Transpo Digest

RCJ BUS LINES VS. STANDARD INCURANCE CO. G.R. No. 193629, Aug. 17, 2011, Carpio, J.:p, 2nd Division FACTS: Standard Insurance Co., Inc. (STANDARD) filed a complaint against the petitioners Flor Bola Mangoba and RCJ Bus Lines, Inc. The complaint was predicated upon an accident which involves the Mitsubishi Lancer and the RCJ Bus Lines. Upon seeing a pile of gravel and sand on the road, the Toyota Corolla, which is ahead of the Mitsubishi Lancer, stopped on its tracks. The Mitsubishi Lancer followed suit and also halted. At this point, the bus hit and bumped the rear portion of the Mitsubishi Lancer causing it to move forward and hit the Toyota Corolla in front of it. As a result of the incident, the Mitsubishi Lancer sustained damages amounting to P162,151.22, representing the costs of its repairs. Under the comprehensive insurance policy secured by Rodelene Valentino, owner of the Mitsubishi Lancer, STANDARD reimbursed to the former the amount she expended for the repairs of her vehicle. Rodelene then executed a Release of Claim and Subrogation Receipt, subrogating STANDARD to all rights, claims and actions she may have against RCJ Bus Lines, Inc. and its driver, Flor Bola Mangoba. In its answer, RCJ Bus Lines, Inc. maintained, among others, that the direct, immediate and proximate cause of the accident was the negligence of the driver of the Mitsubishi Lancer when, for no reason at all, it made a sudden stop along the National Highway, as if to initiate and/or create an accident. The MeTC rendered its decision in favor of Standard. The RTC affirmed with modification the MeTC‟s Decision deleting the award for exemplary damages.The appellate court found that the RTC committed no reversible error in affirming RCJ‟s liability as registered owner of the bus and employer of Mangoba. ISSUE:W/N the Court of Appeals erroneously disregarded the point that petitioner RCJ‟s defense of extraordinary diligence in the selection and supervision of its driver was made as an alternative defense; HELD:The petition has no merit. RCJ, by presenting witnesses to testify on its exercise of diligence of a good father of a family in the selection and supervision of its bus drivers, admitted that Mangoba is its employee. Article 2180 of the Civil Code, in relation to Article 2176, makes the employer vicariously liable for the acts of its employees. When the employee causes damage due to his own negligence while performing his own duties, there arises the juris tantum presumption that the employer is negligent, rebuttable only by proof of observance of the diligence of a good father of a family. For failure to rebut such legal presumption of negligence in the selection and supervision of employees, the employer is likewise responsible for damages, the basis of the liability being the relationship of pater familias or on the employer‟s own negligence.Mangoba, per testimony of his conductor, was ten meters away from the Mitsubishi Lancer before the collision and was driving 60 to 75 kilometers per hour when the speed limit was 50 kilometers per hour. The presumption under Article 2185 of the Civil Code was thus proven true: Mangoba, as driver of the bus which collided with the Mitsubishi Lancer, was negligent since he violated a traffic regulation at the time of the mishap. We see no reason to depart from the findings of the MeTC, RTC and appellate court that Mangoba was negligent.

NEW WORLD INTERNATIONAL VS. NYK-FILJAPAN SHIPPING CORP. G.R. No. 171468, Aug. 24, 2011, Abad, J.:p, 3rd Division

FACTS: Petitioner New World International Development (Phils.), Inc. (New World) bought from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three emergency generator sets worth US$721,500.00.DMT shipped the generator sets by truck from Wisconsin, United States, to LEP Profit International, Inc. (LEP Profit) in Chicago, Illinois. From there, the shipment went by train to Oakland, California, where it was loaded on S/S California Luna V59, owned and operated by NYK Fil-Japan Shipping Corporation (NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading, declaring that it received the goods in good condition.NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that it also owned and operated. On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain filed a sea protest on arrival at the Manila South Harbor respecting the loss and damage that the goods on board his vessel suffered. Marina Port Services, Inc. (Marina), the Manila South Harborarrastre or cargo-handling operator, received the shipment and upon inspection of the three container vans separately carrying the generator sets, two vans bore signs of external damage while the third van appeared unscathed. An examination of the three generator sets in the presence of petitioner New World‟s representatives, Federal Builders (the project contractor) and surveyors of petitioner New World‟s insurer, Seaboard–Eastern Insurance Company (Seaboard), revealed that all three sets suffered extensive damage and could no longer be repaired. For these reasons, New World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK acknowledged receipt of the demand, both denied liability for the loss. Since Seaboard covered the goods with a marine insurance policy, petitioner New World sent it a formal claim. Seaboard required petitioner New World to submit to it an itemized list of the damaged units, parts, and accessories, with corresponding values, for the processing of the claim. But petitioner New World did not submit what was required of it, insisting that the insurance policy did not include the submission of such a list in connection with an insurance claim. Reacting to this, Seaboard refused to process the claim. Thus,petitioner New World filed an action for specific performance and damages against all the respondents before the Regional Trial Court (RTC) of Makati City. The RTC rendered a decision absolving the various respondents from liability with the exception of NYK. The RTC found that the generator sets were damaged during transit while in the care of NYK‟s vessel, ACX Ruby.The RTC ruled, however, that petitioner New World filed its claim against the vessel owner NYK beyond the one year provided under the Carriage of Goods by Sea Act (COGSA).On appeal, the Court of Appeals (CA) rendered judgment affirming the RTC‟s rulings except with respect to Seaboard‟s liability. The CA rendered an amended decision, reversing itself as regards the claim against Seaboard.

Petitioner New World asserts that the roles of respondents DMT, Advatech, LEP, LEP Profit, Marina and Serbros in handling and transporting its shipment from Wisconsin to Manila collectively resulted in the damage to the same, rendering such respondentssolidarily liable with NYK, the vessel owner. ISSUE: W/N the carrier, NYK, is liable for the damage. HELD: Yes.Consequently, the Court will not disturb the finding of the RTC, affirmed by the CA, that the generator sets were totally damaged during the typhoon which beset the vessel‟s voyage from Hong Kong to Manila and that it was her negligence in continuing with that journey despite the adverse condition which caused petitioner New World‟s loss.That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil Code, does not automatically relieve the common carrier of liability. The latter had the burden of proving that the typhoon was the proximate and only cause of loss and that it exercised due diligence to prevent or minimize such loss before, during, and after the disastrous typhoon. As found by the RTC and the CA, NYK failed to discharge this burden.

LOADMASTER CUSTOMS SERVICES VS. GLODEL G.R. No. 179446, Jan. 10, 2011, Mendoza, J.:p, 2nd Division

FACTS: R&B Insurance insured the shipment of 132 bundles of electric copper cathodes against All Risks for Columbia, the owner of the cargoes. The cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbia‟s warehouses/plants in Bulacan and Valenzuela City.One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.Later on, the said truck was recovered but without the copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount ofP1,903,335.39. R&B Insurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity and thereafter, filed a complaint for damages against both Loadmasters and Glodelbefore the Regional Trial Court. It sought reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been subrogated "to the right of the consignee to recover from the party/parties who may be held legally liable for the loss."The RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo and dismissing Loadmasters‟ counterclaim for damages and attorney‟s fees against R&B Insurance.On appeal, the CA likewise held Glodel liable and also Loadmaster. ISSUE: W/N Loadmaster is also liable for the loss.

HELD:Yes.To totally exculpate itself from responsibility for the lost goods, Loadmasters argues that it cannot be considered an agent of Glodel because it never represented the latter in its dealings with the consignee. At any rate, it further contends that Glodel has no recourse against it for its (Glodel‟s) failure to file a cross-claim. Glodel, in its Comment, counters that Loadmasters is liable to it under its cross-claim because the latter was grossly negligent in the transportation of the subject cargo. Finally, Glodel argues that its relationship with Loadmasters is that of Charter wherein the transporter (Loadmasters) is only hired for the specific job of delivering the merchandise. Thus, the diligence required in this case is merely ordinary diligence or that of a good father of the family, not the extraordinary diligence required of common carriers.At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common carriers to determine their liability for the loss of the subject cargo. Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public.Based on the definition, Loadmasters is a common carrier because it is engaged in the business of transporting goods by land, through its trucking service. It is a common carrier as distinguished from a private carrier wherein the carriage is generally undertaken by special agreement and it does not hold itself out to carry goods for the general public.The distinction is significant in the sense that "the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers." In the same vein, Glodel is also considered a common carrier within the context of Article 1732. In its Memorandum, it states that it "is a corporation duly organized and existing under the laws of the Republic of the Philippines and is engaged in the business of customs brokering." It cannot be considered otherwise because as held by this Court in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., 14 a customs broker is also regarded as a common carrier, the transportation of goods being an integral part of its business.Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for reasons of public policy, to observe the extraordinary diligence in the vigilance over the goods transported by them according to all the circumstances of such case, as required by Article 1733 of the Civil Code.With respect to the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of extraordinary diligence lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. Premises considered, the Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R & B Insurance for the loss of the subject cargo. Under Article 2194 of the New Civil Code, "the responsibility of two or more persons who are liable for a quasi-delict is solidary."

CRUZ VS. SUN HOLIDAYS G.R. No. 186312, Jun. 29, 2010, Carpio Morales, J.:p, 3rd Division

FACTS: Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned and operated by respondent.The stay of the newly wed Ruelito and his wife at the Resort was by virtue of a tour package-contract with respondent that included transportation to and from the Resort and the point of departure in Batangas.Petitionersdemanded indemnification from respondent for the death of their son in the amount of at least P4,000,000.Replying, respondent, by letter denied any responsibility for the incident which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.As petitioners declined respondent‟s offer, they filed the Complaint, as earlier reflected, alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA). In its Answer, respondent denied being a common carrier, alleging that its boats are not available to the general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it exercised the utmost diligence in ensuring the safety of its passengers; contrary to petitioners‟ allegation, there was no storm as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged that it is entitled to an award for attorney‟s fees and litigation expenses amounting to not less than P300,000.RTC dismissed petitioners‟ Complaint and respondent‟s Counterclaim. The appellate court denied petitioners‟ appeal, holding, among other things, that the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident was a squall, a fortuitous event. ISSUE: W/N respondent is liable as a common carrier. HELD: Yes.The definition of a common carrier by the Civil Code 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 population, and one who offers services or solicits business only from a narrow segment of the general population. We

think that Article 1733 deliberately refrained from making such distinctions.Indeed, respondent is a common 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.That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to avail of respondent‟s ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have overpaid. Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported by them, according to all the circumstances of each case.19 They are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.The extraordinary diligence required of common carriers demands that they take care of the goods or lives entrusted to their hands as if they were their own. This respondent failed to do. Respondent‟s insistence that the incident was caused by a fortuitous event does not impress either.The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the casofortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor. To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only causeof the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event. UNSWORTH TRANSPORT VS. CA G.R. No. 166250, Jul. 26, 2010, Nachura, J.:p, 2nd Division FACTS: The shipper,Sylvex Purchasing Corporation, delivered to petitioner, UTI, a shipment of 27 drums of various raw materials for pharmaceutical manufacturing. The subject shipment was insured with private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all risks in the amount of P1,779,664.77. The shipment was loaded in a sealed 1x40 container van, boarded on APL‟s vessel M/V "Pres. Jackson," Voyage 42, and transshipped to APL‟s M/V "Pres. Taft" for delivery to petitioner in favor of the consignee United Laboratories, Inc. (Unilab). The shipment

arrived at the port of Manila and petitioner received the said shipment in its warehouse and the materials were noted to be complete and in good order in the gate pass. When the shipment arrived in Unilab‟s warehouse and was immediately surveyed by an independent surveyor andUnilab‟s quality control representative rejected one paper bag containing dried yeast and one steel drum containing Vitamin B Complex as unfit for the intended purpose. Unilab filed a formal claim for the damage against private respondent and UTI. UTI denied liability on the basis of the gate pass issued that the goods were in complete and good condition. By virtue of the Loss and Subrogation Receipt issued by Unilab in favor of private respondent, the latter filed a complaint for Damages against APL, UTI and petitioner with the RTC. The RTC decided in favor of private respondent and against APL, UTI and petitioner. The CA affirmed the RTC decision. Petitioner admits that it is a forwarder but disagrees with the CA‟s conclusion that it is a common carrier. It also questions the appellate court‟s findings that it failed to establish that it exercised extraordinary or ordinary diligence in the vigilance over the subject shipment. As to the damages allegedly suffered by private respondent, petitioner counters that they were not sufficiently proven. Lastly, it insists that its liability, in any event, should be limited to $500 pursuant to the package limitation rule. ISSUE: W/N the petitioner is not a common carrier, and its liability is limited only to $500 pursuant to the package limitation rule under COGSA. HELD: Petitioner is a common carrier. A freight forwarder‟s liability is limited to damages arising from its own negligence, including negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself.Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence. Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible.All these conclusively prove the fact of shipment in good order and condition, and the consequent damage to one steel drum of Vitamin B Complex Extract while in the possession of petitioner which failed to explain the reason for the damage. Further, petitioner failed to prove that it observed the extraordinary diligence and precaution which the law requires a common carrier to exercise and to follow in order to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.

However, we affirm the applicability of the Package Limitation Rule under the COGSA, contrary to the RTC and the CA‟s findings.It is to be noted that the Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Thus, the COGSA supplements the Civil Code by establishing a provision limiting the carrier‟s liability in the absence of a shipper‟s declaration of a higher value in the bill of lading.In the present case, the shipper did not declare a higher valuation of the goods to be shipped. In light of the foregoing, petitioner‟s liability should be limited to $500 per steel drum. In this case, as there was only one drum lost, private respondent is entitled to receive only $500 as damages for the loss. In addition to said amount, as aptly held by the trial court, an interest rate of 6% per annum should also be imposed, plus 25% of the total sum as attorney‟s fees.

AIR FRANCE VS. GILLEGO G.R. No. 165266, Dec. 15, 2010, Villarama, J.:p, 3rd Division FACTS: Respondent left Manila on board petitioner Air France‟s aircraft bound for Paris, France. While waiting at the De‟ Gaulle International Airport for his connecting flight to Budapest scheduled at 3:15 p.m. that same day, respondent learned that petitioner had another aircraft bound for Budapest with an earlier departure time (10:00 a.m.) than his scheduled flight. He then went to petitioner‟s counter at the airport and made arrangements for the change in his booking. He was given a corresponding ticket and boarding pass a new baggage claim stub for his checked-in luggage.However, upon arriving in Budapest, respondent was unable to locate his luggage at the claiming section. He sought assistance from petitioner‟s counter at the airport where petitioner‟s representative verified from their computer that he had indeed a checked-in luggage. He was advised to just wait for his luggage at his hotel and that petitioner‟s representatives would take charge of delivering the same to him that same day.But said luggage was never delivered by petitioner‟s representatives despite follow-up inquiries by respondent.Upon his return to the Philippines, respondent‟s lawyer immediately wrote petitioner‟s Station Manager complaining about the lost luggage and the resulting damages he suffered while in Budapest. Respondent claimed that his single luggage contained his personal effects such as clothes, toiletries, medicines for his hypertension, and the speeches he had prepared, including the notes and reference materials he needed for the conference. He was thus left with only his travel documents, pocket money and the clothes he was wearing. Because petitioner‟s representatives in Budapest failed to deliver his luggage despite their assurances and his repeated followups, respondent was forced to shop for personal items including new clothes and his medicines. Aside from these unnecessary expenditures of about $1,000, respondent had to prepare another speech, in which he had difficulty due to lack of data and information. Respondent thus demanded the sum of P1,000,000.00 from the petitioner as compensation for his loss, inconvenience and moral damages. Respondent asserted that as a common carrier which advertises and offers its services to the public, petitioner is under obligation to observe extraordinary diligence in the vigilance over

checked-in luggage and to see to it that respondent‟s luggage entrusted to petitioner‟s custody would accompany him on his flight and/or could be claimed by him upon arrival at his point of destination or delivered to him without delay. As special and affirmative defense, petitioner contended that its liability for lost checkedin baggage is governed by the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage. Under the said treaty, petitioner‟s liability for lost or delayed registered baggage of respondent is limited to 250 francs per kilogram or US$20.00, which constitutes liquidated damages and hence respondent is not entitled to any further damage.Petitioner averred that it has taken all necessary measures to avoid loss of respondent‟s baggage, the contents of which respondent did not declare, and that it has no intent to cause such loss, much less knew that such loss could occur.Petitioner further asserted that it exercised due diligence in the selection and supervision of its employees and acted in good faith in denying respondent‟s demand for damages. The claims for actual, moral and exemplary damages and attorney‟s fees therefore have no basis in fact and in law, and are, moreover speculative and unconscionable. The trial court rendered its decision in favor of respondent. Petitioner appealed to the CA, which affirmed the trial court‟s decision. ISSUE: W/N petitioner is liable for the damage caused upon respondent. HELD: Yes.A business intended to serve the travelling public primarily, a contract of carriage is imbued with public interest.The law governing common carriers consequently imposes an exacting standard. Article 1735 of the Civil Codeprovides that in case of lost or damaged goods, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required by Article 1733. Thus, in an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier.That respondent‟s checked-in luggage was not found upon arrival at his destination and was not returned to him until about two years later is not disputed. The action filed by the respondent is founded on such breach of the contract of carriage with petitioner who offered no satisfactory explanation for the unreasonable delay in the delivery of respondent‟s baggage. The presumption of negligence was not overcome by the petitioner and hence its liability for the delay was sufficiently established.We hold that the trial and appellate courts did not err in finding that petitioner acted in bad faith in repeatedly ignoring respondent‟s follow-up calls.There was not even any attempt to explain the reason for the loss of respondent‟s luggage. Clearly, petitioner did not give the attention and care due to its passenger whose baggage was not transported and delivered to him at his travel destination and scheduled time. Inattention to and lack of care for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages

would be bad faith in securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit.Petitioner was thus guilty of bad faith in breaching its contract of carriage with the respondent, which entitles the latter to the award of moral damages

LHUILLER VS. BRITISH AIRWAYS G.R. No. 171092, Mar. 15, 2010, Del Castillo, J.:p, 2nd Division

FACTS: Petitioner Edna DiagoLhuillier filed a Complaint for damages against respondent British Airways before the Regional Trial Court (RTC) of Makati City. She alleged that she took respondent‟s flight 548 from London, United Kingdom to Rome, Italy. Once on board, she allegedly requested Julian Halliday (Halliday), one of the respondent‟s flight attendants, to assist her in placing her hand-carried luggage in the overhead bin. However, Halliday allegedly refused to help and assist her, and even sarcastically remarked that "If I were to help all 300 passengers in this flight, I would have a broken back!"Petitioner further alleged that when the plane was about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all the passengers in the business class section to lecture on plane safety. Allegedly, Kerrigan made her appear to the other passengers to be ignorant, uneducated, stupid, and in need of lecturing on the safety rules and regulations of the plane. Affronted, petitioner assured Kerrigan that she knew the plane‟s safety regulations being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few centimeters away from that of the petitioner and menacingly told her that "We don‟t like your attitude."Upon arrival in Rome, petitioner complained to respondent‟s ground manager and demanded an apology. However, the latter declared that the flight stewards were "only doing their job." Respondent, by way of special appearance through counsel, filed a Motion to Dismiss on grounds of lack of jurisdiction over the case and over the person of the respondent. Respondent alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to the Warsaw Convention, Article 28(1). The RTC of Makati City, Branch 132, issued an Order granting respondent‟s Motion to Dismiss.Petitioner now comes directly before us on a Petition for Review on Certiorari on pure questions of law, arguing that her cause of action arose not from the contract of carriage, but from the tortious conduct committed by airline personnel of respondent in violation of the provisions of the Civil Code on Human Relations. Since her cause of action was not predicated on the contract of carriage, petitioner asserts that she has the option to pursue this case in this jurisdiction pursuant to Philippine laws.In contrast, respondent maintains that petitioner‟s claim for damages fell within the ambit of Article 28(1) of the Warsaw Convention. As such, the same can only be filed before the courts of London, United Kingdom or Rome, Italy. ISSUE: W/N the RTC has jurisdiction of the case.

HELD: No.The Warsaw Convention has the force and effect of law in this country.The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between the United Kingdom and Italy, which are both signatories to the Warsaw Convention. Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before – 1. the court where the carrier is domiciled; 2. the court where the carrier has its principal place of business; 3. the court where the carrier has an establishment by which the contract has been made; or 4. the court of the place of destination. In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is properly designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner. A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred. Furthermore, respondent, in seeking remedies from the trial court through special appearance of counsel, is not deemed to have voluntarily submitted itself to the jurisdiction of the trial court.

PNR VS. BRUNTY G.R. No. 169891, Nov. 2, 2008, Callejo, Sr., J.:p, 1st Division FACTS: Rhonda Brunty, Garcia and Mercelita were already approaching the railroad crossing at Barangay Rizal, Moncada, Tarlac. Mercelita, driving at approximately 70 km/hr, drove past a vehicle, unaware of the railroad track up ahead and that they were about to collide with PNR Train No. T-71.Mercelita was instantly killed when the Mercedes Benz smashed into the train; the two other passengers suffered serious physical injuries. A certain James Harrow brought Rhonda Brunty to the Central Luzon Doctor‟s Hospital in Tarlac, where she was pronounced dead after ten minutes from arrival. Garcia, who had suffered severe head injuries, was brought via ambulance to the same hospital. He was transferred to the Manila Doctor‟s Hospital, and later to the Makati Medical Center for further treatment. Ethel Brunty sent a demand letter to the PNR demanding payment of actual, compensatory, and moral damages, as a result of her daughter‟s death. When PNR did not respond, Ethel Brunty and Garcia, filed a complaint for damages against the PNR before the RTC of Manila. They alleged that the death of Mercelita and Rhonda Brunty, as well as the physical injuries suffered by Garcia, were the direct and proximate result of the gross and reckless negligence of PNR in not providing the necessary equipment at the railroad crossing. They pointed out that there was no flagbar or red light signal to warn motorists who were about to cross the railroad track, and that the flagman or switchman was only equipped with a hand flashlight. Plaintiffs likewise averred that PNR failed to supervise its employees in the performance of their respective tasks and duties, more particularly the pilot and operator of the train. In its Answer, PNR claimed that it exercised the diligence of a good father of a family not only in the selection but also in the supervision of its employees. By way of special and affirmative defense, it stressed that it had the right of way on the railroad crossing in question, and that it has no legal duty to put up a bar or red light signal in any such crossing. It insisted that there were adequate, visible, and clear warning signs strategically posted on the sides of the road before the railroad crossing. It countered that the immediate and proximate cause of the accident was Mercelita‟s negligence, and that he had the last clear chance to avoid the accident. The driver disregarded the warning signs, the whistle blasts of the oncoming train and the flashlight signals to stop given by the guard. The RTC rendered its Decision in favor of plaintiffs to which the CA affirmed with partial modifications. ISSUE: (1) Whether or not Mmercelita‟s negligence resulted in the unfortunate collision. (2) W/N the doctrine of last clear chance is applicable in the case. HELD: No. Petitioner was found negligent because of its failure to provide the necessary safety device to ensure the safety of motorists in crossing the railroad track. As such, it is liable for damages for violating the provisions of Article 2176 of the New Civil Code. It was clearly established that plaintiffs-appellees (respondents herein) sustained damage or injury as a result of the collision. That there was negligence on the part of PNR is, likewise, beyond cavil. Considering the circumstances prevailing at the

time of the fatal accident, the alleged safety measures installed by the PNR at the railroad crossing is not only inadequate but does not satisfy well-settled safety standards in transportation. It may broadly be stated that railroad companies owe to the public a duty of exercising a reasonable degree of care to avoid injury to persons and property at railroad crossings, which duties pertain both in the operation of trains and in the maintenance of the crossings.56 Moreover, every corporation constructing or operating a railway shall make and construct at all points where such railway crosses any public road, good, sufficient, and safe crossings and erect at such points, at a sufficient elevation from such road as to admit a free passage of vehicles of every kind, a sign with large and distinct letters placed thereon, to give notice of the proximity of the railway, and warn persons of the necessity of looking out for trains. Mercelita should not have driven the car the way he did. However, while his acts contributed to the collision, they nevertheless do not negate petitioner‟s liability. As to whether or not the doctrine of last clear chance is applicable, we rule in the negative because the proximate cause of the injury having been established to be the negligence of petitioner, we hold that the above doctrine finds no application in the instant case.

DELA TORRE VS. CA G.R. No. 160088, Jul. 13, 2011, Mendoza, J.:p, 3rd Division

FACTS: Crisostomo G. Concepcion (Concepcion) owned LCT-Josephine, a vessel registered with the Philippine Coast Guard. Concepcion and the Philippine Trigon Shipyard Corporation (PTSC), represented by Roland, entered into a "Contract of Agreement," wherein the latter would charter LCT-Josephine. PTSC/Roland subchartered LCT-Josephine to Trigon Shipping Lines (TSL), a single proprietorship owned by Roland‟s father, Agustin de la Torre (Agustin). TSL, this time represented by Roland per Agustin‟s Special Power of Attorney, sub-chartered LCT-Josephine to Ramon Larrazabal (Larrazabal) for the transport of cargo consisting of sand and gravel to Leyte. The LCT-Josephine with its cargo of sand and gravel arrived at Philpos, Isabel, Leyte. The vessel was beached near the NDC Wharf. With the vessel‟s ramp already lowered, the unloading of the vessel‟s cargo began with the use of Larrazabal‟s payloader. While the payloader was on the deck of the LCT-Josephine scooping a load of the cargo, the vessel‟s ramp started to move downward, the vessel tilted and sea water rushed in. Shortly thereafter, LCT-Josephine sank. Concepcion demanded that PTSC/ Roland refloat LCT-Josephine. The latter assured Concepcion that negotiations were underway for the refloating of his vessel. Unfortunately, this did not materialize. For this reason, Concepcion was constrained to institute a complaint for "Sum of Money and Damages" against PTSC and Roland before the RTC. PTSC and Roland filed their answer together with a third-party complaint against Agustin. Agustin, in turn, filed his answer plus a fourth-party complaint against Larrazabal. The latter filed his answer and counterclaim but was subsequently declared in default by the RTC. Eventually, the fourth-party complaint against Larrazabal was dismissed when the RTC rendered its

decision in favor of Concepcion. The appellate court, in agreement with the findings of the RTC, affirmed its decision in toto. ISSUE: (1) W/N the Code of Commerce is applicable, more specifically, the Limited Liability Rule; and (2) W/N the petitioners are solidarily liable. HELD: No. Petitioners‟ position is that the Limited Liability Rule under the Code of Commerce should be applied to them, the argument is misplaced. The said rule has been explained to be that of the real and hypothecary doctrine in maritime law where the shipowner or ship agent‟s liability is held as merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. In this jurisdiction, this rule is provided in three articles of the Code of Commerce. One of which, Article 837 specifically applies to cases involving collision which is a necessary consequence of the right to abandon the vessel given to the shipowner or ship agent under the first provision – Article 587. Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned by several persons. Obviously, the forerunner of the Limited Liability Rule under the Code of Commerce is Article 587. Now, the latter is quite clear on which indemnities may be confined or restricted to the value of the vessel pursuant to the said Rule, and these are the – "indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel." Thus, what is contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the charterer in case of demise or bareboat charter. The only person who could avail of this is the shipowner, Concepcion. He is the very person whom the Limited Liability Rule has been conceived to protect. The petitioners cannot invoke this as a defense. The shipowner‟s or agent‟s liability is merely coextensive 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. This doctrine is based on the real and hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any. The charterer of a vessel, under the conditions stipulated in the charter party in question, is the owner pro hac vice of the ship and takes upon himself the responsibilities of the owner.‟ Therefore, even if the contract is for a bareboat or demise charter where possession, free administration and even navigation are temporarily surrendered to the charterer, dominion over the vessel remains with the shipowner. Ergo, the charterer or the sub-charterer, whose rights cannot rise above that of the former, can never set up the Limited Liability Rule against the very owner of the vessel. In the present case, the charterer and the sub-charterer through their respective contracts of agreement/charter parties, obtained the use and service of the entire LCT-Josephine. The vessel was likewise manned by the charterer and later by the sub-charterer‟s people. With the complete and exclusive relinquishment of possession, command and navigation of the vessel, the charterer and later the subcharterer became the vessel‟s owner pro hac vice. Now, and in the absence of any

showing that the vessel or any part thereof was commercially offered for use to the public, the above agreements/charter parties are that of a private carriage where the rights of the contracting parties are primarily defined and governed by the stipulations in their contract. Thus, Roland, who, in his personal capacity, entered into the Preliminary Agreement with Concepcion for the dry-docking and repair of LCT-Josephine, is liable under Article 1189 of the New Civil Code. There is no denying that the vessel was not returned to Concepcion after the repairs because of the provision in the Preliminary Agreement that the same "should" be used by Roland for the first two years. Before the vessel could be returned, it was lost due to the negligence of Agustin to whom Roland chose to sub-charter or sublet the vessel. Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-Josephine, is liable under Article 1651 of the New Civil Code. Although he was never privy to the contract between PTSC and Concepcion, he remained bound to preserve the chartered vessel for the latter. Despite his non-inclusion in the complaint of Concepcion, it was deemed amended so as to include him because, despite or in the absence of that formality of amending the complaint to include him, he still had his day in court as he was in fact impleaded as a third-party defendant by his own son, Roland – the very same person who represented him in the Contract of Agreement with Larrazabal. Clearly, the petitioners, to whom the possession of LCT Josephine had been entrusted as early as the time when it was dry-docked for repairs, were obliged to insure the same. Unfortunately, they failed to do so in clear contravention of their respective agreements. Certainly, they should now all answer for the loss of the vessel. DIAZ VS. CA G.R. No. 149749, Jul. 25, 2006, Corona, J.:p, 2nd Division FACTS: Petitioner Agapita Diaz operated a Tamaraw FX taxi plying the route of Cagayan de Oro City to any point in Region 10. Petitioner‟s taxi, driven by one Arman Retes, was moving at an excessive speed when it rammed into the rear portion of a Hino cargo truck owned by private respondent Teodoro Lantoria and driven by private respondent Rogelio Francisco. As a result, nine passengers of the taxi died including Sherly Moneño. Thus, the heirs of Sherly Moneño filed with the Regional Trial Court of Malaybalay City, an action for breach of contract of carriage and damages against petitioner and her driver, Arman Retes. Petitioner filed a third-party complaint against private respondents Teodorio Lantoria and Rogelio Francisco. The trial court rendered a decision holding petitioner and Arman Retes jointly and severally liable to pay private respondent. The trial court‟s decision was affirmed by the Court of Appeals. ISSUE: W/N the petitioner liable for breach of contract. HELD: Yes. 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. In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger dies or is injured. In fact, there is even no need for the court to make an express finding of fault or negligence on

the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence. In the case at bar, petitioner, as common carrier, failed to establish sufficient evidence to rebut the presumption of negligence. The findings of the trial court, as affirmed by the Court of Appeals, showed that the accident which led to the death of Sherly Moneño was caused by the reckless speed and gross negligence of petitioner‟s driver who demonstrated no regard for the safety of his passengers. It was thus correct to hold petitioner guilty of breach of the contract of carriage.

ABOITIZ SHIPPING CORP. VS. NEW INDIA ASSURANCE G.R. No. 156978, May 2, 2006, Quisumbing, J.:p, 3rd Division

FACTS:Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on board a vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to General Textile, Inc., in Manila and insured by respondent New India Assurance Company, Ltd. While in Hongkong, the cargo was transferred to M/V P. Aboitiz for transshipment to Manila.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 its hull leaked. The vessel sank, but the captain and his crew were saved.Upon arrival in Manila.the captain of M/V P. Aboitiz filed his "Marine Protest". Thereafter, petitioner notified the consignee, General Textile, of the total loss of the vessel and all of its cargoes. General Textile, lodged a claim with respondent for the amount of its loss. Respondent paid General Textile and was subrogated to the rights of the latter.Respondent hired a surveyor, Perfect, Lambert and Company, to investigate the cause of the sinking. In its report, the surveyor concluded that the cause was the flooding of the holds brought about by the vessel‟s questionable seaworthiness. Consequently, respondent filed a complaint for damages against petitioner Aboitiz, Franco-Belgian Services and the latter‟s local agent, F.E. Zuellig, Inc. (Zuellig). Respondent alleged that the proximate cause of the loss of the shipment was the fault or negligence of the master and crew of the vessel, its unseaworthiness, and the failure of defendants therein to exercise extraordinary diligence in the transport of the goods. Hence, respondent added, defendants therein breached their contract of carriage.Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary diligence in handling the shipment while it was in their possession; its vessel was seaworthy; and the proximate cause of the loss of cargo was a fortuitous event.The Board of Marine Inquiry (BMI) exonerated the captain and crew of any administrative liability; and declared the vessel seaworthy and concluded that the sinking was due to the vessel‟s exposure to the approaching typhoon. The trial courtruled in favor of respondent. It held petitioner liable for the total value of the lost cargo plus legal interest. Upon appeal, the appellate court affirmed in toto the trial court‟s decision.Petitioner, citing Monarch Insurance Co. Inc. v. Court of Appeals, contends that respondent‟s claim for damages should only be against the

insurance proceeds and limited to its pro-rata share in view of the doctrine of limited liability.Respondent counters that the doctrine of real and hypothecary nature of maritime law is not applicable in the present case because petitioner was found to have been negligent. ISSUE: W/N the limited liability doctrine, which limits respondent‟s award of damages to its pro-rata share in the insurance proceeds, applies in this case. HELD:No.Our ruling in Monarch may appear inconsistent with the exception of the limited liability doctrine, as explicitly stated in the earlier part of the Monarch decision. An exception to the limited liability doctrine is when the damage is due to the fault of the shipowner or to the concurrent negligence of the shipowner and the captain. In which case, the shipowner shall be liable to the full-extent of the damage. We thus find it necessary to clarify now the applicability here of the decision in Monarch.From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to all the circumstances of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers are responsible, unless they can prove that the loss, destruction or deterioration was brought about by the causes specified in Article 1734 of the Civil Code. In all other cases, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. Moreover, where the vessel is found unseaworthy, the shipowner is also presumed to be negligent since it is tasked with the maintenance of its vessel. Though this duty can be delegated, still, the shipowner must exercise close supervision over its men.In the present case, petitioner has the burden of showing that it exercised extraordinary diligence in the transport of the goods it had on board in order to invoke the limited liability doctrine. Differently put, to limit its liability to the amount of the insurance proceeds, petitioner has the burden of proving that the unseaworthiness of its vessel was not due to its fault or negligence. Considering the evidence presented and the circumstances obtaining in this case, we find that petitioner failed to discharge this burden. Besides, exoneration of the vessel‟s officers and crew by the BMI merely concerns their respective administrative liabilities. It does not in any way operate to absolve the common carrier from its civil liabilities arising from its failure to exercise extraordinary diligence, the determination of which properly belongs to the courts.

CEBU SALVAGE CORP. VS. PHIL. HOME ASSURANCE G.R. No. 150403, Jan. 25, 2007, Corona, J.:p, 1st Division

FACTS: Pursuant to a contract petitioner received and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day. The shipment never reached its destination, however, because the M/T Espiritu Santo sank off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo. MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance Corporation which paid the claim in the amount

of P211,500 and was subrogated to the rights of MCCII. Thereafter, it filed a case in the RTC against petitioner for reimbursement of the amount it paid MCCII. The RTC rendered judgment in favor of respondent. The CA affirmed the decision of the RTC. ISSUE: W/N a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own. HELD: Yes. Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of freight. Under a voyage charter, the shipowner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of freight. An owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery of the goods received for transportation. Based on the agreement signed by the parties and the testimony of petitioner‟s operations manager, it is clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited MCCII‟s account, offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since these vessels had broken down. There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was engaged in the business of carrying and transporting goods by water, for compensation, and offered its services to the public. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to the circumstances of each case. In the event of loss of the goods, common carriers are responsible, unless they can prove that this was brought about by the causes specified in Article 1734 of the Civil Code. In all other cases, common carriers are presumed to be at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its character and duties as a common carrier. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport (by the expedient of alleging non-ownership of the vessel it employed) would radically derogate from the carrier's duty of extraordinary diligence. It would also open the door to collusion between the carrier and the supposed owner and to the possible shifting of liability from the carrier to one without any financial capability to answer for the resulting damages.

CRESCENT PETROLEUM VS. M/V "LOK MAHESHWARI," G.R. No. 155014, Nov. 11, 2005, Puno, J.:p, 2nd Division FACTS: Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel of Indian registry that is owned by respondent Shipping Corporation of India (SCI), a corporation organized and existing under the laws of India and principally owned by the

Government of India. It was time-chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in turn, sub-chartered the Vessel through a time charter to Transmar Shipping,Inc. (Transmar). Transmar further subchartered the Vessel to Portserv Limited (Portserv). Both Transmar and Portserv are corporations organized and existing under the laws of Canada. Portserv requested petitioner Crescent Petroleum, Ltd.(Crescent), a corporation organized and existing under the laws of Canada that is engaged in the business of selling petroleum and oil products for the use and operation of ocean going vessels, to deliver marine fuel oils (bunker fuels) to the Vessel. Petitioner Crescent granted and confirmed the request through an advice. As security for the payment of the bunker fuels and related services, petitioner Crescent received two (2) checks in theamounts of US$100,000.00 and US$200,000.00. Thus, petitioner Crescent contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another Canadian corporation, for the physical delivery of the bunker fuels to the Vessel. On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to US$103,544 inclusive of barging and demurrage charges to the Vessel at the port of Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer of the Vessel duly acknowledged and received the delivery receipt. Marine Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00 worth of the bunker fuels. Petitioner Crescent issued a check for the same amount in favor of Marine Petrobulk, which check was duly encashed. Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice to "Portserv Limited, and/or the Master, and/or Owners, and/or Operators, and/or Charterers of M/V „Lok Maheshwari‟" in the amount of US$103,544.00 with instruction to remit the amount on or before December 1, 1995. The period lapsed and several demands were made but no payment was received. Also, the checks issued to petitioner Crescent as security for the payment of the bunker fuels were dishonored for insufficiency of funds. As a consequence, petitioner Crescent incurred additional expenses of US$8,572.61 for interest, tracking fees, and legal fees. While the Vessel was docked at the port of Cebu City, petitioner Crescent instituted before the RTC of Cebu City an action "for a sum of money with prayer for temporary restraining order and writ of preliminary attachment" against respondents Vessel and SCI, Portserv and/or Transmar. The trial court issued a writ of attachment against the Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew its prayer for a temporary restraining order and posted the required bond. Summonses were served to respondents Vessel and SCI, and Portservand/or Transmar through the Master of the Vessel. Respondents Vessel and SCI, through Pioneer Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte motion to approve Pioneer‟s letter of undertaking, to consider it as counter-bond and to discharge the attachment. The trial court granted the motion; thus, the letter of undertaking was approved as counter-bond to discharge the attachment. ISSUE: W/N the Philippine court has or will exercise jurisdiction and entitled to maritime lien under our laws on foreign vessel docked on Philippine port and supplies furnished to a vessel in a foreign port. HELD: In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign port, whether such lien exists, or whether the court has or will

exercise jurisdiction, depends on the law of the country where the supplies were furnished, which must be pleaded and proved. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor methodologies as the law of the place of supply. The multiple-contact test to determine, in the absence of a specific Congressional directive as to the statute‟s reach, which jurisdiction‟s law should be applied. The following factors were considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the injured; (4) allegiance of the defendant shipowner; (5) place of contract; (6) inaccessibility of foreign forum; and (7) law of the forum. This is applicable not only to personal injury claims arising under the Jones Act but to all matters arising under maritime law in general. The Court cannot sustain petitioner Crescent‟s insistence on the application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and hold that a maritime lien exists. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under one – the law of the forum. All other elements are foreign – Canada is the place of the wrongful act, of the allegiance or domicile of the injured and the place of contract; India is the law of the flag and the allegiance of the defendant ship owner. Applying P.D. No. 1521,a maritime lien exists would not promote the public policy behind the enactment of the law to develop the domestic shipping industry. Opening up our courts to foreign suppliers by granting them a maritime lien under our laws even if they are not entitled to a maritime lien under their laws will encourage forum shopping. In light of the interests of the various foreign elements involved, it is clear that Canada has the most significant interest in this dispute. The injured party is a Canadian corporation, the sub-charterer which placed the orders for the supplies is also Canadian, the entity which physically delivered the bunker fuels is in Canada, the place of contracting and negotiation is in Canada, and the supplies were delivered in Canada. . LEA MER INDUSTRIES VS. MALAYAN INSURANCE G.R. No. 161745, Sept. 30, 2005, Panganiban, J.;p, 3rd Division FACTS: Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries for the shipment of silica sand valued at P565,000. It was Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by Lea Mer. During the voyage, the vessel sank, resulting in the loss of the cargo. Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. Malayan demanded reimbursement from Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint for the collection of P565,000. The Trial Court dismissed the Complaint, upon finding that the cause of the loss was a fortuitous event; the vessel had sunk because of the bad weather condition brought about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel. The CA REVERSED the trial court decision and held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioner‟s fault, not by a fortuitous event.

ISSUE: (1) W/N petitioner is liable for the loss of the cargo. (2) Whether the loss of the cargo was due to a fortuitous event. HELD (1) YES. Lea Mer is liable to pay Malayan Insurance. (2) No. Lea Mer was negligent. I. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or both, when this service is offered to the public for compensation. Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its vessels. Thus, the Court corrects the trial court‟s finding that petitioner became a private carrier when Vulcan chartered it. Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as follows: “Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice (“for this occasion”; “for this event”; literally, “for this turn”), subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all. The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers. The Contract in the present case was one of affreightment, as shown by the fact that it was petitioner‟s crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII. Necessarily, petitioner was a common carrier, and the pertinent law governs the present factual circumstances. II. As the common carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event. It was not enough for Lea Mer to show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably failed to prove: First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or after the alleged fortuitous event. Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a preponderance of evidence that the barge was not seaworthy when it sailed for Manila. Respondent was able to prove that, in the hull of the barge, there were holes that might have caused or aggravated the sinking. PHIL. CHARTER INSURANCE CORPORATION VS. UNKNOWN OWNER OF THE VESSEL M/V “NATIONAL HONOR,” G.R. No. 161833. July 8, 2005, Callejo, Sr., J.:p, 2nd Division FACTS: Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment on board the vessel M/V “National Honor,” represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The M/V “National Honor”

arrived at the Manila International Container Terminal (MICT). The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the contents of the crate. The following day, the vessel started discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winchman from the ICTSI, exclusive arrastre operator of MICT. Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the hatches, checked the cargo and found it in apparent good condition. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on the mid-portion of the crate. In Dauz‟s experience, this was a normal procedure. As the crate was being hoisted from the vessel‟s hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessel‟s twin deck, sending all its contents crashing down hard, resulting in extensive damage to the shipment. PCIC paid the damage, and as subrogee, filed a case against M/V National Honor, NSCP and ICTSI. Both RTC and CA dismissed the complaint. ISSUE: W/N the presumption of negligence is applicable in the instant case. HELD: No. We agree with the contention of the petitioner that common carriers, from the nature of their business and for reasons of public policy, are mandated 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. The Court has defined extraordinary diligence in the vigilance over the goods as follows: The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and “to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.” The common carrier‟s duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them.] >When the goods shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following causes: 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.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the loss or damage to the cargo is a closed list. To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the aforecited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent. “Defect” is the want or absence of something necessary for completeness or perfection; a lack or absence of something essential to completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be used. On the other hand, inferior means of poor quality, mediocre, or second rate. A thing may be of inferior quality but not necessarily defective. In other words, “defectiveness” is not synonymous with “inferiority.” xxx In the present case, the trial court declared that based on the record, the loss of the shipment was caused by the negligence of the petitioner as the shipper: The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and the total destruction of its contents were not imputable to any fault or negligence on the part of said defendant in handling the unloading of the cargoes from the carrying vessel, but was due solely to the inherent defect and weakness of the materials used in the fabrication of said crate. The crate should have three solid and strong wooden batten placed side by side underneath or on the flooring of the crate to support the weight of its contents. x x x SULPICIO LINES VS. FIRST LEPANTO G.R.No. 140349, Jun. 29, 2005, Chico-Nazario, J.:p, 2nd Division

FACTS: Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract for Delbros, Inc. to transport a shipment of goods consisting of three (3) wooden crates containing one hundred thirty-six (136) cartons of inductors and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one crate containing forty-two (42) cartons dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo, and upon an alleged finding that the contents of the crate were no longer usable for their intended purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho Insurance Corporation (insurer) under a marine insurance policy issued to the former. The payment of the insurance claim of the owner of the goods by the respondent-insurer subrogated the

latter to whatever right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied. Respondent-insurer filed a suit for damages with the trial court against Delbros, Inc. and herein petitioner-carrier. Petitioner-carrier filed its Answer to Delbros, Inc.‟s cross-claim asserting that it observed extraordinary diligence in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition. The trial court dismissed the complaint for damages as well as the counterclaim filed by therein defendant Sulpicio Lines, Inc. and the cross-claim filed by Delbros, Inc. The CA reversed the RTC and decided against the carrier. ISSUE: W/N the carrier is liable for the damages incurred by the owner of the goods. HELD: It cannot be denied that the shipment sustained damage while in the custody of petitioner-carrier. It is not disputed that one of the three (3) crates did fall from the cargo hatch to the pier apron while petitioner-carrier was unloading the cargo from its vessel. Neither is it impugned that upon inspection, it was found that two (2) cartons were torn on the side and the top flaps were open and that two (2) cello bags, each of 50 pieces ferri inductors, were missing from the cargo. The falling of the crate during the unloading is evidence of petitioner-carrier‟s negligence in handling the cargo. As a common carrier, it is expected to observe extraordinary diligence in the handling of goods placed in its possession for transport. Thus, when the shipment suffered damages as it was being unloaded, petitioner-carrier is presumed to have been negligent in the handling of the damaged cargo. Under Articles 1735 and 1752 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for loss, destruction or deterioration of goods under Article 1735, the common carrier must prove that they observed extraordinary diligence as required in Article 1733 of the Civil Code. Petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the presumption that it was negligent in transporting the cargo. Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is liable to pay the amount paid by respondent-insurer for the damages sustained by the owner of the goods. ALLIED BANKING VS. CHENG G.R. No. 151040, Oct. 6, 2005, Garcia, J.:p, 3rd Division

FACTS: Philippine Pacific Fishing Company, Inc. (Philippine Pacific), through its then Vice-Chairman of the Board and concurrent President Marilyn Javier, obtained from Allied Banking Corporation (Allied Bank), a packing credit accommodation amounting to One Million Seven Hundred Fifty Two Thousand Pesos (P1,752,000.00). To secure the obligation, Marilyn Javier and the spouses Cheng Yong and Lilia Gaw (spouses Cheng, for short), executed a Continuing Guaranty/Comprehensive Suret. Later, Philippine Pacific, due to business reverses and alleged misuse of corporate funds by its operating

officers, defaulted in the payment of said obligation. An intra-corporate dispute among its stockholders followed, prompting the filing against Philippine Pacific of a petition for receivership before the Securities and Exchange Commission (SEC). Thereafter, the corporation was reorganized, following which the spouses Cheng Yong and Lilia Gaw were elected as its president and treasurer, respectively. The spouses Cheng also hold similar positions in another company, the Glee Chemicals Phils., Inc. (GCPI), which, incidentally, also had a credit line with Allied Bank. It appears, however, that two (2) days prior to the constitution of the management committee, Allied Bank and Philippine Pacific agreed to restructure and convert the packing credit accommodation into a simple loan. Accordingly, Philippine Pacific executed in favor of Allied Bank a promissory note in the same amount as the packing credit accommodation. Aside from affixing their signatures on the same promissory note in their capacity as officers of Philippine Pacific, the spouses Cheng also signed the note in their personal capacities and as co-makers thereof. As it turned out, Philippine Pacific failed to pay according to the schedule of payments set out in the promissory note prompting the spouses Cheng to secure the note with substantial collateral by executing a deed of chattel mortgage in favor of Allied Bank over a fishing vessel, "Jean III", a Japanese- manufactured vessel with refrigerated hatches and glass freezers, owned by the spouses and registered in their names. Philippine Pacific again defaulted payment. Hence, Allied Bank filed with the sheriff of Navotas an application for extrajudicial foreclosure of the chattel mortgage constituted on "Jean III". In the meantime, the vessel sank at the port of Navotas resulting to its total loss. The spouses Cheng filed with the Regional Trial Court at Makati to declare invalid the deed of chattel mortgage over the vessel "Jean III" for having been constituted to secure a void or unenforceable obligation. Allied Bank filed a motion to dismiss the amended as well as the supplemental complaints. The trial court declared both the promissory note dated 12 August 1981 and the deed of chattel mortgage over the vessel "Jean III" invalid and unenforceable. The Court of Appeals partially reversed and set aside the appealed decision of the trial court ISSUE: W/N the chattel mortgage over the fishing vessel "Jean III" can be foreclosed for Philippine Pacific‟s failure to comply with its obligation under the promissory note and its loss should be bourne by the owners. HELD: The appellate court is correct in declaring that under the parole evidence rule, when the parties have reduced their agreement into writing, they are deemed to have intended such written agreement to be the sole repository and memorial of everything that they have agreed upon. All their prior and contemporaneous agreements are deemed to be merged in the written document so that, as between them and their successors-in-interest, such writing becomes exclusive evidence of the terms thereof and any verbal agreement which tends to vary, alter or modify the same is not admissible.

We thus declare and so hold that Allied Bank‟s foreclosure of the chattel mortgage constituted over the vessel "Jean III" was justified. On this score, we also rule that the loss of the mortgaged chattel brought about by its sinking must be borne not by Allied Bank but by the spouses Cheng. As owners of the fishing vessel, it was incumbent upon the spouses to insure it against loss. Thus, when the vessel sank before the chattel mortgage could be foreclosed, uninsured as it is, its loss must be borne by the spouses Cheng.