public
convenience to a second operator when a prior operator is rendering sufficient, adequate and
satisfactory service, and who in all things and respects is complying with the rules and regulations
of the Commission. The law contemplates that the first licensee will be protected in his investment
and will not be subjected to ruinous competition.

In the case at hand, Bayan Bus Lines Inc., despite its efforts, fall inadequate in rendering
its services.

It cannot therefore invoke the “prior operator” rule against Pasok Transportation, Inc.

2005

Procopio purchased an Isuzu passenger jeepney from Enteng, a holder of a certificate of

public convenience for the operation of public utility vehicle plying the Calamba-Los
Baños route. While Procopio continued offering the jeepney for public transport services,
he did not have the registration of the vehicle transferred in his name. Neither did he secure
for himself a certificate of public convenience for its operation. Thus, per the records of
the Land Transportation Franchising and Regulatory Board, Enteng remained its
registered owner and operator. One day, while the jeepney was traveling southbound, it
collided with a ten-wheeler truck owned by Emmanuel. The driver of the truck admitted
responsibility for the accident, explaining that the truck lost its brakes.

Procopio sued Emmanuel for damages, but the latter moved to dismiss the case on the
ground that Procopio is not the real party in interest since he is not the registered owner
of the jeepney. Resolve the motion with reasons. (3%)

SUGGESTED ANSWER:
The motion to dismiss should be denied. The rule enjoining the registered owner of the
motor vehicle under the “kabit system” from proving another person is the owner is intended to
protect third parties. Since this case does not involve liability of the registered owner to third
parties, and it is the owner of the motor vehicle who is seeking compensation for damages, the
rule is not applicable.

2005

Baldo is a driver of Yellow Cab Company under the boundary system. While cruising along
the South Expressway, Baldo’s cab figured in a collision, killing his passenger, Pietro. The

33
heirs of Pietro sued Yellow Cab Company for damages, but the latter refused to pay the
heirs, insisting that it is not liable because Baldo is not its employee.

Resolve with reasons. (2%)

SUGGESTED ANSWER:
Yellow Cab Company is liable because there exists an employer-employee relationship
between a jeepney owner and a driver under the boundary system arrangement in accordance
with Art. 103 of the RPC. Indeed to exempt from liability the owner of a public vehicle who operates
it under the “boundary system” on the ground that he is a mere lessor would not only to abet a
flagrant violations of the Public Service Law but also to place the riding public at the mercy of
reckless and irresponsible drivers reckless because the measure of their earnings depends
largely on the number of trips they make and, hence, the speed at which they drive; and
irresponsible because most, if not all of them, are in no position to pay the damages they might
cause.

BREACH OF CONTRACT AND QUASI-DELICT

19XX

The vessel M/V Sweet Perceptions, commanded by Kapitan, its captain, was unloading
goods at a private wharf in Naval, Leyte, when the ship bumped the wharf of the pier
causing it to collapse into the sea. It turned out that Kapitan failed to drop the vessel’s bow
anchors and to fasten the vessel property to the pier. The vessel was pushed by the
combined action f the currents in the Biliran Island Strait and the usual southwest
monsoon winds of the season. As a result, Pantalan, the owner of the wharf, lost not only
the wharf but also the goods that had just been unloaded on the pier pending their delivery
to him. Pantalan sued both the owner of the M/V Sweet Perceptions and kapitan for the
loss of the cargoes and the destruction of the wharf of the pier. The vessel’s owner, who
is in Manila, states that he exercised due diligence in the selection and supervision of
Kapitan.

Can the vessel’s owner and kapitan be held liable for the loss of the wharf and the cargoes?
Explain.

SUGGESTED ANSWER:
The vessel’s owner is not liable for the loss of or damage to the wharf but he can be held
liable for the loss of the cargo. The cause of action on the loss of or damage to the wharf is one
of culpa acquillana where due diligence in the selection and supervision of employees is a valid
defense against liability according to Article 2180 of the Civil Code. That defense, however, is not
available for the loss of the cargo since the cause of action is one of culpa contractual (the goods
had not yet been delivered to the consignee).

Negligence is presumed the moment the goods were damaged before delivery.

Kapitan can be held liable for the loss of the wharf and the cargoes. The liability is based
on quasi-delict because his negligent act or omission caused the damage or injury. In fact, the
action against him may even be to enforce his civil liability arising from criminal negligence.

34
 1996

A bus of GL Transit on its way to Davao stopped to enable a passenger to alight. At that
moment, Santiago, who had been waiting for a ride, boarded the bus. However, the bus
driver failed to notice Santiago who was still standing on the bus platform, and stepped on
the accelerator. Because of the sudden motion, Santiago slipped and fell down suffering
serious injuries.

May Santiago hold GL Transit liable for breach of contract of carriage? Explain.

SUGGESTED ANSWER:
Santiago may hold GL Transit liable for breach of contract of carriage.

In the case of Dangwa Transport Co. v. Court of Appeals the victim was considered a
passenger by stepping and standing on the platform bus. The duty which the carrier owes to its
patrons extends also to persons boarding the carrier as well as those alighting therefrom, and a
public utility bus, once it stops is in effect making a continuous offer to bus riders.

Applying the said principle in the instant case, it was therefore the duty of the driver, when
he stopped the bus, to do no act that would have the effect of increasing the peril to a passenger
such as Santiago while he was attempting to board the same. Santiago, by stepping and standing
on the platform of the bus, is already considered a passenger and is entitled to all the rights and
protection pertaining to a contract of carriage.

2013

Fil-Asia Air Flight 916 was on a scheduled passenger flight from Manila when it crashed
as it landed at the Cagayan de Oro airport; the pilot miscalculated the plane's approach
and undershot the runway. Of the I 50 people on board, ten (10) passengers died at the
crash scene.

Of the ten who died, one was a passenger who managed to leave the plane but was run
over by an ambulance coming to the rescue. Another was an airline employee who hitched
a free ride to Cagayan de Oro and who was not in the passenger manifest.

It appears from the Civil Aeronautics Authority investigation that the co-pilot who had
control of the plane's landing had less than the required flying and landing time
experience, and should not have been in control of the plane at the time. He was allowed
to fly as a co-pilot because of the scarcity of pilots - Philippine pilots have been recruited
by foreign airlines under vastly improved flying terms and wages so that newer and less
trained pilots are being locally deployed. The main pilot, on the other hand, had a very high
level of blood alcohol at the time of the crash.

You are part of the team that the victims hired to handle the case for them as a group. In
your case conference, the following questions came up:

(A) Explain the causes of action legally possible under the given facts against the
airline and the pilots; whom will you specifically implead in these causes of action?
(5%)

35
 (B) How will you handle the cases of the passenger run over by the ambulance and the
airline employee allowed to hitch a free ride to Cagayan de Oro? (3%)

SUGGESTED ANSWER:
(A) A complaint for breach of contract of carriage can be filed against Fil-Asia air for failure to
exercise extraordinary diligence in transporting the passengers safely from their point of
embarkation to their destination (Article 1755, Civil Code). A complaint based on a quasi-delict
can also be filed against the pilots because of their fault and negligence (Article 2176, Civil Code).
FilAsia Air can likewise be sued for negligence in the selection and supervision of the pilots (Article
2180, Civil Code). Another cause of action may be a criminal prosecution for reckless imprudence
resulting in homicide against two pilots. However, in this last cause of action, the airline will only
be subsidiarily liable for the civil liability if the pilots are convicted and found to be insolvent.
However, in any case, there can be no recovery of damages twice for the same act or omission
of the defendant.

(B) For the case of the passenger who was run over, the heirs should file an action for
damages against the driver of the ambulance and his employer. This is in accordance with Article
2176 of the Civil Code which provides that whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done. Article 2180 of the Civil
Code also states that employers shall be vicariously liable for the damages caused by their
employees acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry. Likewise, there could be a criminal prosecution for reckless
imprudence resulting in homicide against the ambulance driver and the consequent civil liability.
The employer shall be subsidiarily liable if the ambulance driver is convicted and found to be
insolvent. In any case, the heirs cannot recover damages twice for the same act or omission of
the defendant.

As to the airline employee who was allowed to hitch a free ride to Cagayan De Oro, the
heirs should file an action for breach of contract of carriage. The liability of the airline, as a
common carrier, cannot be dispensed with or lessened by stipulation. Although Article 1758 of
the Civil Code provides that when the passenger is carried gratuitously, a stipulation limiting
liability for negligence is valid except for willful acts or gross negligence, in this scenario, however,
the facts do not show that there is such a stipulation limiting the liability of the common carrier.
Thus, Fil-Asia shall be liable to pay damages to the heir of said employee. A complaint based on
a quasi-delict can also be filed against the pilots because of their fault and negligence (Article
2176, Civil Code). FilAsia Air can likewise be sued for negligence in the selection and supervision
of the pilots (Article 2180, Civil Code). The heirs can also file a criminal action for reckless
imprudence resulting in homicide against two pilots which will make Fil- Air subsidiarily liable only
if the pilots are convicted and found to be insolvent. Regardless of the cause of action, recovery
for damages can only be had once.

2016

A railroad track of the Philippine National Railway (PNR) is located near a busy intersection
of Puyat Avenue and Osmena Highway. One afternoon, the intersection was heavily
congested, as usual. Juan, the driver of a public utility jeepney (PUJ), drove onto the
railroad tracks but could go no farther because of the heavy traffic at the intersection. After
the jeepney stopped right on the railroad track, it was hit and overturned by a PNR train,
resulting in the death of Kim, a passenger of the PUJ, and injuries to Juan and his other
passengers. Juan, the injured passengers and Kim's family sued the PNR for damages for

36
its negligence. It was established that the steel pole barrier before the track was broken,
and that the PNR had the last clear chance of avoiding the accident. On the other hand,
the PNR raised the defense that the track is for the exclusive use of the train and that
motorists are aware that it is negligence per se to stop their vehicles on the tracks. Decide
the case and explain. (5%)

SUGGESTED ANSWER:
PNR should be held liable.

The doctrine of last clear chance provides that where both parties are negligent but the
negligent act of one is appreciably later in point of time than that of the other, or where it is
impossible to determine whose fault or negligence brought about the occurrence of the incident,
the one who had the last clear opportunity to avoid the impending harm but failed to do so, is
chargeable with the consequences arising therefrom.

Stated differently, the rule is that the antecedent negligence of a person does not preclude
recovery of damages caused by the supervening negligence of the latter, who had the last fair
chance to prevent the impending harm by the exercise of due diligence.

The proximate cause of the collision was the petitioners’ negligence in ensuring that
motorists and pedestrians alike may safely cross the railroad track. The unsuspecting driver and
passengers of the jeepney did not have any participation in the occurrence of the unfortunate
incident which befell them. Likewise, they did not exhibit any overt act manifesting disregard for
their own safety. Thus, absent preceding negligence on the part of the respondents, the doctrine
of last clear chance cannot be applied (Philippine National Railways Corporation vs. Vizcara, et
al., G.R. No. 190022, February 15, 2012).

PNR had the last clear chance of avoiding the injury but did not exercise the diligence
expected of it under the circumstances.

ALTERNATIVE ANSWER:
PUJ and PNR are solidarily liable.

The general rule is that “the rights and obligations between the public and a railroad
company at a public crossing are mutual and reciprocal. Both are under mutual obligation to
exercise due care to avoid causing or receiving injury. Each is duty bound to exercise reasonable
or ordinary care commensurate with the risk involved.”

When a person approaches a railroad track and desires to cross it, even at a regular
crossing, he is bound to use his sense of reason and to look, in order to avoid a possible accident
from an approaching train. If he omits to use his senses and walks or drives thoughtlessly upon
the track, or if using them he sees the train approaching and, instead of waiting for it to pass,
undertakes to cross the railroad, he so far contributes to his injury, if injury is received, as to
deprive himself of a right to complain. If one chooses, in such a position, to assume the risk, he
must suffer the consequences. PUJ was guilty of contributory negligence because he drove and
stopped his vehicle on the railroad tracks at a point not intended for that purpose.

Further, the train operator may be held liable if it did not ensure the safety of others through
placing of crossbars, signal lights, warning signs and other permanent safety barriers to prevent
vehicles or pedestrians from crossing there. It is the responsibility of the railroad company to use
reasonable care to keep the signal devices in working order. Failure to do so would be an

37
indication of negligence. PNR was negligent when they failed to repair the steel pole barrier that
was broken. The responsibility of the PNR to secure public safety does not end with the installation
of safety equipment and signages but, with equal measure of accountability, with the upkeep and
repair of the same (Philippine National Railways Corporation vs. Vizcara, et al., G.R. No. 190022,
February 15, 2012).

Since the PUJ was guilty of contributory negligence, it should be held solidarily liable with
PNR consistent with jurisprudence that the tortfeasor and the common carrier are solidarity liable
in case of death or injury to passengers of the carrier.

MARITIME LAW
REAL AND HYPOTHECARY NATURE OF MARITIME LAW
1978

Pablo Esparadon, a duly-licensed ship captain of the M/V Don Jose was drunk while he
was on duty as such, and while M/V Don Jose was sailing from Manila to the Visayas. As
a consequence thereof, the M/V Don Jose rammed another vessel near Corregidor,
causing both vessels to sink completely and thus become total losses. The cargo owners
of both sunken vessels sued the owner of M/V Don Jose for their losses. Is the shipowner
of M/V Don Jose liable? Explain your answer.

SUGGESTED ANSWER:
Yes, the shipowner of the M/V Don Jose is liable.

The exclusively real and hypothecary nature of maritime law operates to limit the liability
of the shipowner to the value of the vessel, earned freightage, and proceeds of the insurance, if
any. “No vessel, no liability,” expresses this limited liability rule.

This rule is subject to exceptions. One such exception, as held in Aboitiz Shipping v New
India Ins. Co., Ltd., is that the limited liability rule does not apply if the carrier failed to overcome
the presumption of negligence. In such case, the shipowner is still liable.

In the case at hand, the presumption is that the loss is due either to the fault of the
shipowner, or to the concurring negligence of the shipowner and the captain. Absent any showing
that the shipowner has overcome this presumption, he is deemed liable for the loss.

1982
a) Explain the limited liability rule or the so called real or hypothecary nature of maritime
law.
b) In an action grounded on the contract of carriage, is there need for the court to make
an express finding of fault or negligence on the part of the carrier in order to hold it
liable for claims filed in behalf of the injured or deceased passengers? Explain. Is there
any exception to any answer you may give on this question?

38
SUGGESTED ANSWER:
a) Under the real or hypothecary nature of maritime law, the liability of the ship owner or
agent, arising from the operation of a ship, is limited to the vessel, equipment and freight during
the voyage, so that if ship owner or agent would abandon the vessel, equipment and freight, his
liability would be extinguished. However, if the vessel would sink and never be recovered, that
would also extinguish the liability of the ship owner or agent, unless those would be insured, and
in this case it would suffice to surrender the insurance to the creditors to extinguish his liability

b) No, there is no need for the court to make an express finding in order to hold the carrier
liable for claims filed against it because in case of death or injuries to passengers, common
carriers are presumed to have been at fault or to have acted negligently. The exception is that
they must prove that they observed the utmost diligence of very cautious persons, with a due
regard for all circumstances.

1985

a) What is the “limited liability rule” in maritime law, otherwise known as the “real or
hypothecary nature of maritime law?” Explain.
b) What are the exceptions to the said rule? Explain.

SUGGESTED ANSWER:
a) The real and hypothecary nature of maritime law states hat the shipowner or agent’s
liability is merely co-extensive with his interest in the vessel such that a total loss thereof results
in its extinction. The total destruction of the vessel extinguishes maritime liens because there is
no longer any res to which it can attach. (Monarch Insurance Co., Inc. v Court of Appeals, G.R
Nos. 92735, June 8, 2000)

b) Some exceptions to the above rule are any of the 2 succeeding enumerations, among
others:
1. Where the injury or death to a passenger is due either to the fault of the shipowner, or
to the concurring negligence of the shipwowner and the captain – if the failure to
maintain the seaworthiness of the vessel can be ascribed to the shipowner or to the
shipowner concurrently with the captain, then the limited liability principle cannot be
invoked; ((Monarch Insurance Co., Inc. v Court of Appeals, G.R Nos. 92735, June 8,
2000)
2. Where the vessel is insured – despite that the total loss of the vessel, the insurance
answers for the damages that a shipowner or agent may be held liable for by reason
of the death of its passengers; (Aboitiz Shipping Corporation v. New India Assurance
Company Ltd., G.R No. L-42926, September 13, 1985)
3. In workmen’s compensation claim – the rule does not apply to the liability under the
Workman’s Compensation Act where even as in said case the vessel was lost, the
liability thereunder is still enforceable against the employer or shipowner. (Abueg v
San Diego, G.R. No. L-773, Dec. 17, 1946)
4. For repairs of the vessel completed before its loss. (Government of the Philippines v
Insular Maritime Co., G.R No. L-21495, March 18, 1924)

39
 1988

a) The goods imported from the United States were unloaded by the carrier in Manila.
While in the custody of the arrastre operator, part of the shipment worth P1,000 was
lost. Does the case involve admiralty and maritime commerce so that the action for
short delivery has to be filed in the Court of First Instance regardless of the amount?
Reasons.
b) What are the remedies if a passenger is injured or dies due to the negligence of a
common carrier?

SUGGESTED ANSWER:
a) No, the case does not fall under admiralty and maritime commerce.

Maritime law by its nature is characterized as real and hypothecary. In the case of Monarch
Insurance Company v. Court of Appeals, the Supreme Court held that the exclusively real and
hypothecary nature of Maritime Law operates to limit the liability of the shipowner to the value of
the vessel, earned freightage, and proceeds of the insurance, if any. Jurisprudence reiterates the
“no vessel, no liability” rule.

In this case, it clearly appears that the matter does not involve admiralty or maritime
commerce which relate only to incidents occurring during the sea voyage. The loss occurred at
the time when the goods were already under the custody of the arrastre operator which is no
longer related to the affairs and businesses of the sea, ship, crew, or its navigation. Furthermore,
even assuming that the case involves an admiralty and maritime case, under B.P. 129, jurisdiction
now also lies with the lower courts if the amount involved does not exceed P300,000 or P400,
000, if in Metro Manila.

Thus, the case does not fall under the admiralty and maritime laws.

b) If a passenger is injured or dies due to the negligence of the common carrier, the
passenger himself or his heirs may file an action for recovery of damages against the common
carrier.

Article 1759 of the New Civil Code provides that Common Carriers are liable for the death
of or injuries to passengers through the negligence or willful acts of the former’s employees,
although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carrier. This liability 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. In
addition, Article 1763 also provides that the common carrier shall be 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.

The cause of action of the passenger against the common carrier is based on culpa
contractual since the negligence of the common carrier is thus, presumed upon death or injury to
the passenger, unless the common carrier can prove that it exercised extraordinary diligence.

1997

Explain these two doctrines in Maritime accidents—

40
a) The Doctrine of Inscrutable Fault; and
b) The Doctrine of Limited Liability

SUGGESTED ANSWER:
a) The Doctrine of Inscrutable Fault. In a collision, the vessel at fault shall indemnify the
damages sustained or losses incurred (Art. 826 of the Code of Commerce), and if both vessels
were at fault, each shall suffer its own damages, and both shall be solidarily liable to others (Arts.
827-828 of the Code of Commerce). This solidarity expressed in Article 827 of the Code of
Commerce has been held to preclude a common carrier operating a vessel from interposing a
defense of due diligence in the selection and supervision of its employees in an action against it
by shipper of the other colliding vessel as distinguished from the ordinary rule in liabilities for tort
or culpa aquiliana. Where the fault is established but it cannot be determined which of the two
vessels were at fault, both shall be deemed to have been at fault.

b) The Doctrine of Limited Liability. In maritime law, obligations are secured or

hypothecated by the vessel. The security is real because the obligation follows the vessel, NO
VESSEL, NO LIABILITY. The exclusively real and hypothecary nature of maritime law operates
to limit the liability of the shipowner to the value of the vessel, earned freightage, and proceeds of
the insurance, if any (Monarch Ins. Co. vs CA, G.R No. 92735, June 8, 2000). The total destruction
of the vessel extinguishes maritime lien, as there is no longer any res to which it can attach.

2000

MV Mariposa, one of five passenger ships owned by the Marina Navigation Company, sank
off the coast of Mindoro while en route to Iloilo City. More than 200 passengers perished
in the disaster. Evidence showed that the ship captain ignored typhoon bulletins issued
by PAGASA during the 24- hour period immediately prior to the vessel’s departure from
Manila. The bulletins warned all types of sea crafts to avoid the typhoon’s expected path
near Mindoro. To make matters worse, he took more load than was allowed for the ship’s
rated capacity. Sued for damages by the victim’s surviving relatives, Marina Navigation
Company contended: (1) that its liability, if any, had been extinguished with the sinking of
MV Mariposa; and (2) that assuming it had not been so extinguished, such liability should
be limited to the loss of the cargo. Are these contentions meritorious in the context of
applicable provisions of the Code of Commerce?

SUGGESTED ANSWER:
Yes, the contentions of Marina Navigation Company are meritorious.

The Supreme Court has held that the liability of a shipowner is limited to the value of the
vessel or to the insurance thereon. Despite the total loss of the vessel therefore, its insurance
answers for the damages that a shipowner or agent may be held liable for by reason of the death
of its passengers. The limited liability doctrine applies not only to the goods but also in all cases
like death or injury to passengers wherein the shipowner or agent may properly be held liable for
the negligent or illicit acts of the captain.

Here, the captain of MV Mariposa is guilty of negligence in ignoring the typhoon bulletins
issued by PAGASA and in overloading the vessel. But only the captain of the vessel MV Mariposa
is guilty of negligence. The shipowner is not. Therefore, the shipowner can invoke the doctrine of
limited liability.

41
 2016

Nautica Shipping Lines (Nautica) bought a second hand passenger ship from Japan. It
modified the design of the bulkhead of the deck of the ship to accommodate more
passengers. The ship sunk with its passengers in Tablas Strait due to heavy rains brought
by the monsoon. The heirs of the passengers sued Nautica for its liability as a common
carrier based on the reconfiguration of the bulkhead which may have compromised the
stability of the ship. Nautica raised the defense that the monsoon is a fortuitous event and,
at most, its liability is prescribed by the Limited Liability Rule. Decide with reasons. (5%)

SUGGESTED ANSWER:
The limited liability rule will not apply in this case.

The limited liability rule or the “no vessel, no liability doctrine,” provides that liability of ship
owner is limited to the ship owner’s interest over the vessel such that a total loss thereof results
in its extinction. However, based on jurisprudence, the limited liability rule will not apply when the
injury or death of a passenger is due either to the fault of the ship owner, or to the concurring
negligence of the ship owner and the captain.

In the case given, there was contributory negligence on the part of the ship owner. The
reconfiguration of the bulkhead of the deck of the ship to accommodate more passengers made
the vessel unseaworthy.

Therefore, the limited liability rule will not apply because of the shipowner’s contributory
negligence.

ALTERNATIVE ANSWER:
The shipowner should be liable.

Fortuitous event, to be a valid defense, must be established to be the proximate cause of

the loss. It is an event which cannot be foreseen and which though foreseen, is inevitable.

Monsoon wind has been jurisprudentially considered as a normal and foreseeable

condition while navigating in the sea. It is not considered as an unusual occurrence. It being the
cause of the accident, the ship owner should be held liable.

Given the foregoing, the presence of monsoon winds did not release the ship owner from
liability.

MARITIME PROTEST
1977

In the morning of April 2, 1977, the South-bound FS-90 belonging to William Lines, Inc.
reached the waters of the Verde island Passage. About the same time, the M.S. General
Del Pilar, another interisland vessel owned by the General Shipping, was likewise in the
same waters, steaming northward to Manila. The vessels, coming from the opposite
directions and towards each other, suddenly collided at a certain point of the passage

42
which resulted in the sinking of FS-190, together with all its cargoes, part of which
belonged to Tanya, who was a paying passenger and Rafael, who was a shipper.

Tanya and Rafael brought an action in court to recover for their losses and for damages
arising from the collision.

Were they under obligation to file a maritime protest for a successful maintenance of the
action? Why?

SUGGESTED ANSWER:
No, Tanya and Rafael are not under obligation to file maritime protest. Art. 835 of the Code
of Commerce states that “the action for recovery of damages and losses arising from collisions
cannot be admitted without a previous protest or declaration presented by the captain within 24
hours before the competent authority of the point where the collision took place, or of the first port
of arrival.” Therefore, a marine protest is required to be made by the master of the vessel not by
the passenger or shipper.

1977

Explain a maritime protest.

SUGGESTED ANSWER:
Maritime Protest—a written statement by the master of vessel, attested by a proper judicial
officer or a notary, to the effect that damage suffered by the ship or her voyage was caused by
storms or other perils of the sea, without any negligence or misconduct on his part.

1988

Captain Hook, the ship captain of M.V. Peter Pan, overloaded the M.V. Peter Pan, as a
consequence of which the vessel sank in the middle of the Sulu Sea, and nothing
whatsoever was recovered. The owners of the cargo and the heirs of the three passengers
of the vessel filed an action for damages in the amount of P500,000 against Mr. Wendy, the
owner.

a) Will the action prosper? Reasons.

b) Explain a maritime protest. When and where should it be filed?

SUGGESTED ANSWER:
a) The action filed by the owners of the lost cargo will not prosper, but the actions file by the
heirs of deceased passengers will prosper.

Article 587 of the Code of Commerce states that as a general rule, a ship owner or agent
shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of
the captain in the care of the goods which the vessel carried. However, as an exception, the
Article 587 also provides that the owner or agent may also exempt himself therefrom by
abandoning the vessel with all her equipment and freightage he may have earned during the
voyage. As a result, the total loss or the lawful abandonment of the vessel precludes further
liability on the part of the shipowner, except to the extent of earned freightage or proceeds of
insurance, if any, for the loss of cargo arising from the “conduct of the captain in the care of

43
goods”. This right of abandonment likewise applies to collisions and shipwreck but in the latter
case only for unpaid wages.

Accordingly, the action filed by the owners of the lost cargo, absent any remaining value
of the vessel, earned freightage or insurance proceeds, may not prosper. The action filed by the
heirs of the deceased passengers may, however, prosper since, except in collisions, the
shipowners are not granted the right of abandonment.

Hence, the actions filed by the cargo owners shall be dismissed but the actions filed by
the heirs of the deceased shall prosper.

b) Article 835 of the Code of Commerce states that a maritime protest is a sworn statement
or declaration that must be presented within twenty-four hours before a competent authority of
the point where collision took place, or at first port of arrival of the vessel, if in the Philippine
territory, and to the consul of the Philippines if it occurred in a foreign country. Such protest is
necessary for the recovery of losses and damages arising from collision.

Protest is required under the Code of Commerce in the following cases:

1) When the vessel makes an arrival under stress (Article 612 of Code of Commerce);
2) When the vessel is shipwrecked (Articles 612 of the Code of Commerce);
3) When the vessel had gone through a hurricane, or the captain believes that the cargo
has suffered damages or averages (Article 624 of the Code of Commerce) and
4) Maritime collisions (Article 835 of the Code of Commerce).

COLLISION
1980

Vessel “U” and “V” collided with each other causing damage to both vessels. Vessel “U”
had the last clear chance to avoid the collision but failed to do so.

1) Is the doctrine of last clear chance in tort applicable to collisions of vessels at sea
under the Code of Commerce? Which vessel should shoulder liability for the
damage suffered by both vessels and by the cargo?
2) Assume that the negligence of the captain of vessel “U” was the proximate cause
of collision, while the negligence of the captain of vessel “V” was merely
contributory. To which vessel should the collision be deemed imputable?

SUGGESTED ANSWER:
1) The doctrine of last clear chance in tort is not applicable to collision of vessels at sea under
the Code of Commerce, and the case is deemed as if the collision is imputable to both vessels;
thus, each one of the vessels shall suffer her own damage, and both shall be solidarily liable for
the damages occasioned to their cargoes.

2) The collision shall be deemed imputable also to both vessels, as in the preceding answer
to No. 1 question. Since the “doctrine of contributory negligence” in tort is not also applicable to
collisions of vessel at sea under the Code of Commerce, the case is deemed as if the collision is
imputable to both vessels.

44
 1987

There was a severe typhoon when the vessel M/V Fortuna collided with M/V Suerte. It is
conceded that the typhoon was a major cause of the collision, although there was a strong
possibility that it could have avoided if the captain of M/V Fortuna was not asleep at the
time of the collision.

Who should bear the damages to the vessels and their cargoes?

SUGGESTED ANSWER:
Neither the carriers may go after the other; however, the carriers shall be solidarily liable
to the shippers for the damages sustained by their cargoes. According to the Doctrine of
Inscrutable Fault, in a collision, the vessel at fault shall indemnify the damages sustained or
incurred, and if both vessels were at fault, each shall suffer its own damages, and both shall be
solidarily liable to the others. In the case at bar, the masters of the vessels failed to exercise
extraordinary diligence in the transporting of the goods as warranted by the severe typhoon.
Hence, the ship owners shall bear their own losses. The shippers may claim damages against
the shipowners and the captains of both vessels. Their liability is solidary. Lastly, the ship owners
have the right to recover damages from the master of the vessels who were both guilty of
negligence.

1991

In a collision between M/T Manila, a tanker, and M/V Don Claro, an inter-island vessel, Don
Claro sank and many of its passengers drowned and died. All its cargoes were lost. The
collision occurred at nighttime but the sea was calm, the weather fair, and visibility was
good. Prior to the collision and while still four (4) nautical miles apart, Don Claro sighted
Manila on its radar screen. Manila had no radar equipment. As for speed, Don Claro was
twice as fast as Manila.

At the time of the collision, Manila failed to follow Rule 19 of the International Rules of the
Road which requires two (2) vessels meeting head on to change their course by each
vessel steering to starboard (right) so that each vessel may pass on the port side (left) of
the other. Manila signaled that it would turn to the port side and steered accordingly, thus
resulting in the collision. Don Claro’s captain was off-duty and was having a drink at the
ship’s bar at the time of the collision.

a) Who would you hold liable for the collision?

b) If Don Claro was at fault, may the heirs of the passengers who died and the owners
of the cargoes recover damages from the owner of said vessel?

SUGGESTED ANSWER:
a) I can hold both vessels liable. In the problem given, whether on the basis of the factual
settings or under the doctrine of inscrutable fault, both vessels can be said to have been guilty of
negligence. Articles 826 to 828 of the Code of Commerce provide that in a collision, the vessel at
fault shall indemnify the damages sustained or losses incurred, and if both vessels were at fault,
each shall suffer its own damages, and both shall be solidarily liable to others. Neither carrier may
invoke the doctrine of last clear chance which can only be relevant, if at all, between the two
vessels but not on the claims made by passengers or shippers (Litonjua Shipping vs. National

45
Seamen Board, G.R. No. 51910, 10 Aug 1989) In this case, Manila failed to follow the International
Rules of the Road, while Don Claro was going twice as fast as Manila and its captain was off-
duty. Hence, both vessels, being guilty of negligence, are liable.

b) Yes, the heirs of the dead passengers and the owners of the cargoes may recover
damages, but subject to the doctrine of limited liability. The doctrine is to the effect that the liability
of the shipowners would only be to the extent of any remaining value of the vessel, proceeds of
insurance, if any, and earned freightage. Given the factual settings, the shipowner himself was
not guilty of negligence and, therefore, the doctrine can well apply (Amparo de los Santos vs. CA,
186 SCRA 69) Hence, the heirs and owners may recover.

1995

Two vessels figured in a collision along the Straits of Guimaras resulting in considerable
loss of cargo. The damaged vessels were safely conducted to the Port of Iloilo. Passenger
A failed to file a maritime protest. B, a non-passenger but a shipper who suffered damage
to his cargo, likewise did not file a maritime protest at all.

a. What is a maritime protest?

b. Can A and B successfully maintain an action to recover losses and damages arising
from the collision? Reason briefly. (10%)

SUGGESTED ANSWER:
a. A “maritime protest” is a sworn statement that must be formally lodged before a competent
authority, by the captain or master of the innocent vessel, which has figured in a collision or
shipwreck, within 24 hours upon arrival at the nearest port; failure of which bars recovery for loss
or damage, no matter how meritorious the claim may be (Article 835, CC).

b. A cannot recover damages from the collision but B can still recover even in the absence
of a protest.

Article 835 of the Code of Commerce requires that a maritime protest be filed for an action
for the recovery of losses and damages to be admitted. However, with respect to damages caused
to persons or to the cargo, the absence of a protest cannot prejudice the persons interested who
were not on board or were not in a condition to make known their wishes (Article 836, CC).

A, being a passenger, cannot maintain the action to recover losses without a prior protest
required under Article 86 of the Code of Commerce. B on the other hand, who was not a
passenger but only a shipper of a cargo, can recover because the lack of protest will not prejudice
such actions to recover damage caused to persons or cargo whose owners were not on board
the vessel at the time of collision.

Hence, only B can maintain an action to recover losses and damages from the collision.

ALTERNATIVE ANSWER:
a. A “maritime protest” is a written statement by the master of a vessel or any authorized
officer, attested by 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:
i. When the vessel makes an arrival under stress (Art. 612, CC);
ii. Where the vessel is shipwrecked (Arts. 612, 624, 843, CC);

46
 iii. Where the vessel has gone through a hurricane or the captain believes that the cargo
has suffered damages or averages (Art. 624, CC); and
iv. Maritime collisions (Art. 835, CC).

AVERAGES
1982

The vessel “General Mascardo” was loaded with 5,000 tons of gold and copper
concentrates by Syndicated Ores, Inc. (the charterer) for delivery to the U.S. The master of
the vessel issued the corresponding bill of lading which contained a prohibition against
the loading of dangerous cargo per se or cargo which may become dangerous and make
the voyage unsafe. The master has had 10 years of experience as captain, but this was his
first experience with cargo of gold and copper concentrates. The cargo was loaded,
stowed and trimmed at the sole risk and expense of Syndicated Ore, Inc. While enroute to
its destination, the vessel met a typhoon and because of the heavy stress, the shifting
boards or compartments constructed by Syndicated broke, causing the cargo of ore
concentrates to shift. Since the vessel was listing on its side to almost 14° for several
hours, the master, in the hope of saving the vessel, decided to jettison some of the cargo
belonging to other shippers. At this point, a powerful tugboat offered to help in
maneuvering the vessel, which the master accepted on no-cure no pay basis. To save the
vessel and the remaining cargo, the master, after consulting with his officers, deviated to
Japan, the nearest port, instead of proceeding to the U.S. Thereafter, the cargo of gold and
copper concentrates were examined by international surveyors who declare that the
moisture content of said concentrates was beyond transportable limit and the same was
much higher than as certified by Syndicated. The master and the shipowner, after
declaring that the cargo was of dangerous nature and condition, unloaded the cargo in
Japan, abandoned the voyage and informed the cargo owners to transship their cargo at
their own cost and expense. The master and the shipowner also slapped a lien on said
cargo for freight up to Japan as well as other expenses.

a) Was there a general average situation? Did the vessel have the right to jettison other
cargo, hire salvors and deviate the vessel to Japan?
b) Assuming Syndicated Ores, Inc. refused general average, may the vessel declare
the cargo as dangerous, unload the same, store the cargo in Japan and abandon
the voyage, at the same time slapping a lien on cargo for freightage, expenses for
unloading, expenses for jettison, salvage and/or general average?
c) Does Syndictaed Ores, Inc. have the right to insist that the vessel carry the cargo
to the U.S. per bill of lading, or that the shipowner hire a substitute vessel to
complete the contracted voyage in accordance with the “extraordinary diligence”
required or common carriers in the carriage of goods?

SUGGESTED ANSWER:
a) As to general average — No, there was no general average situation, the requisites of a
general average being absent.

As to Jettison — Since the requisites of a general average were not existing, the captain
had no right to jettison other cargo.

47
 As to hiring salvor — Yes, because the cargo of the vessel was beyond the control of the
crew.

As to deviation — The vessel/captain had no right to deviate the vessel to Japan because
the requisites of arrival under stress were not present.

b) It depends. If the requisites of law as to general average, salvage work and deviation of
the vessel to Japan, would not be present or satisfied, as discussed above, under question letter
(a), then the vessel/captain may not do these accts/things stated in question letter (b) to the
prejudice of the shipper. If otherwise, the vessel/captain may.

c) It depends. If during the voyage the vessel should become unseaworthy, the captain shall
be obliged to charter at his expense another one in good condition to carry the cargo to its
destination, U.S.A. If the captain should not furnish thru indolence or malice, a vessel to take the
cargo to its destination, the shippers may charter one at the expense of the captain/shipowner.

ALTERNATIVE ANSWER:
a) As to general average — Assuming that the missing facts for requirements (there are four
requisites) were present, then there was general average. (A. Magsaysay, Inc. v. Agan, L-6393,
Jan. 31, 1955)

As to Jettison — If the requisites of general average were present (there are four), then
the captain had the right to jettison the other cargo.

As to hiring salvor — No, because the requisites of a valid salvage claim were not present
(there are three).

As to deviation — Yes, the vessel/captain had the right to deviate the vessel to Japan,
because made in good faith, upon reasonable grounds of belief in its necessity to avoid a peril.

2010

An importer of Christmas toys loaded 100 boxes of Santa Claus talking dolls aboard a ship
in Korea bound for Manila. With the intention of smuggling one-half of his cargo, he took
a bill of lading for only 50 boxes. On the voyage to Manila, 50 boxes were jettisoned to save
the more precious cargo.

A) Is the importer entitled to receive any indemnity for average? Explain. (2%)
B) What are the types of averages in marine commerce? (3%)

SUGGESTED ANSWER:
A) The importer is not entitled to receive any indemnity for average. According to Article 816
of the Code of Commerce, in order that the goods jettisoned may be included in the general
average and the owner be entitled to indemnity, it is necessary that their existence on board be
proven by means of the bill of lading. In the case at bar, the said requisite is not present.

B) There are two types of averages in marine commerce namely, general average and
particular average. General average includes all damages and expenses which are deliberately
caused in order to save the vessel, its cargo, or both at the same time from real and known risk.
On the other hand, simple or particular average are all the expenses and damages caused to the

48
vessel or to her cargo which have not inured to the benefit and common profit of all the persons
interested in the vessel and her cargo.

CHARTER PARTY
1980

Tirso Molina charters a vessel owned and operated by Star Shipping Co., a common
carrier, for the purpose of transporting two tractors to his logging concession. The crane
operator of the shipping company somehow negligently puts the tractors in a place where
they would tilt each other. During the trip, a strong wind hits the vessel, causing severe
damage to the tractors.

Tirso Molina sues the shipping company for damages. The latter cites a stipulation in the
charter agreement exempting the company from liability from loss or damage arising from
the negligence of its agents. Tirso Molina countered by stating that the aforementioned
stipulation is against public policy and, therefore, null and void.

Is the stipulation valid? Would you hold the shipping company liable?

SUGGESTED ANSWER:
Yes, the stipulation in the charter party is valid, and Star Shipping Co. is not liable.

Under a demise or bareboat charter, the charterer mans the vessel and becomes, in effect
the owner for the voyage or service stipulated. Hence, the carrier becomes a private carrier at
least insofar as the particular voyage concerning the charter-party is concerned. Consequently
under this arrangement, the stipulation in the charter exempting the owner from liability for the
negligence of its agent is valid and not against public policy.

The Civil Code provides that provisions on common carriers should not apply where the
common carrier is not acting as such but as a private carrier, as in the case in the above problem.
A common carrier undertaking to carry a special cargo or chartered to a special person only,
becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for
the negligence of its agent is valid, being not against public policy.

1989

X owns the ship M/V Aguinaldo. He bareboat chartered the ship to Y who appointed all its
crew members from the captain down to its last official. Y then transported a shipment of
P10,000 bags of sugar belonging to Z. Thru the negligence of the ship captain, half of sugar
was damaged due to sea water. Since Y is bankrupt, Z sued the captain and X. Will the suit
succeed?

SUGGESTED ANSWER:
The action could prosper against the ship captain whose negligence caused the damage
but not against X who merely was the lessor of the vessel and who was neither a party to the
contract for the shipment of the goods nor an employer of the ship captain. The Code of
Commerce provides that the charterer, in a bareboat charter arrangement, becomes the owner

49
“pro hac vice” of the vessel since he mans the vessel with his own set of master and crew,
effectively becoming the owner for the voyage or service stipulated, subject however to any
liability for damages arising from negligence. The bareboat charterer assumes, to a large extent,
the customary rights and liabilities of the shipowner in relation to third persons who may have
dealt with him or with the vessel.

1991

The Saad Developing Corp. enters into a voyage charter with XYZ Shipping Corp. over the
latter’s vessel, the M/V Lady Love. Before the Saad Development Corp. could load it, XYZ
Shipping Corp. sold M/V Lady Love to Oslob Maritime Corp., which decided to load it for
its own account.

a) May XYZ Shipping Corp. validly ask for the rescission of the charter party? If so,
can Saad Development Corp. recover damages? To what extent?
b) If Oslob Maritime Corp. did not load it for its own account, is it bound by the charter
party?
c) Explain the meaning of “owner pro hac vice of the vessel”. In what kind of charter
party does this obtain?

SUGGESTED ANSWER:
a) Yes, XYZ Shipping Corp. may ask for the rescission of the charter party. Art. 689 of the
Code of Commerce provides that at the request of the person from whom the vessel is chartered,
the charter party may be rescinded if the person from whom the vessel was chartered should sell
it before the charterer has begun to load it, and the purchaser should load it for his own account.
In such case, the vendor shall indemnify the charterer for the losses he may suffer. Since XYZ
Shipping Corp. sold M/V Lady Love to Oslob Maritime Corp. before the loading, Saad Developing
Corp. may ask for rescission and recover damages to the extent of its losses.

b) Yes. Art. 689 of the Code of Commerce provides that if the new owner of the vessel should
not load it for his own account, the charter party shall be respected, and the vendor shall indemnify
the purchaser if the former did not inform him of the charter pending at the time of making the
sale.

c) The term “owner pro hav vice of the vessel” is generally understood to be the charterer of
the vessel in the case of bareboat or demise charter (Litonjua Shipping Co vs. National Seamen’s
Board, G.R. No. 51910, 10 Aug 1989).

2017

Onassis Shipping, Inc. (Onassis) operated passenger vessels and cargo trucks, and
offered its services to the general public. In line with its vision and mission to protect the
environment, Go-Green Asia (Go-Green), an NGO affiliated with Greenpeace, entered into
a contract with Onassis whereby Go-Green would operate with its own crew the MN
Dolphin, an ocean-going passenger vessel of Onassis.

While on its way to Palawan carrying Go-Green's invited guests who were international
and local observers desirous of checking certain environmental concerns in the area, the

50
MN Dolphin encountered high waves and strong winds caused by a typhoon in the West
Philippine Sea. The rough seas led to serious physical injuries to some of the guests.

Discuss the liabilities of Onassis and Go-Green to the passengers of the M/V Dolphin.
Explain briefly your answer. (3%)

SUGGESTED ANSWER:
Onassis will have no liability to the passengers who suffered serious physical injuries.

As ruled in the case of Caltex (Philippines), Inc. v. Sulpicio Lines, G.R. No. 131166,
September 30, 1999, in a demise or bareboat charter, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability
for damages caused by negligence. Furthermore, it was also held in the case of Planters
Products, Inc. v. Court of Appeals, G.R. No. 101503, September 15, 1993, that when the
charter includes both the vessel and its crew, as in a bareboat or demise, the common carrier
becomes private, at least insofar as the particular voyage covering the charter-party is concerned.

In the case at bar, Onassis and Go-Green entered into a contract which is a bare boat or
demise charter. It was stated in the contract between Onassis and Go-Green that the MN Dolphin
would be operated by Go-Green’s own crew. Go-Green was not only given possession of the
vessel but also the command and control of the navigation. The bareboat or demise charter
effectively converts Onassis from a common carrier to a private carrier.

Therefore, having ceased to be the owner of the vessel with respect to the navigation,
Onassis has no liability to the passengers who were the invited guests of Go-Green. Go-Green is
the one liable to the passengers for the injuries they sustained in the course of the navigation. Go-
Green became the owner pro hac vice of MN Dolphin during the whole period of the voyage.

LIABILITIES
1984

X Mining Co. shipped a cargo of machineries on board the S/S Good Ship which was
chartered by the Able Shipping Co., a foreign corporation represented in the Philippines
by its agent, Best Lines, Inc. When the goods were delivered to the consignee, Y
Corporation, they were found to have sustained losses. The insurer, Sunshine Insurance
Co., paid for the losses, thereby subrogating itself to the rights of X Mining Company or Y
Corporation vis-à-vis the shipping company and the shipping agent.

Upon arrival of the S/S Good Ship in Manila, Best Lines, Inc. took charge of the following:
(a) unloading of the cargo and issuing of cargo receipts in its own name for the purpose
of evidencing the condition and discharge of the cargo from the vessel to the arrastre
operator and/or unto the barge lighters; (b) filing and processing of claims against the
vessel S/S Good Ship for damages/ losses sustained by the cargo.

When Sunshine Insurance Co. sued both Able Shipping Co. and and Best Lines, Inc. the
latter contended that it was a disclosed agent and could not therefore be held liable,
despite the insolvency of Able Shipping Co.

51
Rule on the contention of Best Lines, Inc., with reasons.

SUGGESTED ANSWER:
The contention of Best Lines Inc. is without merit. The Code of Commerce provides that
the ship agent shall be liable for indemnities in favor of third persons which arise from the conduct
of the captain in the care of the goods which the vessel carried. Moreover, the law does not make
the liability of the ship agent dependent upon the solvency or insolvency of the ship owner. In the
case herein, it is clear that Best Lines Inc. is the entity that represents the vessel in the port of
Manila and hence is a ship agent within the meaning and context of Article 586 of the Code of
Commerce. Considering the peculiar relationship of the parties, it cannot be considered as a
“mere agent” of a disclosed principal under the civil law on agency as distinguished from a ship
agent within the context of the said code. Thus, Best Lines Inc. is solidarily liable with its principal
Able Shipping Co. for the amount of losses and damages sustained by the goods.

1987

There was a severe typhoon when the vessel M/V Fortuna collided with M/V Suerte. It is
conceded that the typhoon was a major cause of the collision, although there was a strong
possibility that it could have avoided if the captain of M/V Fortuna was not asleep at the
time of the collision.

Who should bear the damages to the vessels and their cargoes?

SUGGESTED ANSWER:
Neither the carriers may go after the other; however, the carriers shall be solidarily liable
to the shippers for the damages sustained by their cargoes. According to the Doctrine of
Inscrutable Fault, in a collision, the vessel at fault shall indemnify the damages sustained or
incurred, and if both vessels were at fault, each shall suffer its own damages, and both shall be
solidarily liable to the others. In the case at bar, the masters of the vessels failed to exercise
extraordinary diligence in the transporting of the goods as warranted by the severe typhoon.
Hence, the ship owners shall bear their own losses. The shippers may claim damages against
the shipowners and the captains of both vessels. Their liability is solidary. Lastly, the ship owners
have the right to recover damages from the master of the vessels who were both guilty of
negligence.

1989

X chartered the ship of Y to transport logs from Zamboanga to Manila. In the course of
their voyage, the ship met a storm and had to dock in Cebu for three days. Z, the captain
of the ship, borrowed P20,000.00 from X on the pretext that he would need money for the
repair of the ship. Z misappropriated the money and converted it to his own benefit. What
is the liability of Y, if any?

SUGGESTED ANSWER:
Y would not be liable in this case. Article 586 of the Code of Commerce provides that the
shipowner shall be civilly liable for the acts of the captain and for the obligations contracted by
the latter to repair, equip, and provision of the vessel, provided the creditor proves that the amount
claimed was invested for the benefit of the same. Absent proof of that the money borrowed by Z
as the ship captain was actually used for the purpose mentioned, Y cannot be held liable for the

52
same. The amount borrowed shall be considered a personal liability of Z, the captain, and Y, as
shipowner cannot thus be held liable.

1989

X, a rich trader, boarded M/V Cebu, a small vessel with a value of P3 M and owned by Y,
plying the route Cotabato to Pagadian City. X had in his possession a diamond worth P5
M. The vessel had a capacity of 40 passengers. Near Pagadian, the vessel met squally
weather and was hit by six foot waves every three seconds. Soon, water entered the engine
room and the hull of the vessel. The patron of the vessel ordered the distribution of life
belts to the passengers. He told them the vessel was sinking and for them to take care of
themselves. The vessel turned out to be overloaded by 20 passengers and had no
sufficient life belts. X failed to get a life belt and died when the vessel totally sunk. The
heirs of X sued Y for P10 M damages. Y raised the defense of limited liability. Decide.

SUGGESTED ANSWER:
Y cannot invoke the defense of limited liability. The doctrine of limited liability does not
apply when death or injury or damage sustained is attributable to the fault or negligence of the
ship owner or ship agent and the captain of the vessel. In this case, the shipowner appears to be
guilty of fault or negligence because he did not make certain that the passenger vessel is not
overloaded and he failed to provided sufficient life belts on board the vessel.

2000

X Shipping Company spent almost a fortune in refitting and repairing its luxury passenger
vessel, the MV Marina, which plied the inter-island routes of the company from La Union
in the north to Davao City in the south. The MV Marina met an untimely fate during its post-
repair voyage. It sank off the coast of Zambales while en route to La Union from Manila.
The investigation showed that the captain alone was negligent. There were no casualties
in that disaster. Faced with a claim for the payment of the refitting and repair, X Shipping
Company asserted exemption from liability on the basis of the hypothecary or limited
liability rule under Article 587 of the Code of Commerce. Is X Shipping Company’s
assertion valid? Explain.

SUGGESTED ANSWER:
No, the assertion of X Shipping Company is not valid.

Under Article 587 of the Code of Commerce, the ship agent shall also be civilly liable for
the indemnities in favor of third persons which arise from the conduct of the captain in the care of
the goods which the vessel carried; but he may exempt himself therefrom by abandoning the
vessel with all her equipment and the freightage he may have earned during the voyage.

Here, the total destruction of the vessel does not affect the liability of the shipowner for
repairs on the vessel completed before its loss. Hence, X Shipping Company is not exempt from
liability for the claim of the payment for the refitting and repair of MV Marina.

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 2000

MV SuperFast, a passenger-cargo vessel owned by SF Shipping Company plying the inter-

island routes, was on its way to Zamboanga City from the Manila port when it accidentally,
and without fault or negligence of anyone on the ship, hit a huge floating object. The
accident caused damage to the vessel and loss of an accompanying crated cargo of
passenger PR. In order to lighten the vessel and save it from sinking and in order to avoid
risk of damage to or loss of the rest of the shipped items (none of which was located on
the deck), some had to be jettisoned. SF Shipping had the vessel repaired at its port of
destination. SF Shipping thereafter filed a complaint demanding all the other cargo owners
to share in the total repair costs incurred by the company and in the value jettisoned
cargoes. In answer to the complaint, the shippers’ sole contention was that, under the
Code of Commerce, each damaged party should bear its or his own damage and those that
did not suffer any loss or damage were not obligated to make any contribution in favor of
those who did. Is the shippers contention valid? Explain.

SUGGESTED ANSWER:
No, the shippers’ contention is not valid. The Supreme Court has held that the owners of
the cargo jettisoned, to save the vessel from sinking and to save the rest of the cargoes, are
entitled to contribution. The jettisoning of said cargoes constitute general average loss which
entitles the owners thereof to contribution from the owner of the vessel and also from the owners
of the cargoes saved. Here, however, SF Shipping is not entitled to contribution/reimbursement
for the cost of repairs on the vessel from the shippers.

2003

For the transportation of its cargo from the Port of Manila to the Port of Kobe, Japan,
Osawa & Co., chartered “bareboat” M/V Ilog of Karagatan Corporation. M/V Ilog met a sea
accident resulting in the loss of the cargo and the death of some of the seamen manning
the vessel. Who should bear the loss of the cargo and the death of the seamen? Why? (4%)

SUGGESTED ANSWER:
Osawa & Co. should bear the loss of the cargo and the death of the seamen.

A bareboat charter is one wherein the whole vessel is let to the charterer which transfers
to him its entire command and possession and consequent control over its navigation, including
the master and crew who are his servants. The charterer is treated as owner pro hac vice (for or
on this occasion only) of the vessel. In such case, a common carrier becomes a private carrier.

As Osawa & Co. is treated as the owner of the vessel, it is therefore liable for the loss of
the cargo and for the death of the seamen.

2008

On October 30, 2007, M/V Pacific, a Philippine registered vessel owned by Cebu Shipping
Company (CSC), sank on her voyage from Hong Kong to Manila. Empire Assurance
Company (Empire) is the insurer of the lost cargoes loaded on board the vessel which
were consigned to Debenhams Company. After it indemnified Debenhams, Empire as
subrogee filed an action for damages against CSC.

54
 1. Assume that the vessel was seaworthy. Before departing, the vessel was advised
by the Japanese Meteorological Center that it was safe to travel to its destination.
But while at sea, the vessel received a report of a typhoon moving within its general
path. To avoid the typhoon, the vessel changed its course. However, it was still at
the fringe of the typhoon when it was repeatedly hit by huge waves, foundered and
eventually sank. The captain and the crew were saved except three (3) who
perished. Is CSC liable to Empire? What principle of maritime law is applicable?
Explain. (3%)

2. Assume the vessel was not seaworthy as in fact its hull had leaked, causing
flooding in the vessel. Will your answer be the same? Explain. (2%)

3. Assume the facts in question (b). Can the heirs of the three (3) crew members who
perished recover from CSC? Explain fully. (3%)

SUGGESTED ANSWER:
1. No, CSC is not liable to Empire.

The principle of maritime law applicable is the Doctrine of Limited Liability. Under this rule,
the exclusively real and hypothecary nature of maritime law operates to limit the liability of the
shipowner to the value of the vessel, earned freightage and proceeds of insurance if any. Hence,
the phrase "NO VESSEL, NO LIABILITY." Total destruction or sinking of the vessel extinguishes
the maritime lien as there is no longer any res to which it can attach.

This doctrine is applicable in the case because, as the facts reveal, the ship sank and was
totally lost. The exception that the carrier failed to overcome the presumption of negligence is not
obtaining as in fact CSC was able to prove that the ship was seaworthy. Moreover, the loss is due
to a typhoon -- a fortuitous event, which is one of the exempting circumstances when the carrier
can avoid liability.

Hence, CSC is not liable under the Doctrine of Limited Liability.

2. No, my answer will not be the same.

While as a rule, the shipowner's liability is limited only to the value of the vessel so that
loss of the vessel operates to extinguish his liability, the same rule has no application when the
carrier failed to overcome the presumption of negligence. Such presumption is only rebutted when
the carrier establishes that the vessel is seaworthy.

According to the facts of the case, the vessel is not seaworthy. Absent this requirement of
seaworthiness of the vessel, CSC has failed to overcome the presumption of negligence.

Hence, the Doctrine of Limited Liability is inapplicable and CSC is liable for the loss.

3. Yes, the heirs of the three (3) crewmembers who perished can recover from CSC. This is
because another exception to the applicability of the Limited Liability Rule is Workmen's
Compensation Claims.

However, in this case, the heirs cannot go after CSC directly since their claim based on
workmen's compensation would have be to be filed with the Social Security System (SSS). After

55
paying said claims, the SSS is subrogated to their rights and is thus entitled to go after CSC. In
either case, CSC cannot raise the defense that its liability is limited to the value of his vessel.

WARSAW CONVENTION
1993

A shipped thirteen pieces of luggage through LG Airlines from Teheran to Manila as

evidenced by LG Air Waybill which disclosed that the actual gross weight of the luggage
was 180 kg. Z did not declare an inventory of the contents or the value of the 13 pieces of
luggage. After the said pieces of luggage arrived in Manila, the consignee was able to claim
from the cargo broker only 12 pieces, with a total weight of 174 kg. X advised the airline of
the loss of one of the 13 pieces of luggage and of the contents thereof. Efforts of the airline
to trace the missing luggage were fruitless. Since the airline failed to comply with the
demand of X to produce the missing luggage, X filed an action for breach of contract with
damages against LG Airlines. In its answer, LG Airlines alleged that the Warsaw
Convention which limits the liability of the carrier, if any, with respect to cargo to a sum of
$20 per kilo or $9.07 per pound, unless a higher value is declared in advance and additional
charges are paid by the passenger and the conditions of the contract as set forth in the air
waybill expressly subject the contract of the carriage of cargo to the Warsaw Convention.
May the allegation of LG Airlines be sustained? Explain.

SUGGESTED ANSWER:
Yes. Unless the contents are declared, it will always be the word of a passenger against
that of the airline. If the loss of life or property is caused by the gross negligence or arbitrary acts
of the airline or the contents of the lost luggage are proved by satisfactory evidence other than
the self-serving declarations of one party, the Court will not hesitate to disregard the fine print in
a contract of adhesion. Otherwise, we are constrained to rule that we have to enforce the contract
as it is the only reasonable basis to arrive at a just award. (Pan American v. Rapadas, G.R. No.
60673, May 19, 1992)

2012

X took Philippine Airlines Flight PR 102 to Los Angeles, USA. She had two (2) luggage
checked-in and was issued two (2) baggage checks. When X reached Los Angeles one (1)
of the two (2) checked in luggage could not be found. Which statement is most accurate?
(A) PAL is liable for the loss of the checked- in luggage under the provisions of the Warsaw
Convention on Air Transport.
(B) PAL is liable for the loss only if the baggage check expressly states that the airline
shall be liable in case of loss.
(C) PAL cannot be held liable because that is the risk that a passenger takes when she
checks- in her baggage.
(D) PAL can only be held liable if it can be proven that PAL was negligent.

SUGGESTED ANSWER:
(A) PAL is liable for the loss of the checked-in luggage under the provisions of the Warsaw
Convention on Air Transport.

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