Transpo.docx

February 28, 2018 Q: Let’s say the shipper engaged a freight forwarder to engage a common carrier to transport goods from one destination to another (Let’s say from Manila to Cebu). The freight forwarder contracted with a common carrier and engaged to import common carrier the goods turned over by shipper from freight forwarder. The common carrier sets sail and then arrived at port of destination. The goods are loaded by arrastre operator, delivered to warehouse. The consignee contracted with a customs broker to facilitate the shipment in the warehouse in favor of the consignee. The custom broker engaged in a trucking company to deliver the goods from that company to the consignee. There were 14 drums supposed to be delivered but only 13 drums were delivered, 1 was missing. Discuss the liabilities of all the parties in this transaction with respect to their obligations with the consignee. A: 1.) Freight forwarder-­­ is not a common carrier as we know right? A freight forwarder chooses the common carrier that would ship or transport goods from one destination to another. So what would be the liability of the freight forwarder? SC said I think in case of Loadmasters v. Glodel that the liability of freight forwarder depends on its negligent choice of a common carrier. So if a common carrier chosen by the freight forwarder is not seaworthy for instance, then the freight forwarder is liable for damages. But it does not assume the obligation of a common carrier. So goods were not seaworthy, or goods were lost or damaged in the possession of common carrier, then the freight forwarder is liable. There are 2 exceptions that freight forwarder is considered a common carrier by jurisprudence: a.) b.)

If it undertakes the delivery of the goods-­­ The freight forwarder just arranges/ chooses common carrier that will transport the goods. But if it undertakes to deliver the goods itself, it becomes a common carrier. If freight forwarder issues a bill of lading to the shipper-­­ the issuance of bill of lading of freight forwarder to the shipper implies that it has undertaken the obligation of a common carrier.

2.) Arrastre operator-­­ Not a common carrier. It does not undertake transportation of the goods. SC said that it is akin to warehouseman. Why akin to warehouseman? Because of the obligation to safe keep the goods and deliver to consignee. 3.) Customs broker-­­ Common carrier; Q: Why is it considered as a common carrier if its principal duties are: a.) Pays import duties, b.) Signs declaration form, and 1

c.) Performs any other task necessary to cause the release of the shipment to the customs. Q: Where is the transportation aspect of its duty to be considered as a common carrier? Is transportation activity integral part of the duties of customs broker? Is it a principal duty or ancillary duty? A: It is only an ancillary duty but yet considered as a common carrier. SC said that it can be ancillary or sideline activity as long as it is part of the activities that it is to be undertaken to the public and performs as a business. SC said that customs broker is considered as a common carrier because transportation is integral part of its business. It may not be the principal activity, it may be ancillary only, but still an integral part of its business. 4.) Trucking Company-­­ I think it’s the case of Loadmasters v. Glodel. If the trucking company is exclusive to customs broker, it is only a private carrier. But if it offers services indiscriminately to the public, even though they may have only limited clientele, it is considered as a common carrier. So they key consideration is exclusive or available to everybody once it avails itself to the services. Q: Why are we talking about private carrier or common carrier? A: Because in case of loss or damage to goods, then there is presumption of fault or negligence on the part of common carrier and that presumption can only be overcome by evidence of extra-­­ ordinary diligence. Q: If you are the consignee, you received one drum less than what you contracted for, who can be sued? A: Everybody right? Well usually in cases that you’ll be reading, the insurance company pays the consignee and subrogated the rights of the consignee. Insurance company will be the one to file the cases against the common carrier. And if you had notice, if you had read the cases already, you’ll notice that everybody can be sued. Q: Everybody can be sued, but who is the “ultimately liable”? Is the obligation of freight forwarder, common carrier, arrastre operator, customs broker and trucking company solidary? A: Not necessary. The one who is ultimately liable depends on whose custody that the goods were damaged or lost. The defendants as you all know are entitled to cross-­­ claim against one another. It is a matter of evidence on whose responsibility or whose custody that the goods were lost or damaged. Q: We all know that the obligation of a common carrier to insure vigilance over the goods is extra-­­ ordinary diligence right? Up to when does it end? A: The obligation to exercise extra-­­ ordinary diligence ceases when it is actually or constructively received by the consignee.

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Q: Once the goods are received by the customs authorities, does the obligation of common carrier end? Can the parties stipulate that the obligation of common carrier ends when the goods are placed in possession or control of the custody of the authorities? A: SC said that obligation does not end just because the goods were received by the customs authorities. But by express provision of law, the obligation to exercise extra-­­ ordinary diligence ends only when the goods are received actually or constructively by the consignee. Or it has given reasonable time to take or obtain delivery of goods from the warehouse or premises of the carrier. But there’s one case also (Lu Do & Lu YM Case) that there’s nothing wrong in stipulating that the obligation of common carrier ends when the goods are received by the customs authorities. But it has to be stipulated. Without stipulation, it ends only when goods are received actually or constructively by consignee. Q: Is there a presumption of fault if goods are lost in the hands of freight forwarder, the common carrier, the arrastre operator, the trucking company, and the customs broker? A: Common carrier, no doubt. Once there is damaged or lost to goods then it arises automatically presumption of fault or negligence on the part of common carrier. We said that presumption can only be negated by showing extra-­­ ordinary diligence. If goods are damaged or lost in the hands of freight forwarder, arrastre operator, or private carrier, then there is presumption of fault. But it can be negated not by showing of extra-­­ ordinary diligence but only by ordinary diligence. Q: Is there a presumption of fault on the part of carrier if there is no damage, loss, or deterioration of goods? Or if there is no injury or death on the part of the passengers? A: Yes. In cases of breach of contract of carriage. Like for instance in the case of Zulueta v. Cathay Pacific. He was downgraded from first class to business class or economy class. Another case involving South China Airlines, The owner of national bookstore, Ramos, he was not able to take flight back home. He was able to checked in the luggage, was able to issued ticket, then while waiting for his flight, sabi sa kanya ng stewardess “You are on wait-­­ listed. You need to pay extra fee in order to have a slot for a seat”. He needs to pay 500 dollars. He did not pay because he was already issued a ticket and he was already checked in his luggage. And so because he did not pay the extra fee, he was not allowed to board. So what did he do? He took a flight from China to Hongkong, Hongkong to Philippines and spent more than the amount asked by South China Airlines. So when he came back to the Philippines he filed a case against South China Airlines. SC said South China Airlines is liable for breach of contract of carriage because Ramos was not able to take the flight despite the issuance of ticket. There was a presumption of fault on the part of carrier. There’s also one case Cebu Pacific v. Manay (2016). The question is WON the obligation of extra-­­ ordinary diligence applies to issuance of ticket. SC said yes in the

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sense that airline company must provide opportunity to the passenger, to examine each and every page of ticket. And once opportunity was given or accorded to the passenger, then the obligation of extra-­­ ordinary diligence with respect to issuance of ticket is deemed complied with. But what happened in that case? Diba maraming promo fares ang Cebu Pacific? So etong family na ito, bumili ng 9 tickets because 9 of them are going from Manila to Palawan. The time of flight is 3pm. And ticket na na-­­ issue sa 2nd page is 9 am. Pag dating nila ng 2:30pm, they were informed that the plane had already left. They said “that cannot be because we were already booked and it said that they reserved our flight for 3pm.” But when they checked on the ticket it says 9am not 3pm. SC said that Cebu Pacific has the obligation to exercise extra-­­ ordinary diligence in the issuance of ticket. But that duty is deemed fulfilled if the passenger has given reasonable opportunity to examine each and every page of the ticket. So you, as passenger, must examine the ticket page by page. You cannot sue that airline in that case. We have another case Fuentebella v. Cathay Pacific, He was downgraded from first class to economy class and he sued the airline company for breach of contract of carriage and SC said that in breach of contract of carriage there is presumption of fault on the part of common carrier. That presumption can only be overcome or negated by evidence of extra-­­ ordinary diligence. Now what about the case of Vasquez v. Cathay Pacific? He was upgraded from business class to first class then he sued airline company. He was awarded damages in that case. Nominal damages. He won right? SC said it may sound ridiculous but it is a breach of contract of carriage to force the passenger to take a first class accommodation instead of business class accommodation. Whatever maybe the reason, it appear to may be odd, but there is breach of contract of carriage. Whether upgraded or downgraded, if there is a breach of contract, then there is presumption of fault. Q: What laws govern by transportation? A: LAND TRANSPORTATION A.) For common carrier-­­ primary law is Civil Code particularly on provisions on common carrier and suppletorily law on Code of Commerce. B.) For private carrier-­­ If object is commerce, primary law is code of commerce and suppletorily is Civil Code. If object is non-­­ commerce and it is a property, NCC on law on deposit will apply. Otherwise, the law on contract will apply if the object refers to passengers. AIR TRANSPORTATION A.) From Local destination-­­ The Civil Code provisions on common carrier because air carrier is common carrier. Suppletorily is Code of Commerce. 4

B.) If Philippines is just one of the itineraries-­­ Primary law is not the Civil Code provisions but treaty or convention. For our jurisdiction is the Warsaw Convention as amended by Montreal Convention. It is now in effect in 2017. Montreal Convention is part of the bar. Under Montreal Convention, you can now file in the residence of the passenger. Remember the so-­­ called 4 jurisdictional rules? That has already been modified or relaxed under Montreal Convention. WATER TRANSPORTATION a.) Inter-­­ Island maritime commerce (local coast to another local coast) -­­ Primary law is Civil Code on provisions on common carrier because it is a common carrier. Vessels, Ships, and boats engaged in inter-­­ island shipping are considered common carrier. Suppletorily law is Code of Commerce. b.) Foreign port to Philippine Port-­­ Primary law is Civil Code provisions and suppletorily the Code of Commerce and COGSA. c.) Philippine Port to Foreign Port-­­ Law of country of destination will apply. Q: What are common carriers? A: Common carriers are persons, corporations, or associations engaged in the business of transporting or carrying passengers or goods or both by land, water, or air, for compensation, offering services to the public. Let’s dissect the definition. 1.) Persons, corporations, or associations-­­ It is redundant right? It is surpluses. 2.) Engaged in the business Q: Is it qualified by the phrase “lawfully engaged in the business”? A: It is not unlike in the definition of warehouseman where it is defined as a “person lawfully engaged in the business of storing goods for profit”. In common carriers therefore, persons may be engaged in transportation business that is unlawful but still considered as a common carrier. Q: What are your proof that you are engage din a “lawfully engaged business”? A: If you have certificate of public convenience from LTFRB. But even if not engaged lawfully, still considered as a common carrier. Otherwise, it would be easy on the part of common carrier to avoid application of the rule presumption of fault in cases of death or injuries to passengers or lost, damaged, or deterioration of goods. 3.) Transporting or carrying passengers or goods or both by land, water, or air, for compensation, offering services to the public. Q: Should the services be offered indiscriminately to the public? Should services be offered to large segment of the public? Should it be on general public?

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A: SC said that it is not necessarily general public. It can be narrow segment of the public as long as the services are offered indiscriminately to the public. Examples of common carrier: 1.) Customs broker-­­ We said earlier that the principal or main activity or duties of customs broker is to pay import duties right? To sign import declaration. And yet it still considered as a common carrier because transportation is integral activity of its business. It may be principal or ancillary activity. 2.) Freight Forwarder-­­ Not a common carrier unless it arranges for transportation for carrying goods or if it issues bill of lading. If not under the two exceptions, then liability will only be dependent on its negligent choice of common carrier but presumption of fault can be negated by evidence of ordinary diligence not extra-­­ ordinary diligence unless it acted as a common carrier. 3.) School bus operator-­­ Perena v. Nicolas (asked in the bar last year); In this case, the spouses are owner of I think FX van. They offered their transportation services to the residents of a particular subdivision indiscriminately. Not to all Metro Manila residents. FX van can only accommodate 14 passengers including the driver. If you only have 13 passengers how can you be called common carrier? Because they offered their services indiscriminately to all residents of a particular subdivision. Passengers are to be transported to Don Bosco. Now one fateful day, the driver took a different route. Naipit dun sa overpass, mayroong rail truck. He tried to overtake the bus but he was not able to overtake the bus. The bus was able to ____ the railway but not the driver of the FX van. The body of Aaron, one of the passengers was decapitated. The parents of course sued the spouses. What are therefore the remedies available to the parents? What are the various causes of action available to them? 1.) Breach of contract of carriage against the operator of the school bus 2.) Torts against the PNR train and operator of railway. 3.) Criminal case against the negligent driver of the FX van. Q: Now the parents filed an action for breach of contract of carriage against the operator of school bus, the FX van. The defense of operator of the school bus is that he exercised due diligence in the selection and supervision of the employees. So the driver was skilled, well trained, and able to attend different seminars on driving. Is that defense available on breach of contract of carriage? A: No. The defense available on breach of contract of carriage is extra-­­ ordinary diligence. The defense of due diligence in the selection and supervision of employees is available for tort and not for breach of contract of carriage. Q: Another issue. Are spouses (owners of FX van) considered a common carrier? A: SC said through Bersamin said yes. They offered their services indiscriminately to a narrow segment of the public, the residents of the subdivision. It need not be 6

offering services to the general public as long as it is done indiscriminately to the narrow segment of the public. Q: What if the school bus operator has 13 passengers but only 1 client? Spouses X and Y with 13 children. Is it a common carrier? A: No. It is a private carrier. It is not the number of passengers. If it is done indiscriminately to the narrow segment of the public, then it is a common carrier despite the fact that they have limited number of passengers. Now, SC said that the freight forwarder becomes a common carrier if it arranges or assumes the obligation of common carrier in which it undertakes or deliver the goods to the consignee (Case of Unsworth v. CA [2010]; That’s your authority) Another authority is the case of Heung Ah, if freight forwarder issues a bill of lading.

Q: Remember this case of De Guzman? He owns a truck. He delivers goods let’s say to Baguio coming from Manila. He accepts delivery from different vendors. Different points from Baguio to Manila. He contracted various vendors to deliver goods. Is he considered common carrier if he only has few customers? Also transportation was done in sideline. A: SC said yes. It need not be a principal activity. It can be ancillary or sideline activity as long as it is part of its business that it present to the public, then he is a common carrier. Q: There’s a bar exam question. It is debatable. A lawyer owns Innova. He picks his friends as passengers at certain points along Edsa and the passengers pay him a flat fee. Is he a common carrier? A: It is debatable but the answer given by UP Law that time is it is common carrier. Q: What about private carrier? A: It does transportation only by special arrangement. The key consideration here is “Are you open to everyone who wants to avail of your services?” If your answer is yes, you are a common carrier. If your answer is no, you are a private carrier. If you have the right to reject a passenger, you are a private carrier. If you have no right to reject passenger, you are a common carrier. Q: What are examples of private carrier? A: 1.) Funeral car 2.) Company bus-­­ In cases of faring employees; It is is not common carrier because it’s not offered to the public but to specific employees of company. Q: What about pipeline operator? The only issue there is about payment of percentage tax. A: It is a common carrier because mode of transportation is immaterial. It can be through a pipeline. 7

Q: Public Bus A: Of course considered a common carrier Q: What about those engaged in lighterage and dryage services? (This was asked in the bar); The vessel hired lighterage to transport passengers from certain point all the way to the docking area. Is lighterage a common carrier? A: Yes, as long as the services are offered indiscriminately to the public as a business or for compensation. Q: Is uber or grab a common carrier? A: You know we have a client, “Angkas”. Ang tanong are they common carrier? Syempre hindi. Just like uber and grab, ang sinasabi namin, they only run an app to meet the requirements of a passenger. We do not want LTFRB to interfere so we will file a petition for declaratory relief with the RTC of Makati to determine if it is a common carrier. So we are asking guidelines from the court and eventually to say that it is not a common carrier. It is an app operator provider and therefore not subject to the requirements of common carrier. We are asking injunction to restrain LTFRB from interfering with the operations of Angkas. We are allowed to operate in Cebu. It is more friendly compared to Makati. So very interesting noh. Anyway, let’s go to the question if uber is a common carrier. Well it has already become moot and academic. The LTFRB considers uber and grab as common carriers. And it is debatable right? Because uber and grab only facilitates the needs of the passengers in the available vehicle. It does not undertake transportation of passengers itself right? It only arranges or matches the needs of passengers. So it is more akin to freight forwarder right? In that uber becomes liable for damages in cases of negligent choice of vehicle. Halimbawa ang binigay na vehicle eh operated by a driver who is a member of ISIS. And we heard so many horror stories right? May mga dalang itak, may mga dalang patalim. Uber has the way of determining or checking the qualifications or their credentials. If there is negligent choice, they shall be liable for damages. But does not LFTRB consider it. The LTFRB considers uber and grab as common carriers. And they do not have a choice otherwise they cannot operate. So tanggapin nalang nila. But it is debatable really. We are hoping to get a favorable ruling for Angkas. Mag-­­asawang Singaporean ang gumawa ng Angkas app They’re not Filipinos. Q: What about bareboat charter? Is it a private carrier? Can you convert a common carrier to a private carrier? This was asked in the bar last year. A: Yes. If that undertaking or transportation is not part of regular activities. For example a vessel is a common carrier right? But if it is chartered does it retain the status of a common carrier? It depends on what kind of charter-­­ party arrangement is entered to by the parties.

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There are 3 kinds. a.) bareboat/ demise charter Q: Why is it converted from common carrier to private carrier? A: Because the charterer has a full control over the vessel not just in navigation but in hiring of the crew who will man the vessel. So the concept of bareboat charter is not only that the possession is turned over or leased to the charterer. He is also given the right to control the navigation of the vessel in the sense that he has the right to recruit/ hire the captain and the other crew members who will operate from the vessel. So possession + control of vessel = translate into a bareboat or demise charter which is considered as a private carrier with the respect to that voyage. There’s a recent case, Federal Phoenix (2015), The charter-­­ party agreement is captioned as “Time Charter Agreement” but control was given to charterer to hire the ship captain and the crew members. So the agreement is named as “Time Charter” but in substance, it gives control to the charterer. What is this then? It’s a bareboat/ demise charter. It is not the name but the contents, the substance of the agreement. The moment you give the charterer not just possession but also control over the vessels, it is a bareboat/ demise charter. It is a private carrier. Q: What if the charterer hires the very ship captain of the vessel owner? A: Ordinarily you’ll be hiring of the same captain of the same vessel owner and the crew members of the vessel owner. But with the respect in that voyage, they’re not under the control of the ship owner. They’re under the control of the charterer. If that is so, it is a private carrier, a bareboat or a demise charter. The key therefore is “who has control over the vessel”? In terms of money, in terms of navigation. If the control is with the charterer, because he has the right to hire the ship captain or crew members who will man the vessel, even though they are members of a ship owner, it is considered as a bareboat or a demise charter. So we are clear on that right? A vessel is a common carrier. But with respect to a particular voyage is concerned, it is private carrier. That particular voyage only and not for all other voyages particularly taken by the ship owner. b.) Time charter-­­ It is a charter/ lease for a particular time. Q: If it is a time charter and the goods are loaded on board the vessel and then the vessel sank, and it turns out that the materials were not loaded properly. So the vessel sank and materials were lost. Is there a presumption of fault on the part of vessel? 9

A: Yes because it is a time-­­ charterer. It is still a common carrier. Thus, there is still a presumption of negligence that can only be negated by showing of extra-­­ ordinary diligence c.) Voyage charter-­­ The vessel is charted for a particular voyage. It retains the status of a common carrier and in case of lost or damaged of goods, there’s a presumption of fault. Q: This was also asked in the bar. Can a person be considered as a common carrier if it does not own the vessel that consummated the contract of carriage? A: In case of Cebu Salvage v. Philippine Shipping (2007), The SC said in that case that a common carrier may be considered as such despite the fact that it does not own the vessel that consummate the contract of carriage. As long as he offers his services to the public for compensation. Q: What is the rationale? A: The rationale is that the public is not expected to inquire on the ownership of the vessel. Otherwise the public would be at disadvantage because he will keep on asking “do you own the vessel?” before we even board. It does not make sense right? Q: So what if you are converted into a private carrier? What is the consequence? As you all know in common carrier, it is contrary to law and public policy to stipulate that the common carrier is exempted from liability in case of negligence of its employees right? But is that stipulation allowed in private carrier? A: Yes. For example, a vessel was chartered and the charterer and ship/vessel owner agreed that the latter is not liable in case there is negligence on the part of the ship captain. The ship owner can invoke that stipulation in cases of lost or damaged of goods or death or injury to passengers. Q: Why? This was asked in bar last year. A: Because ship owner in that particular voyage is only a lessor and no longer the ship owner. And as a lessor, it has the obligation in case of lost, damaged, or deterioration of goods. And the stipulation from limiting negligence is valid. Q: Another bar exam question also, An excursion of students not from UST (I won’t mention the names so it will not harm the school), they hired a bus for an outing. So the bus is a common carrier. There’s a stipulation that the common carrier or the bus company is not responsible for the act or omission of employee. And one of the employees of the conductor had an altercation with one of the batchmates and figured with a fistfight resulting injury to passenger. The affected student sued the carrier for breach of contract. The common carrier invoked the defense or stipulation that it is not liable in case of negligent act on the part of its employees. Is that stipulation valid? A: It is valid because the common carrier is converted to private carrier with respect to that particular transportation because they have been engaged exclusively by the students. Q: Another question in the bar, an aircraft was chartered for campaign. An aircraft is a common carrier but chartered by a political candidate for campaign solely. The 10

captain was negligent and the plane crashed. The political candidate did not die but suffered bruises. He sued the owner of the aircraft for breach of contract. The aircraft invoked the stipulation that it is not liable in case of negligence of the captain. Is that stipulation valid? A: Yes it is valid because the common carrier is converted to a private carrier. Q: A passenger is injured in the course of transportation and filed an action for damages for breach of contract against the common carrier. Now after the presentation of evidence by the injured passenger, the defendant carrier moved for the demurrer of evidence on the ground that the plaintiff was not able to prove that there was negligence on the part of the defendant carrier. If you are the judge will you grant the motion of demurrer of evidence? A: I will not grant. There is no need for finding of negligence on the part of the defendant carrier. It behooves upon the part of the carrier to prove that it has exercised extra-­­ ordinary diligence. The law presumes that there is negligence in case of death or injury to passengers. And that presumption can only be overcome by presentation of evidence of extra-­­ ordinary diligence. Q: RTC rendered judgment finding the defendant carrier liable but without any explanation as to the negligence of carrier. And carrier would like to engage you as counsel to appeal the case on the RTC. Will take the appeal? A: Will not take the appeal because there’s no need for the court to declare of finding that there was negligence on the part of the defendant carrier because there is a presumption of negligence in case of death or injury to the passengers. SC said that it is enough to establish a contract of carriage. The only obligations of the passenger or shipper is: a.) to establish a contract of carriage and b.) there’s death/ injury to passengers or loss, damage, or deterioration of goods Q: This was asked in the bar. The defense of extra-­­ ordinary diligence, is that available in case of tort? A: No, it is not the correct defense. The correct defense is due diligence in the selection and supervision of employees. Q: Juan Dela Cruz is a passenger of ABC transportation and the bus was hit by a vehicle from behind. As a consequence, the bus hit a crane and resulted to injury to the passenger. What are the causes of action on part of Juan Dela Cruz? A: 1.) Breach of contract of carriage against bus operator 2.) Tort against colliding vehicle 3.) Criminal case against bus driver Q: What is the liability of tortfeasor and the operator of bus?

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A: They are liable solidarily (Arriesgado v. Tiu). It doesn’t matter the Juan Dela Cruz does not have any privity contract with the colliding vehicle because it is being sued for tort. Q: What if there is insurance company? The vehicle and public bus are both insured by insurance company. Is liability of insurance company likewise joint and several with tortfeasor and owner of bus? A: No, because it is based on insurance policy and its not joint and several. Q: This was not asked in the bar. Let’s say the passenger sued the bus transportation without suing the colliding vehicle. The bus owner filed 3rd party complaint against tortfeasor meaning owner and operator of the collding vehicle. It established that there was no negligence on the part of the public transportation, the bus that is. That’s why the court rendered a judgment finding the tortfeasor liable. Can the court award damages in favor of Juan Dela Cruz against tortfeasor even though Juan Dela Cruz did not implead the tortfeasor as defendant? A: Yes the court can hold the tortfeasor liable to Juan Dela Cruz even though it was not impleaded as a party defendant. It was brought to court’s jurisdiction when the bus operator filed a 3rd party complaint against the owner of the colliding vehicle. That’s the ruling in Inland v. Pantranco. SC said that it is enough to bring the 3rd party defendant or tortfeasor to court’s jurisdiction and give the court the basis to impose liability on the part of tortfeasor in favor of passenger if it can be established that it was the negligence of the tortfeasor that resulted to the injury of the passenger. Q: Another bar exam question also, this was asked I think 7x in the bar exam on transpo. A vessel while unloading goods on the private wharf bumped the wharf causing it to collapsed. So the wharf was destroyed. As a consequence, the goods inside the vessel were damaged. What are the various causes of action available to that case? A: a.) The owner of goods can sue breach of contract of carriage against ship owner because there was damaged on the goods, and there being damage there’s presumption of fault on the part of carrier. Also, the goods were not delivered or turned over to the consignee, and the goods were lost or damaged in the possession of the carrier so there is a presumption that the carrier was at fault. b.) Tort on the part of the owner of the wharf. He can sue the ship owner for tort and not based on breach of contract of carriage. Another bar exam question. The passengers said on the bus driver “Go driver. Go drive faster. Go! Go! Go!”. But there was a notice posted on the bus that says that “Don’t talk to driver while the bus is on motion otherwise company will not be liable for any accident”. We all know that this notice is void right? The carrier cannot be excused on its obligation or negate liability by simply posting a notice.

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Q: Another bar exam question. A passenger deposited his maleta in the baggage compartment on the bus common to all passengers. He got off and the luggage was not there. Can he sue the carrier for breach of contract? A: Yes because the goods inside his maleta were lost while in the custody of the common carrier. Q: When does the obligation of extra-­­ ordinary diligence commence and when does it end? A: We need to make distinction on goods and passengers. With respect to goods, it started from the time it is surrendered or unconditionally placed on the possession of the carrier and ends when the goods are received actually or constructively by the consignee. Q: Bar exam question. Goods were received by the staff of shipping company. They were not loaded on board the vessel. Before it was loaded on board the vessel, the goods were stolen. Is there any presumption of fault on the part of the common carrier if they are not loaded on board the vessel yet and the goods were lost not in the course of transportation? A: Yes because the obligations start when the goods are surrendered or placed in the possession of the common carrier. Q: When is the obligation converted from extra-­­ ordinary to ordinary? A: By express provision of law, if the shipper owner made use of the right of stoppage in transit. Q: What about carriage of passengers? When does it start? When does it end? A: It starts when the passenger placed himself to _____ of the common carrier under its care and proper charge. And ends when the passenger is given a reasonable opportunity to leave the premises.

Q: The case of Dangwa, Aboitiz, and La Mallorca (They are classic examples of bar questions) In the case of Dangwa, The passenger stepped on the platform of the public bus. The driver stepped on the accelerator and the passenger sped away, lost his balance which resulted to injury. Can he sue the common carrier? A: Yes because the obligation commence when the passenger accepted the offer of services by the common carrier. SC said that everytime that the bus makes a stop, it amounts to an offer of conveyance and once the offer is accepted by the passenger, then the contract of carriage commences. Q: When does it end? A: In the case of Aboitiz, He went back to the vessel to get his luggage. He took 1 hour for him to return to the vessel to get his luggage. On his return to vessel, he got hit on the crane resulting to injuries. He sued the carrier and the carrier argued that he is no longer liable because the passenger has already alighted and gotten off the vessel. In fact 1 hour had already elapsed when he got off from the vessel. But SC said that obligation ends when he is given reasonable 13

opportunity or time to leave the premises. It does not end when he gets off or alights. 1 hour is reasonable opportunity or time to leave the premises. Q: What about more than 1 hour? A: It is no longer reasonable. Another case is La Mallorca. He went back to the bus to get his bayong. Not knowing to him, his daughter followed him and daughter was sideswiped and eventually died. He sued the bus company and the bus company defense is that the obligation had already ended when they alighted from bus. SC said that it is not correct. It only ends when he is given reasonable opportunity or time to leave the premises. Q: Another bar exam question, passengers disembarked. They had to walk on a gangplank, and while traversing the gangplank, the passenger slipped and fell in the water. He died pneumonia after being sick from drowning. Is the vessel owner liable? A: Of course ship owner is liable because the obligation ends only when the passenger is given reasonable opportunity or time to leave the premises. Q: What about stipulation regarding the exercise of extra-­­ ordinary diligence, can it be stipulated to be less than extra-­­ ordinary? A: We need to make distinction on carriage of goods and passengers. With respect to stipulation of goods, it is valid for as long as it is a.) In writing; b.) Reasonable, just, and not contrary to public policy; and c.) Supported by a consideration under the consideration of contract of carriage (There has to be a consideration on top of the consideration of contract of carriage) With regard to passengers, that stipulation is not valid because you cannot lessen the obligation of the common carrier to less than extra-­­ ordinary because we are talking about the lives of the people and not just commodities. The only exception is, if the passenger is carried gratuitously. The stipulation of limiting negligence is valid but not in case of gross negligence.

Q: What is the rationale why that stipulation to reduce the obligation from extra­­ ordinary diligence to ordinary diligence is valid if the passenger is carried gratuitously? A: Because at that point, it partakes of that as a private carrier. It becomes “akin” to private carrier. And we all know that in cases of private carrier, the diligence is only ordinary and not extra-­­ ordinary. March 1, 2018 14

Favorite topic in the bar. I think it was asked 7 or 8x. And even in the last bar examination. About different kind of passengers who all sustained injuries in the course of operation of vehicle. What would be the liability of the common carrier with respect to these 4 kinds of passengers: 1.) Stowing-­­ No liability because there is no contract of carriage to begin with; 2.) Carried gratuitously-­­ Q: Can there be a stipulation limiting extra-­­ ordinary? A: We do committee recommended, yes citing the provision of Civil Code on Common Carrier. 3.) Carried with a discounted fair-­­ Extra-­­ ordinary diligence continues even if he was given a discount; It does not alter or change the obligation of the common carrier to exercise extra-­­ ordinary diligence and does not erase the presumption in case of death or injury of the passengers and presumption of fault on the part of the common carrier. 4.) One issued ticket by a carrier-­­ Obviously there’s a contract of carriage evidenced by a bill of lading. Presumption of fault applies in case of death or injury to the passengers. Q: May a common carrier be held liable despite non-­­ issuance of bill of lading? Whether vigilance over goods or safety of passengers? A: Yes. The liability of the common carrier does not depend on the issuance of bill of lading but on the consummation of the contract of carriage. Now, we made a distinction between goods and passengers right? For passengers, remember the case of Dangwa v. Court of Appeals? The moment the passenger steps on the platform of the bus, or the moment the passenger accepts the offer of the public transportation for transportation services, at that point, the contract is consummated despite the fact that no ticket was issued to the passenger. Q: What about with respect to goods? A: Same principle applies. The issuance of bill of lading is not a condition for the perfection of the contract of carriage. Q: In that sense, what are the purposes of a bill of lading? A: As you all know, you see bill of lading as more commonly used for delivery of goods noh? Bill of lading is generic to include contract of carriage for goods and contract of carriage for passengers. Q: What is the three-­­ fold character of bill of lading? A: As you may have notice in your readings, in some cases, SC said that there is two-­­ fold character right? In some cases there is three-­­ fold character. So what is it really, is it three-­­ fold or is it two-­­ fold? Anyway, most cases are three-­­ fold so we follow that. Why three-­­ fold? 1.) It’s a contract by itself that defines the terms and conditions of carriage; 2.) Acknowledgement receipt on the part of the common carrier; 15

3.) It is an evidence of the contract itself . Next topic in your outline is vigilance of the goods. Q: What are the defenses available to a common carrier in cases of loss, damage, and deterioration of the goods? A: Well our keyword is E-­­FEACO. 1.) Extra-­­ ordinary diligence; 2.) Force Majeure; You may have notice that fire is not included in the enumeration of natural calamity right? Because fire has always human intervention. Q: What are the elements of force majeure? A: (PDD-­­ ND) a.) b.)

c.)

It is the proximate and only cause of the damage, loss, or deterioration of the goods. Exercise of due diligence on the part of the common carrier before, during, or after the incident. Common carrier must not be guilty of delay

Q: Asked in the bar, Juan Dela Cruz contracted with Pedro Reyes to operate transportation to deliver goods from Manila to Batangas. En route to Batangas, in Cavite, the engine blow out. So the vehicle had to be brought to a repair shop. Now while in the repair shop, there was a flood and destroyed the goods inside the vehicle. Can common carrier invoke the defense of force majeure? A: Floods, as we all know are enumerated under the meaning of “force majeure”. But it is not applicable in this case because it is not the proximate and only cause of the loss/ damage of the goods. There was negligence on the part of the common carrier. When we say also “proximate and only cause of the loss”, we mean that there is no contributory negligence on the part of the common carrier. It is not part of the enumeration of the elements but it is implied when we say the “proximate and only cause of the loss or damage of the goods”. Asked in the bar two years ago, reconfiguration on the “roof deck cargo” to accommodate more passengers. It makes the vessel unseaworthy. The defense of force majeure is no longer available. There’s also another case, Philamgen v. Court of Appeals, Yung roof deck ginawang cargo. Nilagyan ng bottles of coca-­­ cola which affected the seaworthiness of the vessel. The defense of force majeure is no longer available. What else? Failure to install the radar dector, as a result when the vessel encountered typhoon and did not avoid typhoon because of lack of proper monitory equipment, the defense of force majeure is no longer made available. 16

What else? The license of ship captain has expired. The defense of force majeure is likewise no longer available. Q: What’s the common denominator of all of these? A: Unseaworthiness. It is not seaworthy because it was not adequately and properly equipped or not fit for the voyage. The defense of force majeure is not available. There’s a recent case penned by CJ Sereno about the measurement of the wind to consider it as force majeure in the beaufort scale. Q: Is rain a force majeure? A: It is not. It has to be a typhoon. Q: What about monsoon rain? A: If it is not typhoon, then it is not force majeure. 3.) Public Enemy in war whether international or civil; Q: Asked in the bar, if the goods were hijacked by members of Abu Sayaff, is the common carrier liable? Will the presumption of fault/negligence apply? A: The presumption of fault or negligence will still apply in case of loss or damage of goods. Anyone can be insured except public enemy. So what’s the definition of public enemy? A citizen of the country at which the Philippines is at war. Abu Sayaff members are obviously not citizens of other countries. They may pledge allegiance to other countries but they are not citizens or nationals of other countries that’s why they do not fit under the definition of public enemy. 4.) Act or omission of the shipper; Meaning sinadya. Sinadya for instance ng shipper na butasan yung sack of rice or palay para maka-­­claim ng damage. I mean it’s self-­­ explanatory. 5.) Character of the goods or defect in the packing; Example in your case outline is loose string. Meaning hindi maganda yung pagkakatali ng sack. I mean poor quality yung paggamit sa pagstore ng goods. We also have SC decisions that if the bill of lading is clean, then this defense is not available. Why? As you all know, there are different kinds of bill of lading right? One of them is a clean bill of lading. It does not have any notation as to the effects of the goods or in the packing. So if there’s a defect, halimbawa yung goods stale na at the outset, halimbawa sack ng watermelon nasira na, so this have to be notated in the bill of lading otherwise, the presumption stands in case of loss, damage, or deterioration of goods.

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You have many SC decision that when the goods are received in good condition by common carrier and then upon arrival, no longer in the same condition, then there is presumption of fault making common carrier liable. Q: Not yet asked in the bar, Simon Enterprises v. Asian Terminals. So we said that in case of deterioration of goods, there is a presumption of fault on the part of common carrier. This is only true if the goods were measured at the port of origin. And then nabawasan yung weight at the port of arrival or destination. What kind of goods are these referred to? Grains, rice, palay. Meaning by their very nature, they tend to deteriorate when they have been exposed to water. Now obviously this rule would not apply to non-­­ commodities like fabric, denims, and jeans. It only applies to staple commodities like rice, palay, grains. In this case, the grains were not measured at the port of origin. And then it got exposed to sea water. So when the goods arrived at the port of destination, there was deterioration. Meaning nabawasan yung weight or quantity. So will we apply the presumption of fault on the part of common carrier? A: SC said no since the goods were not measured at the port of origin. So the presumption of fault in case of deterioration will not apply. 6.) Order of Competent Public Authority Q: There’s a case in your outline, Ganzon v. CA. There was an order of a mayor to dump scrap iron from the vehicle to the water. Of course the driver was forced to dump the goods in the water, reason why the consignee did not receive the goods. So can the defense of order of public authority be available in that case? A: SC said that the mayor in this case was not a competent public authority. He has no authority toward the dumping of scrap iron. Q: So what could be a good example of an order of a competent public authority? A: If the goods for example were seized by a sheriff pursuant to a court order. Let’s say the consignee is a judgment debtor and the goods were seized by a sheriff pursuant to a court order. In this case, the common carrier will not be liable by virtue of an order or act of a competent public authority. Now, contributory negligence by express provision of law, we all know that the liability of a common carrier may be equitably reduced if there is a negligence on the part of the shipper or owner. Q: Next in your outline is duration of liability. I think we took this up yesterday. So deliver of goods by a common carrier. When does it start and when does it end? There’s a case in your outline, 2014, it’s a vessel from Netherlands. The goods were delivered to somebody on the strength of a falsified custom permit. So the common carrier delivered the goods other than the consignee on the strength of falsified custom permit. It ought to be genuine but it was really falsified. Will that excuse the common carrier from liability?

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A: SC said that it does not because the obligation of the common carrier is to deliver goods actually or constructively to the consignee. Good faith is not defense. Bottomline is you must deliver the goods to the consignee actually or constructively. That’s why the obligation starts when the goods are placed in the possession of the common carrier and delivered actually or constructively to the consignee. Or a consignee in a reasonable time, to obtain delivery of goods but fails to do. Delivery to someone who is not a consignee is not an excuse under the specific provision on the civil code. We also said yesterday about stipulation to limit the duration of liability of common carrier. You cannot limit the liability of extra-­­ ordinary unless that stipulation was in writing, supported by a consideration other than the contract of service. There are two exceptions: a.) Custom authority-­­ The liability does not end when it is received by the custom authority. But there’s nothing wrong in stipulating that the obligation is lowered in the hands of the government. There’s an old case Lu Do & Lu Ym, but it was not abandoned or superseded by any SC decision to the contrary. To repeat, it does not end just because the goods are in the hands of the government authority (customs). The obligation to exercise extra-­­ ordinary diligence continues until the goods are received by the consignee actually or constructively. But there’s nothing wrong in stipulating that the obligation ends when the goods are in possession of the customs authority. Q: How do you protect the consignee? A: Well the consignee, in all likelihood will contract with a custom broker right? It’s not the shipper or common carrier that contracts with the custom broker obviously. It is the consignee that engages the customs broker. Also we have said that customs broker is a common carrier. The obligation of extra-­­ ordinary diligence in case of loss or damage on the goods shall fall against the customs broker. We also discussed yesterday the concept of “stoppage-­­in-­­transit” right? You have taken this up on sales. So the seller has the right to exercise stoppage-­­in-­­transit. The seller is supposed to deliver to consignee. So seller contracted common carrier to deliver goods. But he may exercise stoppage-­­in-­­transit kunwari hindi nabayaran yung goods or different goods were delivered which was not accorded with the specifications. Yesterday we have already discussed that in “stoppage-­­in-­­transit” it is no longer extra-­­ ordinary but ordinary. It is akin to depositary or warehouseman. We all know that the obligation of a depository or warehouseman is not extraordinary but only ordinary.

Favorite topic in the bar also, stipulation or limitation of liability. There are 2 provisions on the code as you all know in the stipulations or limitations of liability:

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1.) Limiting liability on the fixed amount. 2.) Limiting value of the goods Q: Are these conditions limiting liability, valid? When does it consider to be valid? A: 1.) In cases of limiting liability on the fixed amount: a.) If it is stipulated; b.) Not contrary to public policy; c.) Fair and reasonable under circumstances 2.) Limiting value of goods: Let’s take a look to some stipulations: a.) Exempting liability in cases of loss or damage of goods-­­ that’s contrary to public policy. It’s common sense, it’s basic, it was asked in the bar. 2 points nga lang. Pero pwede na. b.) Unqualified limitation as to liability fixed based on value of goods-­­ Q: Example, common carrier is liable equivalent only to 90% of goods. Period. Is that valid? A: It is not valid. c.) Limiting liability of the common carrier to the value of goods as reflected in the bill of lading unless shipper is given the option to higher valuation­­ That’s the only stipulation that is valid based on those 3 stipulations mentioned. So if you limit the liability of the value of the goods, as reflected in the bill of lading, without giving the shipper the option to carry higher valuation, that stipulation is void. So it’s valid to stipulate liability of common carrier is $500 per package unless the shipper carries higher valuation. Q: Now what if it turns out that the common carrier is negligent or was not able to overcome the presumption of negligence? A: Still liability is $500 per package. Q: What if the goods are worth more than $500 per package? A: Still the liability is fixed for $500 per package as long as shipper has given the option to declare higher valuation. Q: What do you mean by package? Is it per unit or per shipment? A: There’s a case in your outline, I think it’s unsworth. It’s per shipment and not per unit. Halimbawa, isang package, 14 na motorcycle, lahat yun nawala. Magkano ang marerecover? $500 per shipment or $500 per unit? Sabi ng SC per shipment. Unless 20

the shipper declares the units. Because if he has declared the number of units, he has to pay the additional freight rates. Q: What if there is bill of lading that reflects the value of the goods but makes reference to the invoice value? So stated value is less than the invoice value in the letter of credit. How much can be recovered by the shipper? Let’s repeat. There was a declaration as to the value of the goods in the bill of lading. But the bill of lading makes also reference to the invoice value in the letter of credit. How much can be recovered? Stated value or the invoice value referred to in the letter of credit? A: Sabi ng SC, it’s not enough that the bill of lading makes reference to the invoice value. The amount that can be recovered is based on the value of the goods not not in the invoice value in the letter of credit. A: Because the freight rates were paid based on the value appearing in the bill of lading and not on the letter of credit. You want to recover more, you have to pay more. You have to pay additional freight rates or charges. Q: What are the void stipulations with respect to the delivery of goods? A: Our keyword is ON-­­ELDER O-­­ Owner’s risk N-­­ Not liable for any loss or damage of the goods E-­­ Common carrier is not liable for any acts or omissions of the employee L-­­ Less than ordinary diligence Q: What about less than extra-­­ ordinary? A: That’s valid as you have seen, as long as it is in writing and supported by valuable consideration other than the contract of service. What is void is stipulation less than ordinary. D-­­ Diligence not to be exercised on the part of carrier E-­­ Any stipulation exempting common carrier from any liability in case there’s a defect in the equipment in the consummation of contract of carriage. R-­­ Acts of robbers unless acted with grave irresistible force or threat. Now in COGSA, regarding stipulations on limitation of liability, we all know that under COGSA its $500 per package right? It’s not upgraded. It’s still the same. Q: What about for air carriage? A: Under Warsaw Convention, $20/kilo. But we are no longer following the Warsaw Convention. Under Montreal Convention, it’s a special drawing right (SDR). It’s a computation of various European currency. It’s technical but will take it up when we reach air transportation.

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Q: What about passengers? Can you limit the liability of common carrier in case of death or injury to passengers? A: Well under the Warsaw convention and Montreal Convention, you can. For air carrier, you can. For the rest, no. Civil Code, contrary to public policy right? So pagka land transportation, water stipulation, that stipulation is void. But in air carriage where the Philippines is just one of the itineraries, the Warsaw Convention and the Montreal Convention permit or indicate the limitation or liability of the common carrier. Will take on the figures when we reach air transportation. Next in your outline, liability on the common carriage for baggage of passengers. As we all know, we made a distinction between hand-­­ carry and check-­­in baggae right? If it’s checked-­­ in baggage, In case of loss or damage of goods, then the presumption of fault applies against the common carrier. Q: What about hand-­­ carry baggage? A: Under the law, you have to give notice to the common carrier or the employee. Q: What’s the obligation of common carrier with respect to hand-­­ carry luggage or baggage? A: It is that of a depositary. So yung mga chinicheck-­­ in niyo, mga hand-­­ carry niyo sa Cebu Pacific, hindi yan extra-­­ ordinary diligence. Yan ay similar lang to depository. That’s why you need to keep an eye always to your hand-­­ carry luggage because the obligation is that of a depositary. Q: Regarding safety of passengers, if the death or injury is caused by employees of the carrier, can the presumption of fault be overcome by extra-­­ ordinary diligence. Interesting question right? Because if you read the provision on common carrier with respect to safety of passengers, the law makes the common carrier liable in case of death or injury of passengers for acts or omissions of employee even though they may have acted beyond the scope of their authority. Is defense of extra-­­ ordinary diligence available if death or injury is caused by employee themselves? A: Justice Bersamin said (this a case penned last year) that no defense of extra-­­ ordinary diligence will ever be applied because the law makes the carrier liable. NOT JUST PRESUMED TO BE LIABLE, BUT LIABLE if negligence is caused to the passengers. SC also said that with respect to the act of the employees, the common carrier is the insurer of the safety the passengers. I have a friend, one of my classmates in law school. He was tasked to represent common carriers. So napunta siya sa transportation practice ang mga kliyente niya puro common carrier. I had chit chat with him. I said “In case of death or injury to the passengers your client is presumed to be at fault. Now if the death or injury is caused by negligence of your employee, you are not only presumed to be liable, but liable.” And you know what I said? Only one word. I said “settle”. Sa una 22

very painful especially pag namatayan. But after one year, two years, three years, four years, you know the will is weakened. Eventually they will settle. Time has a way of healing wounds. Now common carriers are bound to carry passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person with due regard to all circumstance. I still remember Justice Peralta, my professor in transportation law said that provision. But it just simply means “Extra-­­ ordinary”. Q: But can the common carrier be liable despite absence of death or injuries? A: I think we have already discussed this earlier right? Common carrier can still be liable in case there is a breach of contract of carriage even in the absence of death or injuries. There are recent cases like Fuentebella v. Cathay Pacific, Cebu Pacific v. Manay, Ramos v. South China Airlines. So all of these cases, there is no death of passengers and yet there was breach of contract of carriage, thus presumption of fault or negligence applies. It comes on the part of the common carrier to prove extra-­­ ordinary diligence. Good conduct on the part of employees, of course, there are also cases in this line. No death or injury but common carrier was made liable. March 7, 2018 Next in your outline, safety of passengers. Q: The gun was tucked in the waist of passenger (basically it was concealed) and shot another passenger. Is the common carrier liable? A: The SC said that the common carrier is not liable. Common carrier is not insurer for the safety of the passengers for the acts of strangers. Whereas to employees, willful acts or negligence on the part of the employees, the common carrier is at fault. In case of death or injury of passengers due to the willful act of employees or negligence, the law makes the common carrier liable. Not just a presumption but it makes the common carrier liable. In effect, it is saying that it is insurer to the safety of passengers for acts of its employees. But for acts of strangers, that is not so. Meaning, it can only be held liable if it did not exercise due diligence to prevent the incidence. Now in this case, it was not obvious, it was concealed. And there’s no obligation on the part of the common carrier to frisk the passenger. Q: What if the driver of a taxicab killed or shot one of the passengers? Is the common carrier liable? Even though the common carrier gave instruction “You should exercise maximum tolerance and patience in dealing with passengers. You should exercise charity, magnanimity, kindness, compassion, mercy, and so on”? (Case of Maranan v. Perez) A: Common carrier is liable because this is the act of its employee. In the case of Maranan v. Perez, the SC said that the common carrier is liable for the act of its employees even though it exceeded its authority or acted against the instruction of common carrier. 23

Q: Let’s say the passenger wanted to feel the wind and basically put up his arm to feel the wind outside the window. A bystander threw a stone which hit the arm of the passenger and caused injury. Is the common carrier liable? A: That’s the case of Pilapil v. CA (Altough in pilapil, tinamaan lang sa mata). Q: What about this one. This is a modification of Pilapil v. CA (Bar exam question). What if there is previous incidence of stone throwing in that area. Is the common carrier liable? A: Yes. The key for the acts of strangers is the exercise of “due diligence to prevent before, during, and after the incidence”. During the incidence of stone throwing, the common carrier did not exercise any precaution. Therefore common carrier shall be held liable. Now let’s complete our discussion on obligation of common carrier to carry passengers safely as far as human care can provide using the utmost diligence of a very cautious person with due regard to all circumstances (which basically translates to exercise of extra-­­ ordinary diligence). So we said last time that in case of death or injury of passengers, the presumption is that the common carrier is at fault. But there’s one case in your outline where Justice Bersamin went even one step further. This is the case of Maranan v. Perez where in case of death or injury of passengers brought about by the willful act or negligence of its employees, then the common carrier is liable. Not just presumed to be liable. No amount of extra-­­ ordinary diligence will negate the liability of the common carrier if it is due to the willful act or negligence of its employees even though it may have acted beyond the scope of authority or against the instruction or order of the common carrier. We also said that the common carrier can be held liable despite absence of death or injury of passengers. Death and injury are not the only grounds to make the carrier liable. We have seen many cases where common carrier is held to be liable in cases of: a.) Bad faith on the part of employees. So rude conduct on the part of employees or b.) Breach of contract of carriage. Q: What is the defense available to the common carrier if it’s not due to negligence or willful act of employees? A: Force majeure Now, if it’s due to the willful act or negligence of the employees, it cannot be equated of course to force majeure. The elements of force majeure are: a.) Independent of the human will b.) Free from any participation in the aggravation of the resulting injury (Or simply put absence of contributory negligence) c.) Prevented the obligor from fulfilling his obligation in normal manner 24

d.) Must be unforeseen or if it can be foreseen, it could not have been avoided. You may have noticed in your cases, that tire blowout is not force majeure. Monsoon rain is also not synonymous to force majeure. Strong wind is not force majeure unless it amounts to typhoon. Let’s go to duration of liability. I think we have discussed this already right? So it starts when the passenger accepts the offer of service of common carrier and it ends when the passenger alighted from the common carrier and give the reasonable opportunity to leave the premises. Q: Okay, what if the passenger who purchased the token while waiting for the train to arrived was shot by the security guard? Is the common carrier liable? A: In the case of LRT v. Navidad, it was not clear WON the security guard was the employee of the common carrier. But in that case, the SC said that it was considered as the agent of the common carrier. So the term “employee” has been expanded to even include the person acting upon the instruction of the common carrier. There’s no evidence that he was being pushed by the security guard. What was clear is that he had an altercation with the security guard right? And after a few seconds he fell on the railway and rammed by the train. The common carrier in this case was held to be liable despite the fact that the security guard was not an employee of the common carrier but only acting upon the instruction of the common carrier. So, let’s be reminded that the term “employee” has been expanded to even include any person acting upon the instruction or behest of the common carrier. Q: What about for acts of passengers or strangers? A: So we said that the common carrier is responsible for death or injury suffered by the passenger on the account of the acts of passengers or strangers only if it did not exercise due diligence to prevent the incident. It has to be before, during, and after the incidence. The exercise of due diligence must be before, during, and after the incidence. Q: In your outline, we have the case of Bachelor Express v. CA. In this case, one of the passengers had an altercation with also one of the passengers. So there’s a commotion inside the bus. Instead of making a full stop, the driver stepped on the accelerator. Victims fell from the bus door when it was opened or gave way while the bus was still running. Is common carrier liable even though the injury was inflicted by one of the passengers and not by the employee of common carrier? A: SC said that the common carrier is liable because it did not exercise due diligence to prevent the incidence. The bus driver should have made a full stop. Another case is Fortune Express v. CA. So this is a case about maranaos right? A jeepney had a collision with a bus owned by fortune express. I forgot what kind of transpo, but anyway 2 maranaos died in that incident. maranaos made a threat for revenge. So true enough, one of the buses owned by Fortune Express was seized by 25

the maranaos armed with guns and set the bus on fire. The passengers there was able to escape. One of the passengers committed a mistake of coming back to look for his luggage. And siya yung namatay. Now the question here is whether or not the common carrier is liable because the death was not caused by the employee of the common carrier but by strangers. A: SC said that the common carrier is liable because it did not exercise due diligence required under the circumstance. There has been a threat already made by the maranaos to seize the vehicle, or take revenge but the common carrier did not exercise precautionary measures. Q: So we have discussed a while ago, a stranger was able to bring with him a gun undetected and unnoticed by the conductor of a bus. He shot one of the passengers. Is the common carrier liable? A: In that case the SC said that the common carrier is not liable because there is no obligation on the part of the common carrier to frisk its passengers. In this case it was not evident that he was carrying a firearm. It would have been different though if he carried a firearm which is at sight and the conductor still allowed him to board the bus. But in this case, there was no sign that he was carrying a gun. As a result, the common carrier was able to exclude itself from liability. Cases (Side comments of Dean on the rulings of SC): 1. Cebu Salvage v. Philippine Home Assurance-­­ This case applies to vessel and not to land transportation. A person maybe considered a common carrier even though he does not own the vessel that will consummate the contract of carriage. The public is not obligated to inquire on the ownership of the vessel. 2. First Philippine Industrial v. CA-­­ Means of transportation is immaterial as long as the elements of common carrier are present. 3. A.F. Sanchez v. CA-­­ Transportation is an integral part of the business or activity of the customs broker. It may not be a principal activity but just as the same, it is still considered as an integral part. For as long as it offers services to the public, then it is considered as a common carrier. Consignee generally is the one who engages the customs broker for the delivery of the goods. 4. Loadmasters v. Glodel-­­ The trucking service company can be considered as a common carrier if its services are not limited to the customs broker. 5. Unsworth v. CA-­­ If freight forwarder only arranges for transportation, then it is not considered as a common carrier. But if undertakes the delivery of goods or issues a bill of lading, it becomes a common carrier. 6. Philippine American General Insurance v. PKS-­­ PKS is taking the position that it is a private carrier and not a common carrier since it has only limited clientele. But SC said there’s so much regularity in its activities. What is important that it offers services indiscriminately to the narrow segment of the public. The fact that the contracts were entered individually will not make that particular transportation to be a private carrier. 26

7. Nedlloyd Linjen v. Glow Laks-­­ Good faith is not a defense. Goods were received to unauthorized person with respect to a falsified permit Good faith is not a defense since what is imposed by law is extra-­­ ordinary diligence. Bottom line is, if the goods were not received by the consignee, actually or constructively, no amount of good faith will save the common carrier from liability. April 11, 2018 Shipper -­­> Common Carrier -­­> Consignee So we have the shipper, entrusting the goods to the common carrier. Common carrier issuing a bill of lading in favor of the shipper. By issuing the bill of lading, we said that the common carrier acknowledges the receipt of the goods and at the same time the obligation to deliver the same thing in favor of the persons specified in the bill of lading, who is the consignee. So the bill of lading serves two other purposes on top of acknowledgment of the receipt of the goods: 1.) It is the contract that defines the rights and obligations of the parties, the amount and description of the goods, to be delivered or caused to be loaded on board the vessel AND 2.) The evidence of the contract itself. So we have the three-­­ fold character of the bill of lading. Now, in the course of our other discussions, we introduced other parties right? We introduced freight forwarder who introduced the common carrier. But let’s limit our discussion to the most basic. Shipper, giving the goods to the common carrier. Common carrier issues bill of lading in favor of the shipper. Q: Now, what happens to the first pace of the contract of carriage? So we have defined what bill of lading is. What are the kinds of bill of lading? A: We have 1.) Negotiable and non-­­ negotiable 2.) Clean bill of lading-­­ contains notation of the defect or damage of the goods. 3.) On board bill of lading and received for shipment bill of lading Q: How do you distinguish negotiable from non-­­ negotiable bill of lading? A: Negotiable-­­ If by its terms the goods are deliverable to the order or bearer. Non negotiable-­­ If the goods are deliverable to specific person. Q: So what is the significance if it is non-­­ negotiable or negotiable? A: If it is non-­­negotiable, the goods cannot be delivered in favor of any other claimants but only in favor of the consignee. So if the claimant is the consignee, it 27

does not have to produce the bill of lading right? He can issue to the common carrier acknowledgement of the receipt of goods. Jurisprudence has it that if the claimant is the consignee, he can dispense with the presentation of the bill of lading. Now, the other one is clean bill of lading which contains notation of defect or damage of goods. Remember our discussion here? If the goods are received in good condition, and then the goods were damaged or lost, what is the presumption? The presumption is fault on the part of the common carrier. So if there is a defect or damage to the shipment, it is incumbent upon the common carrier to bear or indicate it in the bill of lading. So if the goods were received in not good condition, the common carrier must make an appropriate notation in the bill of lading. Q: Now, what about on board bill of lading? This is the case of Magellan Manufacturing Corp v. CA. So let’s say, the letter of credit says “on board bill of lading”. So the buyer in this case purchased anahaw fan. Now the letter of credit requires “on board bill of lading”. It means that there must be no transshipment. From the time it was turn over to the common carrier, until it was received by the consignee, there must be no change of vessel. That’s why it is called “on board bill of lading”. However, this was not notated in the bill of lading. So what will be controlling? So sabi ng LC, dapat on board bill of lading. No transshipment. But in bill of lading, it says that transshipment is allowed. So will the buyer be justified in not accepting the delivery of the goods? A: SC said yes. Justified in not accepting the delivery because of the requirement under letter of credit. Q: Next, what are the stipulations in the bill of lading? What maybe stipulated in the bill of lading between the shipper and the common carrier? Q: Is it valid to stipulate a period to file notice of claim? Can the parties stipulate, “Notice of claim of loss or damage must be made within 24 hours or immediately”? As you know, under the code of commerce, if the defect or damage is apparent on the place of the shipment, then notice of the damage must be made to the common carrier immediately right? Now, will it be binding to the consignee? That’s a stipulation between the shipper and common carrier right? A: If the consignee fails to make a notice of claim on account of damage, SC said that it amounts to stipulation pour autrui. So if the consignee claims the delivery of the goods, in effect it accepts the benefits of the bill of lading, then it also becomes bound to the stipulation of the bill of lading. To repeat, if there is an agreement between the shipper and the common carrier, and in case the damage or defect is apparent, notice must be made immediately. This requirement is likewise applicable to the consignee. It amounts to stipulation pour autrui. Acceptance of benefit is given to a third party (consignee) and as such, he is bound to the terms and agreement between the shipper and the common carrier.

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Now what about under COGSA? So we made a distinction between maritime inter-­­ island or coastwise shipping and a contract of carriage under COGSA. So if it is from one local port to another local port, notice of claim, notice of loss or damage must be done. It is necessary to the accrual of cause of action. If there’s damage on the place of shipment, then notice must be done immediately. Otherwise, failure to give notice is fatal to the cause of action of consignee. Now, what if it is under COGSA? As we all know, if it’s under COGSA, meaning Foreign port to Philippine port, notice of loss or damage is not necessary for the accrual of cause of action. What is important under COGSA is the period to file the suit against the common carrier. What is indispensable is the period to file the suit, which is within 1 year from the date the goods are delivered or should have been delivered. So there’s a question on the bar on the effect of lack of notice to the common carrier in case of damage of the goods. So distinguish the facts of the question. Is it from one local port to another? Or from foreign port to local port? From local port to another, we said that notice of loss or damage is important, the lack of which is fatal to the cause of action of the shipper or consignee. Under COGSA, it is not fatal. It does not prevent the accrual of the cause of action as long as the suit is done within 1 year from the date the goods are delivered or should have been delivered. Q: Is the bill of lading valid even though the shipper only adhered to the terms and conditions of the contract? A: As you all know, the bill of lading is contract of adhesion. It is a “take it leave it” basis. We all know that it is basic principle that the contract of adhesion is not necessarily void. It is valid since the adherence of the terms and conditions is a voluntary act on the part of the shipper. Q: Alright, let’s say local port, Manila to Cebu then Cebu to USA. The goods were received at Davao (I think Davao lan gusto sabihin ni Dean dito nagkamali lang. Please check the case, Davao yung nakalagay), and let’s say there’s damage to the goods. What is the period to file the notice to the common carrier? From the time the goods were off loaded in Cebu? Or from the time they were off loaded in USA? A: It should have been in USA right? But there’s one case in your outline, Lorenz Shipping v. Chubb. The notice must be done immediately, if the damage is apparent in the shipment. It should have been done immediately, when the goods were received in Cebu not when the goods were received at the final port of destination. (CAVEAT: Just cross-­­ reference with the original case.) Q: Now, what about this one. So we said that notice of loss or damage must be done to the common carrier. If it is apparent, immediately. If not apparent, within 24 hours from delivery. What about a period to file an action against the common carrier? Is that valid? Can the parties stipulate let’s say that the action shall be filed only within 6 months only from the loss or damage of the goods? A: There’s one case in your outline, that that stipulation is valid. So you can stipulate for a shorter period of action against the common carrier.

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Q: In insurance, the period to file an action against insurance company is 10 years right? 10 years from the date of the accrual of cause of action right? But can the parties shorten it? Shorten to less than 10 years? A: Yes. And similarly, the parties in the contract of carriage of goods can also stipulate the period to file a suit against the common carrier in case of loss or damage to the goods. Q: Now, what if there’s no stipulation? What is the prescriptive period? A: If there’s bill of lading, 10 years. Because it’s based on a written contract. If there’s no bill of lading, then 6 years. Then let’s go to from common carrier to consignee. For the shipment of goods, the consignee must surrender the bill of lading. So we have taken this up. However, surrender of bill of lading is not necessary to discharge the common carrier from its contractual obligation. We said that acknowledgment receipt will suffice. The loss of the bill of lading does not excuse the common carrier from non-­­ delivery. For as long as the claimant is the consignee. If the claimant is not the consignee, he must surrender or produce the negotiated bill of lading. Q: Now what about this one. What if the goods were received by the agent of the consignee, but the agent did not deliver the goods to the consignee? Will that excuse the common carrier from the liability? Or will the common carrier be still liable? So we said that the obligation of the common carrier is to deliver the goods to the consignee right? Now in this case, It was received by the agent of the consignee, with proper authorization but the agent did not deliver to the consignee. Is the common carrier relieved from the liability? Or is he still liable? A: SC said that in National Trucking and Forwarding Corp. v. Lorenzo Shipping, if the agent is authorized by the consignee, then the obligation on the common carrier is discharged the moment the goods were received by the agent. What happens afterwards is no longer the responsibility of the common carrier. Q: Another one. What if consignee is a corporation? It is an educational institution. Let’s say the goods are deliverable to ABC educational school. Then there’s damage to the goods. Who shall make notice to the common carrier? A: So if the notice was not done in 24 hours, and it is apparent, we said that it is fatal to the cause of action of the consignee right? Now there’s one case in your outline, if it’s an educational institution and the board decides on who is the authorized person to make notice, then the notice given to the person authorized by the board is what is controlling. So let’s say the goods were received by a messenger or a clerk or a staff of the educational institution. And then they will go to the supervisor. And then after that the principal. But the one authorized by the board to make notice is the principal. Then 24 hour period is counted from the time the goods were received not by the staff, not by the supervisor, but by the person authorized by the board, which is in this case, the principal. Q: Is the common carrier an insurer against delay in transportation of the goods? A: As you all know, in the absence of special contract, the common carrier is not the insurer against delay of transportation of goods. However, if they stipulated that the 30

goods shall be delivered on this date, then the common carrier is liable. But if there’s no specific date for delivery, then delay would not make the common carrier liable. Q: There’s one case in your outline, Maersk Line v. CA, is 2 months and 7 days reasonable? Or beyond the norm of reasonableness? A: 2 months and 7 days is beyond reasonable. If there’s no period to deliver, it’s a question of reasonableness. In this case, 2 months and 7 days is no longer reasonable. Q: Let’s repeat the prescriptive period to file an action. So coastwise shipping, notice of damage is condition precedent before the filing of action in court. If damage is apparent, we said immediately. If not apparent, 24 hours from delivery. Now there’s bar examination question noh? He made a notice of damage to the common carrier 48 hours from delivery of goods. Can he still file an action against the common carrier? A: No more right? It must be made within 24 hours from delivery if the damage of goods is not apparent. If apparent, immediately. It is fatal to the cause of action. Q: Now if international port to Philippine port, so we said that notice of damage is not condition precedent as long as it is filed within 1 year from the goods were delivered or should have been delivered. What do you mean by “the goods should have been delivered”? Let’s say the vessel docked at the port of destination on June 22. The goods were not delivered. So you have 1 year right? From June 22 to make an action against common carrier. Now what if the vessel left the port on June 24? So what’s your period to file an action? June 22 or June 24? A: Either right? That’s why 1 year from the date the goods were delivered, June 22, or should have been delivered, June 24. So your period is extended by 2 days because it should have been made a delivery on June 24. Q: Now what do you mean by “loss” in the context of maritime commerce or particularly under COGSA? Does loss of goods also mean loss in the value of goods? A: There’s one case in your outline, it was asked twice in the bar. The case of Mistui O.S.K. Lines v. CA. Loss in the context of maritime commerce particularly under COGSA means the fact of disappearance of the goods. It means it has gone out of commerce, have perished, and NOT loss in the value thereof. Q: So let’s say the goods should have been delivered in time for Christmas. But they were delivered in Valentine. So it can no longer be used by the consignee correct? There’s now loss in terms of value of the goods. Let’s say Christmas decors. It could have been sold in the right price if it were delivered in time for Christmas, but it was delivered in Valentine. So there’s a depreciation in the value of the goods. What’s the actionable period to file a suit against common carrier? Is it 1 year or 10 years? A: SC said that the 1 year to file a suit against the common carrier will not apply. What you will apply is the 10 year prescriptive period.

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So we are clear diba, Foreign port to Philippine Port, COGSA applies not the law in maritime commerce. Under COGSA, we kept on saying that notice of loss or damage is not necessary to the accrual of the cause of action. What is important is to file it within 1 year against the common carrier or shipping agent. That 1 year period applies only to loss of goods. Loss means disappearance or has gone out of commerce, and NOT loss of value. If there’s loss of value, then you will not apply the 1 year prescriptive period. Q: When should 1 year period be counted or computed? Is it 1 year from delivery of the first item of the shipment or last item of the shipment? A: Is it reckoned from delivery of the last item of the shipment. So if it consists of various parts, then 1 year is counted from delivery of the last item of the shipment. Q: What about if the goods were misdelivered? The goods were not delivered in favor of the consignee? What is the actionable period? 1 year or 10 years? A: Jurisprudence has it that in case of misdelivery, it is not 1 year that will apply but 10 years. 1 year period applies only if goods were lost or damaged and received by the consignee. Q: Is the 1 year period toll by demand? As you all know, in civil code, demand tolls the prescriptive period. Will that be true in COGSA? A: Jurisprudence has it that demand does not toll the running to file a suit against the common carrier. Q: So what will now toll or suspend the 1 year period? A: If the suit is filed against the common carrier within 1 year and the suit was dismissed in technical grounds-­­ Let’s say improper venue. Let’s say that the suit was filed on the 6th month. Venue was improperly laid so the case was dismissed. So that suit tolls the 1 year period. Q: So if the suit was dismissed in court, what is the remaining period to file the suit against the common carrier? Fresh 1 year period or the balance of the remaining 1 year period? A: It’s not clear but there’s a case that it must be a fresh 1 year period. Q: What about the insurance company? The 1 year period applies to common carrier right? What about the insurance company? A: As you all know, there’s a different period to enforce the claim against the insurance company. For insurance company, it is 10 years from the accrual of the cause of action. Q: When does the cause of action accrue for the insurance contract? A: From rejection of the claim by insurance. It can be shortened as long as not less then 1 year. Q: What if you are the consignee and you have only 1 year to file a suit against the insurance company. And you also have only 1 year to file a suit against the common carrier. What will you do to preserve the cause of action?

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A: If there’s no stipulation to reduce the period to file a suit against the insurance company, we have 10 years. Jurisprudence is very clear in that regard. QWhat if you shorten the period to less than 1 year? A: Ordinarily the consignee files a claim first against the insurance company right? Ordinarily. Insurance company pays the consignee and subrogated to the rights of the consignee. Q: So if the insurance company pays on the 6th month from delivery of goods by the carrier to the consignee, does the insurance company have a fresh 1 year period to file the suit against the common carrier or the balance of the remaining 1 year? A: SC said that insurance company has only the balance of the remaining1 year period. It is not the fresh 1 year period in so far as the insurance company is concerned. Q: What if you filed a claim against the insurance company. And then the insurance company delayed the process of the claim. As a consequence, you were not able to file a suit against the common carrier within 1 year. What happens to the liability of the insurance company? A: There was a previous SC decision that if the insurance company cannot be subrogated to the rights of insured, then the common carrier is relieved from liability. There’s one case in your outline, 2011, New World International v. NYK Fil-­­ Japan Shipping, the SC said if there is delay in the process of the claim by the insurance company as a consequence, the 1 year period was not observed by the consignee, the consignee was not able to file suit against common carrier within 1 year from date of delivery of goods noh, the common carrier is still relieved from liability. Because the 1 year period is jurisdictional. But the liability is on the part of the insurance company. There’s an inordinate delay on the part of the insurance company. The insurance company has to make up for the loss or damage sustained or suffered by the consignee brought about by that inordinate delay. Q: What about the shipping agent? Is it benefited from the 1 year period? A: As you all know, jurisprudence has it that the 1 year period applies to both the ship owner and the ship agent right? So a ship agent as you know is the representative of the vessel in the local port. Supposed to distribute or settle claims of the cargo owners. It facilitates the claims, distributes the cargoes to the owners noh. It stands as the representative of the foreign vessel in the local port. The liability of ship agent as you all know is not the same as the liability of the agent under the civil code. It is liable solidarily with ship owner. Q: Can the ship agent be therefore relieve on the ground that he acted within the scope of his authority? A: No. In case of loss or damage to the goods, the consignee may file a claims against both the ship owner and the ship agent. Q: Now, will the 1 year apply also to the ship agent?

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A: Yes. So to be sure, you file a suit against both of them. And made them liable solidarily. There’s one case penned by Justice Peralta, S.R. Farms, the goods were lost, or damaged rather. A suit was filed against the ship owner within 1 year. After 1 month from expiration of the 1 year period, the complaint was amended to implead for the first time the ship agent. The amendment retroact to the date of complaint filed against the ship owner. SC said that if it’s a fresh amendment, implead for the first time the ship agent, the suit will no longer prosper. Amendment is different from supplemental complaint correct? Supplemental complaint supplements the first complaint, but if its by way of amendment, impleading for the first time the ship agent, then the suit will no longer prosper. The amendment should have been done within 1 year to the date the goods have been delivered or should have been delivered. In the case of New World International v. NYK Fil-­­ Japan Shipping, August 2011, SC said if there was inordinate delay on the part of insurance company, as a consequence, the consignee was not able to file a suit against the common carrier within 1 year from delivery of goods, the insurance company has to make up for the loss sustained by the consignee. Q: What about when the goods are off loaded from the common carrier by the arrastre operator and the goods are damaged in the possession or custody of the arrastre operator. Will the 1 year period apply? This was asked in the bar 2014. The case of Insurance Company v. Asian Terminals. A: The 1 year period will not apply. It only applies against the ship owner and the ship agent. The 1 year period applies to contract of carriage of goods by sea. It does not apply to the contract between the arrastre operator and Philippine Ports Authority. The applicable period is the period set forth in the contract between the arrastre operator and Philippine Ports Authority which is 4 years from the date the goods were delivered. The 4 year period by the way is not by law, it’s by agreement between the arrastre operator and Philippine Ports Authority. At least we are clear about this that the 1 year period will not apply in favor of the arrastre operator. Q: There’s another recent case in your outline, Can the 1 year period be shorten to less than 1 year? In this case 9 months after delivery of the goods. What if the bill of lading says 9 months but COGSA says 1 year? Can the 1 year period be reduced to less than 1 year? A: As you all know, the 1 year period cannot be reduced to less than 1 year. It can be extended by the common carrier to the benefit of the consignee but cannot be shorten. Let’s move on to the next topic. The next topic in your outline is charter parties correct? 34

Q: So what contract governs maritime commerce? What law or regulation covers the maritime commerce? A: The contract to carry goods and transfer passenger are governed by the civil code provision of course on common carrier and the terms and conditions of the bill of lading. Just because it’s maritime commerce, it does not take it away from the operation of the civil code provisions on common carrier. It’s still common carrier provisions of civil code and the terms and conditions of the bill of lading. Q: Is the ship owner presumed to be at fault or negligent in case of loss or damage of goods on board the vessel? Or in case of death or injuries of passengers under a charter party agreement? A: It depends to the type of charter party agreement. If it is a voyage charter or time charter, the presumption of fault will apply. Under the bareboat or demise charter, the ship owner becomes a mere lessor and has no responsibility to the passengers in case of death or injury or no responsibility to the owner of the cargoes in case of loss or damage to the goods. This was asked in the last year’s bar examination. Q: What is bareboat or demise charter? A: It is a bareboat or demise charter if what is given to the charterer is not only possession to the vessel but the right to control the navigation of vessel and the right to hire its own crew. He is the owner pro hac vice or owner with that respect particular transportation. Don’t forget the recent case of Federal Phoenix, it’s not the title that counts, it’s not the nomenclature, not the name, but the authority given to the charterer. If the terms of the charter party agreement OR in actual practice, the charterer hires the crew members, it is effectively a bareboat or demise charter. So it’s OR and not AND. So just be careful in bar examinations. Take a look if what is given to the charterer. If it’s only possession, there are only 2 types: time or voyage charter. Time charter, if it is chartered for a particular period and voyage charter, if it is chartered for a particular voyage. In either or both cases, the ship owner retains the status of the common carrier. And in case of loss or damage of the goods, then presumption of fault applies. Q: This was asked in the bar. The term “owner pro hac vice”, to what kind of charter party does this term apply? A: Only to bareboart or demise charter. Q: Will the rules of common carrier apply to bareboat or demise charter? A: The case of Caltex v. Suspicio Lines, SC said NO. Q: Who has the obligation to maintain the seaworthiness of the vessel?

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A: It depends. If it is a time or voyage charter, then the ship owner has the obligation to make it seaworthy. If it is a bareboat or demise charter, it is of course the charterer. Q: Is the stipulation exempting ship owner from liability in case of negligence of its employees valid in the charter party agreement? A: It depends. If it is a time or voyage charter, that stipulation is contrary to public policy whereas in bareboat or demise charter, that stipulation is valid because the common carrier is converted to a mere private carrier. Q: What if the persons hired by the charterer are the very ship captain and crew members of the ship owner, can it still be qualified as a bareboat or demise charter? A: There’s a case in your outline and a bar exam question noh that it does not really matter. As long as in the particular voyage he has the right to hire crew members maybe crew members of the ship owner, but with respect to that particular voyage, they are considered as employees of the charterer.

April 18, 2018 So we are done with different types of charter-­­ parties agreement right? Next topic, based on your syllabus, Who are the persons involved in maritime commerce? 1.) Ship owner/ Common Carrier 2.) Ship Captain 3.) Ship Agent Now, in the context of our discussion in the code of commerce, ship owner means common carrier right? So when code of commerce refers to ship owner it basically refers to common carrier. So then we have recent jurisprudence as you know, starting Cebu Salvage Corporation v. CA, then Torres-­­ Madrid Brokerage Inc. v. Feb Mitsui Marine (2016), that the common carrier need not be the owner of the ship right? Need not be the owner of the vessel, need not be the owner of vehicle that will consummate the contract of carriage. In the case of Cebu Salvage v. CA, the common carrier is different from the ship owner right? The Supreme Court said that the common carrier maybe considered as such even though he does not own the vessel that will consummate the contract of carriage. As long as that it presents to the public that is engaged in transportation business right? In 2016, we have a case Torres-­­ Madrid Brokerage v. Feb Mitsui. In that case, the issue is whether or not a custom broker maybe considered as a common carrier

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even if it does not own the vehicle that carried out the contract of carriage right? So in that case, the custom broker hired a trucking company. Because it does not own even a single vehicle. And yet the SC said that the custom broker, by the nature of its business, and because transportation is part of its activity, is considered as a common carrier. We know this already right? We know that in previous SC decisions, the SC made it very consistent that a custom broker is a common carrier even if the principal activity consists of facilitating the release of shipment from the custom. It pays customs duties, signs declaration forms, and performs all acts necessary to the release the shipment from the customs. But why is it considered as a common carrier? The SC said that transportation is part of its activity. It is integral part of its activity. Once the goods are taken out from the customs, then it will be delivered to the consignee right? So you cannot detach the transportation aspect with duties of the custom broker. That’s why it is considered as a common carrier. Now, in 2016, the SC said that the custom broker is a common carrier even if it does not own the vehicle that will consummate the contract of carriage. Therefore this recent jurisprudence now modifies to certain extent the ship owner. So ship owner is not necessarily the common carrier right? So it maybe different parties. Q: Now, in the case of Torres-­­ Madrid Brokerage Inc. v. Feb Mitsui Marine, Is the liability of the custom broker and the trucking company also a common carrier, considered joint and several? Is it? In Loadmasters v. Glodel, what we learned is that if the customs broker hired a trucking company, that trucking company is a private carrier or a common carrier depending on the nature or relationship with the customs broker right? If it is exclusive to the customs broker, it is a private carrier. But if it renders under certain services to the public or at least represents to the public that it is engaged in transportation of business, then the trucking company by itself is a common carrier independently of the customs broker. Is their liability joint and several? In previous cases, they are sued right? They are sued, all of them by the consignee or insurance company after payment to the consignee his rights is subrogated to the consignee’s right , and sues everybody right? That’s what we learned in our previous cases. But in this case of Mitsui, is the liability joint and several? A: SC said that it’s not. What is joint and several? The liability of the tortfeasor and the common carrier right? But not two common carriers. They are separate and distinct from each other. You sue all of them, and then the court will determine under whose custody the goods were damaged or lost. But they are not joint and several. So since we are talking about code of commerce, the ship owner means the common carrier. But we are clear, that it is now modified by recent cases that not necessarily, since ship owner maybe different from the common carrier. Then we have the ship captain.

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Q: When is the ship owner bound by the acts or contracts entered into by the ship captain? What are the basic responsibilities of the ship captain? What does the ship captain do? A: Basically it represents the common carrier right? It has the duty of vigilance over the goods. The duty to insure the safety of the passengers until they reach the destination right? Q: Now, when does the obligation of the ship captain starts, when does it end in so far as vigilance over the goods is concerned? In the code of commerce, it starts when the goods are loaded on board the vessel. And then ends when the goods are off loaded from the vessel. But is that the obligation of the ship captain that represents the common carrier? A: SC said that not anymore right? It is modified by the civil code provisions. It ends when the goods are received actually or constructively by the consignee. So we do not apply anymore code of commerce in so far as the period of vigilance is concerned. Q: What about contracts entered into by the ship captain? When does it be binding to the ship owner? A: If the contracts are authorized, then they are binding obviously on the ship owner. If the ship owner obtains a loan with the consent of the ship owner or on behalf of the ship owner, the ship owner must pay the loan. Q: Now, what about unauthorized contracts? What is the only kind of contract unauthorized that has been recognized by the ship owner? A: Contracts for repairs. Contracts for repairs inured to the benefit of the vessel itself. But other than that, an unauthorized contract is not binding on the ship owner. Ship Agent Ship agent as we said, takes care on the provision of the vessel and represents it on whatever local port it maybe found. Q: Why is there a need for a ship agent? A: Because a vessel may undertake various voyages right? Different locations. It doesn’t make sense for the foreign vessel to be doing business in every port of destination. So who represents the foreign carrier in the local port? It has to be somebody right? I mean who can take care of all the requirements of the arrival, stay, and departure of the vessel? And that’s the duty of the ship agent. It provides for the provisioning and represents the foreign vessel in the local port where it maybe found. Q: What are the liabilities of the ship agent? A: The liabilities are joint and several with the ship owner right? So there are 2 cases in your outline, SC said that it’s not correct for the ship agent to say it is not liable in case of loss or damage of goods on account of negligence of the ship captain right? That’s not a defense. Because if the goods are lost or damaged, it is liable solidarily with the ship owner. Q: What if there is no nomenclature or name as a ship agent? No nomenclature but it performs the duties of the ship agent? It facilitates the release of the cargoes, settles

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claims, and provides for the provisioning of the vessel and represents to the local port where it maybe found. A: If the functions pertain to a ship agent, then the liability is that a ship agent regardless of the lack of nomenclature. Q: Is it correct to say that the ship agent is not liable as long as it acts within his scope of authority? Does the concept of “agency” in civil law apply to code of commerce? A: We said last time that it does not right? The moment the goods are damaged or lost, the moment there is injury or death to passenger, the liability of the ship agent and ship owner is joint and several. Under Republic Act 9515 however, there is a difference between a general agent and a tramp agent. What is a tramp agent? A tramp agent does not have the same liability as the general agent. General agent has the liability of the ship agent. Pero yung tramp agent, it is not liable in case there is loss or damage of the goods. It only attend the requirements of the vessel, docking, staying, and departing from the board. So we have Republic Act 9515 that took effect 2009, that modified to certain extent provisions of code of commerce on liability of ship agent. Q: How do we distinguish from the Arrastre Operator naman from the ship agent? Is the arrastre operator by the way a person? It is not. It is an entity. An entity that has a contract between Philippine Port of Authority that offloads the goods from the vessel, brings them to the warehouse, and then will be received by the consignee by himself or through a customs broker. Is the arrastre operator liable jointly and severally with the common carrier? A: We encountered one case right? Westwind Shipping v. CA where the SC said that when the goods were damaged when offloaded from the vessel, the liability of the arrastre operator and the common carrier is joint and several. The liability is based on contract. The liability of operator is that contract of carriage. Q: What about stevedore? A: Yung mga stevedore parehas sa mga arrastre operator. Stevedore, yung mga tao noh? Who manually loads the goods from the vessel and offloads the same from the vessel. Q: Moving on, what do you understand by “doctrine of limited liability”? This is a favorite topic in the bar as you all know. A: It means that the interest of the ship owner and ship agent is co-­­ extensive with his interest in the vessel. The vessel stands as a guaranty from all maritime claims with the ship owner and the ship agent. And if the vessel is lost, actually or constructively, then all maritime claims are extinguished. So the lost of the vessel goes with it extinguishment from maritime claims against the ship owner and likewise the ship agent. So the moment the vessel is gone, meaning lost, so is then the liability of the ship owner or the ship agent. It is encapsulated by the sentence “no vessel, no liability”. Q: What is the rationale of this maritime law? 39

A: To offset the hazards that goes with the maritime commerce. Keep in mind that the code of commerce was drafted and enacted long long long time ago. When maritime commerce encounters advanced technology, improvement of maritime commerce noh, the hazard is not often as it used to be. But still the rationale of the limited liability rule is to offset the hazards of the maritime commerce and to encourage ship building. Can you imagine, kung walang limited liability rule. Nawala na nga yung vessel mo, all of your investments gone, and yet you are still liable for the lost of the cargoes or injuries or death to the passengers right? Q: Now, having said that, can the charterer invoke this rule against the ship owner? In the case of Dela Torre v. CA (2011), The charterer, the one who leased the vessel from the ship owner, nag capsize yung vessel. So can you say that because the vessel is lost, there is no liability to the ship owner? Or the lost of the vessel extinguishes the liability of the ship owner? A: SC said no. Q: Why? What is the rationale? That this rule cannot be invoke by the charterer against the ship owner even if its is a bareboat or a demis charter? A: Because the purpose of this rule is to encourage ship building. While the charterer is the owner pro hac vice, meaning owner with respect to that particular navigation, it does not have domino over the vessel. Dominion still rests with the ship owner. So it is only the ship owner, and the ship agent likewise who can invoke this rule. The SC likewise likens this rule to the obligation of the stockholder right? What is the liability of the stockholder who is not the director, officer, or agent of the corporation? Remember that it is only limited to the shares of stock. So same with the ship owner. Limited to his interest with the vessel. Q: Also, the SC likens this with the liability of debtor undergoing liquidation proceeding. It is Aboitiz Shipping v. General Accident Fire and Life Assurance. So Aboitiz Shipping entered various contracts with cargo owners. So the vessel, capsized. The vessel was lost and so are the cargoes loaded in the vessel. So the owners of the cargoes filed a claim with respect to their insurance companies. At the same time, Aboitiz shipping obtained insurance proceeds from insurer. So there are various claimants against Aboitiz and interest of Aboitiz replaced by the insurance proceeds. So the question is, can the insurance companies that paid the cargo owners ahead of the others recover their share for the insurance proceeds arising from the lost of the vessel? A: SC said not yet. We have to collate first all the various claims against the vessel. Let all the claims of the cargo owners or insurance companies that paid cargo owners be collated, be determined. So they have to wait, all of them, before they can file their claim against the ship owner, or in this case the proceeds of the insurance that replaced the lost vessel. Q: This rule as you know is not exclusive. So what are the cases or instances where this rule will not apply? Our keyword is CRINO-­­ nAMC

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C-­­ Crew members; The heirs can file a claim and the lost of the vessel will not bar to the claims made by the heirs of crew members. Or crew members themselves who got injured can file claim. There’s a recent case in your outline, 2016, likewise excluded are death benefit claims under POEA standard employment contract. So those payable to seafarers under this POEA standard employment contract. This is akin under the labor code. So bottomline, claims of crew members imposed by the labor code or similar laws nothing to do with code of commerce can be collected from ship owner/ ship agent despite the loss of the vessel. This is imposed by the statute independently of the code of commerce. That’s why they can be recovered from ship owner/ ship agent despite of the loss of the vessel. R-­­ Repairs contracted before the vessel is lost; I-­­ Insurance proceeds The interest of the ship owner is to the extent of the vessel or the replacement of vessel. The insurance takes the place of the vessel. So the proceeds will be the one to answer for the claims against the ship owner. NO-­­ Negligence of the Owner; Keep this in mind. If there is negligence on the part of the ship captain, resulting to death or injury to the passengers, and then the vessel is lost, the ship owner is not liable. That’s the essence of the limited liability rule. Q: What about the negligence of the ship captain causing loss or damage to the goods? Let’s say clearly, unmistakably, undeniably, the ship captain was negligent. He was drunk. As a consequence the vessel collided with another vessel, and the vessel was lost. So with the cargoes. So with the passengers boarded on the vessel. Is the ship owner liable? A: Not liable. That’s the concept/ rationale of this limited liability rule. Q: What happens to our discussion that if there is death or injury to the passengers, or loss or damage to the goods, what happens to this principle? A: Well we replaced that with limited liability rule in case of maritime commerce where the vessel was lost. However, if there is negligence on the part of the ship owner, either directly, actually, or contributory, this limited liability rule cannot be invoked. Negligence of the ship owner bars the invocation of the application of this limited liability rule. Asked in the bar: The ship captain ignored weather forecasts. Despite warning by pag-­­ asa that “typhoon will hit this path or this part of the sea” but the ship captain ignored it and did not change the course of the voyage, as a consequence it met with 41

typhoon the vessel was capsized, and the cargoes were lost. Is the ship owner liable? Can he invoke this limited liability rule? A: He is no longer liable because the negligence on his part but on the part of the ship captain by ignoring the forecasts. Q: What about cases were the SC that there is negligence on the part of the ship owner and barring this invocation of limited liability rule? There are many. A: 1.) Vessel was reconfigured to accommodate more passengers making the vessel unseaworthy. 2.) Roof deck cargo-­­ This is the case of Philippine American General Insurance v. CA, bottled pepsi cola were loaded on the roof deck making it unseaworthy. The roof deck is supposed to be open space. 3.) No life vests 4.) Ship Captain not trained or his licensed has already expired 5.) Vessel not properly equipped, as there is no radar to monitor the weather 6.) Undeclared cargo-­­ It is overweight because there are cargoes requiring some measure, as not manifested. 7.) 4 hours delay despite of clearance to set sail All these cases made the vessel unseaworthy, and because there is negligence on the ship owner, the limited liability rule cannot be invoke. Anything that affects the seaworthiness of the vessel because of the act or omission of the ship owner bars the limited liability rule. Q: When do you say that it is not seaworthy? A: It is not seaworthy if it is not properly manned, there are no sufficient crew members or there is lack of competent crew members, and if it is not properly equipped. So not properly manned and not properly equipped. n-­­ Not: A-­­ Abandoned In case of constructive loss as you all know, the interest of the ship owner must be relinquished/ abandoned in favor of the insurance company in able to claim or to consider it as a total loss. M-­­ Not engaged in Maritime Commerce If the vessel is not engaged in maritime commerce, then this rule does not hold application. What you apply instead is the civil code provisions.

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Q: Have you tried cruising in Manila bay for 100 pesos? I have not tried noh but I was told that it was worth 100 pesos. You can cruise of the manila bay with the view of the sunset. So what if that vessel sinks? Will this rule apply? A: No, because it is not engaged in maritime commerce C-­­ Not a common carrier In these cases, the lost of the vessel will not extinguish the obligations of the ship owner/ agent for these obligations. Next in your outline, accidents and damages in maritime commerce. Q: What are averages? A: Simply expenses on damages incurred by the vessel and/or cargo in the course of voyage. If it is extra-­­ ordinary-­­ general averages If it ordinary-­­ simple/ particular averages Q: How do you distinguish general from simple? A: General Simple/ Particular 1.) Extra-­­ ordinary Ordinary 2.) Deliberately caused by the ship Not deliberately caused by the ship owner owner 3.) Inured to the benefit of the vessel or Does not inure to the benefit of cargo passenger thereof or some of the cargoes owners and/or vessel Q: What are the requisites of general average? A: Our keyword is Cesarean Section San Fernando ward (CSSF) a.) Common danger b.) Sacrifice of the vessel or portion thereof were deliberately sacrifice c.) Cargo and/or vessel successfully saved d.) General average caused after compliance of formalities prescribed by the code of commerce Q: What are the formalities prescribed by the code of commerce? Meaning before the ship owner/ ship captain be charged with the vessel? A: ADR-­­ EDR a.) Assembly of ship captain, owner cargo is present, and the officers of the vessels b.) Deliberation c.) Resolution d.) Entry in the minutes of book

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e.) Delivery of the minutes in the nearest port of authority f.) Ratification under oath by the captain Q: The most common example used in so many bar exam questions is jettisoning of the cargo to lighten the vessel, to save it from sinking. So let’s say the vessel encountered a typhoon. So waters slid into the vessel, it affected its weight. So to lighten the vessel and save the vessel from sinking, some part of cargo should be jettisoned. And let’s say that because of jettisoning of the cargoes, the vessel was saved and all other cargoes stored in the vessel. So obviously there was damage caused to the cargoes that were jettisoned. So what are the rights of the owners of the jettisoned cargoes? A: The right of general averages. The right of contribution from the vessel and the owner of the cargoes benefited. Q: What about the so-­­ called “Jason clause”? A: Jason clause relates to general averages. So if the vessel sinks, but as a consequence, there was decision to let the vessel sink, but cargoes were saved, so is the owner of the vessel entitled to general average? Can he demand on the owners of the cargoes benefited by the deliberate sacrifice that caused the vessel to sink? That’s what Jason’s clause is all about. So the ship owner is entitled to general average from the owners of the cargo benefited even if the vessel was capsized or lost because of fault in navigation as long as there is effort to make the vessel seaworthy. So effort to make the vessel seaworthy. So that’s the Jason’s clause. There are many examples. Let’s say, not jettisoning but there is damage suffered by the effects loaded as cargo by opening small hole of the vessel to drain her. So binutasan ng konti noh yung vessel to drain the excess water. As a consequence, meron naapektuhan na cargoes. So they were not jettisoned, but there was damage as a result of draining the vessel. So the owners of the cargoes damaged as a result of their act or decision made by the ship captain can claim for their exact contribution from the vessel and the owners of the cargoes. Anyway, the bottom line is, as long as those 4 requisites are present, the owner thereof can claim for exact general average contribution from the vessel or owners of the cargo benefited by the sacrifice made on the vessel and/ or the cargo. Q: This was asked in the bar, let’s say handed cargoes were saved as a result on the sacrifice made on other cargoes. But the bill of lading only reflects 50 out of 100. So… Wait I’m sorry. 100 cargoes were jettisoned to save the vessel. But the bill of lading only dictates 50 out of 100. So how much can be claimed as general average contribution by the owner of the cargoes that were jettisoned? A: Only those goods declared in the bill of lading are entitled to general average contribution. Otherwise, you’ll encourage smuggling. Next topic in your outline, Collisions.

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Collisions, as you know simply means colliding of two vessels whether moving or stationary. If one is moving, and the other one is stationary, it is called allision. In the context of code of commerce, when one is moving or both are moving, they are governed by the same rules on collision of vessel. Q: So what are the rules regarding collision? A: 1.) The vessel at fault shall indemnify damages that sustained losses incurred. In cases of negligence on both part of the two vessels, each one shall suffer for their own damage but the owners of the vessel is liable solidarily to the owners of the cargoes wherever there may be loaded. 2.) In case of situation where you are not sure on who is negligent or at fault, so you apply doctrine of inscrutable fault. There is a presumption that they are both at fault. Let’s discuss one by one. 1.) Q: Vessel X and Vessel Y. So they collided. Clearly at fault was the ship captain of the vessel X. He was drunk. So all the cargoes on board of vessel X and vessel Y were lost/ destroyed. So lost on those goods loaded in vessel X and destroyed on the goods loaded in vessel Y. Who is liable? A: Obviously, Vessel X. Q: But is the ship owner liable in this case if the vessel is lost? A: No, because you have limited liability rule. 2.) Q: What if Vessel X was at fault because of the negligence of the ship captain and likewise negligence on the part of ship owner. So no fault on the part of Vessel Y. What happens? A: Vessel X is liable for the damage caused on its own cargoes. Q: What about the cargoes loaded in Vessel Y? Can the owners of the cargoes file a claim against Vessel X even if there is no privity of contract between owner of cargoes on board vessel Y with the owner of the (??? 42:41.13) A: Yes, because that’s what the law says. So the vessel at fault shall be liable for the cargoes/ goods that were damaged as a result of the collision brought about by his fault. 3.) Q: So 2 vessels collided. So based on the investigation, both captains were drunk. So all the cargoes on board the vessel were destroyed. And then passengers died likewise. Are the ship owners liable? 45

A: Not liable because we did not mention negligence on the part of the ship owner but negligence on the part of the ship captain. And what are we saying all along? If the negligence is on the part of the ship captain, if the vessel sinks, then there is no liability on the part of the ship owner/ ship agent. 4.) Q: Both vessels collided. There was no loss to the vessel. Nagcollide pero hindi naman nagsink. Who is liable? Can you apply this limited liability rule? A: You cannot because it does not presupposes that the vessel sank/ lost. So if there is no loss to the vessel, and both are at fault, so each one of them shall bear damage for its own cargoes but liable solidarily to the owners of the cargoes wherever they may be loaded. Q: Can the owners of the cargoes loaded on board of vessel Y claim against ship owner Vessel X despite lack of contract between or among them. A: Yes, because that’s what the law provides. That’s what the code of commerce provides. 5.) Q: What about a situation where one vessel could have avoided the collision but likewise at fault? That’s the doctrine of last clear chance. A: We all know that this rule does not apply in collision of vessels. What you apply instead is the code of commerce. So same thing, under the doctrine of inscrutable fault, meaning it is not clear on who is at fault, then you presume that both owners or both vessels are liable. So that are the scenarios that you have to consider in regard of collision of vessels. The first is, whose negligence is it? Ship captain only? Or ship captain and ship owner? Second, was there loss of vessel? If there was no loss, you forget about this limited liability rule. And third situation or factor that you need to consider, the loss of the vessel. So let’s say ship captain is negligent but there was no loss of the vessel. Or Ship captain is negligent but there was loss of the vessel. So there are different rules for these different scenarios. So to recapitulate, scenario number 1, 2 vessels collided. Ship captain of one vessel is only at fault, the vessel did not sink, then the ship owner is liable for the damage caused on the cargoes loaded on vessel at fault as well as the cargoes loaded on board on the other vessel. If the vessel sinks, then the ship captain is not liable to all owners of the cargoes. Third scenario, so the vessel sinks. If there is even a slight negligence on the part of the ship owner, it bars from the invocation of limited liability rule.

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Next topic before we take our short break, maritime protes. Q: What is maritime protest? Why is it necessary? A: Maritime protest is basically a written statement under oath that must be lodged before the competent authority by the captain or master of the vessel that figured in a collision or ship wreck within 24 hours upon arrival at the nearest port. Failure to file maritime protest bars recovery for loss or damage no matter how meritorious the claim maybe. Q: Who files the protest? A: Under the code of commerce supposedly the captain/ master of the vessel. But there are bar questions that made reference to a protest on the part of the passenger or part of the cargo owner. So are the answers correct? In code of commerce, It is only the master of the vessel or the owner or the ship captain who can file the protest. The passengers are not in the position to file a protest. What it meant is if they are present, they could have participated in the discussion with the ship captain in carrying out, let’s say, in doing general average noh. But, they’re not the ones who can make the protest. So the lack on their part will not bar recovery for damages. So the lack of protest from the ship captain or master of the vessel, that will bar recovery of damages. Yet 2 bar exam questions, that refer to protest to be made by the passengers. So protest is necessary on the part of the passengers if the law says it is done by the owner or the ship captain, or master of the vessel? I think the answers are wrong. It can only be done by persons authorized to make the protest under the code of commerce. Therefore, the lack of the protest on the part of passengers will not bar recovery for damages. Article 835. Now let’s move to COGSA. So COGSA covers carriage of goods by sea, to and from the Philippine ports. Whether originating from here, Philippine port or destination here. COGSA and civil code shall mean only however from foreign port to local port. It shall not cover local port to foreign port because the laws that will govern there is the country of destination of the foreign port. So we are clear. While COGSA says to and from the Philippine port, now civil code says that the law of country of destination will apply in case of local port to foreign port. So the context of our discussion for COGSA, it should mean carriage of goods by sea FROM foreign port to local port. So COGSA covers loss or damage to the goods arising from the contract of carriage. Now will COGSA apply in case of transshipment? So it will not apply if it is from one local port to foreign port right? What if, if it is from local port, and then the local port transshipped, meaning the goods shall be offloaded from the original vessel and 47

transported to another vessel, let’s say, a smaller vessel, and then final destination is local port. So let’s say: USA-­­ CEBU (transshipped)-­­ Manila (final destination) Q: Will it be governed by COGSA? A: The SC said YES as long as one, single transaction. Q: Will the COGSA apply if the transshipped vessel is not owned by the common carrier? A: It does not matter on who owns right? As long as one transaction. Q: Now last time we said that loss in the context of COGSA means disappearance, gone out of commerce, and does not include value of the goods. We have the case of Mitsui v. CA. So the goods arrived off season because there was a delay in transshipment, let’s say supposed to arrive at this month but arrived month before or after on the expected date of arrival. So the goods were no longer valuable, if they were delivered off season, only ½ of valuable of the goods was paid. What was the period to file a suit against the ship owner? Will it be 1 year or 10 years? A: SC said that loss under the context of COGSA means actual loss, meaning disappearance, gone out of commerce. So in case of loss in the value of the goods, it is not COGS that will apply. COGSA is important because in case of loss or damage to the goods, you only have 1 year to file the suit against the ship owner or ship agent. And that’s the only significant part of the COGSA. The prescriptive period to file the suit against the ship owner and the ship agent. But that 1 year will not apply in case of loss in value of the goods, and not loss of the goods. So two types of casualty, loss or damage. In case of loss or damage, there are two things to be done by the consignee: 1. Notice of claim with the ship owner or ship agent. 2. And such notice of claim must be done immediately of the loss or damage is apparent, and 3 days from delivery if not apparent. But lack of notice, as we said so many times will not prevent the accrual of the cause of action as long as the suit is filed within 1 year from the date the goods are delivered or should have been delivered. Q: Now, we also learned that the 1 year period is not tolled by the making of extra judicial demands even though the civil code demands for toll the running of the prescriptive period. Why is that so? A: This is a SC case right? Because the effect of demand on prescriptive period only applies in civil law. And civil law is general law, COGSA is a special law. Special law prevails with respect to prescriptive period. Q: Now what interrupts the running of the 1 year period? A:

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1.) If a suit is filed within 1 year but was dismissed on technicality maybe lack or improper venue; Q: The suit was dismissed more than 1 year from date the goods are delivered. So suit was filed let’s say in 6th month from date of delivery of goods. The court dismissed for improper venue and let’s say that the court decided more than 1 year from the time the goods are delivered. What is the prescriptive period to file a suit against the ship owner or the ship agent? So ulitin natin. Halimbawa after 6 months finile yung damage suit against the common carrier. Nadismiss on the 9th month. How much period does the consignee have to file a suit against the ship owner or ship agent? The remaining 3 months or fresh 1 year period? A: SC said fresh 1 year, not the balance of the 1 year period. Q: Is the 1 year period to file a suit against the carrier or agent, also applicable to insurance company? A: Just to clarify, the 1 year period to file a suit against the ship owner or agent also applies to the insurance company in the sense that the insurance company after payment was made to the consignee of the goods also has 1 year to file a suit against ship owner or ship agent. The insurance company is subject to same rules in so far as suit against ship owner or ship agent is concerned. Q: Remember our discussion here? The consignee files a claim with insurance company. And then insurance company paid 6 months from delivery of goods. Value of claim, 6 months, nabayaran, 7th month, 5 months ang natitira. Within what period can the insurance company filed a suit against ship owner? Q: What about the liability of insurance company? The case of Meyer. A: Sabi ng SC, the 1 year period does apply to the insurance company. So the context is that 1 year period does (?) apply to enforce the liability of the insurance company. But it applied to insurance company if it will file a suit against the ship owner or ship agent Q: What is the prescriptive period to file against the insurance company? A: If it’s based on written contract, 10 years. But as we said last time, parties can stipulate to reduce the period, shorten the period to file a suit against the insurance company, as long as not less than 1 year from the accrual of the cause of action. Now, that’s why we go to say 1 year. Because 1 year is by stipulation of parties spelled out or specified in the contract of insurance. 2.) In case the parties agree that demand tolls the running of the 1 year.

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Now, there’s a case in your outline, New World International v. NYK Fil-­­ Japan Shipping (2011), this yet has to be asked in the bar. Remember this case? So the consignee, because of the damage of the goods did not file a suit against common carrier. Instead filed a claim against the insurance company and hoping that the insurance company will process and settle the claim. But the insurance company delayed the process of the claim. As a consequence, nag lapse yung 1 year. We said in that case, if you remember, that ship owner and ship agent are relieved from liability because it also prescribe in 1 year. So insurance company must pay on the value of goods and damages because it caused delay in the process of the claim that precluded the suit against the ship owner or ship agent. Q: This was also asked in the bar, what period will apply in case of misdelivery of goods? Not delivered to the consignee but to somebody else. Or let’s say that the claimant, is not the consignee. Delivery as a result of fake or falsified custom permit. What period will apply? 1 yr? 6 yrs? 10 yrs? A: Obviously not 1 year. Because misdelivery takes out from COGSA. 6 years, based on tort, 10 years, if based on written contract. I think we also discussed this case, Wallem v. S.R. Farms the suit against must be filed against the ship owner and the ship agent. The 1 year period applies to both ship owner and ship agent. So if the complaint is filed against the ship owner within 1 year, and subsequently amended to implead for the first time the ship agent, SC said that the suit is prescribed in so far as the ship agent is concerned. Amendment to the complaint, to bring about or implead the ship agent does not retroact from the date of filing of the original complaint. We also discusses the liability or the prescriptive period against the arrastre operator right? It’s not 1 year. The contract of arrastre operator with P.P.A. is not maritime in nature. The obligation of the arrastre operator is akin to warehouseman. The period is not 1 year but 4 years based on the contract with P.P.A. AIR TRANSPORTATION Q: What laws govern persons in case air transportation business? A: Still the provision on civil code on common carrier on the premise that the place of departure and the place of destination are located within the Philippines. Or located within the Philippine if there is no stop over in another country signatory or adherent to the warsaw convention. So the moment that the Philippines is just one of the itineraries, either the place of depature and/or destination, then it is the warsaw convention as supplemented by the montreal convention of 1999 that will apply. Q: So what are the obligations of an air carrier under contract of air transportation? A: Same as the common carrier. The vigilance over the goods, the preservation of the goods using extra-­­ ordinary diligence and to insure the safety of the passengers 50

using utmost diligence of a very cautious person with due regard to all circumstances. Air carrier is a common carrier. So the same obligations are to be exercised by the air carrier. Before these recent cases, the obligations of the common carrier are limited to insuring the preservation of the goods and safety of passengers using extra-­­ ordinary diligence, but SC in recent cases said that obligation to exercise extra-­­ ordinary diligence extends to issuance of ticket. Remember the case of Cebu Air v. Manay? The SC said that the travel agent representing airline company must afford the passenger the opportunity to examine each and every page of ticket. And the obligation is deemed fulfilled as long as that opportunity is given to the passenger. Q: When is the contract of air transportation perfected? A: From the moment the ticket is issued by the air company or travel agent, and the passenger is confirmed from a particular flight and pays on type of the accommodation. So if he was not able to take flight based on that type of accommodation or what is specified on the contract, then there is breach of contract. Q: When does the obligation to exercise extra-­­ ordinary diligence commence? When does it end? What if habang naghihintay ng flight, naaksidente na siya? Is the common carrier liable? Or let’s say the time he left the house going to the airport, nabangga yung sasakyan niya. Can you say that the common carrier is liable since the contract is already perfected? A: It should mean from the time that the passenger is placed in the vicinity of the airline company. Nasa lounge, within the vicinity of airline company. Then there is breach on part of the carrier in case of injury or death to the passengers. Or nagcheck in ng luggage, tapos nawala. Air carrier is already liable when the goods were placed in possession of airline company. Q: Moving on, what governs the relationship between the passengers, consignors, and air carrier? What define the rights and liabilities of the parties in air transportation? A: Provisions of the law, governing air transportation meaning common carrier, and the terms of contract of carriage. Let’s take a look on jurisprudence. Then we have this case, the passenger arrived late. The flight is scheduled in 3:15. Hindi pinagbigyan ng airline company. Airline company is not liable, because the ticket says “that you have to be here 2 hours before departure”. There’s this case, PanAm v. IAC, the airline company accepted last minute passenger. But did not have enough time to load the bag/ luggage. So airline company was liable for accepting the passenger and not being able to load the luggage. That’s why in this case hindi na pinapayagan ng mga airline company, kasi there might not have been enough time to load the luggage. 51

WARSAW CONVENTION Q: What are the important terms of the Montreal Convention that supplanted the warsaw convention? A: 1. So the warsaw convention covers injury or death to passengers in case of embarking or disembarking from carrier. Or loss or damage to the luggage. 2. We have 2 year period to file a suit against air carrier under warsaw convention. 3. Limiting the liability. It is supposed to be $20 per kilo. Under the Montreal convention, it is no longer by kilo but by passenger. 1,113 Special Drawing Right (SDR). So in case of death or injury to the passengers, you can recover 100,000 SDR. SDR is a mixed of currency values imposed by the IMF. In dollars, it translates to $150k. So 100k SDR equivalent to $150k. You can recover more than that amount if you were able to prove negligence on the part of air carrier. But with or without proving negligence, you can recover up to 100k SDR. Q: What about lost luggage? A: 1,113 SDR it’s about $1,600 per passenger, not per unit. 4. 21 days of delay is equivalent to loss. You can recover 1,113 SDR per passenger. 5. The so-­­ called 4 jurisdictional rules. Under the warsaw convention, parties are bound by the so-­­ called 4 jurisdictional rules in case of loss or damage to the goods, or death or injury to the passengers from embarking or disembarking from the carrier, you have 2 years to file a suit against the carrier. But where can you file the suit? Under 4 jurisdictional rules: a.) Court where the carrier is domiciled; b.) Court where the carrier has its principal place of business; c.) Court where the carrier has an establishment by which the contract has been made; d.) Court of the place of destination. In the case of Lhuiller v. British Airways, Lhuiller purchased a ticket in London. So she boarded British Airways, the principal place of business is London, UK. And then she was going to Rome, Italy. So she requested the flight attendant “Can you please help me or assist me in loading my luggage on the bin?” And she was receiving unkind treatment. So she complained to the manager. And instead of receiving sympathy from manager, she was even scolded on the protocols. When she came back to the Philippines, she filed a suit for damages against British Airways. SC dismissed for lack of jurisdiction. SC applied the so-­­ called 4 jurisdictional rules.

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Where is the place of business? UK. Where did she buy the ticket? UK. Where is she going? Italy. However, this is not anymore applicable under Montreal Convention. It allows the passengers or heirs (in case of death of passengers) to file a suit in the residence of the plaintiff. So place of residence is now allowed for venue in the suit filed against the air carrier. Other than those provisions, we still adhere to the warsaw convention. Q: So when is warsaw convention applicable? A: It is applicable to international air transportations of persons, baggage, or goods performed in aircraft gratuitously or for hire and if the place of departure and place of destination are located with different two high contracting parties. High contracting parties means countries signatories to warsaw convention. Or the place of departure and place of destination are located in one country but there is an agreed stopover in a country signatory to the warsaw convention. Q: What are the liabilities of air carrier under warsaw convention? A: 1.) Death or injury to passengers while on board, embarking or disembarking-­­ If the passenger was stabbed in the lounge, while waiting for his flight, it is not the warsaw convention that will apply but provision on civil code on common carrier. 2.) Loss, damage, or destruction of goods during the carriage SC was very clear is that what the warsaw convention covers or simple loss of the luggage without any improper conduct on the part of airline companies. If there is tortious act or misconduct on the part of airline crew or employees, then it is taken out on the operation of the warsaw convention. The only 1:35:57.38 is the case of Lhullier v. British Airways. Because when you think about it, it’s one for tort. She was embarrassed and given unkind treatment. But SC di not apply law of torts, but instead apply the warsaw convention. Except from 1:36:17.44 all other cases on warsaw convention., the moment there is tortious act or misconduct on the part of airline employees, automatic it is taken away from the operation of the warsaw convention. Again, we have only prescriptive period of 2 years to file a suit against air carrier. So 2 years from delivery of goods, meaning 2 years from the time the vessel arrived. Beyond that, you cannot anymore file a suit against the air carrier.

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What about this, lagpas na yung 2 years mo. Pwede bang sabihin mo “I will just file based on civil code provisions”? So SC said if it’s only under warsaw convention, you are barred by the warsaw convention. 1:37:19.12 Now of course, not all types of breach of contract are governed by the warsaw convention. So it only covers loss or damage of goods, injury or death of passengers, WITHOUT tortious act or misconduct on the part of the airline crew or employees. Q: What are the legal effects of warsaw convention on the liabilities of air carrier engaged in ??? (1:37:53.50) transportation? 1.) The first as we said is governed by the 2 year prescriptive period. So 2 years from the arrival of the air carrier. So the action will prescribed if not brought within 2 years from the arrival or should have arrived. 2.) The limit as to the liability of the air carrier. Under warsaw convention, it is supposed to be $20 per kilo right? Not anymore, it is 1,113 SDR in case of loss to the goods. Now for injury or death of the passengers, we said 100k SDR or $150k. There’s this case, British Airways v. CA, the limitation of liability is waived if not timely invoked. So it has to be timely invoked. Moreso, if there is a cross-­­ claim in the complaint. So you have to invoke the warsaw convention, otherwise it is deemed waived. Now, let’s take a look at cases where SC did not apply the warsaw convention: 1.) PanAm v. Lopez (? 1:39:17.86)-­­ 1st class to economy due to negligence of the airline employee. 2.) KLM v. CA-­­ Off loaded in inhumane manner despite confirmed reservation. 3.) Lufthansa case-­­ 1st class to economy despite assurance that it will be first class in the next leg of the carriage. 4.) Alitalia v. CA-­­ He arrived 9:15 am. Departure is 9:30. Ordinarily, air carrier is not liable. He did not arrive on time. In this case however, Alitalia was made liable. You know why? Because there’s a line. Sabi niya “there’s a line. Why can I not take the line?” So instead of escorting in the line, he was even scolded. Konyo on how the alitalians talked. SC said that because of the rude treatment she received from the airlone staff, Alitalia is liable. It’s not warsaw convention but local laws, because there is tortious act on the part of airline company’s employees. 5.) Zulueta v. Panam-­­ Abusive attitude, menacing and ugly stare, unfair attitude in asking that the bag be opened. So out of the warsaw convention. 6.) What about the famous case yung drinag diba, physically dragged out of the carrier. He is a Vietnamese doctor. So kinaladkad siya, so it is not the warsaw convention obviously.

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7.) Sabena v. CA-­­ Lost of baggage twice. So pag lost of baggage once, warsaw convetion. Pag lost of baggage twice, the SC said it’s out of the warsaw convention. 8.) Misplaced luggage and then failure to deliver on time. Remember this case? Professor Pablo? He was called to deliver a speech on monecular or nuclear something, hindi siya nakapag deliver dahil yung luggage niya were not delivered on time. So ginawa niya, he want back home. Pagdating niya ng Pilipinas, dumating yung luggage. So he cancelled his speech basically. Napahiya siya. The Philippines and UP were deprived of the honor on a very prestigious event. Sabi ng SC, pag mayroong “special kind of injury”, as in this case, he is a prominent professor, not able to lecture on time, therefore depriving the country and its university, honor and glory, it is taken out of the warsaw convention. So pag mayroong special kind of injury or tort, it’s taken outside the warsaw convention. Therefore, the 2 year period will not apply. Q: Is bumping off the same as delay? A: So pag delay, warsaw convention diba? Pag bumping off, your seat is given to somebody else. So pag bumped off, it’s no longer covered by the warsaw convention. Q: Now, this one is interesting. PAL v. CA. From San Francisco to Manila, mayroon siyang dinala na second hand microwave oven. The second hand, 30k lang cause ng microwave oven noh. So gusto niya magdeclare ng higher valuation. Sabi ng agent ng airline company, ng PAL employee, “No need. You don’t need to declare higher valuation.” Paguwi sa pilipinas, mayroong crack yung microwave oven. He wanted 40k. So 30k yung value, gusto niya 40k. Yung cause ng new microwave oven is 40k. Gusto niya 40k. Sabi ng PAL “eto lang limit ng liability mo on the term of your ticket based on warsaw convention”. But sabi niya “I want more but you deprived me the chance or the opportunity to declare higher valuation. I’m not bound by the provisions on the ticket limiting the liability of $20/kilo. Alright, what do you think? Will the warsaw convention apply? A: Sabi ng SC, “hindi. Because you deprived the chance or opportunity to declare higher valuation. So the $20/kilo will not apply in so far as the limitation on liability of carriage is concerned”. So 30k lang diba yung cause ng microwave oven. In this case, it took more than 7 years to decide. And then the fees they paid to the lawyers, more than 30k. Q: Are death or injury to passengers or loss, destruction, or damage to the goods the only causes of the liability of the air carrier? A: Not necessarily. We have seen our discussion of cases, because they can be held liable if there is tortious conduct on the part of the employees or other cases of breach of contract. We have seen new cases. Let’s take a look first on some old cases. Overbooking-­­ It’s a practice. Why do airline companies overbooked? Because based on their studies, mayroong last minute na hindi tumutuloy. Eh sayang naman yung mga seats. Eh paano lahat pag nagdatingan? That’s the time that they will enforce 55

the terms of the ticket. If they are not on time, I’m sorry. Or round trip ticket, business class, from Manila to Kalibo. So they will offer amenities or other forms of accommodation, so as to discourage them in filing a suit against the air carrier. Q: What are the damages which can be recovered or awarded? A: As you know, damages that the court may award against the common carrier shall be in accordance with provisions of civil code on damages. So we have: 1.) Basic indemnity-­­ how much is it? According to Alden, it’s still 50k. Alden of course is the head of our civil and labor department. According to him, no change, 50k is the basic indemnity. 2.) Damages for loss of earning capacity-­­ based on the formula: life expectancy x gross annual income less living expenses. So life expectancy, no change. The formula is same. 2/3 x 80 – age of decedent. Multiply that to gross annual income less living expenses. 3.) Moral damages in case of death of passenger-­­ die?

Q: Can the court award moral damages even if the passenger did not A: Only in cases of bad faith or fraud

4.) Atty’s fees 5.) Costs of suit April 19, 2018 Side Comments of Dean Divina in Cases: 1. Magellan Manufacturing Marketing v. CA-­­ On board bill of lading presupposes, 1 vessel, 1 carrier, all throughout from the time the goods are offloaded until in its final destination. The LC requires “on board bill of lading” but bill of lading indicated that there was transshipment. The shipper is bound by the terms of the bill of lading. 2. Unsworth Transport v. CA-­­ Under COGSA, there is a provision regarding limitation of liability on the part of the carrier unless the shipper declares higher valuation. 3. Designer Baskets v. Air Sea Transport-­­ The carrier can be discharged from its obligation despite non surrender of bill of lading. Acknowledgement receipt will suffice, so bill of lading will be dispensed with if it is lost for other cause. There was an indemnity agreement between the carrier and the buyer. So basically buyer agrees to indemnify the carrier and exclude from liability for the release of goods to him without the bill of lading.

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Q: So does that excuse then the carrier from any suit that will be filed by the seller? Or did the carrier take the risk in delivering the goods to the buyer despite knowledge of the seller, as maintained in the bill of lading, because buyer was not able to pay in full the purchase price? A: The carrier is discharged from his obligation as a common carrier, because of non-­­ delivery of goods because of indemnity agreement between and the buyer and the consignee and the common carrier. But it does not mean that the common carrier is absolved from the liability for the claim of damage. Or a suit for damage maybe filed by the seller. But at least for the buyer, he is discharged from the liability despite the non-­­ surrender of bill of lading (Parang naguluhan ako sa explanation. Anyway, please check recording 0:13:02.95 kung tama ba yung pagkakatranscribe ko word per word. Thanks) 4. Keng Hua Paper v. CA-­­ Q: What is the concept of demurrage? A: It is payment to the carrier for the delay of shipper/ consignee to get the delivery of the goods for a certain period of time. This situation is binding to the parties. The shipper and the consignee. Supposed there is violation of that stipulation, that justifies waiver of that provision in the bill of lading. 5. Lorenzo Shipping v. Chubb-­­ Q: Where did goods originated? A: Japan and then transshipped to Davao to US. [Transcriber’s note: I think it’s Manila-­­ Davao-­­ US]

Q: Had there been an agent authorized to conduct inspection at the port of transshipment, when does 24 hour period start? A: At that point. So it should be reckoned from date of transshipment if agent is authorized. In this case, there’s no agent that was appointed to conduct inspection, so it’s start upon delivery of the goods at the port of destination. Q: But have you ever thought about this, Code of Commerce only applies to local port. And if foreign port, under civil code, law of country of destination will apply. The final destination is USA. Why does the SC apply the code of commerce? It does not make sense right? Anyway, for bar exam purposes, if the shipment, so consignee has an agent to do an inspection, then 24 hour period to file notice of claim or damage will apply at that point not at the place of final destination. 6. Maersk Line v. CA-­­ 57

Q: How many months were obtained before delivery in this case? A: After 2 months and 7 days. So there 2 ways where the carrier maybe held liable in case of delay: 1.) If the Bill of lading or contract of carriage stipulates the date of delivery , and the goods were not delivered on that date/ time. 2.) There is no specified date on the bill of lading but there was a delay and unreasonable time. 7. Eastern Shipping Lines v. CA-­­ Q: If it not carriage of goods by foreign port to local port, is that stipulation reducing the period to file a case within 10 years to 60 days for the accrual of cause of action, valid? A: I think there’s a case but excluded in your recitation. But in that one case, the rare case, SC said that reducing the period to file a suit to 60 days from the accrual of cause of action for coastwise shipping is valid, but not under COGSA. 8. Oceaneering Contractors v. Nestor Barreto doung business as NNB Lighterage Q: What about the discussion of the liability of the owner of the barge, whether private carrier or common carrier? The vessel here was capsized right? The vessel sank. And so the materials loaded on board the vessel right? There was discussion whether or not there was negligence on the part of the charterer in loading the goods on board the vessel right? A: Because it is still a common carrier, in case of loss or damage to the goods presumption of fault applies. 9. Caltex v. Sulpicio Lines Q: What about discussion of seaworthiness of the vessel? A: Charterer has no obligation to insure the seaworthiness of the vessel. Q: What if it is a bareboat or demise charter? A: Then there is now obligation to insure the seaworthiness of the vessel. 10. Cebu Salvage v. Philippine Home Assurance Q: What is the typical consideration why the corporation in this case is common carrier despite the fact that it does not own the vessel that consummated the contract of carriage? What is the essence of the common carrier? A: For as long as it represents to the public that it is engaged in transportation. The public is not expected to inquire on the ownership of the vehicle that consummated 58

the contract of carriage as long as there is representation to the public that the person/ entity is engaged in transportation business and offers its services to the public. 11. Macondray V. Provident Insurance Corp. In this case, it is not the formal designation as a shipping agent that makes a ship agent one, but the performance of duties appropriate for ship agent in provisioning and representing the vessel. 12. Dela Torre v. CA Q: What is the rationale of this ‘limited liability rule’ and how is this significant to the contention of charterer that he can also invoke this rule against the ship owner? A: The rationale of this limited liability rule is to encourage maritime commerce and ship building which the charterer cannot invoke. 13. Phil Nippon Kyoei Corp. v. Rosalia T. Guidelosao Ship owner is liable for this POEA death benefits of the employees’ compensation act. 14. Philippine First Insurance Company v. Wallem Q: Is discussion limited to Sec. 3 of the Civil Code? A: COGSA says the obligation to carry ends when the goods are discharged from the vessel the Civil Code says from the time the goods were delivered to the consignee. Sec.2 and 3 of COGSA by the civil code should be modified in so far as liability of the carrier is concerned. 15. Belgian Overseas Chartering v, Philippine First Insurance Notice of claim is beyond the period provided by COGSA but the suit is filed within 1 year. 16. Wallem Philippines v. SR Farms The suit or action against the common carrier for loss or damage of goods under COGSA must be filed against the ship owner and ship agent within 1 year from the date the goods have been delivered or should have been delivered. So the amendment of the complaint that impleads the ship agent does not retroact from the date it filed the complaint against the ship owner. 17. New World International Development v. NYK-­­ FilJapan Shipping

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Q: Is the carrier liable or no longer liable because the insurer delayed the process of claim, and as a consequence prevented the consignee from filing the suit within 1 year from the date the goods are delivered? A: The action has prescribed against the carrier. So the lesson for the consignee is he should not wait for the insurance company to approve his claim. He has 1 year from the date the goods have been delivered to file a suit against ship owner/ ship agent, and he can invoke as excuse the delay on the part of the insurance company to process his claim. If that is filed within 1 year, carrier would be (??? 1:09:32) from liability, but insurance company should have to pay for the value of the goods because it was his fault, the inordinate delay that prevented the consignee from filing the suit. 18. Insurance Company of North America v. Asian Terminals Q: What is the prescriptive period to file a suit against the arrastre operator in case of loss or damage to the goods while in its possession or custody? A: Not 1 year. It depends on the terms and conditions of the contract between arrastre operator and the PPA. 19. Pioneer Insurance and Surety Corp. v. APL Co. Pte Ltd. It is the 1 year period and not the 9 month period that will prevail because the provision to limit liability (?) is contrary to law.

April 25, 2018 Let’s summarize the cases: 1.) Manay v. Cebu Air-­­ The obligation of common carrier is not limited to ensuring the safety of the passengers, and making sure that the goods are reached in the intended destination. It extends to the fulfillment of each and every term and condition of contract of carriage. If any of those terms are is not fulfilled, then there is presumption of fault on the part of the common carrier. In this case, remember that the SC said while common carrier has the obligation to exercise extra-­­ ordinary diligence with respect to its operations, the corresponding obligation on the part of passenger to exercise ordinary diligence is also necessary right? So not everything can be charged with or be faulted to the common carrier with respect to the issuance of the ticket. The passenger before purchase, must examine each and every page of the ticket. So if there’s a mistake on the part of the ticketing agent, or travel agent, or airline company as represented by the travel agent, then he must call the attention of the travel agent. He must examine each and every page of the

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ticket before making the purchase. Once it was purchased, and once it was issued, then it is bound by the terms and conditions of the contract of carriage. As you know on what happened on that case, they were there earlier than before their flight that they had in mind, so they thought it was 4:00 in the afternoon but the ticket says 9 something in the morning. And they did not arrived on time, the plane left without them so they sued the carrier but the carrier was absolved from liability. I think the ticket was with them for 37 days. So they had more sufficient time or opportunity to examine and rectify the errors in the ticket, but they failed. That’s why the carrier in this case was not liable. 2.) Sulpicio Lines v. Sesante-­­ Sesante was a lawyer, a passenger of the vessel owned by Sulpicio Lines. So he survived, and filed a case for damages against Sulpicio Lines and then while the case is pending, he died. So the first issue is whether or not his claim may continue despite his death. And the SC citing the rules, that action survives death of the party in case of recovery for damages based on personal injury arising from contract of carriage. So the case maybe continued despite his death. What was the defense of Sulpicio Lines? So they had clearance to set sail. The argument of Sesante was despite the storm, the vessel set sail. But the common carrier argued that despite the storm, they had clearance from government authority. Q: So is storm then considered as force majeure? A: SC said force majeure would have been a defense. Except that there was negligence in the maneuvering of the vessel. So it was in full speed, and there was no proper diligence exercised by the captain. When you maneuver, you are supposed to slow down right? You are not supposed to be on “full speed” which happened in this case. So force majeure could have been invoked as defense but there was negligence on the part of the common carrier. 3.) Ramos v. South China Airlines Q: What is the reason why South China Airlines was made to pay moral and exemplary damages? Did they act in bad faith? Where lies the bad faith on the part of South China Airlines? A: Offloading or bumping off the passenger despite having issued a ticket already. So they had already a boarding pass. They checked in already. Luggage were checked in. But despite that, they were told that they are waitlisted, and eventually bumped off. The plane left without them because they refused to pay additional fee. So exemplary damages to serve them a

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lesson and deter the commission of similar act or conduct on the part of airline company. 4.) Cathay Pacific v. Fuentebella-­­ This case reiterated the case of Air France v. Gillego. In this case, these are members of congress. They are supposed to attend a parliament in Australia. So Manila-­­ Hongkong-­­ Australia via Cathay Pacific. So initially, they purchased business class. But they decided to upgrade it to first class. It’s not clear if its from the government or from their own pocket since it was not mentioned in the SC decision (*class laughing*) but they decided to upgrade from business class to first class. And they were issued first class ticket right? But the boarding pass given to them, economy. Uhm, Manila to Hongkong, business class. Hongkong to Australia, economy. And for whatever reason, Congressman Fuentebella did not notice it. So he only noticed it when tried to access in the first class lounge. So as you know there is a lounge for the business class, first class noh. Now for ordinary passengers/ economy, there is a common lounge. So he was refused access noh because his ticket only indicated business class noh. And then economy pa sa Hongkong to Australia. So he want back and berated the airline crew. Alright, he filed an action for damages and the Court sustained his claim for damages. And of course he was awarded 500,000. So this is the lesson for us. The highest award given by the Court in so far as breach of contract of carriage for there was moral damage suffered by the passenger is 500,000. There’s a case we are representing now a multi-­­ millioner. An owner-­­ chairman of the bank. He was bumped off by Singapore Airlines. So our fees, our contingent, meaning the amount of our fees is contingent on how much it would be recovered. And he wants 100 million. And I said “the highest award so far is 500k. Fuenteballa in that case is the congressman and at the same time the speaker of the house. But that’s the challenge for us, for him to recover more than 500k. So we are thinking on how we can dramatize (I don’t want to say “embellish”. Embellish means parang fake diba) or convince the Court that this client deserves more than 500,000 pesos. So let’s see, let’s see. 5.) Bernales v. NorthWest Airlines-­­ This case is interesting. Bernales and other prominent personalities from Bicol were on their way to Honolulu, Hawaii. So stop over in Narita. Narita is in Tokyo noh. But they were not able to take the connecting flight of Narita to Honolulu because of typhoon that hit Japan. So they were stranded noh in the airport. And this happened to us. That’s why I can relate to this case. So we were stranded in New York. My entire family, but two of them stayed behind. So we went to New York and then Mexico. From New York to Mexico, we were stranded because of blizzard. Unusual cold temperature, freezing cold temperature, zero. So you can see the snow accumulating outside the airport. 62

So all the flights were cancelled. We had to decide whether or not stay in the lounge. We decided to go outside. You know with my wife and three boys. So initially my children were excited in the snow noh. You know the nearest three­­ star hotel (because we cannot go to the heart of the City it’s difficult to come back the following day), this indian hotel, I was charged 660 dollars a night. And I have to get 3 rooms kasi lima kami. The Ritz Carlton in New York is only 550 dollars. This indian took advantage of us. After our co-­­ stranded passengers were assured of the room, they were cursing the Indians “ you whatever whatever mother mother something something”. Very interesting noh kasi from Mexico we are going to San Francisco. If we would forego to let go of the trip, it would cost 500 dollars per passenger. That’s 2.5 million just to go to San Franciso. So it’s better for us to go to Mexico. Because Mexico to San Franciso were already paid. So our boarding flight is 7:00 in the morning and we were able to make it at 4pm. So we saw Mexico only overnight. The following day, we had to go back. So we missed one day, but we were able to pray at Guadalupe Church, able to pray for a topnotcher. :D :D :D

Going back to this case of Bernales, they were stranded with 1,500 passengers. They took a chance for another flight and of course they were wait-­­ listed, they were issued dummy boarding pass (So just in case that that carrier was able to take the flight and there was available seat). But there was no available seat. So despite that they were confirmed of a seat, the plane was not able to take off because of the curfew conditions imposed by the Narita Airport Authority. So no plane can leave beyond 1pm. So as a consequence, they had to take a flight the following day and make it to Honolulu the following day. So they sued NorthWest but SC said “WELL, FORCE MAJEURE”. Typhoon that hit japan is force majeure. Curfew conditions imposed by Narita Airport Authority is likewise force majeure. NorthWest is not liable noh. They even offered accommodation on passengers, there was no bad faith on their part, so in this case, The prayer for damages was dismissed. 6. Torres-­­ Madrid Brokerage v. FEB Mitsui-­­ Remember this case? It’s supposed to cover shipment of Sony products. The custom broker obtain delivery of the sony products noh out of the customs then it engaged the service of a trucking company because the custom broker had no any vehicle. Apat na truck, tatlo lang ang nakarating, one of them was found abandoned. So basically the goods inside that truck were stolen. So the insurance company paid the consignee. So the insurance company was subrogated to the rights of the consignee. Insurance company filed a case against the customs broker. Custom broker file a third-­­ party complaint against the trucking company but the Court found that the trucking company and the custom broker, joint and several liable. The first principle we learned is that the custom broker is a common carrier right? Because transportation is an integral part of its activity. It may not be a principal 63

activity, it maybe just an ancillary activity, but for as long as this transportation is part of its activity that it offers to the public for compensation, then it becomes a common carrier. So for the first time, SC said the custom broker is a common carrier even though if does not own a single vehicle that will undertake the transportation itself. You remember what we said in the case of Cebu Salvage right? In Cebu Salvage, it involves vessels. So the common carrier maybe considered as such even though he does not own a single vessel. It charters the vessel. The ship owner is different from common carrier right? Common carrier is considered as such despite the fact that he does not own the vessel. Now this time, it’s applied to land transportation right? So custom broker deemed a common carrier even though he does not own a single vehicle that will the consummate that part of his business of transporting the goods to the consignee. The second principle, robbery and theft. Robbery and theft, are they force majeure? THEY ARE NOT RIGHT unless of course if they acted with grave or irresistible threat or force. So according to SC, theft or robbery is not considered as force majeure or fortuitous event. Nevertheless, even though it’s not force majeure, the common carrier maybe relieved from liability if it establishes extra-­­ ordinary diligence. So in other words, SC say “theft should not have been invoked as a defense because theft or robbery per se is not force majeure. It could have been invoked extra-­­ ordinary diligence or a stipulation limiting the diligence to less than extra-­­ ordinary”. So in effect, SC say that if there is a stipulation reducing diligence to less than extra-­­ ordinary, then make it ordinary, then theft or robbery would have been a defense. But if there’s no stipulation, theft or robbery do not translate to force majeure. The only way it can negate liability is extra-­­ ordinary diligence. To repeat extra-­­ ordinary diligence or stipulation reducing diligence to less than ordinary. If that’s the case then theft or robbery could have been a defense. Q: Third principle, did the Court err in imposing solidary liability on the part of the custom broker and the trucking company when the suit was filed only against the custom broker? So the insurance company filed a case against the custom broker and the custom broker filed a third party complaint against the trucking company. So is there a basis now in imposing solidary liability on the part of the custom broker and trucking company? A: The SC said no. There can be this time joint and several. So Mitsui was subrogated to the rights of the consignee, it does not have a contract with the trucking company right? Its contract is with the custom broker. So who has the right of recourse against the trucking company? It is the customs broker which has the right of recourse against the trucking company for the latter’s breach of its contract with the custom broker. So the trucking company is supposed to deliver the goods to the consignee. One truck was lost. So there was a breach of contract by the trucking company with the custom broker but not the insurance company.

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And also you remember, we said, well if there is only breach of contract of carriage with tortfeasor that the liability is joint and several. That’s the case of Arriesgado v. Tiu. 7. Transimex Co v. Mafre Insurance-­­ In the shipment of the fertilizer upon the arrival at the port of destination , there was a shortage of about 349 metric tons. This translates to 1.6 million peso difference. So what happened? So the fertilizer was exposed to water. There were strong winds, water seeped into the vessel and affected the weight or melted the fertilizer that’s why there is shortage. The issue in this case is that “Are strong winds anyway considered as storm?” Because storm is force majeure right? Are they perils of sea? Well we’ll take this up in insurance in the remaining 2 or 3 meetings that we’ll have. SC said as we pointed out last time, that strong winds accompanied by monsoon rain could have been classified as a storm. So they are just ordinary misfortunes of sea voyage noh if these misfortunes are not unusual for that particular area at that specific. So to qualify as a storm, SC said that the the wind force should be 48-­­ 55 knots. It’s equivalent to 55 to 63 miles per hour or 10 to 11 in Beaufort Scale. Now in this case, wind force niya was 40 lang. Tapos measurement in Beaufort Scale was 7-­­9. So not considered as storm. Force majeure is not available as a defense.

Also in this case, the carriage of goods started from foreign port to local port. So SC said that primary law of course is Civil Code provisions on common carrier and suppletorily the Code of Commerce and COGSA. 8. Marina Port Services v. American Home Assurance-­­ So this is penned by J. Del Castillo regarding “Shipper’s Load and Count”. So ang procedure is goods will be loaded on board the vessel. Then pagdating sa port of destination, off loaded by the arrastre operator. Pag dating sa customs, the customs will unlock or destroy the seal so that it can take note of the contents of the shipment and then compute the corresponding import duties. Pag unsealed or unlocked ng seal, binabalik ng customs. Tapos dadalhin sa area ng arrastre operator tapos pi-­­pickupin ng consignee, either to the custom broker or to its local representative. That’s the procedure, okay. Ang nangyari dito, nagkulang. Ang subject dito ay wheat flour or ang goods. Pag dating sa consignee, mayroong substantial losses. So ang tanong sino ang may liability? SC said in this case, that the relationship between the arrastre operator and the consignee is one of “warehouseman” OR OR “common carrier-­­ consignee” which is wrong right? These are not the same. Kasi pag common carrier-­­ consignee extra ordinary diligence. Pag depositary/warehouseman-­­ consignee ordinary diligence. Kaya nga warehouseman lang. So that’s the part that it is quite doubtful noh, so don’t follow this part. Because subsequent of this case, Peralta reiterated what we already know. What we

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know is the established rule. The obligation is “akin to warehouseman” and only ORDINARY DILIGENCE IS REQUIRED. Now what probably maybe asked in the bar is the so called “shipper’s load and count arrangement”. Pag shipper’s load and count arrangement, ibig sabihin niyan “shipper at his own risk”. So the carrier does not warrant against pilferage. Kung may nanakawan man, nabawasan man, walang kasalanan ang COMMON CARRIER “AT” ARRASTRE OPERATOR if the arrangement is that of shipper’s load and count. Syempre pag shipper’s load and count, mas mura. Wala kang inaasahan sa common carrier at sa arrastre operator in case of pilferage. So the case I’m referring to penned by Peralta is Asian Terminal v. Allied Guarantee. So again reiterating the settled rule that arrastre operator’s duty is akin to “warehouseman”. In this case the SC reiterated what we know that presumption of fault on the part of arrastre operator if the goods were lost or damaged under its condition. The obligation here is ordinary, but if there’s loss or damage in its possession then there is presumption of fault on its part. So arrastre operator again here has the obligation to insure the delivery of the goods in favor of the consignee. But there is more interesting part, SC said that the customs broker and the arrastre operator are JOINTLY AND SEVERALLY LIABLE in case of loss. Diba in Western Shipping, common carrier and arrastre operator, jointly and severally liable if the goods were damaged while offloaded from the vessel right? But SC said that while they have different source of liability, breach of contract of carriage for the common carrier and breach of contract of arrastre operator before the PPA, the obligation is joint and several right? Now in this case, the SC declares it further that the arrastre operator and custom broker are jointly and severally liable in case of loss or damage to the goods without prejudice to determine who is ultimately responsible for such loss or damage. So it turns out that the custom broker may sue the arrastre operator or vice versa. Okay safety of passengers: 9. G.V. Florida v. Heirs of Battung-­­ It’s a good you should read this case. SC reiterated or summarized the previous rulings like Pilapil v. CA on liability for the acts of strangers or acts of passengers. So SC said that common carrier is not insurer of the safety of passengers for acts of passengers/third party. So if death or injury is caused to the passenger, common carrier is not liable as long as it exercised due diligence to prevent the death/ injury. In this case, there was nothing obvious on the part of passenger when they boarded the bus. Meaning the gun was not bulging. The common carrier has no obligation to frisk its passengers.

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Okay, Bill of Lading: 10. Designer Baskets v. Air Sea Transport-­­ In this case, bill of lading need not be presented by the consignee to the common carrier. So the common carrier is discharged from liability. So the obligation to deliver the goods is deemed fulfilled even if there is no surrender of bill of lading. Acknowledgment receipt will suffice. Now there are 2 reasons that would justify non-­­ surrender/tender of bill of lading: 1.) Loss 2.) Other cause Now in this case, the “other cause” referred to is the indemnity agreement between the consignee and the common carrier to indemnify the common carrier from liability in case of claim for damage/ suit filed by the seller or any other party. Remember this case, the seller retained the bill of lading right? So that bill of lading is supposed to be given to the consignee. But the seller/ shipper retained the bill of lading because the consignee is not fully paid. So the consignee could not produce the bill of lading because it is in the possession of the seller. So in turn, he signed an indemnity agreement with the common carrier. If you (common carrier) release the goods to me, and somebody sues you, such as the seller, I will indemnify you.” I will take whatever amount you will be ordered to pay by the seller. SC said in this case that it is a valid reason for the common carrier to release the goods to the consignee. So the consignee’s obligation is deemed fulfilled, of course without any prejudice for any suit that will be filed by the seller. If the action is filed, the buyer is supposed to indemnify the carrier arising from that suit. Maritime Commerce: 12.) Federal Phoenix v. Fortune Sea Carrier-­­ Ship owner chartered a vessel to the charterer. The charterer leased the vessel to other party. Ganito nangyari. So, ang tanong anong liability ng charterer? Is the ship owner that is liable? Or is it the charterer that leased the vessel/ sub-­­ leased the vessel in favor of somebody? SC said that while it is captioned as a time-­­ chartered party agreement in name, it is essentially a bareboat/ demise charter because what is given to a charterer is not just possession but control of the navigation of the vessel. So he recruited/ hired the very ship captain and crew members of the ship owner. So it converted the same to a private carrier that’s why the ship owner becomes a mere lessor. No liability in case the goods were lost or damaged in the course of the voyage of the charterer. 67

13.) Philippine-­­Nippon Kyoei v. Guidelosao-­­ This is about limited liability rule, admits exception right? We said that if the vessel is lost, there goes the liability of the ship owner/ ship agent for maritime claims. One of the exceptions, meaning, one of the cases where the ship owner or ship agent must reinstate despite loss of the vessel, claims under the ECC, then workmen’s compensation act, now employees’ compensation commission. So death benefits due to seafarers under POEA standard employment contract are akin to death benefits under this ECC and therefore they ought to be paid by the ship owner despite of the loss of vessel. So benefits imposed by statute under the Code of Commerce due to crew members must be paid by the ship owner/ ship agent despite the loss of the vessel. Air transportation: There are 2 cases of British Airways in your outline. 14.) Lhuiller v. British Airways-­­ The jurisdictional rules, we said last time, that there has been change by Montreal Convention. It now allows a suit filed in the city where the plaintiff is domiciled/ has residence. 15.) British Airways v. CA-­­ So this is an interesting case especially when you go to practice. What happened here? There is a limited liability under Warsaw Convention as you know before Montreal Convention takes effect in Philippine law. $20/kilo or 9.07 pounds. In the course of the case or proceeding, the counsel of the consignee introduced evidence to prove that the goods are valued more than the limit set forth in the bill of lading, citing the Warsaw Convention. And the counsel for British Airways did not object. So nakalusot right? How much can be recovered now by the consignee? The limits under Warsaw Convention, $20/kilo? Or the evidence admitted by the Court which shows the higher value of the goods compared to the limits under the Bill of lading. So sabi ng SC, the counsel did not object. Failing to object, the consignee can recovered. So that a lesson for us right? Under Montreal Convention, 1,113 Special Drawing Rights (SDR). And then 2 cases regarding special injury: 16.) Alitalia v. IAC-­­ Professor ng UP hindi nakapag deliver ng speech niya dahil yung luggage niya naiwan. He arrived on time, but the luggage did not. The luggage came, the day after the convention when he decided to come back to the Philippines. So he sued Alitalia. What will apply? Prescriptive period of 2 years or 4 years torts? SC said that it’s outside the Warsaw Convention. Special injury sustained by Professor Pablo. So he was deprived the honor of giving his speech. Deprived the country and the university, UP, of being able to deliver the speech 17.) Philippine Airlines v. Hon. Savillo-­­ Failure to endorse a ticket. May competition sa Jakarta. Bumili siya ticket, Manila to Singapore, From Singapore to Jakarta, Singapore Airlines. Hindi siya pinagboard ng Singapore Airlines. Why? Because

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Philippine Airlines did not endorse the ticket for the second leg of the transportation. Sabi ng SC, pag failure to endorse ticket, hindi yan covered ng Warsaw Convention. It’s also a special kind of injury that is taken out of the Warsaw Convention. 18.) Lufthansa German Airlines v. CA-­­ Successive legs of.. I mean successive carriers, different segments of the transportation. So five successive carriers which is quite a number because you are going all the way to Africa. So there’s no direct flight from Philippines to Africa. So you have to various routes. Manila to India by Lufthansa. But after that, carrier, no longer by Lufthansa by different airline company. But the ticket was purchase from Lufthansa. Na-­­ bumpoff siya sa third and fourth leg of transportation going to Rome. Q: Is it delay or bumping off? A: So pag hindi ka nakapagtake ng flight mo, sabi ng SC hindi yan delay. He was bumped off. So bumping off takes out of the Warsaw Convention. Q: What about the liability of the carrier? A: Sabi ng SC, the one that issued the ticket right? So he is responsible for each and every segment of the transportation. So even though the carrier that will consummate the other legs of the contract or segment of contract, may not be the same carrier who issued the ticket. So you can sue the airline company that issued the ticket and the travel agent that caused the facilitation of the ticket without the prejudice to the right of the carrier to proceed against the air carrier ultimately liable.

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