[G.R. No. 138334.

August 25, 2003]

ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS and CARAVAN TRAVEL &
TOURS INTERNATIONAL, INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan
Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in
a tour dubbed Jewels of Europe. The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was
given a 5% discount on the amount, which included airfare, and the booking fee was also waived
because petitioners niece, Meriam Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to
deliver petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for
the package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA)
on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to
take the flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she
discovered that the flight she was supposed to take had already departed the previous day. She learned
that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to
complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which
included England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew
to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave respondent
US$300 or P7,980.00 as partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for Jewels of Europe and the amount
she owed respondent for the British Pageant tour. Despite several demands, respondent company
refused to reimburse the amount, contending that the same was non-refundable. [1] Petitioner was thus
constrained to file a complaint against respondent for breach of contract of carriage and damages, which
was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati
City.

also negligent in informing her of the wrong flight schedule through its employee Menor. She insisted
that the British Pageant was merely a substitute for the Jewels of Europe tour, such that the cost of the
former should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied
responsibility for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed of
the correct departure date, which was clearly and legibly printed on the plane ticket. The travel
documents were given to petitioner two days ahead of the scheduled trip. Petitioner had only herself to
blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed on the
ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels of Europe,
considering that the same had already been remitted to its principal in Singapore, Lotus Travel Ltd.,
which had already billed the same even if petitioner did not join the tour. Lotus European tour organizer,
Insight International Tours Ltd., determines the cost of a package tour based on a minimum number of
projected participants. For this reason, it is accepted industry practice to disallow refund for individuals
who failed to take a booked tour.[3]
Lastly, respondent maintained that the British Pageant was not a substitute for the package tour
that petitioner missed. This tour was independently procured by petitioner after realizing that she made a
mistake in missing her flight for Jewels of Europe. Petitioner was allowed to make a partial payment of
only US$300.00 for the second tour because her niece was then an employee of the travel
agency. Consequently, respondent prayed that petitioner be ordered to pay the balance of P12,901.00
for the British Pageant package tour.
After due proceedings, the trial court rendered a decision,[4] the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three
Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00)
Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.

In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was due to
respondents fault since it did not clearly indicate the departure date on the plane ticket. Respondent was

SO ORDERED.[5]

The trial court held that respondent was negligent in erroneously advising petitioner of her
departure date through its employee, Menor, who was not presented as witness to rebut petitioners
testimony. However, petitioner should have verified the exact date and time of departure by looking at
her ticket and should have simply not relied on Menors verbal representation. The trial court thus
declared that petitioner was guilty of contributory negligence and accordingly, deducted 10% from the
amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at
fault. However, the appellate court held that petitioner is more negligent than respondent because as a
lawyer and well-traveled person, she should have known better than to simply rely on what was told to
her. This being so, she is not entitled to any form of damages. Petitioner also forfeited her right to the
Jewels of Europe tour and must therefore pay respondent the balance of the price for the British
Pageant tour. The dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is
hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the plaintiffappellee to pay to the defendant-appellant the amount of P12,901.00, representing the balance of the
price of the British Pageant Package Tour, the same to earn legal interest at the rate of SIX PERCENT
(6%) per annum, to be computed from the time the counterclaim was filed until the finality of this
decision. After this decision becomes final and executory, the rate of TWELVE PERCENT (12%) interest
per annum shall be additionally imposed on the total obligation until payment thereof is satisfied. The
award of attorneys fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for reconsideration,[7] petitioner filed the instant petition under Rule 45
on the following grounds:

III
The Honorable Court erred in not granting to the petitioner the consequential damages due her as a
result of breach of contract of carriage.[8]
Petitioner contends that respondent did not observe the standard of care required of a common
carrier when it informed her wrongly of the flight schedule. She could not be deemed more negligent
than respondent since the latter is required by law to exercise extraordinary diligence in the fulfillment of
its obligation. If she were negligent at all, the same is merely contributory and not the proximate cause of
the damage she suffered. Her loss could only be attributed to respondent as it was the direct
consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one place to
another for a fixed price.[9] Such person or association of persons are regarded as carriers and are
classified as private or special carriers and common or public carriers. [10] A common carrier is defined
under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business of
transporting either passengers or goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one place to another since its covenant with
its customers is simply to make travel arrangements in their behalf. Respondents services as a travel
agency include procuring tickets and facilitating travel permits or visas as well as booking customers for
tours.

I
It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in reversing
and setting aside the decision of the trial court by ruling that the petitioner is not entitled to a refund of
the cost of unavailed Jewels of Europe tour she being equally, if not more, negligent than the private
respondent, for in the contract of carriage the common carrier is obliged to observe utmost care and
extra-ordinary diligence which is higher in degree than the ordinary diligence required of the passenger.
Thus, even if the petitioner and private respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the private respondent. At best, petitioners
negligence is only contributory while the private respondent [is guilty] of gross negligence making the
principle of pari delicto inapplicable in the case;

While petitioner concededly bought her plane ticket through the efforts of respondent company,
this does not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an
agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe. Respondents
obligation to petitioner in this regard was simply to see to it that petitioner was properly booked with the
airline for the appointed date and time. Her transport to the place of destination, meanwhile, pertained
directly to the airline.

II

The object of petitioners contractual relation with respondent is the latters service of arranging
and facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and not one of carriage.
Petitioners submission is premised on a wrong assumption.

The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was not
indivisible and the amount paid therefor refundable;

The nature of the contractual relation between petitioner and respondent is determinative of the
degree of care required in the performance of the latters obligation under the contract. For reasons of

public policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as
human care and foresight can provide using the utmost diligence of very cautious persons and with due
regard for all the circumstances.[11] As earlier stated, however, respondent is not a common carrier but a
travel agency. It is thus not bound under the law to observe extraordinary diligence in the performance of
its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of care
required of respondent is that of a good father of a family under Article 1173 of the Civil Code. [12] This
connotes reasonable care consistent with that which an ordinarily prudent person would have observed
when confronted with a similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent act use that reasonable
care and caution which an ordinarily prudent person would have used in the same situation? If not, then
he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner
of the wrong day of departure. Petitioners testimony was accepted as indubitable evidence of Menors
alleged negligent act since respondent did not call Menor to the witness stand to refute the allegation.
The lower court applied the presumption under Rule 131, Section 3 (e) [14] of the Rules of Court that
evidence willfully suppressed would be adverse if produced and thus considered petitioners
uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and maintains
that petitioners assertion is belied by the evidence on record. The date and time of departure was legibly
written on the plane ticket and the travel papers were delivered two days in advance precisely so that
petitioner could prepare for the trip. It performed all its obligations to enable petitioner to join the tour and
exercised due diligence in its dealings with the latter.

proving it and a mere allegation cannot take the place of evidence. [17] If the plaintiff, upon whom rests the
burden of proving his cause of action, fails to show in a satisfactory manner facts upon which he bases
his claim, the defendant is under no obligation to prove his exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent exercised due
diligence in performing its obligations under the contract and followed standard procedure in rendering
its services to petitioner. As correctly observed by the lower court, the plane ticket [19] issued to petitioner
clearly reflected the departure date and time, contrary to petitioners contention. The travel documents,
consisting of the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two days
prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary
documents and procured the plane tickets. It arranged petitioners hotel accommodation as well as food,
land transfers and sightseeing excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised due diligence
in the conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say,
after the travel papers were delivered to petitioner, it became incumbent upon her to take ordinary care
of her concerns. This undoubtedly would require that she at least read the documents in order to assure
herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him liable for damages
for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to
exercise due care and prudence in the performance of the obligation as the nature of the obligation so
demands.[20] There is no fixed standard of diligence applicable to each and every contractual obligation
and each case must be determined upon its particular facts. The degree of diligence required depends
on the circumstances of the specific obligation and whether one has been negligent is a question of fact
that is to be determined after taking into account the particulars of each case. [21]

We agree with respondent.

Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise
to an inference unfavorable to the former. Menor was already working in France at the time of the filing
of the complaint,[15] thereby making it physically impossible for respondent to present her as a witness.
Then too, even if it were possible for respondent to secure Menors testimony, the presumption under
Rule 131, Section 3(e) would still not apply. The opportunity and possibility for obtaining Menors
testimony belonged to both parties, considering that Menor was not just respondents employee, but also
petitioners niece. It was thus error for the lower court to invoke the presumption that respondent willfully
suppressed evidence under Rule 131, Section 3(e). Said presumption would logically be inoperative if
the evidence is not intentionally omitted but is simply unavailable, or when the same could have been
obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors negligence concurred with
the negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not
sufficiently proved, considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party alleging a fact has the burden of

The lower court declared that respondents employee was negligent. This factual finding, however,
is not supported by the evidence on record. While factual findings below are generally conclusive upon
this court, the rule is subject to certain exceptions, as when the trial court overlooked, misunderstood, or
misapplied some facts or circumstances of weight and substance which will affect the result of the case.
[22]

In the case at bar, the evidence on record shows that respondent company performed its duty
diligently and did not commit any contractual breach. Hence, petitioner cannot recover and must bear
her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of
Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent
the amount of P12,901.00 representing the balance of the price of the British Pageant Package Tour,
with legal interest thereon at the rate of 6% per annum, to be computed from the time the counterclaim
was filed until the finality of this Decision. After this Decision becomes final and executory, the rate of

12% per annum shall be imposed until the obligation is fully settled, this interim period being deemed to
be by then an equivalent to a forbearance of credit.[23]

plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier,
and having failed to exercise the extraordinary diligence required of him by the law, should be held liable
for the value of the undelivered goods.

SO ORDERED.
In his Answer, private respondent denied that he was a common carrier and argued that he could not be
held responsible for the value of the lost goods, such loss having been due to force majeure.
G.R. No. L-47822 December 22, 1988
PEDRO
DE
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

GUZMAN, petitioner,

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such
material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo
which various merchants wanted delivered to differing establishments in Pangasinan. For that service,
respondent charged freight rates which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General
Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of
750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970,
respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck
driven by respondent himself, while 600 cartons were placed on board the other truck which was driven
by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the
cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise,

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common
carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P
4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering
him a common carrier; in finding that he had habitually offered trucking services to the public; in not
exempting him from liability on the ground of force majeure; and in ordering him to pay damages and
attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged
in
transporting
return
loads
of
freight
"as
a
casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this
Court by way of a Petition for Review assigning as errors the following conclusions of the Court of
Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts
earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local Idiom as
"a sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier

offering its services to the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think that Article
1733 deliberaom making such distinctions.

duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with
the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended)
which at least partially supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes,
any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express
service, steamboat, or steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both, shipyard, marine repair shop,
wharf
or
dock,
ice
plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such
back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent'sprincipal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently
fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the Civil Code provisions governing
common carriers. That liability arises the moment a person or firm acts as a common carrier, without
regard to whether or not such carrier has also complied with the requirements of the applicable
regulatory statute and implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public convenience, would be offensive to
sound public policy; that would be to reward private respondent precisely for failing to comply with
applicable statutory requirements. The business of a common carrier impinges directly and intimately
upon the safety and well being and property of those members of the general community who happen to
deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a common carrier to render such

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very
high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care of goods transported by a common
carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6
and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction
or deterioration of the goods which they carry, "unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, lightning or other natural
disaster
or
calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing orin
the
containers;
and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt
the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list,
even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which
provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in Article 1733. (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the
instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's
vehicle must be dealt with under the provisions of Article 1735, in other words, that the private
respondent as common carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on the part of private
respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should
have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled
milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence
required private respondent to retain a security guard to ride with the truck and to engage brigands in a
firelight at the risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733,
given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5
and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the
acts or omissions of his or its employees;
(6) that the common carrier's liability for acts committed by
thieves, or of robbers who donot act with grave or
irresistible threat, violence or force, is dispensed with or
diminished; and
(7) that the common carrier shall not responsible for the
loss, destruction or deterioration of goods on account of the
defective condition of the car vehicle, ship, airplane or other
equipment used in the contract of carriage. (Emphasis
supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest
or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such
thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so
hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible
threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First
Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe

Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused
were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by
Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's
store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if
not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms.
The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper,
detaining them for several days and later releasing them in another province (in Zambales). The hijacked
truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the
accused of robbery, though not of robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite
beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to
recall that even common carriers are not made absolute insurers against all risks of travel and of
transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable,
provided that they shall have complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is
not liable for the value of the undelivered merchandise which was lost because of an event entirely
beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of
Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 148496. March 19, 2002]
VIRGINES CALVO doing business under the name and style TRANSORIENT CONTAINER
TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL INSURANCE CO., INC.
(formerly Allied Guarantee Ins. Co., Inc.) respondent.
DECISION
MENDOZA, J.:
This is a petition for review of the decision, [1] dated May 31, 2001, of the Court of Appeals,
affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148, which ordered petitioner to
pay respondent, as subrogee, the amount of P93,112.00 with legal interest, representing the value of
damaged cargo handled by petitioner, 25% thereof as attorneys fees, and the cost of the suit.
The facts are as follows:

Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a
sole proprietorship customs broker. At the time material to this case, petitioner entered into a contract
with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124
reels of kraft liner board from the Port Area in Manila to SMCs warehouse at the Tabacalera Compound,
Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co.,
Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on
board M/V Hayakawa Maru and, after 24 hours, were unloaded from the vessel to the custody of the
arrastre operator, Manila Port Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her
contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMCs warehouse in
Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that
15 reels of the semi-chemical fluting paper were wet/stained/torn and 3 reels of kraft liner board were
likewise torn. The damage was placed atP93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the
Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding
petitioner liable to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in the custody of
defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report (Exh. F) with
entries appearing therein, classified as TED and TSN, which the claims processor, Ms. Agrifina De Luna,
claimed to be tearrage at the end and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh. H - H-4-A) confirms the fact of the
damaged condition of the subject cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which
provides among others that:
. . . we opine that damages sustained by shipment is attributable to improper handling in transit
presumably whilst in the custody of the broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her] defense that [she is] are not
liable. Defendant by reason of the nature of [her] business should have devised ways and means in
order to prevent the damage to the cargoes which it is under obligation to take custody of and to
forthwith deliver to the consignee. Defendant did not present any evidence on what precaution [she]
performed to prevent [the] said incident, hence the presumption is that the moment the defendant
accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo.
....

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have been lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the extraordinary diligence required by law. The
burden of the plaintiff, therefore, is to prove merely that the goods he transported have been lost,
destroyed or deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has exercised
the extraordinary diligence required by law. Thus, it has been held that the mere proof of delivery of
goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a
prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to
accident or some other circumstances inconsistent with its liability. (cited in Commercial Laws of the
Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same time a common carrier is
supposed [to] exercise [the] extraordinary diligence required by law, hence the extraordinary
responsibility lasts from the time the goods are unconditionally placed in the possession of and received
by the carrier for transportation until the same are delivered actually or constructively by the carrier to the
consignee or to the person who has the right to receive the same.[3]
Accordingly, the trial court ordered petitioner to pay the following amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence this petition for review
on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE
SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE
OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC. [5]
It will be convenient to deal with these contentions in the inverse order, for if petitioner is not a
common carrier, although both the trial court and the Court of Appeals held otherwise, then she is indeed
not liable beyond what ordinary diligence in the vigilance over the goods transported by her, would

require.[6] Consequently, any damage to the cargo she agrees to transport cannot be presumed to have
been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of Appeals, she is
not a common carrier but a private carrier because, as a customs broker and warehouseman, she does
not indiscriminately hold her services out to the public but only offers the same to select parties with
whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed a similar
contention and held the party to be a common carrier, thus

with whom she contracts the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for her customers, as already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case. . . .
In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in the
vigilance over goods was explained thus:

The Civil Code defines common carriers in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity . . . Article 1732
also carefully avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the general public, i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions.
So understood, the concept of common carrier under Article 1732 may be seen to coincide neatly with
the notion of public service, under the Public Service Act (Commonwealth Act No. 1416, as amended)
which at least partially supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, public service includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever
may be its classification, freight or carrier service of any class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other similar public
services. x x x [8]
There is greater reason for holding petitioner to be a common carrier because the transportation
of goods is an integral part of her business. To uphold petitioners contention would be to deprive those

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the
greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise due care in the handling and stowage, including such
methods as their nature requires.
In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the
spoilage or wettage took place while the goods were in the custody of either the carrying vessel M/V
Hayakawa Maru, which transported the cargo to Manila, or the arrastre operator, to whom the goods
were unloaded and who allegedly kept them in open air for nine days from July 14 to July 23, 1998
notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged, as
noted in the Marine Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.[10]
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified that he has no
personal knowledge on whether the container vans were first stored in petitioners warehouse prior to
their delivery to the consignee. She likewise claims that after withdrawing the container vans from the
arrastre operator, her driver, Ricardo Nazarro, immediately delivered the cargo to SMCs warehouse in

Ermita, Manila, which is a mere thirty-minute drive from the Port Area where the cargo came from. Thus,
the damage to the cargo could not have taken place while these were in her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo Surveyors
indicates that when the shipper transferred the cargo in question to the arrastre operator, these were
covered by clean Equipment Interchange Report (EIR) and, when petitioners employees withdrew the
cargo from the arrastre operator, they did so without exception or protest either with regard to the
condition of container vans or theircontents. The Survey Report pertinently reads
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex vessel to dock of Pier #13
South Harbor, Manila on 14 July 1990, containerized onto 30 x 20 secure metal vans, covered by clean
EIRs. Except for slight dents and paint scratches on side and roof panels, these containers were
deemed to have [been] received in good condition.

Anent petitioners insistence that the cargo could not have been damaged while in her custody as
she immediately delivered the containers to SMCs compound, suffice it to say that to prove the exercise
of extraordinary diligence, petitioner must do more than merely show the possibility that some other
party could be responsible for the damage. It must prove that it used all reasonable means to ascertain
the nature and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the
handling [thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which provides
Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same
is due to any of the following causes only:
....
(4) The character of the goods or defects in the packing or in the containers.

....

....

Transfer/Delivery:

For this provision to apply, the rule is that if the improper packing or, in this case, the defect/s in
the container, is/are known to the carrier or his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception notwithstanding such condition, he is not
relieved of liability for damage resulting therefrom.[14] In this case, petitioner accepted the cargo without
exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to
prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is
exempt from liability, the presumption of negligence as provided under Art. 1735[15] holds.

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by Transorient
Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignees storage warehouse located at Tabacalera
Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from the vessel to the arrastre,
Marina Port Services Inc., in good order and condition as evidenced by clean Equipment Interchange
Reports (EIRs).Had there been any damage to the shipment, there would have been a report to that
effect made by the arrastre operator. The cargoes were withdrawn by the defendant-appellant from the
arrastre still in good order and condition as the same were received by the former without exception, that
is, without any report of damage or loss. Surely, if the container vans were deformed, cracked, distorted
or dented, the defendant-appellant would report it immediately to the consignee or make an exception on
the delivery receipt or note the same in the Warehouse Entry Slip (WES). None of these took place. To
put it simply, the defendant-appellant received the shipment in good order and condition and delivered
the same to the consignee damaged. We can only conclude that the damages to the cargo occurred
while it was in the possession of the defendant-appellant. Whenever the thing is lost (or damaged) in the
possession of the debtor (or obligor), it shall be presumed that the loss (or damage) was due to his fault,
unless there is proof to the contrary. No proof was proffered to rebut this legal presumption and the
presumption of negligence attached to a common carrier in case of loss or damage to the goods.[13]

WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is AFFIRMED.
SO ORDERED.
[G.R. No. 131621. September 28, 1999]
LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA
INSURANCE CO., INC., respondents.
DECISION
DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the
following: (a) the 30 January 1997 decision[1] of the Court of Appeals in CA-G.R. CV No. 36401, which
affirmed the decision of 4 October 1991[2] of the Regional Trial Court of Manila, Branch 16, in Civil Case

No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter MIC) the
amount of P6,067,178, with legal interest from the filing of the complaint until fully paid, P8,000 as
attorneys fees, and the costs of the suit; and (b) its resolution of 19 November 1997, [3] denying
LOADSTARs motion for reconsideration of said decision.
The facts are undisputed.
On 19 November 1984, LOADSTAR received on board its M/V Cherokee (hereafter, the vessel)
the following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and others; and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various risks
including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. The vessel, in turn, was insured by
Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984, on its
way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off
Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with
LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured in full
settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI, alleging that the
sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees. It also
prayed that PGAI be ordered to pay the insurance proceeds from the loss of the vessel directly to MIC,
said amount to be deducted from MICs claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shippers goods and claimed that
the sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no
cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped as
a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR
to elevate the matter to the Court of Appeals, which, however, agreed with the trial court and affirmed its
decision in toto.
In dismissing LOADSTARs appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole ground that there was a
single shipper on that fateful voyage. The court noted that the charter of the vessel
was limited to the ship, but LOADSTAR retained control over its crew.[4]

2) As a common carrier, it is the Code of Commerce, not the Civil Code, which should be
applied in determining the rights and liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the day of the voyage. If
it had been seaworthy, it could have withstood the natural and inevitable action of the
sea on 20 November 1984, when the condition of the sea was moderate. The vessel
sank, not because of force majeure, but because it was not seaworthy. LOADSTARS
allegation that the sinking was probably due to the convergence of the winds, as stated
by a PAGASA expert, was not duly proven at the trial. The limited liability rule,
therefore, is not applicable considering that, in this case, there was an actual finding of
negligence on the part of the carrier.[5]
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading do not apply because
said provisions bind only the shipper/consignee and the carrier. When MIC paid the
shipper for the goods insured, it was subrogated to the latters rights as against the
carrier, LOADSTAR.[6]
5) There was a clear breach of the contract of carriage when the shippers goods never
reached their destination. LOADSTARs defense of diligence of a good father of a
family in the training and selection of its crew is unavailing because this is not a proper
or complete defense in culpa contractual.
6) Art. 361 (of the Code of Commerce) has been judicially construed to mean that when
goods are delivered on board a ship in good order and condition, and the shipowner
delivers them to the shipper in bad order and condition, it then devolves upon the
shipowner to both allege and prove that the goods were damaged by reason of some
fact which legally exempts him from liability. Transportation of the merchandise at the
risk and venture of the shipper means that the latter bears the risk of loss or
deterioration of his goods arising from fortuitous events, force majeure, or the inherent
nature and defects of the goods, but not those caused by the presumed negligence or
fault of the carrier, unless otherwise proved.[7]
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V Cherokee a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these premises?
Regarding the first issue, LOADSTAR submits that the vessel was a private carrier because it was
not issued a certificate of public convenience, it did not have a regular trip or schedule nor a fixed route,
and there was only one shipper, one consignee for a special cargo.

In refutation, MIC argues that the issue as to the classification of the M/V Cherokee was not timely
raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the cargo
of wood products for delivery to one consignee, it was also carrying passengers as part of its regular
business. Moreover, the bills of lading in this case made no mention of any charter party but only a
statement that the vessel was a general cargo carrier. Neither was there any special arrangement
between LOADSTAR and the shipper regarding the shipment of the cargo. The singular fact that the
vessel was carrying a particular type of cargo for one shipper is not sufficient to convert the vessel into a
private carrier.

Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same
must be deemed waived.

As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed
to have been negligent, and the burden of proving otherwise devolved upon MIC.[8]

Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary
that the carrier be issued a certificate of public convenience, and this public character is not altered by
the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.

LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19
November 1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly
inspected by the maritime safety engineers of the Philippine Coast Guard, who certified that the ship was
fit to undertake a voyage. Its crew at the time was experienced, licensed and unquestionably
competent. With all these precautions, there could be no other conclusion except that LOADSTAR
exercised the diligence of a good father of a family in ensuring the vessels seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being
due to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November
1984, the weather was fine until the next day when the vessel sank due to strong waves. MICs witness,
Gracelia Tapel, fully established the existence of two typhoons, WELFRING and YOLING, inside the
Philippine area of responsibility.In fact, on 20 November 1984, signal no. 1 was declared over Eastern
Visayas, which includes Limasawa Island. Tapel also testified that the convergence of winds brought
about by these two typhoons strengthened wind velocity in the area, naturally producing strong waves
and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such
as what transpired in this case, is valid. Since the cargo was being shipped at owners risk, LOADSTAR
was not liable for any loss or damage to the same. Therefore, the Court of Appeals erred in holding that
the provisions of the bills of lading apply only to the shipper and the carrier, and not to the insurer of the
goods, which conclusion runs counter to the Supreme Courts ruling in the case of St. Paul Fire & Marine
Insurance Co. v. Macondray & Co., Inc.,[9] and National Union Fire Insurance Company of Pittsburg v.
Stolt-Nielsen Phils., Inc.[10]
Finally, LOADSTAR avers that MICs claim had already prescribed, the case having been instituted
beyond the period stated in the bills of lading for instituting the same suits based upon claims arising
from shortage, damage, or non-delivery of shipment shall be instituted within sixty days from the accrual
of the right of action. The vessel sank on 20 November 1984; yet, the case for recovery was filed only on
4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the
cargo was due to force majeure, because the same concurred with LOADSTARs fault or negligence.

Thirdly, the limited liability theory is not applicable in the case at bar because LOADSTAR was at
fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc.,[11] where this Court held that a common carrier transporting special cargo or
chartering the vessel to a special person becomes a private carrier that is not subject to the provisions of
the Civil Code. Any stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent is void only if the strict policy governing common carriers is upheld. Such policy
has no force where the public at large is not involved, as in the case of a ship totally chartered for the
use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc. v. Court of
Appeals[12] and National Steel Corp. v. Court of Appeals,[13] both of which upheld the Home
Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for simple reason that
the factual settings are different. The records do not disclose that the M/V Cherokee, on the date in
question, undertook to carry a special cargo or was chartered to a special person only. There was no
charter party. The bills of lading failed to show any special arrangement, but only a general provision to
the effect that the M/V Cherokee was a general cargo carrier.[14] Further, the bare fact that the vessel was
carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason
enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was
shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a
common carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals,
[15]
the Court juxtaposed the statutory definition of common carriers with the peculiar circumstances of
that case, viz.:
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as
a sideline.Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think that Article
1733 deliberately refrained from making such distinctions.
xxx
It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely back-hauled goods for other merchants from Manila to Pangasinan, although such
backhauling was done on a periodic or occasional rather than regular or scheduled manner, and even
though private respondents principal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods; that that fee
frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the Civil Code provisions governing
common carriers. That liability arises the moment a person or firm acts as a common carrier, without
regard to whether or not such carrier has also complied with the requirements of the applicable
regulatory statute and implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the liabilities of a common carrier
because he has not secured the necessary certificate of public convenience, would be offensive to
sound public policy; that would be to reward private respondent precisely for failing to comply with
applicable statutory requirements. The business of a common carrier impinges directly and intimately
upon the safety and well being and property of those members of the general community who happen to
deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain the necessary permits and
authorizations.
Moving on to the second assigned error, we find that the M/V Cherokee was not seaworthy when
it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the
time. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. The failure of a common carrier to maintain in
seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in
Article 1755 of the Civil Code.[16]
Neither do we agree with LOADSTARs argument that the limited liability theory should be applied
in this case. The doctrine of limited liability does not apply where there was negligence on the part of the
vessel owner or agent.[17] LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and

in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not
sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the
area where it sank was determined to be moderate. Since it was remiss in the performance of its duties,
LOADSTAR cannot hide behind the limited liability doctrine to escape responsibility for the loss of the
vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the
goods, in utter disregard of this Courts pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray
& Co., Inc.,[18]and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. [19] It was ruled in these two
cases that after paying the claim of the insured for damages under the insurance policy, the insurer is
subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in turn,
be recovered by the latter. Since the right of the assured in case of loss or damage to the goods is
limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is
necessarily subject to the same limitations and restrictions. We do not agree. In the first place, the cases
relied on by LOADSTAR involved a limitation on the carriers liability to an amount fixed in the bill of
lading which the parties may enter into, provided that the same was freely and fairly agreed upon
(Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces the
common carriers liability for the loss or destruction of the goods to a degree less than extraordinary
(Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to shipments made at
owners risk. Such stipulation is obviously null and void for being contrary to public policy.[20] It has been
said:
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier
from any and all liability for loss or damage occasioned by its own negligence. The second is one
providing for an unqualified limitation of such liability to an agreed valuation. And the third is one limiting
the liability of the carrier to an agreed valuation unless the shipper declares a higher value and pays a
higher rate of freight.According to an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.[21]
Since the stipulation in question is null and void, it follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MICs
cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil Code
nor the Code of Commerce states a specific prescriptive period on the matter, the Carriage of Goods by
Sea Act (COGSA) which provides for a one-year period of limitation on claims for loss of, or damage to,
cargoes sustained during transit may be applied suppletorily to the case at bar. This one-year
prescriptive period also applies to the insurer of the good. [22] In this case, the period for filing the action
for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year period is null and void;
[23]
it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of
the Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.

SO ORDERED.
[G.R. No. 125948. December 29, 1998]
FIRST

PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS,

HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C. ARELLANO,
in her official capacity as City Treasurer of Batangas, respondents.

DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated November
29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial Court of Batangas City,
Branch 84, in Civil Case No. 4293, which dismissed petitioners' complaint for a business tax refund
imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in 1967[1] and
renewed by the Energy Regulatory Board in 1992.[2]

"The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of
the Local Government Code. The said section limits the imposition of fees and charges on business to
such amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence,
assuming arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts
is violative of the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and licensing. The fee is already a revenue raising
measure, and not a mere regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner
cannot be considered engaged in transportation business, thus it cannot claim exemption under Section
133 (j) of the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint [6] for
tax refund with prayer for a writ of preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that:
(1) the imposition and collection of the business tax on its gross receipts violates Section 133 of the
Local Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of
"contractors and independent contractors" under Sec. 141 (e) and 151 does not include the authority to
collect such taxes on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and
collected the said tax, thus meriting the immediate refund of the tax paid.[7]

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code.[3] The respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped
at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its
operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of
1993.

Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes
under Section 133 (j) of the Local Government Code as said exemption applies only to "transportation
contractors and persons engaged in the transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the term "common carrier" which refers
solely to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the
term "common carrier" under the said code pertains to the mode or manner by which a product is
delivered to its destination.[8]

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer,
the pertinent portion of which reads:

wise:

"Please note that our Company (FPIC) is a pipeline operator with a government concession granted
under the Petroleum Act. It is engaged in the business of transporting petroleum products from the
Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is
exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 x x
xx
"Moreover, Transportation contractors are not included in the enumeration of contractors under Section
131, Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax 'on contractors
and other independent contractors' under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this

"xxx Plaintiff is either a contractor or other independent contractor.

xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are
to be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption
may therefore be granted only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose
concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the
deed of concession grant any tax exemption upon the plaintiff.

"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax
Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to
distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common
carriers so as not to overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a special carrier extending
its services and facilities to a single specific or "special customer" under
a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective
local autonomy to local governments than the previous enactments, to
make them economically and financially viable to serve the people and
discharge their functions with a concomitant obligation to accept certain
devolution of powers, x x x So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and contractors are also taxed
under Sec. 143 (e) and 151 of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February
27, 1995, we referred the case to the respondent Court of Appeals for consideration and adjudication.
[10]
On November 29, 1995, the respondent court rendered a decision [11] affirming the trial court's
dismissal of petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.
[12]

Hence, this petition. At first, the petition was denied due course in a Resolution dated November
11, 1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14] of
January 20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not
a common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not
clear under the law.

1. He must be engaged in the business of carrying goods for others as a public

employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over
his established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire
as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it from the definition of a common carrier. In De
Guzman vs. Court of Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as a 'sideline'). Article 1732 x x x avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on anoccasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the 'general public,' i.e., the general
community or population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1877 deliberately refrained from
making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide neatly with
the notion of 'public service,' under the Public Service Act (Commonwealth Act No. 1416, as amended)
which at least partially supplements the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, 'public service' includes:

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for compensation,
offering his services to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:

'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done
for general business purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system
gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or
wireless communications systems, wire or wireless broadcasting stations and other similar public
services.' "(Underscoring Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers through
moving vehicles or vessels either by land, sea or water, is erroneous.

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or
water, except as provided in this Code."

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes
no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide
that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers.[17]

The deliberations conducted in the House of Representatives on the Local Government Code of
1991 are illuminating:

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:

Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common
Limitations on the Taxing Powers of Local Government Units." x x x

"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to
utilize installations for the transportation of petroleum owned by him, but is obligated to utilize the
remaining transportation capacity pro rata for the transportation of such other petroleum as may be
offered by others for transport, and to charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural Resources."

MR. AQUINO (A.). Thank you Mr. Speaker.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to
the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby
declared to be apublic utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum
products, it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is
not subject to withholding tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local Government
Code, to wit:

"MR. AQUINO (A). Thank you, Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of
those being deemed to be exempted from the taxing powers of the local government units. May we
know the reason why the transportation business is being excluded from the taxing powers of
the local government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that
provinces have the power to impose a tax on business enjoying a franchise at the rate of not more than
one-half of 1 percent of the gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government
units on the carrier business. Local government units may impose taxes on top of what is already
being imposed by the National Internal Revenue Code which is the so-called "common carriers tax." We
do not want a duplication of this tax, so we just provided for an exception under Section 125 [now
Sec. 137] that a province may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]

"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following :

It is clear that the legislative intent in excluding from the taxing power of the local government unit
the imposition of business tax against common carriers is to prevent a duplication of the so-called
"common carrier's tax."

xxxxxxxxx

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.
[G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., respondents.
DECISION

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's
wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due
to strong current. To avoid the complete sinking of the barge, a portion of the goods was transferred to
three other barges.[10]
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting
in the total loss of the remaining cargo.[11] A second Marine Protest was filed on September 7, 1990.[12]
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and
loaded on the three other barges.[13] The total proceeds from the sale of the salvaged cargo
wasP201,379.75.[14]

PUNO, J.:

On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and
another letter dated September 18, 1990 to the private respondent for the value of the lost cargo.

On appeal is the Court of Appeals May 11, 2000 Decision [1] in CA-G.R. CV No. 49195 and
February 21, 2001 Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the Regional
Trial Court of Manila which found petitioner liable to pay private respondent the amount of indemnity and
attorney's fees.

On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the petitioner, but
to no avail.

First, the facts.

On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.35[4] was shipped by Marubeni American Corporation of Portland, Oregon on board the
vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila,
evidenced by Bill of Lading No. PTD/Man-4. [5] The shipment was insured by the private respondent
Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under Marine
Cargo Risk Note RN 11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the
consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced
by Lighterage Receipt No. 0364[7] for delivery to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning
of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering
Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other barges
which arrived ahead of it while weathering out the storm that night. A few days after, the barge
developed a list because of a hole it sustained after hitting an unseen protuberance underneath the
water. The petitioner filed a Marine Protest on August 28, 1990. [8] It likewise secured the services of
Gaspar Salvaging Corporation which refloated the barge. [9] The hole was then patched with clay and
cement.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the
amount of indemnity, attorney's fees and cost of suit.[16] Petitioner filed its answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its
Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia Lighterage
& Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc. the sum
of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until fully satisfied plus
10% of the amount awarded as and for attorney's fees. Defendant's counterclaim is hereby
DISMISSED. With costs against defendant.[18]
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate
court affirmed the decision of the trial court with modification. The dispositive portion of its decision
reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the sense that the
salvage value of P201,379.75 shall be deducted from the amount of P4,104,654.22. Costs against
appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate
court in a Resolution promulgated on February 21, 2001.

Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate
court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A
QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE
APPLICABLE TO COMMON CARRIERS, THE LOSS OF THE CARGO IS,
THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE
(5) CASES ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO
EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND
CUSTODY OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence in its
care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed
and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged
to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does
not hold out its services to the general public.[20]
We disagree.
In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in Article
1732 of the Civil Code makes no distinction between one whose principal business activity is the

carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. We
also did not distinguish between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Further,
we ruled that Article 1732 does not distinguish between a carrier offering its services to thegeneral
public, and one who offers services or solicits business only from a narrow segment of the general
population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage [22] and it
offers its barges to the public for carrying or transporting goods by water for compensation.Petitioner is
clearly a common carrier. In De Guzman, supra,[23] we considered private respondent Ernesto Cendaa to
be a common carrier even if his principal occupation was not the carriage of goods for others, but that of
buying used bottles and scrap metal in Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not
have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.[24] The test to determine a common carrier is whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation rather
than the quantity or extent of the business transacted. [25] In the case at bar, the petitioner admitted that it
is engaged in the business of shipping and lighterage,[26] offering its barges to the public, despite its
limited clientele for carrying or transporting goods by water for compensation.[27]
On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.[28] They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.[29] To overcome the presumption of negligence in the case of
loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

1990, typhoon Loleng has already entered the Philippine area of responsibility. [32] A part of the testimony
of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:

(5) Order or act of competent public authority.

DIRECT-EXAMINATION BY ATTY. LEE:[33]
In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss
of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for
the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only
cause of the loss of the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss. [30] The evidence show that, even before the
towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object
while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed
to the typhoon. The partly-submerged vessel was refloated but its hole was patched with only clay and
cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further
damage. A portion of the cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue
Adjustment Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:[31]
xxxxxxxxx
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they tried to pull out
the barge from the place of the accident, and bring it to the anchor terminal for
safety, then after deciding if the vessel is stabilized, they tried to pull it to the
consignees warehouse, now while on route another accident occurred, now this time
the barge totally hitting something in the course.
q - You said there was another accident, can you tell the court the nature of the second
accident?

xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie
where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the
consignee) as I have said was in a hurry for their goods to be delivered at their
Wharf since they needed badly the wheat that was loaded in PSTSI-3. It was needed
badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.
xxxxxxxxx
CROSS-EXAMINATION BY ATTY. IGNACIO:[34]
xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I
correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.
q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - The sinking, sir.

q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?
a - Mostly it was related to the first accident because there was already a whole (sic) on the
bottom part of the barge.

a - It is already in an inner portion of Pasig River. The typhoon would be coming and it
would be dangerous if we are in the vicinity of Manila Bay.
q - But the fact is, the typhoon was incoming? Yes or no?
a - Yes.

xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee's wharf on September 5,

q - And yet as a standard operating procedure of your Company, you have to secure a sort
of Certification to determine the weather condition, am I correct?

a - Yes, sir.
q - So, more or less, you had the knowledge of the incoming typhoon, right?
a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are
already inside the vicinity or inside Pasig entrance, it is a safe place to tow
upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls
short of due diligence required from a common carrier. More importantly, the officers/employees
themselves of petitioner admitted that when the towing bits of the vessel broke that caused its sinking
and the total loss of the cargo upon reaching the Pasig River, it was no longer affected by the
typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human factor, i.e.,
negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 141910. August 6, 2002]
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING CORPORATION
and LAMBERT M. EROLES, respondents.
DECISION
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units
of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the
plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro Manila, to the
Central Luzon Appliances in Dagupan City. While the truck was traversing the north diversion road along
McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it
to fall into a deep canal, resulting in damage to the cargoes.

FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries,
Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of
the rights and interests of Concepcion Industries, Inc., sought reimbursement of the amount it had paid
to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for
damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional
Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive
hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a
common carrier. Respondents further claimed that the cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting its
evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on
the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss, explaining thusly:
Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove his own
affirmative allegation, xxx.
In the instant case, plaintiff did not present any single evidence that would prove that defendant is a
common carrier.
xxxxxxxxx
Accordingly, the application of the law on common carriers is not warranted and the presumption of fault
or negligence on the part of a common carrier in case of loss, damage or deterioration of goods during
transport under 1735 of the Civil Code is not availing.
Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was
subrogated and the owner of the vehicle which transports the cargo are the laws on obligation and
contract of the Civil Code as well as the law on quasi delicts.
Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict
provides for some presumption of negligence but only upon the attendance of some
circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has
been negligent if at the time of the mishap, he was violating any traffic regulation.
Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence, the
presumption of negligence is not obtaining.

Considering that plaintiff failed to adduce evidence that defendant is a common carrier and defendants
driver was the one negligent, defendant cannot be made liable for the damages of the subject cargoes.[2]
The subsequent motion for reconsideration having been denied, [3] plaintiff interposed an appeal to
the Court of Appeals, contending that the trial court had erred (a) in holding that the appellee corporation
was not a common carrier defined under the law and existing jurisprudence; and (b) in dismissing the
complaint on a demurrer to evidence.

I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED
UNDER THE LAW AND EXISTING JURISPRUDENCE.
II

The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate
court, in its decision of 10 June 1999, [4] discoursed, among other things, that -

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY

BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT
SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND
POSSESSION.

"x x x in order for the presumption of negligence provided for under the law governing common carrier
(Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a common
carrier. Should the appellant fail to prove that the appellee is a common carrier, the presumption would
not arise; consequently, the appellant would have to prove that the carrier was negligent.

III

"x x x x x x x x x
"Because it is the appellant who insists that the appellees can still be considered as a common carrier,
despite its `limited clientele, (assuming it was really a common carrier), it follows that it (appellant) has
the burden of proving the same. It (plaintiff-appellant) `must establish his case by a preponderance of
evidence, which means that the evidence as a whole adduced by one side is superior to that of the
other. (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA 175). This, unfortunately, the
appellant failed to do -- hence, the dismissal of the plaintiffs complaint by the trial court is justified.

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be
amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering
or offering its services to no other individual or entity, cannot be considered a common carrier. Common
carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their
services to the public,[8] whether to the public in general or to a limited clientele in particular, but never
on an exclusive basis.[9] The true test of a common carrier is the carriage of passengers or goods,
providing space for those who opt to avail themselves of its transportation service for a fee. [10] Given
accepted standards, GPS scarcely falls within the term common carrier.

"x x x x x x x x x
The above conclusion nothwithstanding, GPS cannot escape from liability.
"Based on the foregoing disquisitions and considering the circumstances that the appellee trucking
corporation has been `its exclusive contractor, hauler since 1970, defendant has no choice but to comply
with the directive of its principal, the inevitable conclusion is that the appellee is a private carrier.
"x x x x x x x x x
"x x x the lower court correctly ruled that 'the application of the law on common carriers is not warranted
and the presumption of fault or negligence on the part of a common carrier in case of loss, damage or
deterioration of good[s] during transport under [article] 1735 of the Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and valid reasons."[5]
Petitioner's motion for reconsideration was likewise denied; [6] hence, the instant petition,[7] raising
the following issues:

In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.[11] The law, recognizing the obligatory force
of contracts,[12] will not permit a party to be set free from liability for any kind of misperformance of the
contractual undertaking or a contravention of the tenor thereof. [13] A breach upon the contract confers
upon the injured party a valid cause for recovering that which may have been lost or suffered. The
remedy serves to preserve the interests of the promisee that may include his expectation interest, which
is his interest in having the benefit of his bargain by being put in as good a position as he would have
been in had the contract been performed, or his reliance interest, which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as good a position as he would
have been in had the contract not been made; or his restitution interest, which is his interest in having
restored to him any benefit that he has conferred on the other party. [14] Indeed, agreements can
accomplish little, either for their makers or for society, unless they are made the basis for action. [15] The
effect of every infraction is to create a new duty, that is, to make recompense to the one who has been
injured by the failure of another to observe his contractual obligation [16] unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that of the diligence of a good father

of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability.

however, that the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.

Respondent trucking corporation recognizes the existence of a contract of carriage between it and
petitioners assured, and admits that the cargoes it has assumed to deliver have been lost or damaged
while in its custody. In such a situation, a default on, or failure of compliance with, the obligation in this
case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of
lack of care and corresponding liability on the part of the contractual obligor the burden being on him to
establish otherwise. GPS has failed to do so.

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant
shall be deemed to have waived the right to present evidence. [24] Thus, respondent corporation may no
longer offer proof to establish that it has exercised due care in transporting the cargoes of the assured
so as to still warrant a remand of the case to the trial court.

Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between
petitioners principal and defendant, may not be held liable under the agreement. A contract can only
bind the parties who have entered into it or their successors who have assumed their personality or their
juridical position.[17] Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such
contract can neither favor nor prejudice a third person. Petitioners civil action against the driver can only
be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to
prove negligence or fault on the part of the defendant.[18]
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant
liable where the thing which caused the injury complained of is shown to be under the latters
management and the accident is such that, in the ordinary course of things, cannot be expected to
happen if those who have its management or control use proper care. It affords reasonable evidence, in
the absence of explanation by the defendant, that the accident arose from want of care. [19] It is not a rule
of substantive law and, as such, it does not create an independent ground of liability. Instead, it is
regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and
relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply places
on the defendant the burden of going forward with the proof. [20] Resort to the doctrine, however, may be
allowed only when (a) the event is of a kind which does not ordinarily occur in the absence of
negligence; (b) other responsible causes, including the conduct of the plaintiff and third persons, are
sufficiently eliminated by the evidence; and (c) the indicated negligence is within the scope of the
defendant's duty to the plaintiff.[21] Thus, it is not applicable when an unexplained accident may be
attributable to one of several causes, for some of which the defendant could not be responsible.[22]
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the circumstances
and nature of the occurrence and not from the nature of the relation of the parties. [23] Nevertheless, the
requirement that responsible causes other than those due to defendants conduct must first be
eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure (noncontractual) tort since obviously the presumption of negligence in culpa contractual, as previously so
pointed out, immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver,
whose liability in a civil action is predicated on culpa acquiliana, while he admittedly can be said to have
been in control and management of the vehicle which figured in the accident, it is not equally shown,

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati
City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as
respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and decision of the
appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is
hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in the
amount of P204,450.00. No costs.
SO ORDERED.
[G.R. No. 125290. August 9, 2000]
MARIO BASCO y SALAO, petitioner, vs. COURT OF APPEALS and THE PEOPLE OF
THE PHILIPPINES, respondents.
RESOLUTION
KAPUNAN, J.:
This petition for review on certiorari before us seeks the reversal of the Court of Appeals
Resolutions dated 29 September 1995 and 7 June 1996, which respectively denied
petitioners petition for relief from judgment under Rule 38 of the Revised Rules of Court and
the motion for reconsideration filed therein for lack of merit.
The antecedents leading to the present controversy are as follows:
On 24 August 1992, petitioner was charged with Qualified Illegal Possession of Firearm and
Illegal Possession of Firearm before the Regional Trial Court of Manila (Branch XLI) under
the following informations:
INFORMATION
The undersigned accuses MARIO BASCO y SALAO of the crime of Qualified
Illegal Possession of Firearm, committed as follows:

That on or about May 3, 1992, in the City of Manila,

Philippines, the said accused, not being allowed or
authorized by law to keep, possess and carry a firearm, did
then and there willfully, unlawfully and knowingly have in his
possession, control and custody a firearm, to wit:

1.....In Criminal Case No. 92-109511, finding the accused MARIO BASCO y
SALAO guilty beyond reasonable doubt for the crime of Illegal Possession of
Firearm which he used to kill Rolando Buenaventura, Sr. alias Olay and hereby
sentences him to suffer the penalty of Reclusion Perpetua. With costs against the
accused.

one (1) cal. .38 revolver, Squire Bingham bearing Serial No.
183110 loaded with one (1) live ammunition and five (5)
spent shells

2.....In Criminal Case No. 92-109512, finding the accused MARIO BASCO Y
SALAO guilty beyond reasonable doubt for the violation of Section 261 (q) of
Batas Pambansa Blg. 881, in relation to Section 5 of Republic Act No. 7166 and
hereby sentences the accused to suffer an indeterminate sentence ranging from
one (1) year as minimum to three (3) years as maximum. Costs against the
accused.

without first obtaining the necessary license and/or permit to carry and possess the same and
in connection and by reason of such possession, did then and there willfully, unlawfully and
feloniously, with intent to kill, fire and shoot one Rolando Buenaventura y Manuel, thus
inflicting upon the latter mortal gunshot wounds and injuries which caused the death of the
latter as a consequence.

SO ORDERED.[3]

INFORMATION

Petitioner received a copy of the trial courts decision on 22 March 1993. Thereafter, on 6 April
1993, petitioners counsel filed a Motion for Reconsideration of the said decision. However, in
the notice of hearing, petitioners counsel failed to indicate the date and time of the motions
hearing as explicitly required by Sections 4 and 5, Rule 15 of the Rules of Court.

The undersigned accuses MARIO BASCO y SALAO of violation of Section 261(q),

B.P. 881 in relation to Section 31, RA 7166, committed as follows:

When petitioners counsel realized his error, he submitted a Notification and Manifestation on
14 April 1993, which reads, thus:

Contrary to law.[1]

That on or about May 3, 1992, in the City of Manila,

Philippines, the said accused, did then and there willfully,
unlawfully and knowingly have in his possession and under
his custody and control a cal. .38 revolver "Squire Bingham"
bearing Serial Number 183110 by then and there carrying
the same along Cabangis Street, Tondo, this City, which is a
public place on the aforesaid date which is covered by an
Election period, without first securing the written authority
from the COMELEC, as provided for by Section 261(q), B.P.
881 in relation to Section 31, RA 7166.
Contrary to law.[2]
On 9 September 1992, upon arraignment, petitioner pleaded not guilty and the trial on the
merits ensued.
On 15 March 1993, the trial court rendered its decision finding petitioner guilty as charged
and sentenced him as follows:
WHEREFORE, judgment is hereby rendered as follows:

NOTIFICATION AND MANIFESTATION

FISCAL
Trial
Manila
BRANCH
Branch
Manila

ZENAIDA

CLERK

LAGUILLES
Prosecutor

OF

COURT
XLI

GREETINGS:
Accused intended to submit for this Courts consideration and approval on Friday,
23 April 1993 at 8:30 in the morning the Motion for Reconsideration dated 5 April
1993. However, due to inadvertence brought about by the need to rush the
finalization of this motion, which has been delayed by the spate of prolonged
power outages, this setting was omitted.

Accused therefore serves notice that he is submitting the Motion for

Reconsideration dated 5 April 1993 for this Courts consideration and approval on
Friday, 23 April 1993 at 8:30 a.m.

xxx
As can be readily seen, accused had up to April 6, 1993 within which to file his
Motion for Reconsideration or Appeal.

Makati, for Manila, 13 April 1993.[4]

On 28 April 1993, the trial court issued the following order:
ORDER
The record shows that the judgment in this case was promulgated last March 22,
1993. In other words, accused had up to April 6, 1993 within which to perfect an
appeal.
Last April 5, 1993, the accused through a new counsel filed a Motion for
Reconsideration without the notice required under Secs. 4 and 5 of Rule 15 of the
Rules of Court.

While it is true that judgments or orders may be set aside due to fraud, accident,
mistake, or excusable negligence (Sec. 2, Rule 38), "a motion which does not
meet the requirements of Sections 4 and 5 of Rule 15 of the Revised Rules of
Court is a worthless piece of paper which the clerks have no right to receive and
the respondent court a quo has no authority to act upon." (Lucila B. Vda. de
Azarias, petitioner, vs. The Honorable Manolo L. Madela, et al., 38 SCRA 35.)
The failure or defect in the notice of hearing in said motion cannot be cured by
subsequent action of the court, for as held in Andrada, et al. vs. The Honorable
Court of Appeals, et al., 60 SCRA 379, the Supreme Court said:
"This Court has repeatedly made it clear not only that a
notice addressed to the Clerk of Court requesting him to set
the foregoing motion for the consideration and approval of
this Honorable Court immediately upon receipt hereof does
not comply with the requirements of Section 5 of Rule 15 but
also that subsequent action of the court thereon does not
cure the flaw, for a motion with a notice fatally defective is a
useless piece of paper."

Considering that a motion that does not contain a notice of hearing is but a mere
scrap of paper, it presents no question which merits the attention and
consideration of the Court, it is not even a motion for it does not comply with the
rules and hence the Clerk has no right to receive it; the Court did not act on the
motion.
Last April 14, 1993, accused through counsel filed with the Court a Notification and
Manifestation whereby it prayed that the Motion for Reconsideration be set for
hearing today. Considering that the motion above adverted did not suspend the
running of the period to appeal; that the judgment in this case has become final
and executory, the Motion for Reconsideration and the Notification and
Manifestation filed by the accused are hereby denied.
SO ORDERED.

[5]

In response thereto, petitioner on 4 May 1993 filed a petition for relief from judgment with the
Regional Trial Court pursuant to Rule 38 of the Rules of Court. He contended that his
inadvertence was due to the perennial brownouts being experienced across the country
during that time and should, thus, be considered as a mistake or excusable negligence.
Technical rules of procedure, he further asserted, should not be applied strictly when to do so
would result in manifest injustice.[6]
On 12 July 1993, the trial court issued an order denying the petition for relief for lack of merit.
Said order is hereunder reproduced in part:

The notice of hearing in the motion for reconsideration addressed to the Branch
Clerk of Court states: "Please submit the foregoing Motion to the Honorable Court
for its consideration and approval immediately upon receipt hereof." The same is
patently a defective and fatal notice.
The subsequent filing of the Notification and Manifestation that said Motion would
be submitted for consideration and approval on Friday, 23 April 1993 at 8:30
oclock in the morning did not cure the defect in the notice of hearing in the motion.
As already stated, the last day for accused to file an appeal was April 6, 1993. As
of April 7, 1993, the period to file an appeal already lapsed so that, curing the
defective notice of hearing on April 14, 1993, granting that the subsequent
notification cured the defect, was no longer possible.
WHEREFORE, premises considered, finding the Petition for Relief from Order of
28 April 1993 to be without merit, the same is hereby DENIED and let accused be
committed to the Director of Prisons, Muntinlupa, Metro-Manila.
SO ORDERED.[7]

Petitioner appealed the aforequoted order to the Court of Appeals on 30 July 1993. On 29
September 1995, the Court of Appeals dismissed petitioners appeal on the ground of lack of
jurisdiction through the following resolution:

There is no longer any justification for allowing transfers of

erroneous appeals from one court to another, much less for
tolerating continued ignorance of the law on appeals. It thus
behooves every attorney seeking review and reversal of a
judgment or order promulgated against his client, to
determine clearly the errors he believes may be ascribed to
the judgment or order, whether of fact or of law, then to
ascertain which court properly has appellate jurisdiction; and
finally, to observe scrupulously the requisites for appeal
prescribed by law, with keen awareness that any error or
imprecision in compliance therewith may well be fatal to his
clients cause.

RESOLUTION
This "Appeal on Certiorari" purporting to be an appeal of a special action is
actually an appeal from the March 15, 1993 decision of Branch 41 of the Regional
Trial Court of Manila convicting accused-appellant, Mario Basco, in Criminal
Cases Nos. 92-109511 and 92-109512, for Qualified Illegal Possession of
Firearms and Violation of Section 261 (9) of Batas Pambansa Blg. 881 in relation
to Section 31, and for violation of Republic Act 7166, respectively.

WHEREFORE, the appeal is hereby DISMISSED.

A perusal of the records of the case discloses that no special civil action was filed
with the court a quo that may be made the subject of this appeal. The only
incidents submitted to it for resolution were the Motion for Reconsideration of the
March 15, 1993 decision and Petition for Relief from Order which were both
denied.
Since accused appellant was found guilty beyond reasonable doubt of the crimes
charged and was sentenced to suffer the penalty of reclusion perpetua in Criminal
Case No. 92-109511, and imprisonment of One (1) Year to Three (3) Years in
Criminal Case No. 92-109512, his appeal falls under the exclusive appellate
jurisdiction of the Supreme Court (Article VIII, Section 5, par. 2[d], Constitution).
We are thus constrained to dismiss this appeal on the ground of lack of
jurisdiction.

SO ORDERED.[8]
Petitioners motion for reconsideration was, likewise, denied by the Court of Appeals in its
resolution dated 7 June 1996. The Court of Appeals ruled, thus:
xxx
Accused-appellant moors his motion upon the ground that his appeal was not from
the judgment of conviction but rather from the court a quos order denying his
petition for relief from judgment.
We find this argument to be untenable. A Petition for Relief from Judgment is an
extraordinary remedy.

We cannot certify the appeal to the High Tribunal as it is not a case contemplated
by Section 13 of Rule 124 of the Revised Rules of Court and to do so, would
contravene the guidelines set forth in Supreme Court Circular No. 2-90.
(d)....No transfer of appeals erroneously taken No transfers
of appeals taken to the Supreme Court or to the Court of
Appeals to whichever of these Tribunals has appropriate
appellate jurisdiction will be allowed, continued ignorance of
willful disregard of the law on appeals will not be tolerated.
(Paragraph [d], Sub-Head 4 of Circular No. 2-90),
which circular is based from the High Tribunals March 1, 1990 minute resolution in
the case of Anacleto Murillo v. Rodolfo Consul, (UDK-9748, 183 SCRA xi, xvii,
xviii) where it emphatically declared that:

Relief from judgment or order is premised on equity and it is

granted only in exceptional circumstances, as when a
judgment or order is entered, or any other proceeding is
taken through fraud, accident, mistake or excusable
negligence. (Director of Lands v. Rommaban, 131 SCRA
431, 437 [1984]).
Appellant has cited us to no ground to enable him to avail of this remedy. What is
evident is that accused-appellant resorted to this remedy only to retrieve his lost
appeal.
WHEREFORE, the Motion for Reconsideration is hereby DENIED for lack of merit.
SO ORDERED.[9]

Hence, this petition for review on certiorari.

relief from judgment is usually not regarded with favor and thus, is allowed only in exceptional
cases where there are no other adequate and available remedies.[14]

Petitioner raises three issues for the Courts resolution:

The Court, in Samoso v. CA,[15] further elucidates:
A.....WHETHER OR NOT THE PROSECUTION HAS PROVED THE GUILT OF
THE PETITIONER BEYOND REASONABLE DOUBT.
B.....WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT
PETITIONERS APPEAL FROM THE DENIAL OF HIS PETITION FOR RELIEF
SHOULD HAVE BEEN LODGED WITH THIS HONORABLE COURT.
C.....WHETHER OR NOT THE PETITIONER HAS SUCCEEDED IN SHOWING
HIS ENTITLEMENT TO RELIEF.[10]
The core issue in this case is whether or not petitioners plea for annulment of judgment under
Rule 38 of the Rules of Court is meritorious.
At the outset, it bears stressing that the instant controversy does not concern an appeal from
the judgment of conviction itself. The Court of Appeals evidently erred in dismissing
petitioners appeal on the ground of lack of jurisdiction. It ruled that since petitioner was meted
the sentence of reclusion perpetua, his appeal falls under the Supreme Courts exclusive
appellate jurisdiction in accordance with Article VIII, Section 5 (2)[d] of the 1987 Constitution
of the Philippines.[11]
The case brought to the Court of Appeals involved an appeal from the trial courts denial of
petitioners petition for relief from judgment. When the Court of Appeals dismissed the appeal
on 29 September 1995, the applicable provision was Section 2, Rule 41 of the Rules of
Court[12] governing appeals from the Regional Trial Courts to the Court of Appeals. Said
provision specifically stated that:
Sec. 2. Judgments or orders subject to appeal.xxx
A judgment denying relief under Rule 38 is subject to appeal, and in the course
thereof, a party may also assail the judgment on the merits, upon the ground that it
is not supported by the evidence or it is contrary to law.
In Service Specialists, Inc. v. Sheriff of Manila,[13] the Court confirmed that "a judgment or
order denying relief under Rule 38 is final and appealable, unlike an order granting such relief
which is interlocutory." Hence, jurisdiction then properly belonged to the Court of Appeals.
The issue of jurisdiction aside, the Court has emphasized that petition for relief from judgment
is a unique remedy in the sense that it is based on the principle of equity and constitutes the
petitioners final chance to prosecute or defend his cause. Being an act of grace, a petition for

Relief from judgment under Rule 38 of the Rules of Court is a remedy provided by
law to any person against whom a decision or order is entered into through fraud,
accident, mistake or excusable negligence. It is of equitable character, allowed
only in exceptional cases as when there is no other available or adequate remedy.
When a party has another adequate remedy available to him, which was either a
motion for new trial or appeal from adverse decisions of the lower court, and he
was not prevented by fraud, accident, mistake or excusable negligence from filing
such motion or taking the appeal he cannot avail himself of the relief provided in
Rule 38 (Rizal Commercial Banking Corporation v. Lood, 110 SCRA 205 [1981];
Ibabao v. Intermediate Appellate Court, 150 SCRA 76 [1987]).
Petitioner, however, implores the Court to be liberal in the application of technical rules of
procedure (which in this instance refer to the requisites of a proper notice of hearing) and
cites a plethora of cases[16] in support thereof. He reasons out that the defective notice of
hearing in his motion for reconsideration was due to the day-long brown-outs that plagued the
metropolis and which caused his counsel to have the above pleading prepared outside the
law office. In view of this peculiar circumstance, he submits that his counsels failure to specify
the date and time for the hearing of his motion for reconsideration should rightly be deemed
excusable negligence.
Petitioner claims that whatever defect there was in his motion was cured by the notification
and manifestation which he filed even before the trial court issued its order denying the
motion for reconsideration for being a mere scrap of paper.
Finally, petitioner points that his conviction carries a prison term for life which, standing alone,
is a circumstance exceptional enough to allow him opportunity to challenge the judgment of
conviction against him for reasons of equity and substantial justice.[17]
We are acutely aware of the judicial mandate that:
Rules of court prescribing the time within which certain acts must be done, or
certain proceedings taken, are absolutely indispensable to the prevention of
needless delays and the orderly and speedy discharge of judicial business. Strict
compliance with such rules is mandatory and imperative.[18]
With respect to notices of hearing of motions, this has been more often than not the Courts
guiding principle. We have time and again given warning that a notice of hearing which does
not comply with the requirements of Sections 4, 5 and 6, Rule 15 of the Rules of Court, [19] is a

worthless piece of paper and would not merit any consideration from the courts. Recently, this
rule was reiterated and upheld in People of the Philippines vs. CA, et al.[20] Thus:
Under Section 4 of Rule 15 of the Rules of Court, the applicable law during the
pendency of the case before the trial court, every written motion must be set for
hearing by the applicant and served together with the notice of hearing thereof, in
such a manner as to ensure receipt by the other party at least three days before
the date of hearing, unless the court, for good cause, sets the hearing on shorter
notice. Under Sections 5 and 6 thereof, the notice of hearing shall be addressed to
the parties concerned and shall specify the time and date of the hearing of the
motion; no motion shall be acted upon by the court without proof of service of the
notice thereof, except when the court is satisfied that the rights of the adverse
party are not affected.
A motion without a notice of hearing is pro forma, a mere scrap of paper that does
not toll the period to appeal, and upon expiration of the 15-day period, the
questioned order or decision becomes final and executory. The rationale behind
this rule is plain: unless the movant sets the time and place of hearing, the court
will be unable to determine whether the adverse party agrees or objects to the
motion, and if he objects, to hear him on his objection, since the rules themselves
do not fix any period within which he may file his reply or opposition.
A supplemental pleading subsequently filed to remedy the previous absence of
notice will not cure the defect nor interrupt the tolling of the prescribed period
within which to appeal. InCledera v. Sarmiento, citing Manila Surety v. Bath, this
Court ruled:
We are not impressed by the argument that the supplement
filed by the appellants on May 30 should be deemed
retroactive as of the date the motion for reconsideration was
filed and, therefore, cured the defect therein. To so consider
it would be to put a premium on negligence and subject the
finality of judgments to the forgetfulness or whims of partieslitigants and their lawyers. This of course would be
intolerable in a well-ordered judicial sytsem.
[A]ppellants were or should have been alerted to the fact
that their motion for reconsideration of May 12 did not
interrupt the period for appeal when they received the courts
order of May 21, 1959, wherein it was stated that what
appellants had filed was not even a motion and presented
no question which the court could decide.

Nonetheless, procedural rules were conceived to aid the attainment of justice. If a stringent
application of the rules would hinder rather than serve the demands of substantial justice, the
former must yield to the latter. Recognizing this, Section 2, Rule 1 of the Rules of Court
specifically provides that:
Sec. 2. Construction. These rules shall be liberally construed in order to promote
their object and to assist the parties in obtaining just, speedy, and inexpensive
determination of every action and proceeding. (Underscoring ours.)
The liberal construction of the rules on notice of hearing is exemplified in Goldloop
Properties, Inc. v. CA:[21]
Admittedly, the filing of respondent-spouses motion for reconsideration did not
stop the running of the period of appeal because of the absence of a notice of
hearing required in Secs. 3, 4 and 5, Rule 15, of the Rules of Court. As we have
repeatedly held, a motion that does not contain a notice of hearing is a mere scrap
of paper; it presents no question which merits the attention of the court. Being a
mere scrap of paper, the trial court had no alternative but to disregard it. Such
being the case, it was as if no motion for reconsideration was filed and, therefore,
the reglementary period within which respondent-spouses should have filed an
appeal expired on 23 November 1989.
But, where a rigid application of that rule will result in a manifest failure or
miscarriage of justice, then the rule may be relaxed, especially if a party
successfully shows that the alleged defect in the questioned final and executory
judgment is not apparent on its face or from the recitals contained therein.
Technicalities may thus be disregarded in order to resolve the case. After all, no
party can even claim a vested right in technicalities. Litigations should, as much as
possible, be decided on the merits and not on technicalities.
Hence, this Court should not easily allow a party to lose title and ownership over a
party worth P4,000,000.00 for a measly P650,000.00 without affording him ample
opportunity to prove his claim that the transaction entered into was not in fact an
absolute sale but one of mortgage. Such grave injustice must not be permitted to
prevail on the anvil of technicalities.
Likewise, in Samoso v. CA,[22] the Court ruled:
But time and again, the Court has stressed that the rules of procedure are not to
be applied in a very strict and technical sense. The rules of procedure are used
only to help secure not override substantial justice (National Waterworks &
Sewerage System vs. Municipality of Libmanan, 97 SCRA 138 [1980]; Gregorio v.
Court of Appeals, 72 SCRA 120 [1976]). The right to appeal should not be lightly
disregarded by a stringent application of rules of procedure especially where the

appeal is on its face meritorious and the interests of substantial justice would be
served by permitting the appeal (Siguenza v. Court of Appeals, 137 SCRA 570
[1985]; Pacific Asia Overseas Shipping Corporation v. National Labor Relations
Commission, et al., G.R. No. 76595, May 6, 1998). x x x.
In the instant case, it is petitioners life and liberty that is at stake. The trial court has
sentenced him to suffer the penalty of reclusion perpetua and his conviction attained finality
on the basis of mere technicality. It is but just, therefore, that petitioner be given the
opportunity to defend himself and pursue his appeal. To do otherwise would be tantamount to
grave injustice. A relaxation of the procedural rules, considering the particular circumstances
herein, is justified.
Considering that there is sufficient evidence before the Court to enable it to resolve the
fundamental issues, we will dispense with the regular procedure of remanding the case to the
lower court, in order to avoid further delays in the resolution of the case.[23]
WHEREFORE, premises considered, the petition is given DUE COURSE. The 12 July 1993
Order of the trial court denying the petition for relief from judgment and the Court of Appeals
Resolution dated 29 September 1995 and 7 June 1996 dismissing petitioners appeal from
said 12 July 1993 Order are hereby REVERSED and SET ASIDE. Petitioner and the Solicitor
General are required to file with this Court their respective briefs in support of their positions
within the period prescribed in the rules.
SO ORDERED.
[G.R. No. 111127. July 26, 1996]
MR. & MRS. ENGRACIO FABRE, JR. * and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS,
THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO,
JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA,
ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN
GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO,
ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA,
ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA,
TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN,
MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ,
LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.
DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals [1] in CA-GR No.
28245, dated September 30, 1992, which affirmed with modification the decision of the Regional Trial
Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private
respondent Amyline Antonio, and its resolution which denied petitioners motion for reconsideration for
lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they operated in
Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two
weeks. His job was to take school children to and from the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to
La Union and back in consideration of which private respondent paid petitioners the amount of
P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did not leave the Tropical Hut at
the corner of Ortigas Avenue and EDSA until 8:00 oclock in the evening. Petitioner Porfirio Cabil drove
the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip
to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30
that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction,
which he described as siete. The road was slippery because it was raining, causing the bus, which was
running at the speed of 50 kilometers per hour, to skid to the left road shoulder.The bus hit the left traffic
steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and
landed on its left side, coming to a full stop only after a series of impacts.The bus came to rest off the
road. A coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of
the bus and pinned down by a wooden seat which came off after being unscrewed. It took three persons
to safely remove her from this position. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was
not familiar with the area and he could not have seen the curve despite the care he took in driving the
bus, because it was dark and there was no sign on the road. He said that he saw the curve when he was
already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too
late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of
their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with
the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the

latters fence. On the basis of Escanos affidavit of desistance the case against petitioners Fabre was
dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed
from the waist down. During the trial she described the operations she underwent and adduced evidence
regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to the
Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not adequately equipped, she was
transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray
was taken and the damage to her spine was determined to be too severe to be treated there. She was
therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical
Center where she underwent an operation to correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a long distance
trip and that the driver was properly screened and tested before being admitted for employment. Indeed,
all the evidence presented have shown the negligent act of the defendants which ultimately resulted to
the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were
the only ones who adduced evidence in support of their claim for damages, the Court is therefore not in
a position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs.
Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the
Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs the following
amount:

SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but
dismissed it with respect to the other plaintiffs on the ground that they failed to prove their respective
claims. The Court of Appeals modified the award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise due
care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively negligent. Hence,
this petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED
BY PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO
WHAT EXTENT.

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.

Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of P600,000.00 is
unconscionable and highly speculative. Amyline Antonio testified that she was a casual employee of a
company called Suaco, earning P1,650.00 a month, and a dealer of Avon products, earning an average
of P1,000.00 monthly. Petitioners contend that as casual employees do not have security of tenure, the
award of P600,000.00, considering Amyline Antonios earnings, is without factual basis as there is no
assurance that she would be regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory that
petitioners are liable for breach of contract of carriage or culpa contractual or on the theory ofquasi

delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the
relation of passenger and carrier is contractual both in origin and nature, nevertheless the act that
breaks the contract may be also a tort.[2] In either case, the question is whether the bus driver, petitioner
Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the
bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their
employee is fully supported by the evidence on record. These factual findings of the two courts we
regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil
that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was
dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead.However, it is
undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when
he noticed the curve some 15 to 30 meters ahead.[3] By then it was too late for him to avoid falling off the
road. Given the conditions of the road and considering that the trip was Cabils first one outside of
Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony[4] that the vehicles
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it was dark,
that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20
kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should
be held liable for the injuries suffered by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervision of their
employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional drivers license. The employer should also examine the applicant for his qualifications,
experience and record of service.[5] Due diligence in supervision, on the other hand, requires the
formulation of rules and regulations for the guidance of employees and the issuance of proper
instructions as well as actual implementation and monitoring of consistent compliance with the rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the St.
Scholasticas College in Metro Manila.[7] They had hired him only after a two-week apprenticeship. They
had tested him for certain matters, such as whether he could remember the names of the children he
would be taking to school, which were irrelevant to his qualification to drive on a long distance travel,
especially considering that the trip to La Union was his first. The existence of hiring procedures and
supervisory policies cannot be casually invoked to overturn the presumption of negligence on the part of
an employer.[8]
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregations delayed meeting) could have averted the mishap and (2) under the contract, the WWCF

was directly responsible for the conduct of the trip. Neither of these contentions hold water. The hour of
departure had not been fixed. Even if it had been, the delay did not bear directly on the cause of the
accident. With respect to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he
wishes to be conveyed, but exercises no other control over the conduct of the driver, is not responsible
for acts of negligence of the latter or prevented from recovering for injuries suffered from a collision
between the automobile and a train, caused by the negligence either of the locomotive engineer or the
automobile driver.[9]
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did
not have to be engaged in the business of public transportation for the provisions of the Civil Code on
common carriers to apply to them. As this Court has held:[10]
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public.
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in
local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the general public, i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof that they
exercised the diligence of a good father of the family in the selection and supervision of their
employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence or
wilful acts of the formers employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the
appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify finding
them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the
Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate.[11] To the contrary, the award of P500,000.00 for
compensatory damages which the Regional Trial Court made is reasonable considering the contingent
nature of her income as a casual employee of a company and as distributor of beauty products and the
fact that the possibility that she might be able to work again has not been foreclosed.In fact she testified
that one of her previous employers had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court of Appeals do
not sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported
by evidence in the records of this case. Viewed as an action for quasi delict, this case falls squarely
within the purview of Art. 2219(2) providing for the payment of moral damages in cases of quasi
delict. On the theory that petitioners are liable for breach of contract of carriage, the award of moral
damages is authorized by Art. 1764, in relation to Art. 2220, since Cabils gross negligence amounted to
bad faith.[12] Amyline Antonios testimony, as well as the testimonies of her father and co-passengers, fully
establish the physical suffering and mental anguish she endured as a result of the injuries caused by
petitioners negligence.
The award of exemplary damages and attorneys fees was also properly made. However, for the
same reason that it was error for the appellate court to increase the award of compensatory damages,
we hold that it was also error for it to increase the award of moral damages and reduce the award of
attorneys fees, inasmuch as private respondents, in whose favor the awards were made, have not
appealed.[13]
As above stated, the decision of the Court of Appeals can be sustained either on the theory
of quasi delict or on that of breach of contract. The question is whether, as the two courts below held,
petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally to
private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals,[14]on facts
similar to those in this case, this Court held the bus company and the driver jointly and severally liable
for damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals[15] a driver found negligent in failing to stop the bus in order to let off passengers when a fellow
passenger ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered
injuries, was held also jointly and severally liable with the bus company to the injured passengers.

already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the
drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some
members of the Court, though, are of the view that under the circumstances they are liable on quasidelict.[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this Court exonerated the
jeepney driver from liability to the injured passengers and their families while holding the owners of the
jeepney jointly and severally liable, but that is because that case was expressly tried and decided
exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and Carreon
[the jeepney owners] were negligent. However, its ruling that spouses Mangune and Carreon are jointly
and severally liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with
the carrier in case of breach of the contract of carriage. The rationale behind this is readily
discernible. Firstly, the contract of carriage is between the carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively responsible therefore to the passenger, even if such breach
be due to the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81,
April 29, 1966, 16 SCRA 742) . . .[22]
As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out
their claim against the carrier and the driver exclusively on one theory, much less on that of breach of
contract alone. After all, it was permitted for them to allege alternative causes of action and join as many
parties as may be liable on such causes of action [23] so long as private respondent and her co-plaintiffs
do not recover twice for the same injury. What is clear from the cases is the intent of the plaintiff there to
recover from both the carrier and the driver, thus justifying the holding that the carrier and the driver were
jointly and severally liable because their separate and distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to the
award of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent
Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;

The same rule of liability was applied in situations where the negligence of the driver of the bus on
which plaintiff was riding concurred with the negligence of a third party who was the driver of another
vehicle, thus causing an accident. In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v.
Intermediate Appellate Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,[18]the bus
company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and
severally held liable to the injured passenger or the latters heirs. The basis of this allocation of liability
was explained in Viluan v. Court of Appeals,[19] thus:

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline

Antonio;

Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while
that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we

5) 25% of the recoverable amount as attorneys fees; and

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

6) costs of suit.

On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring Corporation,
having found the latter to have merely delivered what it received from the carrier in the same condition
and quality, and ordered American Steamship Agencies to pay plaintiff P14,870.71 with legal interest
plus P1,000 attorney's fees. Said court cited the following grounds:

SO ORDERED.
G.R. No. L-25599

April 4, 1968

HOME
INSURANCE
vs.
AMERICAN
STEAMSHIP
AGENCIES,
INC.
and
CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.

COMPANY, plaintiff-appellee,
LUZON

STEVEDORING

(a) The non-liability claim of American Steamship Agencies under the charter party contract is
not tenable because Article 587 of the Code of Commerce makes the ship agent also civilly
liable for damages in favor of third persons due to the conduct of the captain of the carrier;
(b) The stipulation in the charter party contract exempting the owner from liability is against
public policy under Article 1744 of the Civil Code;

plaintiff-appellee.

(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at
fault or negligent under Article 1735 of the Civil Code unless they prove extraordinary
diligence, and they cannot by contract exempt themselves from liability resulting from their
negligence or that of their servants; and

"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740 jute
bags of Peruvian fish meal through SS Crowborough, covered by clean bills of lading Numbers 1 and 2,
both dated January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San Miguel
Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on March 7,
1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo was
delivered to consignee San Miguel Brewery Inc., there were shortages amounting to P12,033.85,
causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance Company and
the American Steamship Agencies, owner and operator of SS Crowborough.

(d) When goods are delivered to the carrier in good order and the same are in bad order at
the place of destination, the carrier is prima facie liable.

William
H.
Quasha
and
Associates
Ross, Selph, Salcedo and Associates for defendant-appellant.

for

BENGZON, J.P., J.:

Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 the
insurance value of the loss, as full settlement of the claim. Having been refused reimbursement by both
the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance Company, as
subrogee to the consignee, filed against them on March 6, 1964 before the Court of First Instance of
Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney's fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in the
same quantity and quality that it had received the same from the carrier. It also claimed that plaintiff's
claim had prescribed under Article 366 of the Code of Commerce stating that the claim must be made
within 24 hours from receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the provisions of the Charter party
referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss or damage
of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the goods and that as a
mere forwarding agent, it was not responsible for losses or damages to the cargo.

Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal
brings forth for determination this legal issue: Is the stipulation in the charter party of the owner's nonliability valid so as to absolve the American Steamship Agencies from liability for loss?
The bills of lading,1 covering the shipment of Peruvian fish meal provide at the back thereof that the bills
of lading shall be governed by and subject to the terms and conditions of the charter party, if any,
otherwise, the bills of lading prevail over all the agreements.2 On the of the bills are stamped "Freight
prepaid as per charter party. Subject to all terms, conditions and exceptions of charter party dated
London, Dec. 13, 1962."
A perusal of the charter party 3 referred to shows that while the possession and control of the ship were
not entirely transferred to the charterer, 4 the vessel was chartered to its full and complete capacity (Exh.
3). Furthermore, the, charter had the option to go north or south or vice-versa,5 loading, stowing and
discharging at its risk and expense.6 Accordingly, the charter party contract is one of affreightment over
the whole vessel rather than a demise. As such, the liability of the shipowner for acts or negligence of its
captain and crew, would remain in the absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to the
goods caused by personal want of due diligence on its part or its manager to make the vessel in all
respects seaworthy and to secure that she be properly manned, equipped and supplied or by the
personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of the
vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of
the captain or crew or some other person employed by the owner on board, for whose acts the owner
would ordinarily be liable except for said paragraph..

Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article 587 of
the Code of Commerce making the ship agent civilly liable for indemnities suffered by third persons
arising from acts or omissions of the captain in the care of the goods and Article 1744 of the Civil Code
under which a stipulation between the common carrier and the shipper or owner limiting the liability of
the former for loss or destruction of the goods to a degree less than extraordinary diligence is valid
provided it be reasonable, just and not contrary to public policy. The release from liability in this case
was held unreasonable and contrary to the public policy on common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American law. 7 Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special
person only, becomes a private carrier. 8 As a private carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not against public policy,9 and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict
public policy governing common carriers is applied. Such policy has no force where the public at large is
not involved, as in the case of a ship totally chartered for the use of a single party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the charterer,
as shipper, is in fact and legal contemplation merely a receipt and a document of title not a contract, for
the contract is the charter party. 10 The consignee may not claim ignorance of said charter party because
the bills of lading expressly referred to the same. Accordingly, the consignees under the bills of lading
must likewise abide by the terms of the charter party. And as stated, recovery cannot be had thereunder,
for loss or damage to the cargo, against the shipowners, unless the same is due to personal acts or
negligence of said owner or its manager, as distinguished from its other agents or employees. In this
case, no such personal act or negligence has been proved.
WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from liability to
plaintiff. No costs. So ordered.
G.R. No. 101503 September 15, 1993
PLANTERS
PRODUCTS,
INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI
KAISHA,respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer transform a common carrier into a private
one as to negate the civil law presumption of negligence in case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New
York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk on 16
June 1974 aboard the cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,
Philippines, as evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued on
the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to
the Uniform General Charter 2 was entered into between Mitsubishi as shipper/charterer and KKKK as
shipowner, in Tokyo, Japan. 3 Riders to the aforesaid charter-party starting from par. 16 to 40 were
attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably inspected by
the charterer's representative and found fit to take a load of urea in bulk pursuant to par. 16 of the
charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by certificate from
National Cargo Bureau inspector or substitute appointed by charterers for his
account certifying the vessel's readiness to receive cargo spaces. The vessel's
hold to be properly swept, cleaned and dried at the vessel's expense and the
vessel to be presented clean for use in bulk to the satisfaction of the inspector
before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the
shipper, the steel hatches were closed with heavy iron lids, covered with three (3) layers of tarpaulin,
then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire
voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches were opened with
the use of the vessel's boom. Petitioner unloaded the cargo from the holds into its steelbodied dump
trucks which were parked alongside the berth, using metal scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly (which provided for an F.I.O.S. clause). 6 The hatches
remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was
transported to the consignee's warehouse located some fifty (50) meters from the wharf. Midway to the
warehouse, the trucks were made to pass through a weighing scale where they were individually
weighed for the purpose of ascertaining the net weight of the cargo. The port area was windy, certain

portions of the route to the warehouse were sandy and the weather was variable, raining occasionally
while the discharge was in progress. 8 The petitioner's warehouse was made of corrugated galvanized
iron (GI) sheets, with an opening at the front where the dump trucks entered and unloaded the fertilizer
on the warehouse floor. Tarpaulins and GI sheets were placed in-between and alongside the trucks to
contain spillages of the ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except July 12th, 14th
and 18th).10 A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was
hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior
to and after discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19 July
1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the cargo delivered
was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been
polluted
with
sand,
rust
and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship Agencies
(SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged
shortage in the goods shipped and the diminution in value of that portion said to have been
contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's claim for payment
because, according to them, what they received was just a request for shortlanded certificate and not a
formal claim, and that this "request" was denied by them because they "had nothing to do with the
discharge of the shipment." 14Hence, on 18 July 1975, PPI filed an action for damages with the Court of
First Instance of Manila. The defendant carrier argued that the strict public policy governing common
carriers does not apply to them because they have become private carriers by reason of the provisions
of the charter-party. The court a quo however sustained the claim of the plaintiff against the defendant
carrier for the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common carrier is presumed
negligent in case of loss or damage of the goods it contracts to transport, all that a
shipper has to do in a suit to recover for loss or damage is to show receipt by the
carrier of the goods and to delivery by it of less than what it received. After that,
the burden of proving that the loss or damage was due to any of the causes which
exempt him from liability is shipted to the carrier, common or private he may be.
Even if the provisions of the charter-party aforequoted are deemed valid, and the
defendants considered private carriers, it was still incumbent upon them to prove
that the shortage or contamination sustained by the cargo is attributable to the
fault or negligence on the part of the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed to do. By this omission,
coupled with their failure to destroy the presumption of negligence against them,
the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the carrier from liability
for the value of the cargo that was lost or damaged. 16 Relying on the 1968 case of Home Insurance
Co. v. American Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun
Plum" owned by private respondent KKKK was a private carrier and not a common carrier by reason of
the time charterer-party. Accordingly, the Civil Code provisions on common carriers which set forth a
presumption of negligence do not find application in the case at bar. Thus
. . . In the absence of such presumption, it was incumbent upon the plaintiffappellee to adduce sufficient evidence to prove the negligence of the defendant
carrier as alleged in its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of action, fails to show
in a satisfactory manner the facts upon which he bases his claim, the defendant is
under no obligation to prove his exception or defense (Moran, Commentaries on
the Rules of Court, Volume 6, p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to prove the basis
of its cause of action, i.e. the alleged negligence of defendant carrier. It appears
that the plaintiff was under the impression that it did not have to establish
defendant's negligence. Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing that defendant
carrier was not negligent in performing its obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of the Court of Appeals.
Petitioner theorizes that the Home Insurance case has no bearing on the present controversy because
the issue raised therein is the validity of a stipulation in the charter-party delimiting the liability of the
shipowner for loss or damage to goods cause by want of due deligence on its part or that of its manager
to make the vessel seaworthy in all respects, and not whether the presumption of negligence provided
under the Civil Code applies only to common carriers and not to private carriers. 19 Petitioner further
argues that since the possession and control of the vessel remain with the shipowner, absent any
stipulation to the contrary, such shipowner should made liable for the negligence of the captain and crew.
In fine, PPI faults the appellate court in not applying the presumption of negligence against respondent
carrier, and instead shifting the onus probandi on the shipper to show want of due deligence on the part
of the carrier, when he was not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a private carrier by
reason of a charter-party; in the negative, whether the shipowner in the instant case was able to prove
that he had exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial cases. This being so, we
find it fitting to first define important terms which are relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by
the owner to another person for a specified time or use; 20 a contract of affreightment by which the owner
of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance

of goods, on a particular voyage, in consideration of the payment of freight; 21 Charter parties are of two
types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the
owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by
the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command
and possession and consequent control over its navigation, including the master and the crew, who are
his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for a determinate
period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for
the wages of the master and the crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. 23 The
definition extends to carriers either by land, air or water which hold themselves out as ready to engage in
carrying goods or transporting passengers or both for compensation as a public employment and not as
a casual occupation. The distinction between a "common or public carrier" and a "private or special
carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a
part of the general business or occupation, although involving the carriage of goods for a fee, the person
or corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their
business, should observe extraordinary diligence in the vigilance over the goods they carry. 25 In the case
of private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice.
Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed
to have been at fault or to have acted negligently, and the burden of proving otherwise rests on
them. 26 On the contrary, no such presumption applies to private carriers, for whosoever alleges damage
to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the
carrier.
It is not disputed that respondent carrier, in the ordinary course of business, operates as a common
carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V
"Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and
therefore continued to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer
did not have any control of the means in doing so. This is evident in the present case considering that
the steering of the ship, the manning of the decks, the determination of the course of the voyage and
other technical incidents of maritime navigation were all consigned to the officers and crew who were
screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in
the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its
crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage

charter retains possession and control of the ship, although her holds may, for the moment, be the
property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American Steamship
Agencies, supra, is misplaced for the reason that the meat of the controversy therein was the validity of
a stipulation in the charter-party exempting the shipowners from liability for loss due to the negligence of
its agent, and not the effects of a special charter on common carriers. At any rate, the rule in the United
States that a ship chartered by a single shipper to carry special cargo is not a common carrier, 29 does
not find application in our jurisdiction, for we have observed that the growing concern for safety in the
transportation of passengers and /or carriage of goods by sea requires a more exacting interpretation of
admiralty laws, more particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-law 30
As a matter of principle, it is difficult to find a valid distinction between cases in
which a ship is used to convey the goods of one and of several persons. Where
the ship herself is let to a charterer, so that he takes over the charge and control of
her, the case is different; the shipowner is not then a carrier. But where her
services only are let, the same grounds for imposing a strict responsibility exist,
whether he is employed by one or many. The master and the crew are in each
case his servants, the freighter in each case is usually without any representative
on board the ship; the same opportunities for fraud or collusion occur; and the
same difficulty in discovering the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods shipped, the shipper or
consignee should first prove the fact of shipment and its consequent loss or damage while the same was
in the possession, actual or constructive, of the carrier. Thereafter, the burden of proof shifts to
respondent to prove that he has exercised extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other circumstances
inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof, the prima
faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April 1977 before
the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo, Japan, testified that before
the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After
completing the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed
and sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins which were tied
with steel bonds. The hatches remained close and tightly sealed while the ship was in transit as the
weight of the steel covers made it impossible for a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition, foreclosing the
possibility of spillage of the cargo into the sea or seepage of water inside the hull of the vessel. 33 When

M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the
presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor
representing CSCI, opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were overseeing the
whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has been efficaciously
overcome by the showing of extraordinary zeal and assiduity exercised by the carrier in the care of the
cargo. This was confirmed by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the record of the instant
case discloses ample evidence showing that defendant carrier was not negligent
in performing its obligations. Particularly, the following testimonies of plaintiffappellee's own witnesses clearly show absence of negligence by the defendant
carrier; that the hull of the vessel at the time of the discharge of the cargo was
sealed and nobody could open the same except in the presence of the owner of
the cargo and the representatives of the vessel (TSN, 20 July 1977, p. 14); that
the cover of the hatches was made of steel and it was overlaid with tarpaulins,
three layers of tarpaulins and therefore their contents were protected from the
weather (TSN, 5 April 1978, p. 24); and, that to open these hatches, the seals
would have to be broken, all the seals were found to be intact (TSN, 20 July 1977,
pp. 15-16) (emphasis supplied).
The period during which private respondent was to observe the degree of diligence required of it as a
public carrier began from the time the cargo was unconditionally placed in its charge after the vessel's
holds were duly inspected and passed scrutiny by the shipper, up to and until the vessel reached its
destination and its hull was reexamined by the consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum to the standard "GENCON" time charterparty which provided for an F.I.O.S., meaning, that the loading, stowing, trimming and discharge of the
cargo was to be done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a
shipowner is liable for damage to the cargo resulting from improper stowage only when the stowing is
done by stevedores employed by him, and therefore under his control and supervision, not when the
same is done by the consignee or stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not responsible for the loss,
destruction or deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also provides that all losses and deterioration
which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the
inherent defect of the goods, shall be for the account and risk of the shipper, and that proof of these
accidents is incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and
damage resulting from the preceding causes if it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the precautions which usage has established among
careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and
the expected risks of bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas
Fertilizer, described Urea as a chemical compound consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not normally evaporate even on a long voyage,
provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr.
Chupungco further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to
spillage during such operation amounting to one percent (1%) against the bill of lading is deemed
"normal" or "tolerable." The primary cause of these spillages is the clamped shell which does not seal
very tightly. Also, the wind tends to blow away some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely
high temperature in its place of storage, or when it comes in contact with water. When Urea is drenched
in water, either fresh or saline, some of its particles dissolve. But the salvaged portion which is in liquid
form still remains potent and usable although no longer saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was
made greater by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical
effects of the elements and the grimy condition of the various pieces of equipment used in transporting
and hauling it.
The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into
the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches
were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the
cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have
occurred while the same was being transported from the ship to the dump trucks and finally to the
consignee's warehouse. This may be gleaned from the testimony of the marine and cargo surveyor of
CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as
contained in their report to PPI was just an approximation or estimate made by them after the fertilizer
was discharged from the vessel and segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port and unloaded her cargo. It
rained from time to time at the harbor area while the cargo was being discharged according to the supply
officer of PPI, who also testified that it was windy at the waterfront and along the shoreline where the
dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries
with it the risk of loss or damage. More so, with a variable weather condition prevalent during its
unloading, as was the case at bar. This is a risk the shipper or the owner of the goods has to face.
Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes it
highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to
the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise
in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which
reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First
Instance, now Regional Trial Court, of Manila should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.

WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for
demurrage to P44,000.00 and deleting the award for attorneys fees and expenses of litigation. Except as
thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.
SO ORDERED. [3]

The Facts

[G.R. No. 112287. December 12, 1997]

NATIONAL STEEL CORPORATION, petitioner, vs. COURT OF APPEALS AND VLASONS
SHIPPING, INC., respondents.
[G.R. No. 112350. December 12, 1997]
VLASONS SHIPPING, INC., petitioner, vs. COURT OF APPEALS AND NATIONAL STEEL
CORPORATION, respondents.
DECISION
PANGANIBAN, J.:

The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport
cargo or shipment for the general public. Its services are available only to specific persons who enter
into a special contract of charter party with its owner. It is undisputed that the ship is a private
carrier. And it is in this capacity that its owner, Vlasons Shipping, Inc., entered into a contract of
affreightment or contract of voyage charter hire with National Steel Corporation.

The Court finds occasion to apply the rules on the seaworthiness of a private carrier, its owners
responsibility for damage to the cargo and its liability for demurrage and attorneys fees. The Court also
reiterates the well-known rule that findings of facts of trial courts, when affirmed by the Court of Appeals,
are binding on this Court.

(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons
Shipping, Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit B; also Exhibit 1)
whereby NSC hired VSIs vessel, the MV VLASONS I to make one (1) voyage to load steel products at
Iligan City and discharge them at North Harbor, Manila, under the following terms and conditions, viz:

The facts as found by Respondent Court of Appeals are as follows:

1. x x x x x x.
The Case
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and
Vlasons Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of
Appeals. [1] The Court of Appeals modified the decision of the Regional Trial Court of Pasig, Metro
Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing
the complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the counterclaim
as follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at
the legal rate on both amounts from April 7, 1976 until the same shall have been fully
paid;
2. Attorneys fees and expenses of litigation in the sum of P100,000.00; and

3. x x x x x x
4. Freight/Payment: P30.00 /metric ton, FIOST basis. Payment upon presentation of Bill of Lading within
fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive
hours, Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. x x x x x x

3. Cost of suit.
SO ORDERED. [2]
On the other hand, the Court of Appeals ruled:

9. Cargo Insurance: Charterers and/or Shippers must insure the cargoes. Shipowners not responsible
for losses/damages except on proven willful negligence of the officers of the vessel.
10. Other terms:(a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized
Charter Party Agreement shall form part of this Contract.

xxxxxxxxx
The terms F.I.O.S.T. which is used in the shipping business is a standard provision in the NANYOZAI
Charter Party which stands for Freight In and Out including Stevedoring and Trading, which means that
the handling, loading and unloading of the cargoes are the responsibility of the Charterer. Under
Paragraph 5 of the NANYOZAI Charter Party, it states, Charterers to load, stow and discharge the
cargo free of risk and expenses to owners. x x x (Underscoring supplied).
Under paragraph 10 thereof, it is provided that (o)wners shall, before and at the beginning of the voyage,
exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and
to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or
resulting from: unseaworthiness unless caused by want of due diligence on the part of the owners to
make the vessel seaworthy, and to secure that the vessel is properly manned, equipped and supplied
and to make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its
reception, carriage and preservation; xxx; perils, dangers and accidents of the sea or other navigable
waters; xxx; wastage in bulk or weight or any other loss or damage arising from inherent defect, quality
or vice of the cargo; insufficiency of packing; xxx; latent defects not discoverable by due diligence; any
other cause arising without the actual fault or privity of Owners or without the fault of the agents or
servants of owners.
Paragraph 12 of said NANYOZAI Charter Party also provides that (o)wners shall not be responsible for
split, chafing and/or any damage unless caused by the negligence or default of the master and crew.
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV
VLASONS I loaded at plaintiffs pier at Iligan City, the NSCs shipment of 1,677 skids of tinplates and 92
packages of hot rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric
tons for carriage to Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate
Gonzalo Sabando, acting as agent of the vessel[,] acknowledged receipt of the cargo on board and
signed the corresponding bill of lading, B.L.P.P. No. 0233 (Exhibit D) on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following
day, August 13, 1974, when the vessels three (3) hatches containing the shipment were opened by
plaintiffs agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and
rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was
completed only on August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain
which interrupted the unloading operations. (Exhibit E)
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the
shipment by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March
17, 1975 (Exhibit G), MASCO made a report of its ocular inspection conducted on the cargo, both while
it was still on board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where
the cargo was taken and stored.MASCO reported that it found wetting and rusting of the packages of hot
rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various
extents; that container/metal casings of the skids were rusting all over. MASCO ventured the opinion that
rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel
as a consequence of the heavy weather and rough seas encountered while en route to destination
(Exhibit F). It was also reported that MASCOs surveyors drew at random samples of bad order packing
materials of the tinplates and delivered the same to the M.I.T. Testing Laboratories for analysis. On
August 31, 1974, the M.I.T. Testing Laboratories issued Report No. 1770 (Exhibit I) which in part, states,

The analysis of bad order samples of packing materials xxx shows that wetting was caused by contact
with SEA WATER.
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the
defendant its claim for damages suffered due to the downgrading of the damaged tinplates in the
amount of P941,145.18.Then on October 3, 1974, plaintiff formally demanded payment of said claim but
defendant VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976
which was docketed as Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a
result of the act, neglect and default of the master and crew in the management of the vessel as well as
the want of due diligence on the part of the defendant to make the vessel seaworthy and to make the
holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception,
carriage and preservation -- all in violation of defendants undertaking under their Contract of Voyage
Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV VLASONS I was
seaworthy in all respects for the carriage of plaintiffs cargo; that said vessel was not a common
carrier inasmuch as she was under voyage charter contract with the plaintiff as charterer under the
charter party; that in the course of the voyage from Iligan City to Manila, the MV VLASONS I
encountered very rough seas, strong winds and adverse weather condition, causing strong winds and
big waves to continuously pound against the vessel and seawater to overflow on its deck and hatch
covers; that under the Contract of Voyage Charter Hire, defendant shall not be responsible for
losses/damages except on proven willful negligence of the officers of the vessel, that the officers of said
MV VLASONS I exercised due diligence and proper seamanship and were not willfully negligent; that
furthermore the Voyage Charter Party provides that loading and discharging of the cargo was on FIOST
terms which means that the vessel was free of risk and expense in connection with the loading and
discharging of the cargo; that the damage, if any, was due to the inherent defect, quality or vice of the
cargo or to the insufficient packing thereof or to latent defect of the cargo not discoverable by due
diligence or to any other cause arising without the actual fault or privity of defendant and without the fault
of the agents or servants of defendant; consequently, defendant is not liable; that the stevedores of
plaintiff who discharged the cargo in Manila were negligent and did not exercise due care in the
discharge of the cargo; and that the cargo was exposed to rain and seawater spray while on the pier or
in transit from the pier to plaintiffs warehouse after discharge from the vessel; and that plaintiffs claim
was highly speculative and grossly exaggerated and that the small stain marks or sweat marks on the
edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant claimed
that it had complied with all its duties and obligations under the Voyage Charter Hire Contract and had
no responsibility whatsoever to plaintiff. In turn, it alleged the following counterclaim:
(a) That despite the full and proper performance by defendant of its obligations under the Voyage
Charter Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite
demands made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum
of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila
waiting for plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant
demurrage in the total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay
defendant attorneys fees and all expenses of litigation in the amount of not less than P100,000.00.

(8) From the evidence presented by both parties, the trial court came out with the following findings
which were set forth in its decision:
(a) The MV VLASONS I is a vessel of Philippine registry engaged in the tramping service and is
available for hire only under special contracts of charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. 1), the MV
VLASONS I was covered by the required seaworthiness certificates including the Certification of
Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh. 4);
Coastwise License from the Board of Transportation (Exh. 5); International Loadline Certificate from the
Philippine Coast Guard (Exh. 6); Cargo Ship Safety Equipment Certificate also from the Philippine Coast
Guard (Exh. 7); Ship Radio Station License (Exh. 8); Certificate of Inspection by the Philippine Coast
Guard (Exh. 12); and Certificate of Approval for Conversion issued by the Bureau of Customs (Exh.
9). That being a vessel engaged in both overseas and coastwise trade, the MV VLASONS I has a higher
degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter
Hire, the MV VLASONS I underwent drydocking in Cebu and was thoroughly inspected by the Philippine
Coast Guard. In fact, subject voyage was the vessels first voyage after the drydocking. The evidence
shows that the MV VLASONS I was seaworthy and properly manned, equipped and supplied when it
undertook the voyage. It had all the required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were
covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were
water tight.Furthermore, under the hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by
evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a
presumption of negligence in case of loss or damage to the cargo are not applicable. As to the damage
to the tinplates which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony
of witness Vicente Angliongto that tinplates sweat by themselves when packed even without being in
contract (sic) with water from outside especially when the weather is bad or raining. The rust caused by
sweat or moisture on the tinplates may be considered as a loss or damage but then, defendant cannot
be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from
responsibility for loss or damage arising from the character of the goods x x x. All the 1,769 skids of the
tinplates could not have been damaged by water as claimed by plaintiff. It was shown as claimed by
plaintiff that the tinplates themselves were wrapped in kraft paper lining and corrugated cardboards
could not be affected by water from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing
the hatch openings of the MV VLASONS I when rains occurred during the discharging of the cargo thus
allowing rainwater to enter the hatches. It was proven that the stevedores merely set up temporary tents
to cover the hatch openings in case of rain so that it would be easy for them to resume work when the
rains stopped by just removing the tent or canvas. Because of this improper covering of the hatches by
the stevedores during the discharging and unloading operations which were interrupted by rains,
rainwater drifted into the cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI
[sic] Charter Party which was expressly made part of the Contract of Voyage Charter Hire, the loading,
stowing and discharging of the cargo is the sole responsibility of the plaintiff charterer and defendant
carrier has no liability for whatever damage may occur or maybe [sic] caused to the cargo in the process.

(g) It was also established that the vessel encountered rough seas and bad weather while en route from
Iligan City to Manila causing sea water to splash on the ships deck on account of which the master of the
vessel (Mr. Antonio C. Dumlao) filed a Marine Protest on August 13, 1974 (Exh. 15) which can be
invoked by defendant as a force majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire
contract that it was to insure the cargo because it did not. Had plaintiff complied with the requirement,
then it could have recovered its loss or damage from the insurer. Plaintiff also violated the charter party
contract when it loaded not only steel products, i.e. steel bars, angular bars and the like but also
tinplates and hot rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff
was able to ship high grade cargo at a lower freight rate.
(I) As regards defendants counterclaim, the contract of voyage charter hire under paragraph 4 thereof,
fixed the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of
lading within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite
demands. The evidence also showed that the plaintiff was required and bound under paragraph 7 of the
same Voyage Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of
the cargoes. The delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant for
demurrage in the amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV VLASONS I was seaworthy, properly manned, equipped and
supplied, and that there is no proof of willful negligence of the vessels officers.
II
The trial court erred in finding that the rusting of NSCs tinplates was due to the inherent nature or
character of the goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSCs
shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorneys fees, to VSI.[4]
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of
litigation. NSC and VSI filed separate motions for reconsideration. In a Resolution[5] dated October 20,
1993, the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions
for review before this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation
of these petitions.[6]

The Issues
In its petition[7] and memorandum,[8] NSC raises the following questions of law and fact:

II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the
Nanyozai Charter, are valid and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact

Questions of Law

2. Effect of NSCs Failure to Insure the Cargo

3. Admissibility of Certificates Proving Seaworthiness

1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading
delays caused by weather interruption;
2. Whether or not the alleged seaworthiness certificates (Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and
12) were admissible in evidence and constituted evidence of the vessels
seaworthiness at the beginning of the voyages; and
3. Whether or not a charterers failure to insure its cargo exempts the shipowner from
liability for cargo damage.

Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;
2. Whether or not vessels officers and crew were negligent in handling and caring for NSCs
cargo;
3. Whether or not NSCs cargo of tinplates did sweat during the voyage and, hence, rusted
on their own; and
(4) Whether or not NSCs stevedores were negligent and caused the wetting[/]rusting of
NSCs tinplates.
In its separate petition, [9] VSI submits for the consideration of this Court the following alleged
errors of the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage
from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for
attorneys fees and expenses of litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum: [10]
I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to
which there exist[s] a presumption of negligence against the common carrier in case of loss or damage
to the cargo are applicable to a private carrier.

4. Demurrage and Attorneys Fees.

The Courts Ruling

The Court affirms the assailed Decision of the Court of Appeals, except in respect of the
demurrage.

Preliminary Matter: Common Carrier or Private Carrier?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or
as a private carrier. The resolution of this preliminary question determines the law, standard of diligence
and burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public. It has been held that the true test of a
common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail
themselves of its transportation service for a fee. [11] A carrier which does not qualify under the above test
is deemed a private carrier. Generally, private carriage is undertaken by special agreement and the
carrier does not hold himself out to carry goods for the general public. The most typical, although not the
only form of private carriage, is the charter party, a maritime contract by which the charterer, a party
other than the shipowner, obtains the use and service of all or some part of a ship for a period of time or
a voyage or voyages. [12]
In the instant case, it is undisputed that VSI did not offer its services to the general public. As
found by the Regional Trial Court, it carried passengers or goods only for those it chose under a special
contract of charter party. [13] As correctly concluded by the Court of Appeals, the MV Vlasons I was not a
common but a private carrier. [14] Consequently, the rights and obligations of VSI and NSC, including their
respective liability for damage to the cargo, are determined primarily by stipulations in their contract of
private carriage or charter party. [15] Recently, in Valenzuela Hardwood and Industrial Supply,
Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, [16] the Court ruled:
x x x in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage
does not involve the general public. Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a ship transporting commercial

goods as a private carrier.Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in contracts involving
common carriers.[17]

Extent of VSIs Responsibility and Liability Over NSCs Cargo

It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974, that VSI shall not
be responsible for losses except on proven willful negligence of the officers of the vessel. The
NANYOZAI Charter Party, which was incorporated in the parties contract of transportation, further
provided that the shipowner shall not be liable for loss of or damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its lack of due diligence to make the vessel seaworthy
or to ensure that the same was properly manned, equipped and supplied, and to make the holds and all
other parts of the vessel in which cargo [was] carried, fit and safe for its reception, carriage and
preservation. [18] The NANYOZAI Charter Party also provided that [o]wners shall not be responsible for
split, chafing and/or any damage unless caused by the negligence or default of the master or crew. [19]

Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its
shipment was caused by VSIs willful negligence or failure to exercise due diligence in making MV
Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of
proof was placed on NSC by the parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not
been expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous
event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of
the shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the
preceding article if proofs against him show that they occurred on account of his negligence or his
omission to take the precautions usually adopted by careful persons, unless the shipper committed fraud
in the bill of lading, making him to believe that the goods were of a class or quality different from what
they really were.
Because the MV Vlasons I was a private carrier, the shipowners obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule,
places the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove
that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in
the carriers custody does not put the burden of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only to exercise due care in the protection of
the goods committed to its care, the burden of proving negligence or a breach of that duty rests on
plaintiff and proof of loss of, or damage to, cargo while in the carriers possession does not cast on it the
burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause
in the contract or bill of lading.However, in discharging the burden of proof, plaintiff is entitled to the
benefit of the presumptions and inferences by which the law aids the bailor in an action against a bailee,
and since the carrier is in a better position to know the cause of the loss and that it was not one involving
its liability, the law requires that it come forward with the information available to it, and its failure to do so
warrants an inference or presumption of its liability. However, such inferences and presumptions, while
they may affect the burden of coming forward with evidence, do not alter the burden of proof which
remains on plaintiff, and, where the carrier comes forward with evidence explaining the loss or damage,
the burden of going forward with the evidence is again on plaintiff.
Where the action is based on the shipowners warranty of seaworthiness, the burden of proving a breach
thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that
the goods were lost or damaged while in the carriers possession does not cast on it the burden of
proving seaworthiness. x x x Where the contract of carriage exempts the carrier from liability for
unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the
exercise of due diligence to make the vessel seaworthy. [20]
In the instant case, the Court of Appeals correctly found that NSC has not taken the correct
position in relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after
citing Clause 10 and Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellants [NSCs]
interpretation of Clause 12 is not even correct), it argues that a careful examination of the evidence will
show that VSI miserably failed to comply with any of these obligations as if defendant-appellee [VSI] had
the burden of proof.[21]

First Issue: Questions of Fact

Based on the foregoing, the determination of the following factual questions is manifestly
relevant: (1) whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended
purpose under the charter party; (2) whether the damage to the cargo should be attributed to the willful
negligence of the officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the
rusting of the tinplates was caused by its own sweat or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties conflicting claims and to carefully weigh their respective evidence.The
findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings
of both the trial court and the Court of Appeals coincide, the same are binding on this Court. [22] We stress
that, subject to some exceptional instances, [23] only questions of law -- not questions of fact -- may be
raised before this Court in a petition for review under Rule 45 of the Rules of Court.After a thorough
review of the case at bar, we find no reason to disturb the lower courts factual findings, as indeed NSC
has not successfully proven the application of any of the aforecited exceptions.

Was MV Vlasons I Seaworthy?

Q: What is the purpose of the canvas cover?

A: So that the cargo would not be soaked with water.

In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and
fit for the carriage of NSCs cargo of steel and tinplates. This is shown by the fact that it was drydocked
and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila
under the contract of voyage charter hire. [24] The vessels voyage from Iligan to Manila was the
vessels first voyage after drydocking. The Philippine Coast Guard Station in Cebu cleared it
as seaworthy, fitted and equipped; it met all requirements for trading as cargo vessel. [25] The Court of
Appeals itself sustained the conclusion of the trial court that MV Vlasons I was seaworthy. We find no
reason to modify or reverse this finding of both the trial and the appellate courts.

Who Were Negligent: Seamen or Stevedores?

A: And will you describe how the canvas cover was secured on the hatch opening?
WITNESS
A: It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and
we place[d] a flat bar over the canvas on the side of the hatches and then we
place[d] a stopper so that the canvas could not be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch opening? The length and the width of the hatch
opening.
A: Forty-five feet by thirty-five feet, sir.

As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by
the negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for
the carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or
canvas to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults
the Court of Appeals for failing to consider such claim as an uncontroverted fact [26] and denies that MV
Vlasons I was equipped with new canvas covers in tandem with the old ones as indicated in the Marine
Protest xxx. [27] We disagree.

xxxxxxxxx
Q: How was the canvas supported in the middle of the hatch opening?
A: There is a hatch board.
ATTY DEL ROSARIO
Q: What is the hatch board made of?
A: It is made of wood, with a handle.

The records sufficiently support VSIs contention that the ship used the old tarpaulin, only in
addition to the new one used primarily to make the ships hatches watertight. The foregoing are clear
from the marine protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the
ships boatswain, Jose Pascua. The salient portions of said marine protest read:

Q: And aside from the hatch board, is there any other material there to cover the hatch?

x x x That the M/V VLASONS I departed Iligan City or or about 0730 hours of August 8, 1974, loaded
with approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation;
that before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or
about August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very
rough seas and strong winds and Manila office was advised by telegram of the adverse weather
conditions encountered; that in the morning of August 10, 1974, the weather condition changed to worse
and strong winds and big waves continued pounding the vessel at her port side causing sea water to
overflow on deck andhatch (sic) covers and which caused the first layer of the canvass covering to give
way while the new canvass covering still holding on;

A: It is made of steel, sir.

That the weather condition improved when we reached Dumali Point protected by Mindoro; that we resecured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering
Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching
Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same
canvass to give way and leaving the new canvass holding on;

Q: And on top of the beams you said there is a hatch board. How many pieces of wood are
put on top?

A: There is a beam supporting the hatch board.

Q: What is this beam made of?

Q: Is the beam that was placed in the hatch opening covering the whole hatch opening?
A: No, sir.
Q: How many hatch beams were there placed across the opening?
A: There are five beams in one hatch opening.
ATTY DEL ROSARIO

A: Plenty, sir, because there are several pieces on top of the hatch beam.
Q: And is there a space between the hatch boards?

xxx xxx xxx [28]

A: There is none, sir.

And the relevant portions of Jose Pascuas deposition are as follows:

Q: They are tight together?

A: Yes, sir.

COURT:

Q: How tight?

All right, witness may answer.

A: Very tight, sir.

ATTY LOPEZ:

Q: Now, on top of the hatch boards, according to you, is the canvas cover. How many
canvas covers?

Q: What was used in order to protect the cargo from the weather?

A: Two, sir. [29]

A: A base of canvas was used as cover on top of the tin plates, and tents were built at the
opening of the hatches.

That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give
way and the ships hatches and cargo holds remained waterproof. As aptly stated by the Court of
Appeals, xxx we find no reason not to sustain the conclusion of the lower court based on overwhelming
evidence, that the MV VLASONS I was seaworthy when it undertook the voyage on August 8, 1974
carrying on board thereof plaintiff-appellants shipment of 1,677 skids of tinplates and 92 packages of hot
rolled sheets or a total of 1,769 packages from NSCs pier in Iligan City arriving safely at North Harbor,
Port Area, Manila, on August 12, 1974; xxx. [30]

Q: You also stated that the hatches were already opened and that there were tents
constructed at the opening of the hatches to protect the cargo from the rain. Now,
will you describe [to] the Court the tents constructed.

Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the
crew of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were
negligent in unloading the cargo from the ship.

Q: Now, is this procedure adopted by the stevedores of covering tents proper?

The stevedores employed only a tent-like material to cover the hatches when strong rains
occasioned by a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however,
was clearly inadequate for keeping rain and seawater away from the hatches of the ship. Vicente
Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979, you stated on August 14 you went on
board the vessel upon notice from the National Steel Corporation in order to conduct
the inspection of the cargo. During the course of the investigation, did you chance to
see the discharging operation?
WITNESS:
A: Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on
the pier but majority of the tinplates were inside the hall, all the hatches were
opened.
Q: In connection with these cargoes which were unloaded, where is the place.
A: At the Pier.
Q: What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the
transcript of stenographic notes shows the same was covered in the direct
examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.

A: The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high
at the middle with the whole side separated down to the hatch, the size of the hatch
and it is soaks [sic] at the middle because of those weather and this can be used
only to temporarily protect the cargo from getting wet by rains.

A: No, sir, at the time they were discharging the cargo, there was a typhoon passing by and
the hatch tent was not good enough to hold all of it to prevent the water soaking
through the canvas and enter the cargo.
Q: In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter
and soak into the canvas and tinplates.
A: Yes, sir, the second time I went there, I saw it.
Q: As owner of the vessel, did you not advise the National Steel Corporation [of] the
procedure adopted by its stevedores in discharging the cargo particularly in this tent
covering of the hatches?
A: Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the
stevedores did not mind at all, so, I called the attention of the representative of the
National Steel but nothing was done, just the same. Finally, I wrote a letter to
them. [31]
NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain
immediately about the stevedores negligence on the first day of unloading, pointing out that he wrote his
letter to petitioner only seven days later. [32] The Court is not persuaded. Angliongtos candid answer in
his aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called
the attention of the stevedores, then the NSCs representative, about the negligent and defective
procedure adopted in unloading the cargo. This series of actions constitutes a reasonable response in
accord with common sense and ordinary human experience. Vicente Angliongto could not be blamed for
calling the stevedores attention first and then the NSCs representative on location before formally
informing NSC of the negligence he had observed, because he was not responsible for the stevedores
or the unloading operations. In fact, he was merely expressing concern for NSC which was ultimately
responsible for the stevedores it had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts findings and conclusions on this
point, viz:

In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by
NSC were negligent in the unloading of NSCs shipment. We do not think so. Such negligence according
to the trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV VLASONS I
when rains occurred during the discharging of the cargo thus allowing rain water and seawater spray to
enter the hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set up
temporary tents or canvas to cover the hatch openings when it rained during the unloading operations so
that it would be easier for them to resume work after the rains stopped by just removing said tents or
canvass. It has also been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC]
calling attention to the manner the stevedores hired by [NSC] were discharging the cargo on rainy days
and the improper closing of the hatches which allowed continuous heavy rain water to leak through and
drip to the tinplates covers and [Vicente Angliongto] also suggesting that due to four (4) days continuos
rains with strong winds that the hatches be totally closed down and covered with canvas and the hatch
tents lowered. (Exh 13). This letter was received by [NSC] on 22 August 1974 while discharging
operations were still going on (Exhibit 13-A). [33]
The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be
noted that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring
company at fault in the discharge operations. A stevedore company engaged in discharging cargo xxx
has the duty to load the cargo xxx in a prudent manner, and it is liable for injury to, or loss of, cargo
caused by its negligence xxx and where the officers and members and crew of the vessel do nothing
and have no responsibility in the discharge of cargo by stevedores xxx the vessel is not liable for loss of,
or damage to, the cargo caused by the negligence of the stevedores xxx [34] as in the instant case.

Do Tinplates Sweat?
The trial court relied on the testimony of Vicente Angliongto in finding that xxx tinplates sweat by
themselves when packed even without being in contact with water from outside especially when the
weather is bad or raining xxx. [35] The Court of Appeals affirmed the trial courts finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the
damage to the tinplates was occasioned not by airborne moisture but by contact with rain and seawater
which the stevedores negligently allowed to seep in during the unloading.

Second Issue: Effect of NSCs Failure to Insure the Cargo

The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is
totally separate and distinct from the contractual or statutory responsibility that may be incurred by VSI
for damage to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons
I. Clearly, therefore, NSCs failure to insure the cargo will not affect its right, as owner and real party in
interest, to file an action against VSI for damages caused by the latters willful negligence. We do not find
anything in the charter party that would make the liability of VSI for damage to the cargo contingent on or
affected in any manner by NSCs obtaining an insurance over the cargo.

Third Issue: Admissibility of Certificates Proving Seaworthiness

NSCs contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility
of the certificates of seaworthiness offered in evidence by VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippine Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs. [36]
NSC argues that the certificates are hearsay for not having been presented in accordance with
the Rules of Court. It points out that Exhibits 3, 4 and 11 allegedly are not written records or acts of
public officers; while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced by official publications or certified
true copies as required by Sections 25 and 26, Rule 132, of the Rules of Court. [37]
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12
are inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates
issued by private parties, but they have not been proven by one who saw the writing executed, or by
evidence of the genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6,
7, 8, 9, and 12 are photocopies, but their admission under the best evidence rule have not been
demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule
per Section 44 of Rule 130 of the Rules of Court, which provides that (e)ntries in official records made in
the performance of a duty by a public officer of the Philippines, or by a person in the performance of a
duty specially enjoined by law, are prima facie evidence of the facts therein stated. [38]Exhibit 11 is an
original certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C.
Flores to the effect that the vessel VLASONS I was drydocked x x x and PCG Inspectors were sent on
board for inspection x x x. After completion of drydocking and duly inspected by PCG Inspectors, the
vessel VLASONS I, a cargo vessel, is in seaworthy condition, meets all requirements, fitted and
equipped for trading as a cargo vessel was cleared by the Philippine Coast Guard and sailed for Cebu
Port on July 10, 1974. (sic) NSCs claim, therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that that NSC has the burden of proving that MV Vlasons I was
not seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the
obligation of a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge
its duty of proving the willful negligence of VSI in making the ship seaworthy resulting in damage to its
cargo. Assailing the genuineness of the certificate of seaworthiness is not sufficient proof that the vessel
was not seaworthy.

Fourth Issue: Demurrage and Attorneys Fees

The contract of voyage charter hire provides inter alia:
xxx xxx xxx

2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
xxx xxx xxx
6. Loading/Discharging Rate : 750 tons per WWDSHINC.
7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day. [39]
The Court defined demurrage in its strict sense as the compensation provided for in the contract
of affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for
loading and unloading of cargo. [40] It is given to compensate the shipowner for the nonuse of the
vessel. On the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. x x x If laytime is expressed in
running days, this means days when the ship would be run continuously, and holidays are not
excepted. A qualification of weather permitting excepts only those days when bad weather reasonably
prevents the work contemplated. [41]
In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified
laytime as WWDSHINC or weather working days Sundays and holidays included. [42] The running of
laytime was thus made subject to the weather, and would cease to run in the event unfavorable weather
interfered with the unloading of cargo. [43] Consequently, NSC may not be held liable for demurrage as
the four-day laytime allowed it did not lapse, having been tolled by unfavorable weather condition in view
of the WWDSHINC qualification agreed upon by the parties. Clearly, it was error for the trial court and
the Court of Appeals to have found and affirmed respectively that NSC incurred eleven days of delay in
unloading the cargo. The trial court arrived at this erroneous finding by subtracting from the twelve days,
specifically August 13, 1974 to August 24, 1974, the only day of unloading unhampered by unfavorable
weather or rain which was August 22, 1974. Based on our previous discussion, such finding is a
reversible error. As mentioned, the respondent appellate court also erred in ruling that NSC was liable to
VSI for demurrage, even if it reduced the amount by half.

At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to
the cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such
damage was brought about during the unloading process when rain and seawater seeped through the
cargo due to the fault or negligence of the stevedores employed by it. Basic is the rule that factual
findings of the trial court, when affirmed by the Court of Appeals, are binding on the Supreme
Court. Although there are settled exceptions, NSC has not satisfactorily shown that this case is one of
them. Second, the agreement between the parties -- the Contract of Voyage Charter Hire -- placed the
burden of proof for such loss or damage upon the shipper, not upon the shipowner. Such stipulation,
while disadvantageous to NSC, is valid because the parties entered into a contract of private charter, not
one of common carriage. Basic too is the doctrine that courts cannot relieve a party from the effects of a
private contract freely entered into, on the ground that it is allegedly one-sided or unfair to the
plaintiff. The charter party is a normal commercial contract and its stipulations are agreed upon in
consideration of many factors, not the least of which is the transport price which is determined not only
by the actual costs but also by the risks and burdens assumed by the shipper in regard to possible loss
or damage to the cargo. In recognition of such factors, the parties even stipulated that the shipper should
insure the cargo to protect itself from the risks it undertook under the charter party. That NSC failed or
neglected to protect itself with such insurance should not adversely affect VSI, which had nothing to do
with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The
questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage
awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 102316. June 30, 1997]
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY, INC., petitioner, vs. COURT OF APPEALS
AND SEVEN BROTHERS SHIPPING CORPORATION,respondents.
DECISION
PANGANIBAN, J.:

Attorneys Fees
VSI assigns as error of law the Court of Appeals deletion of the award of attorneys fees. We
disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an
award of attorneys fees under Article 2208 of the Civil Code when x x x no sufficient showing of bad faith
would be reflected in a partys persistence in a case other than an erroneous conviction of the
righteousness of his cause x x x. [44] Moreover, attorneys fees may not be awarded to a party for the
reason alone that the judgment rendered was favorable to the latter, as this is tantamount to imposing a
premium on ones right to litigate or seek judicial redress of legitimate grievances. [45]

Epilogue

Is a stipulation in a charter party that the (o)wners shall not be responsible for loss, split, shortlanding, breakages and any kind of damages to the cargo [1] valid? This is the main question raised in this
petition for review assailing the Decision of Respondent Court of Appeals[2] in CA-G.R. No. CV-20156
promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial
Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay
plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the
lost logs with legal interest thereon from the date of demand on February 2, 1984 until the amount is fully
paid or in the alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the amount of
TWO MILLION PESOS (P2,000,000.00) representing the value of lost logs plus legal interest from the
date of demand on April 24, 1984 until full payment thereof; the reasonable attorneys fees in the amount
equivalent to five (5) percent of the amount of the claim and the costs of the suit.

Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of TWO
HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of the stipulated
freight charges.
Defendant South Sea Surety and Insurance Companys counterclaim is hereby dismissed.

Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following
assignment of errors, to wit:
A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven
Ambassadors, was not due to fortuitous event but to the negligence of the captain in stowing and
securing the logs on board, causing the iron chains to snap and the logs to roll to the portside.

In its assailed Decision, Respondent Court of Appeals held:

WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the liability of the
Seven Brothers Shipping Corporation to the plaintiff is concerned which is hereby REVERSED and SET
ASIDE.[3]
The Facts
The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered
into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter
undertook to load on board its vessel M/V Seven Ambassador the formers lauan round logs numbering
940 at the port of Maconacon, Isabela for shipment to Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea
Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy
No. 84/24229 for P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to
Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss
of the plaintiffs insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. E) to cover payment of the premium and documentary
stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea
Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for
non-payment of the premium due in accordance with Section 77 of the Insurance Code.

B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping
Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to public
policy invoking article 1745 of the New Civil Code.
C. The lower court erred in holding defendant-appellant Seven Brothers Shipping Corporation liable in
the alternative and ordering/directing it to pay plaintiff-appellee the amount of two million
(P2,000,000.00) pesos representing the value of the logs plus legal interest from date of demand until
fully paid.
D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping Corporation to pay
appellee reasonable attorneys fees in the amount equivalent to 5% of the amount of the claim and the
costs of the suit.
E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its counterclaim for attorneys fees.
F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:
A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant South Sea
Surety and Insurance Company, Inc. and likewise erred in not holding that he was the representative of
the insurance broker Columbia Insurance Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received compensation/commission on the
premiums paid on the policies issued by the defendant-appellant South Sea Surety and Insurance
Company, Inc.
C. The trial court erred in not applying Section 77 of the Insurance Code.

On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the
payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed
a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the
latter denied the claim.
After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against
defendants. Both defendants shipping corporation and the surety company appealed.

D. The trial court erred in disregarding the receipt of payment clause attached to and forming part of the
Marine Cargo Insurance Policy No. 84/24229.
E. The trial court in disregarding the statement of account or bill stating the amount of premium and
documentary stamps to be paid on the policy by the plaintiff-appellee.

F. The trial court erred in disregarding the indorsement of cancellation of the policy due to non-payment
of premium and documentary stamps.
G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance Company, Inc.
to pay plaintiff-appellee P2,000,000.00 representing value of the policy with legal interest from 2
February 1984 until the amount is fully paid,
H. The trial court erred in not awarding to the defendant-appellant the attorneys fees alleged and proven
in its counterclaim.

The Issue
Petitioner Valenzuelas arguments revolve around a single issue: whether or not respondent Court
(of Appeals) committed a reversible error in upholding the validity of the stipulation in the charter party
executed between the petitioner and the private respondent exempting the latter from liability for the loss
of petitioners logs arising from the negligence of its (Seven Brothers) captain.[9]
The Courts Ruling
The petition is not meritorious.

The primary issue to be resolved before us is whether defendants shipping corporation and the surety
company are liable to the plaintiff for the latters lost logs.[4]
The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea
Surety and Insurance Company (South Sea), but modified it by holding that Seven Brothers Shipping
Corporation (Seven Brothers) was not liable for the lost cargo.[5] In modifying the RTC judgment, the
respondent appellate court ratiocinated thus:
It appears that there is a stipulation in the charter party that the ship owner would be exempted from
liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the
liability of the shipping corporation. The provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier.
As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is
valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24).

Validity of Stipulation is Lis Mota

The charter party between the petitioner and private respondent stipulated that the (o)wners shall
not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo. [10] The
validity of this stipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the parties that the proximate
cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the snapping of the
iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in
stowing and securing the logs on board the vessel and not due to fortuitous event. [11] Likewise
undisputed is the status of Private Respondent Seven Brothers as a private carrier when it contracted to
transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition.[12]
The trial court deemed the charter party stipulation void for being contrary to public policy, [13] citing
Article 1745 of the Civil Code which provides:
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;

The shipping corporation should not therefore be held liable for the loss of the logs.[6]
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. (Valenzuela)
filed separate petitions for review before this Court. In a Resolution dated June 2, 1995, this Court
denied the petition of South Sea.[7] There the Court found no reason to reverse the factual findings of the
trial court and the Court of Appeals that Chua was indeed an authorized agent of South Sea when he
received Valenzuelas premium payment for the marine cargo insurance policy which was thus binding
on the insurer.[8]
The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the
CA Decision which exempted Seven Brothers from any liability for the lost cargo.

(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a
family, or of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished;

(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.

public policy governing common carriers is applied. Such policy has no force where the public at large is
not involved, as in this case of a ship totally chartered for the use of a single party. [19] (Underscoring
supplied.)

Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of
the Code of Commerce[14] and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and
paragraph 1, Article 1409 of the Civil Code,[15] petitioner further contends that said stipulation gives no
duty or obligation to the private respondent to observe the diligence of a good father of a family in the
custody and transportation of the cargo."

Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public
enters into a contract of transportation with common carriers without a hand or a voice in the preparation
thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its
own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted in tickets, invoices or other documents over
which the riding public has no understanding or, worse, no choice. Compared to the general public, a
charterer in a contract of private carriage is not similarly situated. It can -- and in fact it usually does -enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can
stipulate the carriers obligations and liabilities over the shipment which, in turn, determine the price or
consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to
set aside the protection of the law on common carriers. When the charterer decides to exercise this
option, he takes a normal business risk.

The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had
acted as a private carrier in transporting petitioners lauan logs. Thus, Article 1745 and other Civil Code
provisions on common carriers which were cited by petitioner may not be applied unless expressly
stipulated by the parties in their charter party.[16]
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo
rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo
caused even by the negligence of the ship captain. Pursuant to Article 1306[17] of the Civil Code, such
stipulation is valid because it is freely entered into by the parties and the same is not contrary to law,
morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even
a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate
their duties and obligations which perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public.Hence, the stringent provisions of
the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship
transporting commercial goods as a private carrier.Consequently, the public policy embodied therein is
not contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.

Petitioner contends that the rule in Home Insurance is not applicable to the present case because
it covers only a stipulation exempting a private carrier from liability for the negligence of his agent, but it
does not apply to a stipulation exempting a private carrier like private respondent from the negligence of
his employee or servant which is the situation in this case.[20] This contention of petitioner is bereft of
merit, for it raises a distinction without any substantive difference. The case of Home
Insurance specifically dealt with the liability of the shipowner for acts or negligence of its captain and
crew[21] and a charter party stipulation which exempts the owner of the vessel from any loss or damage
or delay arising from any other source, even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose acts the owner would ordinarily be liable
except for said paragraph.[22] Undoubtedly, Home Insurance is applicable to the case at bar.

The issue posed in this case and the arguments raised by petitioner are not novel; they were
resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc. [18] In that
case, the trial court similarly nullified a stipulation identical to that involved in the present case for being
contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of
Commerce. Consequently, the trial court held the shipowner liable for damages resulting from the partial
loss of the cargo. This Court reversed the trial court and laid down, through Mr. Justice Jose P. Bengzon,
the following well-settled observation and doctrine:

The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the
rule in the Philippines[23] deserves scant consideration. The Court there categorically held that said rule
was reasonable and proceeded to apply it in the resolution of that case. Petitioner miserably failed to
show such circumstances or arguments which would necessitate a departure from a well-settled
rule. Consequently, our ruling in said case remains a binding judicial precedent based on the doctrine
of stare decisis and Article 8 of the Civil Code which provides that (j)udicial decisions applying or
interpreting the laws or the Constitution shall form part of the legal system of the Philippines.

The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special
person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not against public policy, and is deemed valid.

In fine, the respondent appellate court aptly stated that [in the case of] a private carrier, a
stipulation exempting the owner from liability even for the negligence of its agent is valid.[24]

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict

On the basis of the foregoing alone, the present petition may already be denied; the Court,
however, will discuss the other arguments of petitioner for the benefit and satisfaction of all concerned.

Other Arguments

Articles 586 and 587, Code of Commerce

Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of
the Code of Commerce which confer on petitioner the right to recover damages from the shipowner and
ship agent for the acts or conduct of the captain.[25] We are not persuaded. Whatever rights petitioner
may have under the aforementioned statutory provisions were waived when it entered into the charter
party.
Article 6 of the Civil Code provides that (r)ights may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good customs, or prejudicial to a person with a right
recognized by law. As a general rule patrimonial rights may be waived as opposed to rights to
personality and family rights which may not be made the subject of waiver. [26] Being patently and
undoubtedly patrimonial, petitioners right conferred under said articles may be waived. This, the
petitioner did by acceding to the contractual stipulation that it is solely responsible for any damage to the
cargo, thereby exempting the private carrier from any responsibility for loss or damage
thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and private
respondent alone; it is not imbued with public policy considerations for the general public or third
persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary
to Articles 1170 and 1173 of the Civil Code[27] which read:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of the
time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, shall
apply.
If the law does not state the diligence which is to be observed in the performance, that which is expected
of a good father of a family shall be required.
The Court notes that the foregoing articles are applicable only to the obligor or the one with an
obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect
of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter
party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner
are, therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the second paragraph
of Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event

the law or the contract is silent. In the instant case, Article 362 of the Code of Commerce [28] provides the
standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence under this
statutory provision may, however, be modified in a contract of private carriage as the petitioner and
private respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc.[29] which, in turn, quoted Juan Ysmael & Co.
vs. Gabino Barreto & Co.[30] and argues that the public policy considerations stated there vis-viscontractual stipulations limiting the carriers liability be applied with equal force to this case. [31] It also
cites Manila Railroad Co. vs. Compaia Transatlantica[32] and contends that stipulations exempting a party
from liability for damages due to negligence should not be countenanced and should be strictly
construed against the party claiming its benefit.[33] We disagree.
The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify
the application of such policy considerations and concomitantly stricter rules. As already discussed
above, the public policy considerations behind the rigorous treatment of common carriers are absent in
the case of private carriers. Hence, the stringent laws applicable to common carriers are not applied to
private carriers. The case of Manila Railroad is also inapplicable because the action for damages there
does not involve a contract for transportation. Furthermore, the defendant therein made a promise to use
due care in the lifting operations and, consequently, it was bound by its undertaking; besides, the
exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable
occurrences not caused by its personal negligence. This promise was thus construed to make sense
together with the stipulation against liability for damages. [34] In the present case, we stress that the
private respondent made no such promise. The agreement of the parties to exempt the shipowner from
responsibility for any damage to the cargo and place responsibility over the same to petitioner is the lone
stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo,[35] Walter A. Smith &
Co. vs. Cadwallader Gibson Lumber Co.,[36] N. T. Hashim and Co. vs. Rocha and Co., [37] Ohta
Development Co. vs. SteamshipPompey[38] and Limpangco Sons vs. Yangco Steamship Co.[39] in support
of its contention that the shipowner be held liable for damages. [40] These however are not on all fours
with the present case because they do not involve a similar factual milieu or an identical stipulation in the
charter party expressly exempting the shipowner from responsibility for any damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no cause of action against it
because this Court has earlier affirmed the liability of South Sea for the loss suffered by
petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single
loss.[41] In view of the above disquisition upholding the validity of the questioned charter party stipulation
and holding that petitioner may not recover from private respondent, the present issue is moot and
academic. It suffices to state that the Resolution of this Court dated June 2, 1995 [42] affirming the liability
of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private

respondent. An aggrieved party may still recover the deficiency from the person causing the loss in the
event the amount paid by the insurance company does not fully cover the loss. Article 2207 of the Civil
Code provides:
ART. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss,
the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show
any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED.
SO ORDERED.
[G.R. No. 102316. June 30, 1997]
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY, INC., petitioner, vs. COURT OF APPEALS
AND SEVEN BROTHERS SHIPPING CORPORATION,respondents.
DECISION
PANGANIBAN, J.:
Is a stipulation in a charter party that the (o)wners shall not be responsible for loss, split, shortlanding, breakages and any kind of damages to the cargo [1] valid? This is the main question raised in this
petition for review assailing the Decision of Respondent Court of Appeals[2] in CA-G.R. No. CV-20156
promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial
Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which reads:

In its assailed Decision, Respondent Court of Appeals held:

WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the liability of the
Seven Brothers Shipping Corporation to the plaintiff is concerned which is hereby REVERSED and SET
ASIDE.[3]
The Facts
The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered
into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter
undertook to load on board its vessel M/V Seven Ambassador the formers lauan round logs numbering
940 at the port of Maconacon, Isabela for shipment to Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea
Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy
No. 84/24229 for P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to
Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss
of the plaintiffs insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. E) to cover payment of the premium and documentary
stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea
Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for
non-payment of the premium due in accordance with Section 77 of the Insurance Code.

WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay
plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the
lost logs with legal interest thereon from the date of demand on February 2, 1984 until the amount is fully
paid or in the alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the amount of
TWO MILLION PESOS (P2,000,000.00) representing the value of lost logs plus legal interest from the
date of demand on April 24, 1984 until full payment thereof; the reasonable attorneys fees in the amount
equivalent to five (5) percent of the amount of the claim and the costs of the suit.

On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the
payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed
a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the
latter denied the claim.

Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of TWO
HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of the stipulated
freight charges.

Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following
assignment of errors, to wit:

Defendant South Sea Surety and Insurance Companys counterclaim is hereby dismissed.

After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against
defendants. Both defendants shipping corporation and the surety company appealed.

A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven
Ambassadors, was not due to fortuitous event but to the negligence of the captain in stowing and
securing the logs on board, causing the iron chains to snap and the logs to roll to the portside.

G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance Company, Inc.
to pay plaintiff-appellee P2,000,000.00 representing value of the policy with legal interest from 2
February 1984 until the amount is fully paid,

B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping
Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to public
policy invoking article 1745 of the New Civil Code.

H. The trial court erred in not awarding to the defendant-appellant the attorneys fees alleged and proven
in its counterclaim.

C. The lower court erred in holding defendant-appellant Seven Brothers Shipping Corporation liable in
the alternative and ordering/directing it to pay plaintiff-appellee the amount of two million
(P2,000,000.00) pesos representing the value of the logs plus legal interest from date of demand until
fully paid.
D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping Corporation to pay
appellee reasonable attorneys fees in the amount equivalent to 5% of the amount of the claim and the
costs of the suit.
E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its counterclaim for attorneys fees.
F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:
A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant South Sea
Surety and Insurance Company, Inc. and likewise erred in not holding that he was the representative of
the insurance broker Columbia Insurance Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received compensation/commission on the
premiums paid on the policies issued by the defendant-appellant South Sea Surety and Insurance
Company, Inc.

The primary issue to be resolved before us is whether defendants shipping corporation and the surety
company are liable to the plaintiff for the latters lost logs.[4]
The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea
Surety and Insurance Company (South Sea), but modified it by holding that Seven Brothers Shipping
Corporation (Seven Brothers) was not liable for the lost cargo.[5] In modifying the RTC judgment, the
respondent appellate court ratiocinated thus:
It appears that there is a stipulation in the charter party that the ship owner would be exempted from
liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the
liability of the shipping corporation. The provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier.
As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is
valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24).
The shipping corporation should not therefore be held liable for the loss of the logs.[6]

D. The trial court erred in disregarding the receipt of payment clause attached to and forming part of the
Marine Cargo Insurance Policy No. 84/24229.

South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. (Valenzuela)
filed separate petitions for review before this Court. In a Resolution dated June 2, 1995, this Court
denied the petition of South Sea.[7] There the Court found no reason to reverse the factual findings of the
trial court and the Court of Appeals that Chua was indeed an authorized agent of South Sea when he
received Valenzuelas premium payment for the marine cargo insurance policy which was thus binding
on the insurer.[8]

E. The trial court in disregarding the statement of account or bill stating the amount of premium and
documentary stamps to be paid on the policy by the plaintiff-appellee.

The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the
CA Decision which exempted Seven Brothers from any liability for the lost cargo.

F. The trial court erred in disregarding the indorsement of cancellation of the policy due to non-payment
of premium and documentary stamps.

The Issue

C. The trial court erred in not applying Section 77 of the Insurance Code.

Petitioner Valenzuelas arguments revolve around a single issue: whether or not respondent Court
(of Appeals) committed a reversible error in upholding the validity of the stipulation in the charter party
executed between the petitioner and the private respondent exempting the latter from liability for the loss
of petitioners logs arising from the negligence of its (Seven Brothers) captain.[9]
The Courts Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent stipulated that the (o)wners shall
not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo. [10] The
validity of this stipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the parties that the proximate
cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the snapping of the
iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in
stowing and securing the logs on board the vessel and not due to fortuitous event. [11] Likewise
undisputed is the status of Private Respondent Seven Brothers as a private carrier when it contracted to
transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition.[12]
The trial court deemed the charter party stipulation void for being contrary to public policy, [13] citing
Article 1745 of the Civil Code which provides:
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a
family, or of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished;

(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of
the Code of Commerce[14] and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and
paragraph 1, Article 1409 of the Civil Code,[15] petitioner further contends that said stipulation gives no
duty or obligation to the private respondent to observe the diligence of a good father of a family in the
custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had
acted as a private carrier in transporting petitioners lauan logs. Thus, Article 1745 and other Civil Code
provisions on common carriers which were cited by petitioner may not be applied unless expressly
stipulated by the parties in their charter party.[16]
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo
rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo
caused even by the negligence of the ship captain. Pursuant to Article 1306[17] of the Civil Code, such
stipulation is valid because it is freely entered into by the parties and the same is not contrary to law,
morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even
a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate
their duties and obligations which perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public.Hence, the stringent provisions of
the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship
transporting commercial goods as a private carrier.Consequently, the public policy embodied therein is
not contravened by stipulations in a charter party that lessen or remove the protection given by law in
contracts involving common carriers.
The issue posed in this case and the arguments raised by petitioner are not novel; they were
resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc. [18] In that
case, the trial court similarly nullified a stipulation identical to that involved in the present case for being
contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of
Commerce. Consequently, the trial court held the shipowner liable for damages resulting from the partial
loss of the cargo. This Court reversed the trial court and laid down, through Mr. Justice Jose P. Bengzon,
the following well-settled observation and doctrine:
The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special
person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict

public policy governing common carriers is applied. Such policy has no force where the public at large is
not involved, as in this case of a ship totally chartered for the use of a single party. [19] (Underscoring
supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public
enters into a contract of transportation with common carriers without a hand or a voice in the preparation
thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its
own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted in tickets, invoices or other documents over
which the riding public has no understanding or, worse, no choice. Compared to the general public, a
charterer in a contract of private carriage is not similarly situated. It can -- and in fact it usually does -enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can
stipulate the carriers obligations and liabilities over the shipment which, in turn, determine the price or
consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to
set aside the protection of the law on common carriers. When the charterer decides to exercise this
option, he takes a normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to the present case because
it covers only a stipulation exempting a private carrier from liability for the negligence of his agent, but it
does not apply to a stipulation exempting a private carrier like private respondent from the negligence of
his employee or servant which is the situation in this case.[20] This contention of petitioner is bereft of
merit, for it raises a distinction without any substantive difference. The case of Home
Insurance specifically dealt with the liability of the shipowner for acts or negligence of its captain and
crew[21] and a charter party stipulation which exempts the owner of the vessel from any loss or damage
or delay arising from any other source, even from the neglect or fault of the captain or crew or some
other person employed by the owner on board, for whose acts the owner would ordinarily be liable
except for said paragraph.[22] Undoubtedly, Home Insurance is applicable to the case at bar.
The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the
rule in the Philippines[23] deserves scant consideration. The Court there categorically held that said rule
was reasonable and proceeded to apply it in the resolution of that case. Petitioner miserably failed to
show such circumstances or arguments which would necessitate a departure from a well-settled
rule. Consequently, our ruling in said case remains a binding judicial precedent based on the doctrine
of stare decisis and Article 8 of the Civil Code which provides that (j)udicial decisions applying or
interpreting the laws or the Constitution shall form part of the legal system of the Philippines.
In fine, the respondent appellate court aptly stated that [in the case of] a private carrier, a
stipulation exempting the owner from liability even for the negligence of its agent is valid.[24]
Other Arguments
On the basis of the foregoing alone, the present petition may already be denied; the Court,
however, will discuss the other arguments of petitioner for the benefit and satisfaction of all concerned.

Articles 586 and 587, Code of Commerce

Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of
the Code of Commerce which confer on petitioner the right to recover damages from the shipowner and
ship agent for the acts or conduct of the captain.[25] We are not persuaded. Whatever rights petitioner
may have under the aforementioned statutory provisions were waived when it entered into the charter
party.
Article 6 of the Civil Code provides that (r)ights may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good customs, or prejudicial to a person with a right
recognized by law. As a general rule patrimonial rights may be waived as opposed to rights to
personality and family rights which may not be made the subject of waiver. [26] Being patently and
undoubtedly patrimonial, petitioners right conferred under said articles may be waived. This, the
petitioner did by acceding to the contractual stipulation that it is solely responsible for any damage to the
cargo, thereby exempting the private carrier from any responsibility for loss or damage
thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and private
respondent alone; it is not imbued with public policy considerations for the general public or third
persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary
to Articles 1170 and 1173 of the Civil Code[27] which read:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of the
time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, shall
apply.
If the law does not state the diligence which is to be observed in the performance, that which is expected
of a good father of a family shall be required.
The Court notes that the foregoing articles are applicable only to the obligor or the one with an
obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect
of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter
party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner
are, therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the second paragraph
of Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event

the law or the contract is silent. In the instant case, Article 362 of the Code of Commerce [28] provides the
standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence under this
statutory provision may, however, be modified in a contract of private carriage as the petitioner and
private respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc.[29] which, in turn, quoted Juan Ysmael & Co.
vs. Gabino Barreto & Co.[30] and argues that the public policy considerations stated there vis-viscontractual stipulations limiting the carriers liability be applied with equal force to this case. [31] It also
cites Manila Railroad Co. vs. Compaia Transatlantica[32] and contends that stipulations exempting a party
from liability for damages due to negligence should not be countenanced and should be strictly
construed against the party claiming its benefit.[33] We disagree.

respondent. An aggrieved party may still recover the deficiency from the person causing the loss in the
event the amount paid by the insurance company does not fully cover the loss. Article 2207 of the Civil
Code provides:
ART. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss,
the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show
any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED.
SO ORDERED.

The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify
the application of such policy considerations and concomitantly stricter rules. As already discussed
above, the public policy considerations behind the rigorous treatment of common carriers are absent in
the case of private carriers. Hence, the stringent laws applicable to common carriers are not applied to
private carriers. The case of Manila Railroad is also inapplicable because the action for damages there
does not involve a contract for transportation. Furthermore, the defendant therein made a promise to use
due care in the lifting operations and, consequently, it was bound by its undertaking; besides, the
exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable
occurrences not caused by its personal negligence. This promise was thus construed to make sense
together with the stipulation against liability for damages. [34] In the present case, we stress that the
private respondent made no such promise. The agreement of the parties to exempt the shipowner from
responsibility for any damage to the cargo and place responsibility over the same to petitioner is the lone
stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo,[35] Walter A. Smith &
Co. vs. Cadwallader Gibson Lumber Co.,[36] N. T. Hashim and Co. vs. Rocha and Co., [37] Ohta
Development Co. vs. SteamshipPompey[38] and Limpangco Sons vs. Yangco Steamship Co.[39] in support
of its contention that the shipowner be held liable for damages. [40] These however are not on all fours
with the present case because they do not involve a similar factual milieu or an identical stipulation in the
charter party expressly exempting the shipowner from responsibility for any damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no cause of action against it
because this Court has earlier affirmed the liability of South Sea for the loss suffered by
petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single
loss.[41] In view of the above disquisition upholding the validity of the questioned charter party stipulation
and holding that petitioner may not recover from private respondent, the present issue is moot and
academic. It suffices to state that the Resolution of this Court dated June 2, 1995 [42] affirming the liability
of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private

G.R. No. L-69044 May 29, 1987

EASTERN
SHIPPING
vs.
INTERMEDIATE APPELLATE COURT
CORPORATION,respondents.

LINES,
and

DEVELOPMENT

INC., petitioner,
INSURANCE

&

SURETY

No. 71478 May 29, 1987

EASTERN
SHIPPING
LINES,
INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO.,
LTD.,respondents.

MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance, arose from the same incident,
the sinking of the M/S ASIATICA when it caught fire, resulting in the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by
petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at
P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at

P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk
for their stated value with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment
fabrics and accessories, in two (2) containers, consigned to Mariveles Apparel Corporation, and two
cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128
cartons were insured for their stated value by respondent Nisshin Fire & Marine Insurance Co., for US
$46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and
cargo. The respective respondent Insurers paid the corresponding marine insurance values to the
consignees concerned and were thus subrogated unto the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance,
for short), having been subrogated unto the rights of the two insured companies, filed suit against
petitioner Carrier for the recovery of the amounts it had paid to the insured before the then Court of First
instance of Manila, Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary
fortuitous event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the
amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's
fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14,
1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478

On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the
amounts of US $46,583.00 and US $11,385.00, respectively, with legal interest, plus attorney's fees of
P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984,
affirmed with modification the Trial Court's judgment by decreasing the amount recoverable by DOWA to
US $1,000.00 because of $500 per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First
Division, and G. R. No. 71478 on September 25, 1985 by the Second Division. Upon Petitioner Carrier's
Motion for Reconsideration, however, G.R. No. 69044 was given due course on March 25, 1985, and the
parties were required to submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution
denying the Petition for Review and moved for its consolidation with G.R. No. 69044, the lowernumbered case, which was then pending resolution with the First Division. The same was granted; the
Resolution of the Second Division of September 25, 1985 was set aside and the Petition was given due
course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely
a charterer thereof. We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts where
various plaintiffs are represented by various counsel representing various
consignees or insurance companies. The common defendant in these cases is
petitioner herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a
party's pleading are deemed admissions of that party and binding upon it. 2 And an admission in one
pleading in one action may be received in evidence against the pleader or his successor-in-interest on
the trial of another action to which he is a party, in favor of a party to the latter action. 3

On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire
& Marine Insurance Co., Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against
Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First
Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and nonobservance of extraordinary diligence by petitioner Carrier.

The threshold issues in both cases are: (1) which law should govern the Civil Code provisions on
Common carriers or the Carriage of Goods by Sea Act? and (2) who has the burden of proof to show
negligence of the carrier?

Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the
ship is an exempting circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act
(COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is
shifted to the cargo shipper.

The law of the country to which the goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were transported
from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil
Code. 5 However, in all matters not regulated by said Code, the rights and obligations of common carrier

On the Law Applicable

shall be governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea
Act, a special law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the
circumstances of each case. 8 Common carriers are responsible for the loss, destruction, or deterioration
of the goods unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase
"natural disaster or calamity. " However, we are of the opinion that fire may not be considered a natural
disaster or calamity. This must be so as it arises almost invariably from some act of man or by human
means. 10 It does not fall within the category of an act of God unless caused by lightning 11 or by other
natural disaster or calamity. 12 It may even be caused by the actual fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases
of rural lands where a reduction of the rent is allowed when more than one-half of the fruits have been
lost due to such event, considering that the law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of
the Civil Code provides that all cases than those mention in Article 1734, the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it proves that it has observed the
extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the
transported goods have been lost. Petitioner Carrier has also proved that the loss was caused by fire.
The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence
required by law. In this regard, the Trial Court, concurred in by the Appellate Court, made the following
Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in
hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed that
smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke
was noticed, the fire was already big; that the fire must have started twenty-four
24) our the same was noticed; that carbon dioxide was ordered released and the
crew was ordered to open the hatch covers of No, 2 tor commencement of fire
fighting by sea water: that all of these effort were not enough to control the fire.

Pursuant to Article 1733, common carriers are bound to extraordinary diligence in

the vigilance over the goods. The evidence of the defendant did not show that
extraordinary vigilance was observed by the vessel to prevent the occurrence of
fire at hatches numbers 2 and 3. Defendant's evidence did not likewise show he
amount of diligence made by the crew, on orders, in the care of the cargoes. What
appears is that after the cargoes were stored in the hatches, no regular inspection
was made as to their condition during the voyage. Consequently, the crew could
not have even explain what could have caused the fire. The defendant, in the
Court's mind, failed to satisfactorily show that extraordinary vigilance and care had
been made by the crew to prevent the occurrence of the fire. The defendant, as a
common carrier, is liable to the consignees for said lack of deligence required of it
under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary diligence
required by law, Petitioner Carrier cannot escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil
Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the
"proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or
minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has also
failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is
provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage
arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was
"actual fault" of the carrier shown by "lack of diligence" in that "when the smoke was noticed, the fire was
already big; that the fire must have started twenty-four (24) hours before the same was noticed; " and
that "after the cargoes were stored in the hatches, no regular inspection was made as to their condition
during the voyage." The foregoing suffices to show that the circumstances under which the fire
originated and spread are such as to show that Petitioner Carrier or its servants were negligent in
connection therewith. Consequently, the complete defense afforded by the COGSA when loss results
from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:

Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in
section 4(5) of the COGSA, which reads:

rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained."
Consequently, the aforestated amount of P256,039 should be upheld.

(5) Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or the equivalent of
that sum in other currency, unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in bill of lading. This
declaration if embodied in the bill of lading shall be prima facie evidence, but all be
conclusive on the carrier.

With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75
(Exhibit "I"), which is likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to be
paid by respondent Court. however, multiplying seven (7) cases by $500 per package at the present
prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount
that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75.

By agreement between the carrier, master or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named. In
no event shall the carrier be Liable for more than the amount of damage actually
sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of
the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed
amount per package although the Code expressly permits a stipulation limiting such liability. Thus, the
COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by
establishing a statutory provision limiting the carrier's liability in the absence of a declaration of a higher
value of the goods by the shipper in the bill of lading. The provisions of the Carriage of Goods by.Sea Act
on limited liability are as much a part of a bill of lading as though physically in it and as much a part
thereof as though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7
limiting the carrier's liability for the loss or destruction of the goods. Nor is there a declaration of a higher
value of the goods. Hence, Petitioner Carrier's liability should not exceed US $500 per package, or its
peso equivalent, at the time of payment of the value of the goods lost, but in no case "more than the
amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was
exactly the amount of the insurance coverage by Development Insurance (Exhibit "A"), and the amount
affirmed to be paid by respondent Court. The goods were shipped in 28 packages (Exhibit "C-2")
Multiplying 28 packages by $500 would result in a product of $14,000 which, at the current exchange

In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount
awarded to DOWA which was already reduced to $1,000 by the Appellate Court following the statutory
$500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with
NISSHIN, the Appellate Court also limited Petitioner Carrier's liability to $500 per package and affirmed
the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500
to arrive at the figure of $64,000, and explained that "since this amount is more than the insured value of
the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128 cartons,
which amount is less than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the
shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots
and the shipper of floor covering brought action against the vessel owner and operator to recover for
loss of ingots and floor covering, which had been shipped in vessel supplied containers. The U.S.
District Court for the Southern District of New York rendered judgment for the plaintiffs, and the
defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed
holding that:
When what would ordinarily be considered packages are shipped in a container
supplied by the carrier and the number of such units is disclosed in the shipping
documents, each of those units and not the container constitutes the "package"
referred to in liability limitation provision of Carriage of Goods by Sea Act. Carriage
of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to
whether carrier-furnished containers whose contents are disclosed should be
treated as packages, the interest in securing international uniformity would
suggest that they should not be so treated. Carriage of Goods by Sea Act, 4(5), 46
U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that
treating a container as a package is inconsistent with the congressional purpose of

establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F.

Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped
criticism, there is, nonetheless, much to commend it. It gives
needed recognition to the responsibility of the courts to
construe and apply the statute as enacted, however great
might be the temptation to "modernize" or reconstitute it by
artful judicial gloss. If COGSA's package limitation scheme
suffers from internal illness, Congress alone must undertake
the surgery. There is, in this regard, obvious wisdom in the
Ninth Circuit's conclusion in Hartford that technological
advancements, whether or not forseeable by the COGSA
promulgators, do not warrant a distortion or artificial
construction of the statutory term "package." A ruling that
these large reusable metal pieces of transport equipment
qualify as COGSA packages at least where, as here, they
were carrier owned and supplied would amount to just
such a distortion.
Certainly, if the individual crates or cartons prepared by the
shipper and containing his goods can rightly be considered
"packages" standing by themselves, they do not suddenly
lose that character upon being stowed in a carrier's
container. I would liken these containers to detachable
stowage compartments of the ship. They simply serve to
divide the ship's overall cargo stowage space into smaller,
more serviceable loci. Shippers' packages are quite literally
"stowed" in the containers utilizing stevedoring practices and
materials analogous to those employed in traditional on
board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on
other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with many maritime
cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the
functional economics test. Judge Kellam held that when rolls of polyester goods
are packed into cardboard cartons which are then placed in containers, the
cartons and not the containers are the packages.
xxx xxx xxx

Eurygenes concerned a shipment of stereo equipment packaged by the shipper

into cartons which were then placed by the shipper into a carrier- furnished
container. The number of cartons was disclosed to the carrier in the bill of lading.
Eurygenes followed the Mitsui test and treated the cartons, not the container, as
the COGSA packages. However, Eurygenes indicated that a carrier could limit its
liability to $500 per container if the bill of lading failed to disclose the number of
cartons or units within the container, or if the parties indicated, in clear and
unambiguous language, an agreement to treat the container as the package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of
Package Limitations and Third World Delivery Problems by
Chester D. Hooper & Keith L. Flicker, published in Fordham
International Law Journal, Vol. 6, 1982-83, Number 1)
(Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the
number of cartons or units, as well as the nature of the goods, and applying the ruling in
the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be
considered as the shipping unit subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were carrier-furnished or
not. Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they
were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they
were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following
stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is acknowledged on the
face of this Bill of Lading are not already packed into container(s) at the time of
receipt, the Carrier shall be at liberty to pack and carry them in any type of
container(s).

The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:

The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading,
meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper had

furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed.
and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts
that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused
the obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already
prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw. up by
the carrier. 21

Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the
award by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No.
69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount
of P5,000.00 would be more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478
is affirmed.

On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its
witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do
so. On this point, the Trial Court found:

WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines
shall pay the Development Insurance and Surety Corporation the amount of P256,039 for the twentyeight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with
interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as
attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.

xxx xxx xxx

SO ORDERED.
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time
from June 27, 1978, when its answer was prepared and filed in Court, until
September 26, 1978, when the pre-trial conference was conducted for the last
time, the defendant had more than nine months to prepare its evidence. Its
belated notice to take deposition on written interrogatories of its witnesses in
Japan, served upon the plaintiff on August 25th, just two days before the hearing
set for August 27th, knowing fully well that it was its undertaking on July 11 the that
the deposition of the witnesses would be dispensed with if by next time it had not
yet been obtained, only proves the lack of merit of the defendant's motion for
postponement, for which reason it deserves no sympathy from the Court in that
regard. The defendant has told the Court since February 16, 1979, that it was
going to take the deposition of its witnesses in Japan. Why did it take until August
25, 1979, or more than six months, to prepare its written interrogatories. Only the
defendant itself is to blame for its failure to adduce evidence in support of its
defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that
it was denied due process when the Trial Court rendered its Decision on the basis of the evidence
adduced. What due process abhors is absolute lack of opportunity to be heard. 24
On the Award of Attorney's Fees:

G.R. No. L-49407 August 19, 1988

NATIONAL
DEVELOPMENT
vs.
THE COURT OF APPEALS and DEVELOPMENT
CORPORATION, respondents-appellees.

COMPANY, petitioner-appellant,
INSURANCE

&

SURETY

No. L-49469 August 19, 1988

MARITIME
COMPANY
OF
vs.
THE COURT OF APPEALS and
CORPORATION, respondents- appellees.

THE
DEVELOPMENT

PHILIPPINES, petitioner-appellant,
INSURANCE

&

SURETY

Balgos & Perez Law Office for private respondent in both cases.

PARAS, J.:
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R
entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the
Philippines and National Development Company defendant-appellants," affirming in toto the
decision ** in Civil Case No. 60641 of the then Court of First Instance of Manila, Sixth Judicial District,
the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering the defendants National

Development Company and Maritime Company of the Philippines, to pay jointly
and severally, to the plaintiff Development Insurance and Surety Corp., the sum of
THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN
PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal interest
thereon from the filing of plaintiffs complaint on April 22, 1965 until fully paid, plus
TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and for attorney's
fee.
On defendant Maritime Company of the Philippines' cross-claim against the
defendant National Development Company, judgment is hereby rendered, ordering
the National Development Company to pay the cross-claimant Maritime Company
of the Philippines the total amount that the Maritime Company of the Philippines
may voluntarily or by compliance to a writ of execution pay to the plaintiff pursuant
to the judgment rendered in this case.
With costs against the defendant Maritime Company of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are as follows:
The evidence before us shows that in accordance with a memorandum agreement
entered into between defendants NDC and MCP on September 13, 1962,
defendant NDC as the first preferred mortgagee of three ocean going vessels
including one with the name 'Dona Nati' appointed defendant MCP as its agent to
manage and operate said vessel for and in its behalf and account (Exh. A). Thus,
on February 28, 1964 the E. Philipp Corporation of New York loaded on board the
vessel "Dona Nati" at San Francisco, California, a total of 1,200 bales of American
raw cotton consigned to the order of Manila Banking Corporation, Manila and the
People's Bank and Trust Company acting for and in behalf of the Pan Asiatic
Commercial Company, Inc., who represents Riverside Mills Corporation (Exhs. K-2
to K7-A & L-2 to L-7-A). Also loaded on the same vessel at Tokyo, Japan, were the
cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking
Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of
aluminum foil (Exhs. M & M-1). En route to Manila the vessel Dofia Nati figured in
a collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel
'SS Yasushima Maru' as a result of which 550 bales of aforesaid cargo of
American raw cotton were lost and/or destroyed, of which 535 bales as damaged
were landed and sold on the authority of the General Average Surveyor for Yen
6,045,-500 and 15 bales were not landed and deemed lost (Exh. G). The damaged
and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer,
paid to the Riverside Mills Corporation as holder of the negotiable bills of lading
duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-

3}. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui
Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting
for Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer
paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3).
Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the
consignees or their successors-in-interest, for the said lost or damaged cargoes.
Hence, plaintiff filed this complaint to recover said amount from the defendantsNDC and MCP as owner and ship agent respectively, of the said 'Dofia Nati'
vessel. (Rollo, L-49469, p.38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First
Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of
P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does, the action has
prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an
Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on Appeal, pp. 14-24).
On June 29, 1965, the trial court deferred the resolution of the motion to dismiss till after the trial on the
merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and crossclaim against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It
also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on
October 16, 1965, NDC's answer to DISC's complaint was stricken off from the record for its failure to
answer DISC's written interrogatories and to comply with the trial court's order dated August 14, 1965
allowing the inspection or photographing of the memorandum of agreement it executed with MCP. Said
order of October 16, 1965 likewise declared NDC in default (Record on Appeal, p. 44). On August 31,
1966, NDC filed a motion to set aside the order of October 16, 1965, but the trial court denied it in its
order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court
rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC the sum
of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on April 22,
1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said decision, the trial court granted
MCP's crossclaim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after
its motion to set aside the decision was denied by the trial court in its order dated February 13,1970.
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the
trial court.
Hence these appeals by certiorari.

NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On
July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). On August
27,1979, these consolidated cases were given due course (Rollo, p. 108) and submitted for decision on
February 29, 1980 (Rollo, p. 136).

INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND
LACK OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR
NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI
IV

In its brief, NDC cited the following assignments of error:

I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND
NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE
OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING
FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED
AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES.
II

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF
COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP
AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL
DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE
WITH SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE
COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA MARU.
V

THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT
FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER,
HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant National Development
Company; p. 96, Rollo).

THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES
TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE
AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS ESTABLISHED IN
THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING
HAS NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK
OF.

On its part, MCP assigned the following alleged errors:

VI

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL

DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND
SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE
COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF
SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN PETITIONERS ITS COUNTERCLAIM
IN THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for
the Maritime Company of the Philippines; p. 121, Rollo)

THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT

DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS
AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING THE
COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION
OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS
AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY THE
STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE
RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE COLLISION OF
THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH VESSELS

The pivotal issue in these consolidated cases is the determination of which laws govern loss or
destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability as
well as the rules of prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to
the case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the
carrier is not responsible for the loss or damage resulting from the "act, neglect or default of the master,
mariner, pilot or the servants of the carrier in the navigation or in the management of the ship." Thus,
NDC insists that based on the findings of the trial court which were adopted by the Court of Appeals,
both pilots of the colliding vessels were at fault and negligent, NDC would have been relieved of liability
under the Carriage of Goods by Sea Act. Instead, Article 287 of the Code of Commerce was applied and

both NDC and MCP were ordered to reimburse the insurance company for the amount the latter paid to
the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA
469-470 [1987]) where it was held under similar circumstance "that the law of the country to which the
goods are to be transported governs the liability of the common carrier in case of their loss, destruction
or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes
transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil
Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of
Goods by Sea Act, a special law, is merely suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from San
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a collision
which was found to have been caused by the negligence or fault of both captains of the colliding vessels.
Under the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the
collision actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons
of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them according to all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all other than those mentioned is Article 1734 thereof, the
common carrier shall be presumed to have been at fault or to have acted negigently, unless it proves
that it has observed the extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so
that no reversible error can be found in respondent courses application to the case at bar of Articles 826
to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the
personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred
after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which
provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both
shall be solidarily responsible for the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or
negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the
universally accepted doctrine that the shipmaster or captain is merely the representative of the owner
who has the actual or constructive control over the conduct of the voyage (Y'eung Sheng Exchange and
Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to
domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com.

Act No. 65) does not specifically provide for the subject of collision, said Act in no uncertain terms,
restricts its application "to all contracts for the carriage of goods by sea to and from Philippine ports in
foreign trade." Under Section I thereof, it is explicitly provided that "nothing in this Act shall be construed
as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its
application." By such incorporation, it is obvious that said law not only recognizes the existence of the
Code of Commerce, but more importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety
Corporation, has no cause of action against it because the latter did not prove that its alleged subrogers
have either the ownership or special property right or beneficial interest in the cargo in question; neither
was it proved that the bills of lading were transferred or assigned to the alleged subrogers; thus, they
could not possibly have transferred any right of action to said plaintiff- appellee in this case. (Brief for the
Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly
endorsed bills of lading covering the shipments in question and an examination of the invoices in
particular, shows that the actual consignees of the said goods are the aforementioned companies.
Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is
undisputed that the insurer, plaintiff appellee paid the total amount of P364,915.86 to said consignees for
the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of action to
recover (what it has paid) from defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo,
p. 43).
MCP next contends that it can not be liable solidarity with NDC because it is merely the manager and
operator of the vessel Dona Nati not a ship agent. As the general managing agent, according to MCP, it
can only be liable if it acted in excess of its authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13,
1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the
concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of
the vessel, including the power to contract in the name of the NDC (Decision, CA G.R. No. 46513, p. 12;
Rollo, p. 40). Consequently, under the circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending vessel are liable for the damage done
where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case
of collision, both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng
Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard
Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of
the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of
Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but
more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the
Court held that both the owner and agent (Naviero) should be declared jointly and severally liable, since
the obligation which is the subject of the action had its origin in a tortious act and did not arise from
contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent,

even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo
transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his
rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the
freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package
or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the
law on averages should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence ' during the trial. Besides, common carriers, in the
language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its
liability for injury to a loss of goods where such injury or loss was caused by its own negligence."
Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not
being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals
acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima
Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need not be discussed
lengthily as said claim is not only at variance with NDC's posture, but also contrary to the factual findings
of the trial court affirmed no less by the Court of Appeals, that both pilots were at fault for not changing
their excessive speed despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow
trans-shipment of the cargo, which simply means that the date of arrival of the ship Dona Nati on April
18,1964 was merely tentative to give allowances for such contingencies that said vessel might not arrive
on schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in
consequent delay of their arrival. In fact, because of the collision, the cargo which was supposed to
arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964.
Hence, had the cargoes in question been saved, they could have arrived in Manila on the abovementioned dates. Accordingly, the complaint in the instant case was filed on April 22, 1965, that is, long
before the lapse of one (1) year from the date the lost or damaged cargo "should have been delivered" in
the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision
of the respondent Appellate Court is AFFIRMED.
SO ORDERED.

G.R. No. L-8095

F.C.
vs.

YANGCO STEAMSHIP COMPANY, J.S. STANLEY, as Acting Collector of Customs of the Philippine
Islands, IGNACIO VILLAMOR, as Attorney-General of the Philippine Islands, and W.H. BISHOP, as
prosecuting attorney of the city of Manila, respondents.
Haussermann,
Cohn
and
Fisher
for
plaintiff.
Office of the Solicitor-General Harvey for respondents.
CARSON, J.:
The real question involved in these proceedings is whether the refusal of the owners and officers of a
steam vessel, duly licensed to engage in the coastwise trade of the Philippine Islands and engaged in
that trade as a common carrier, to accept for carriage "dynamite, powder or other explosives" from any
and all shippers who may offer such explosives for carriage can be held to be a lawful act without regard
to any question as to the conditions under which such explosives are offered to carriage, or as to the
suitableness of the vessel for the transportation of such explosives, or as to the possibility that the
refusal to accept such articles of commerce in a particular case may have the effect of subjecting any
person or locality or the traffic in such explosives to an undue, unreasonable or unnecessary prejudice or
discrimination.
Summarized briefly, the complaint alleges that plaintiff is a stockholder in the Yangco Steamship
Company, the owner of a large number of steam vessels, duly licensed to engage in the coastwise trade
of the Philippine Islands; that on or about June 10, 1912, the directors of the company adopted a
resolution which was thereafter ratified and affirmed by the shareholders of the company, "expressly
declaring and providing that the classes of merchandise to be carried by the company in its business as
a common carrier do not include dynamite, powder or other explosives, and expressly prohibiting the
officers, agents and servants of the company from offering to carry, accepting for carriage said dynamite,
powder or other explosives;" that thereafter the respondent Acting Collector of Customs demanded and
required of the company the acceptance and carriage of such explosives; that he has refused and
suspended the issuance of the necessary clearance documents of the vessels of the company unless
and until the company consents to accept such explosives for carriage; that plaintiff is advised and
believes that should the company decline to accept such explosives for carriage, the respondent
Attorney-General of the Philippine Islands and the respondent prosecuting attorney of the city of Manila
intend to institute proceedings under the penal provisions of sections 4, 5, and 6 of Act No. 98 of the
Philippine Commission against the company, its managers, agents and servants, to enforce the
requirements of the Acting Collector of Customs as to the acceptance of such explosives for carriage;
that notwithstanding the demands of the plaintiff stockholder, the manager, agents and servants of the
company decline and refuse to cease the carriage of such explosives, on the ground that by reason of
the severity of the penalties with which they are threatened upon failure to carry such explosives, they
cannot subject themselves to "the ruinous consequences which would inevitably result" from failure on
their part to obey the demands and requirements of the Acting Collector of Customs as to the
acceptance for carriage of explosives; that plaintiff believes that the Acting Collector of Customs
erroneously construes the provisions of Act No. 98 in holding that they require the company to accept
such explosives for carriage notwithstanding the above mentioned resolution of the directors and
stockholders of the company, and that if the Act does in fact require the company to carry such
explosives it is to that extent unconstitutional and void; that notwithstanding this belief of complainant as
to the true meaning of the Act, the questions involved cannot be raised by the refusal of the company or
its agents to comply with the demands of the Acting Collector of Customs, without the risk of irreparable
loss and damage resulting from his refusal to facilitate the documentation of the company's vessels, and
without assuming the company to test the questions involved by refusing to accept such explosives for
carriage.

March 31, 1915

FISHER, plaintiff,

The prayer of the complaint is as follows:

Wherefore your petitioner prays to this honorable court as follows:

First. That to the due hearing of the above entitled action be issued a writ of prohibition
perpetually restraining the respondent Yangco Steamship Company, its appraisers, agents,
servants or other representatives from accepting to carry and from carrying, in steamers of
said company dynamite, powder or other explosive substance, in accordance with the
resolution of the board of directors and of the shareholders of said company.

In support of this contention counsel cites for a number of English and American authorities, discussing
and applying the doctrine of the common law with reference to common carriers. But it is unnecessary
now to decide whether, in the absence of statute, the principles on which the American and English
cases were decided would be applicable in this jurisdiction. The duties and liabilities of common carriers
in this jurisdiction are defined and fully set forth in Act No. 98 of the Philippine Commission, and until and
unless that statute be declared invalid or unconstitutional, we are bound by its provisions.
Sections 2, 3 and 4 of the Act are as follows:

Second. That a writ of prohibition be issued perpetually enjoining the respondent J.S. Stanley
as Acting Collector of Customs of the Philippine Islands, his successors, deputies, servants or
other representatives, from obligating the said Yangco Steamship Company, by any means
whatever, to carry dynamite, powder or other explosive substance.
Third. That a writ of prohibition be issued perpetually enjoining the respondent Ignacio
Villamor as Attorney-General of the Philippine Islands, and W.H. Bishop as prosecuting
attorney of the city of Manila, their deputies representatives or employees, from accusing the
said Yangco Steamship Company, its officers, agents or servants, of the violation of Act No.
98 by reason of the failure or omission of the said company to accept for carriage out to carry
dynamite powder or other explosive.
Fourth. That the petitioner be granted such other remedy as may be meet and proper.
To this complaint the respondents demurred, and we are of opinion that the demurrer must be sustained,
on the ground that the complaint does not set forth facts sufficient to constitute a cause of action.
It will readily be seen that plaintiff seeks in these proceedings to enjoin the steamship company from
accepting for carriage on any of its vessels, dynamite, powder or other explosives, under any conditions
whatsoever; to prohibit the Collector of Customs and the prosecuting officers of the government from all
attempts to compel the company to accept such explosives for carriage on any of its vessels under any
conditions whatsoever; and to prohibit these officials from any attempt to invoke the penal provisions of
Act No. 98, in any case of a refusal by the company or its officers so to do; and this without regard to the
conditions as to safety and so forth under which such explosives are offered for carriage, and without
regard also to any question as to the suitableness for the transportation of such explosives of the
particular vessel upon which the shipper offers them for carriage; and further without regard to any
question as to whether such conduct on the part of the steamship company and its officers involves in
any instance an undue, unnecessary or unreasonable discrimination to the prejudice of any person,
locality or particular kind of traffic.
There are no allegations in the complaint that for some special and sufficient reasons all or indeed any of
the company's vessels are unsuitable for the business of transporting explosives; or that shippers have
declined or will in future decline to comply with such reasonable regulations and to take such reasonable
precautions as may be necessary and proper to secure the safety of the vessels of the company in
transporting such explosives. Indeed the contention of petitioner is that a common carrier in the
Philippine Islands may decline to accept for carriage any shipment of merchandise of a class which it
expressly or impliedly declines to accept from all shippers alike, because as he contends "the duty of a
common carrier to carry for all who offer arises from the public profession he has made, and limited by
it."

SEC. 2. It shall be unlawful for any common carrier engaged in the transportation of
passengers or property as above set forth to make or give any unnecessary or unreasonable
preference or advantage to any particular person, company, firm, corporation or locality, or
any particular kind of traffic in any respect whatsoever, or to subject any particular person,
company, firm, corporation or locality, or any particular kind of traffic, to undue or
unreasonable prejudice or discrimination whatsoever, and such unjust preference or
discrimination is also hereby prohibited and declared to be unlawful.
SEC. 3. No common carrier engaged in the carriage of passengers or property as aforesaid
shall, under any pretense whatsoever, fail or refuse to receive for carriage, and as promptly
as it is able to do so without discrimination, to carry any person or property offering for
carriage, and in the order in which such persons or property are offered for carriage, nor shall
any such common carrier enter into any arrangement, contract or agreement with any other
person or corporation whereby the latter is given an exclusive or preferential or monopolize
the carriage any class or kind of property to the exclusion or partial exclusion of any other
person or persons, and the entering into any such arrangement, contract or agreement, under
any form or pretense whatsoever, is hereby prohibited and declared to be unlawful.
SEC. 4. Any willful violation of the provisions of this Act by any common carrier engaged in
the transportation of passengers or property as hereinbefore set forth is hereby declared to
be punishable by a fine not exceeding five thousand dollars money of the United States, or by
imprisonment not exceeding two years, or both, within the discretion of the court.
The validity of this Act has been questioned on various grounds, and it is vigorously contended that in so
far as it imposes any obligation on a common carrier to accept for carriage merchandise of a class which
he makes no public profession to carry, or which he has expressly or impliedly announced his intention
to decline to accept for carriage from all shippers alike, it is ultra vires, unconstitutional and void.
We may dismiss without extended discussion any argument or contention as to the invalidity of the
statute based on alleged absurdities inherent in its provisions or on alleged unreasonable or impossible
requirements which may be read into it by a strained construction of its terms.
We agree with counsel for petitioner that the provision of the Act which prescribes that, "No common
carrier ... shall, under any pretense whatsoever, fail or refuse to receive for carriage ... to carry any
person or property offering for carriage," is not to be construed in its literal sense and without regard to
the context, so as to impose an imperative duty on all common carriers to accept for carriage, and to
carry all and any kind of freight which may be offered for carriage without regard to the facilities which
they may have at their disposal. The legislator could not have intended and did not intend to prescribe
that a common carrier running passenger automobiles for hire must transport coal in his machines; nor
that the owner of a tank steamer, expressly constructed in small watertight compartments for the

carriage of crude oil must accept common carrier must accept and carry contraband articles, such as
opium, morphine, cocaine, or the like, the mere possession of which is declared to be a criminal offense;
nor that common carriers must accept eggs offered for transportation in paper parcels or any
merchandise whatever do defectively packed as to entail upon the company unreasonable and
unnecessary care or risks.
Read in connection with its context this, as well as all the other mandatory and prohibitory provisions of
the statute, was clearly intended merely to forbid failures or refusals to receive persons or property for
carriage involving any "unnecessary or unreasonable preference or advantage to any particular person,
company, firm, corporation, or locality, or any particular kind of traffic in any respect whatsoever," or
which would "subject any particular person, company, firm, corporation or locality, or any particular kind
of traffic to any undue or unreasonable prejudice or discrimination whatsoever."
The question, then, of construing and applying the statute, in cases of alleged violations of its provisions,
always involves a consideration as to whether the acts complained of had the effect of making or giving
an "unreasonable or unnecessary preference or advantage" to any person, locality or particular kind of
traffic, or of subjecting any person, locality, or particular kind of traffic to any undue or unreasonable
prejudice or discrimination. It is very clear therefore that the language of the statute itself refutes any
contention as to its invalidity based on the alleged unreasonableness of its mandatory or prohibitory
provisions.
So also we may dismiss without much discussion the contentions as to the invalidity of the statute, which
are based on the alleged excessive severity of the penalties prescribed for violation of its provisions.
Upon general principles it is peculiarly and exclusively within the province of the legislator to prescribe
the pains and penalties which may be imposed upon persons convicted of violations of the laws in force
within his territorial jurisdiction. With the exercise of his discretion in this regard where it is alleged that
excessive fines or cruel and unusual punishments have been prescribed, and even in such cases the
courts will not presume to interfere in the absence of the clearest and most convincing argument and
proof in support of such contentions. (Weems vs.United States, 217 U.S., 349; U.S. vs. Pico, 18 Phil.
Rep., 386.) We need hardly add that there is no ground upon which to rest a contention that the
penalties prescribed in the statute under consideration are either excessive or cruel and unusual, in the
sense in which these terms are used in the organic legislation in force in the Philippine Islands.
But it is contended that on account of the penalties prescribed the statute should be held invalid upon
the principles announced in Ex parte Young (209 U.S., 123, 147, 148); Cotting vs. Goddard (183 U.S.,
79, 102); Mercantile Trust Co. vs. Texas Co. (51 Fed., 529); Louisville Ry. vs. McCord (103 Fed., 216);
Cons. Gas Co. vs.Mayer (416 Fed., 150). We are satisfied however that the reasoning of those cases is
not applicable to the statute under consideration. The principles announced in those decisions are fairly
indicated in the following citations found in petitioner's brief:
But when the legislature, in an effort to prevent any inquiry of the validity of a particular statute, so
burdens any challenge thereof in the courts that the party affected is necessarily constrained to submit
rather than take the chances of the penalties imposed, then it becomes a serious question whether the
party is not deprived of the equal protection of the laws. (Cotting vs. Goddard, 183 U. S., 79, 102.)
It may therefore be said that when the penalties for disobedience are by fines so enormous
and imprisonment so severe as to intimidate the company and its officers from resorting to
the courts to test the validity of the legislation, the result is the same as if the law in terms
prohibited the company from seeking judicial construction of laws which deeply affect its
rights.

It is urged that there is no principle upon which to base the claim that a person is entitled to
disobey a statute at least once, for the purpose of testing its validity, without subjecting
himself to the penalties for disobedience provided by the statute in case it is valid. This is not
an accurate statement of the case. Ordinarily a law creating offenses in the nature of
misdemeanors or felonies relates to a subject over which the jurisdiction of the legislature is
complete in any event. In the case, however, of the establishment of certain rates without any
hearing, the validity of such rates necessarily depends upon whether they are high enough to
permit at least some return upon the investment (how much it is not now necessary to state),
and an inquiry as to that fact is a proper subject of judicial investigation. If it turns out that the
rates are too low for that purpose, then they are illegal. Now, to impose upon a party
interested the burden of obtaining a judicial decision of such a question (no prior hearing
having been given) only upon the condition that, if unsuccessful, he must suffer imprisonment
and pay fines, as provided in these acts, is, in effect, to close up all approaches to the courts,
and thus prevent any hearing upon the question whether the rates as provided by the acts
are not too low, and therefore invalid. The distinction is obvious between a case where the
validity of the act depends upon the existence of a fact which can be determined only after
investigation of a very complicated and technical character, and the ordinary case of a statute
upon a subject requiring no such investigation, and over which the jurisdiction of the
legislature is complete in any event.
We hold, therefore, that the provisions of the acts relating to the enforcement of the rates,
either for freight or passengers, by imposing such enormous fines and possible imprisonment
as a result of an unsuccessful effort to test the validity of the laws themselves, are
unconstitutional on their face, without regard to the question of the insufficiency of those
rates. (Ex parte Young, 209 U.S., 123 147, 148.)
An examination of the general provisions of our statute, of the circumstances under which it was
enacted, the mischief which it sought to remedy and of the nature of the penalties prescribed for
violations of its terms convinces us that, unlike the statutes under consideration in the above cited cases,
its enactment involved no attempt to prevent common carriers "from resorting to the courts to test the
validity of the legislation;" no "effort to prevent any inquiry" as to its validity. It imposes no arbitrary
obligation upon the company to do or to refrain from doing anything. It makes no attempt to compel such
carriers to do business at a fixed or arbitrarily designated rate, at the risk of separate criminal
prosecutions for every demand of a higher or a different rate. Its penalties can be imposed only upon
proof of "unreasonable," "unnecessary" and "unjust" discriminations, and range from a maximum which
is certainly not excessive for willful, deliberate and contumacious violations of its provisions by a great
and powerful corporation, to a minimum which may be a merely nominal fine. With so wide a range of
discretion for a contention on the part of any common carrier that it or its officers are "intimidated from
resorting to the courts to test the validity" of the provisions of the statute prohibiting such "unreasonable,"
"unnecessary" and "unjust" discriminations, or to test in any particular case whether a given course of
conduct does in fact involve such discrimination. We will presume, for the purpose of declaring the
statute invalid, that there is so real a danger that the Courts of First Instance and this court on appeal will
abuse the discretion thus conferred upon us, as to intimidate any common carrier, acting in good faith,
from resorting to the courts to test the validity of the statute. Legislative enactments, penalizing
unreasonable discriminations, unreasonable restraints of trade, and unreasonable conduct in various
forms of human activity are so familiar and have been so frequently sustained in the courts, as to render
extended discussion unnecessary to refute any contention as to the invalidity of the statute under
consideration, merely it imposes upon the carrier the obligation of adopting one of various courses of
conduct open to it, at the risk of incurring a prescribed penalty in the event that the course of conduct
actually adopted by it should be held to have involved an unreasonable, unnecessary or unjust
discrimination. Applying the test announced in Ex parte Young, supra, it will be seen that the validity of

the Act does not depend upon "the existence of a fact which can be determined only after investigation
of a very complicated and technical character," and that "the jurisdiction of the legislature" over the
subject with which the statute deals "is complete in any event." There can be no real question as to the
plenary power of the legislature to prohibit and to penalize the making of undue, unreasonable and
unjust discriminations by common carriers to the prejudice of any person, locality or particular kind of
traffic. (See Munn vs. Illinois, 94 U.S., 113, and other cases hereinafter cited in support of this
proposition.)
Counsel for petitioner contends also that the statute, if construed so as to deny the right of the steamship
company to elect at will whether or not it will engage in a particular business, such as that of carrying
explosives, is unconstitutional "because it is a confiscation of property, a taking of the carrier's property
without due process of law," and because it deprives him of his liberty by compelling him to engage in
business against his will. The argument continues as follows:
To require of a carrier, as a condition to his continuing in said business, that he must carry
anything and every thing is to render useless the facilities he may have for the carriage of
certain lines of freight. It would be almost as complete a confiscation of such facilities as if the
same were destroyed. Their value as a means of livelihood would be utterly taken away. The
law is a prohibition to him to continue in business; the alternative is to get out or to go into
some other business the same alternative as was offered in the case of the Chicago &
N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880), and which was there commented on as follows:
"Whatever of force there may be in such arguments, as applied to mere personal
property capable of removal and use elsewhere, or in other business, it is wholly
without force as against railroad corporations, so large a proportion of whose
investment is in the soil and fixtures appertaining thereto, which cannot be
removed. For a government, whether that government be a single sovereign or
one of the majority, to say to an individual who has invested his means in so
laudable an enterprise as the construction of a railroad, one which tends so much
to the wealth and prosperity of the community, that, if he finds that the rates
imposed will cause him to do business at a loss, he may quit business, and
abandon that road, is the very irony of despotism. Apples of Sodom were fruit of
joy in comparison. Reading, as I do, in the preamble of the Federal Constitution,
that it was ordained to "establish justice," I can never believe that it is within the
property of an individual invested in and used for a purpose in which even the
Argus eyes of the police power can see nothing injurious to public morals, public
health, or the general welfare. I read also in the first section of the bill of rights of
this state that "all men are by nature free and equal, and have certain inalienable
rights, among which are those of enjoying and defending life and liberty, acquiring,
possessing, and protecting property, and pursuing and obtaining safety and
happiness;" and I know that, while that remains as the supreme law of the state,
no legislature can directly or indirectly lay its withering or destroying hand on a
single dollar invested in the legitimate business of transportation." (Chicago &
N.W. Ry. vs.Dey, 35 Fed. Rep., 866, 880.)
It is manifest, however, that this contention is directed against a construction of the statute, which, as we
have said, is not warranted by its terms. As we have already indicated, the statute does not "require of a
carrier, as a condition to his continuing in said business, that he must carry anything and everything,"
and thereby "render useless the facilities he may have for the carriage of certain lines of freight." It
merely forbids failures or refusals to receive persons or property for carriage which have the effect of

giving an "unreasonable or unnecessary preference or advantage" to any person, locality or particular

kind of traffic, or of subjecting any person, locality or particular kind of traffic to any undue or
unreasonable prejudice or discrimination.
Counsel expressly admits that the statute, "as a prohibition against discrimination is a fair, reasonable
and valid exercise of government," and that "it is necessary and proper that such discrimination be
prohibited and prevented," but he contends that "on the other hand there is no reasonable warrant nor
valid excuse for depriving a person of his liberty by requiring him to engage in business against his will. If
he has a rolling boat, unsuitable and unprofitable for passenger trade, he may devote it to lumber
carrying. To prohibit him from using it unless it is fitted out with doctors and stewards and staterooms to
carry passengers would be an invalid confiscation of this property. A carrier may limit his business to the
branches thereof that suit his convenience. If his wagon be old, or the route dangerous, he may avoid
liability for loss of passengers' lives and limbs by carrying freight only. If his vehicles require expensive
pneumatic tires, unsuitable for freight transportation, ha may nevertheless carry passengers. The only
limitation upon his action that it is competent for the governing authority to impose is to require him to
treat all alike. His limitations must apply to all, and they must be established limitations. He cannot refuse
to carry a case of red jusi on the ground that he has carried for others only jusi that he was green, or
blue, or black. But he can refuse to carry red jusi, if he has publicly professed such a limitation upon his
business and held himself out as unwilling to carry the same for anyone."
To this it is sufficient answer to say that there is nothing in the statute which would deprive any person of
his liberty "by requiring him to engage in business against his will." The prohibitions of the statute against
undue, unnecessary or unreasonable regulations which the legislator has seen fit to prescribe for the
conduct of the business in which the carrier is engaged of his own free will and accord. In so far as the
self-imposed limitations by the carrier upon the business conducted by him, in the various examples
given by counsel, do not involve an unreasonable or unnecessary discrimination the statute would not
control his action in any wise whatever. It operates only in cases involving such unreasonable or
unnecessary preferences or discriminations. Thus in the hypothetical case suggested by the petitioner, a
carrier engaged in the carriage of green, blue or black jusi, and duly equipped therefor would manifestly
be guilty of "giving an unnecessary and unreasonable preference to a particular kind of traffic" and of
subjecting to "an undue and reasonable prejudice a particular kind of traffic," should he decline to carry
red jusi, to the prejudice of a particular shipper or of those engaged in the manufacture of that kind
of jusi, basing his refusal on the ground of "mere whim or caprice" or of mere personal convenience. So
a public carrier of passengers would not be permitted under this statute to absolve himself from liability
for a refusal to carry a Chinaman, a Spaniard, an American, a Filipino, or a mestizo by proof that from
"mere whim or caprice or personal scruple," or to suit his own convenience, or in the hope of increasing
his business and thus making larger profits, he had publicly announced his intention not to carry one or
other of these classes of passengers.
The nature of the business of a common carrier as a public employment is such that it is clearly within
the power of the state to impose such just and reasonable regulations thereon in the interest of the
public as the legislator may deem proper. Of course such regulations must not have the effect of
depriving an owner of his property without due process of law, nor of confiscating or appropriating private
property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges
lawfully acquired under a charter or franchise. But aside from such constitutional limitations, the
determination of the nature and extent of the regulations which should be prescribed rests in the hands
of the legislator.
Common carriers exercise a sort of public office, and have duties to perform in which the public is
interested. Their business is, therefore, affected with a public interest, and is subject of public regulation.

(New Jersey Steam Nav. Co. vs. Merchants Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U.S., 113,
130.) Indeed, this right of regulation is so far beyond question that it is well settled that the power of the
state to exercise legislative control over railroad companies and other carriers "in all respects necessary
to protect the public against danger, injustice and oppression" may be exercised through boards of
commissioners. (New York etc. R. Co. vs. Bristol, 151 U.S., 556, 571; Connecticut etc. R.
Co. vs. Woodruff, 153 U.S., 689.)
Regulations limiting of passengers the number of passengers that may be carried in a particular vehicle
or steam vessel, or forbidding the loading of a vessel beyond a certain point, or prescribing the number
and qualifications of the personnel in the employ of a common carrier, or forbidding unjust discrimination
as to rates, all tend to limit and restrict his liberty and to control to some degree the free exercise of his
discretion in the conduct of his business. But since the Granger cases were decided by the Supreme
Court of the United States no one questions the power of the legislator to prescribe such reasonable
regulations upon property clothed with a public interest as he may deem expedient or necessary to
protect the public against danger, injustice or oppression. (Munn vs.Illinois, 94 U.S., 113, 130; Chicago
etc. R. Co. vs. Cutts, 94 U.S., 155; Budd vs. New York, 143 U.S., 517; Cottingvs. Goddard, 183 U.S.,
79.) The right to enter the public employment as a common carrier and to offer one's services to the
public for hire does not carry with it the right to conduct that business as one pleases, without regard to
the interest of the public and free from such reasonable and just regulations as may be prescribed for
the protection of the public from the reckless or careless indifference of the carrier as to the public
welfare and for the prevention of unjust and unreasonable discrimination of any kind whatsoever in the
performance of the carrier's duties as a servant of the public.
Business of certain kinds, including the business of a common carrier, holds such a peculiar relation to
the public interest that there is superinduced upon it the right of public regulation. (Budd vs. New York,
143 U.S., 517, 533.) When private property is "affected with a public interest it ceases to be juris
privati only." Property becomes clothed with a public interest when used in a manner to make it of public
consequence and affect the community at large. "When, therefore, one devotes his property to a use in
which the public has an interest, he, in effect, grants to the public an interest in that use, and must
submit to be controlled by the public for the common good, to the extent of the interest he has thus
created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he
must submit to control." (Munn vs. Illinois, 94 U.S., 113; Georgia R. & Bkg. Co. vs.Smith, 128 U.S., 174;
Budd vs. New York, 143 U.S., 517; Louisville etc. Ry. Co. vs. Kentucky, 161 U.S., 677, 695.)
Of course this power to regulate is not a power to destroy, and limitation is not the equivalent of
confiscation. Under pretense of regulating fares and freight the state can not require a railroad
corporation to carry persons or property without reward. Nor can it do that which in law amounts to a
taking of private property for public use without just compensation, or without due process of law.
(Chicago etc. R. Co. vs. Minnesota, 134 U.S., 418; Minneapolis Eastern R. Co. vs. Minnesota, 134 U.S.,
467.) But the judiciary ought not to interfere with regulations established and palpably unreasonable as
to make their enforcement equivalent to the taking of property for public use without such compensation
as under all the circumstances is just both to the owner and to the public, that is, judicial interference
should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon
the rights of property under the guise of regulations as to compel the court to say that the regulation in
question will have the effect to deny just compensation for private property taken for the public use.
(Chicago etc. R. Co. vs. Wellman, 143 U.S., 339; Smyth vs. Ames, 169 U.S., 466, 524; Henderson
Bridge Co. vs.Henderson City, 173 U.S., 592, 614.)
Under the common law of England it was early recognized that common carriers owe to the public the
duty of carrying indifferently for all who may employ them, and in the order in which application is made,

and without discrimination as to terms. True, they were allowed to restrict their business so as to exclude
particular classes of goods, but as to the kinds of property which the carrier was in the habit of carrying
in the prosecution of his business he was bound to serve all customers alike (State vs. Cincinnati etc. R.
Co., 47 Ohio St., 130, 134, 138; Louisville etc. Ry. Co. vs. Quezon City Coal Co., 13 Ky. L. Rep., 832);
and it is to be observed in passing that these common law rules are themselves regulations controlling,
limiting and prescribing the conditions under which common carriers were permitted to conduct their
business. (Munn vs. Illinois, 94 U. S., 113, 133.)
It was found, in the course of time, that the correction of abuses which had grown up with the
enormously increasing business of common carriers necessitated the adoption of statutory regulations
controlling the business of common carriers, and imposing severe and drastic penalties for violations of
their terms. In England, the Railway Clauses Consolidation Act was enacted in 1845, the Railway and
Canal Traffic Act in 1854, and since the passage of those Acts much additional legislation has been
adopted tending to limit and control the conduct of their business by common carriers. In the United
States, the business of common carriers has been subjected to a great variety of statutory regulations.
Among others Congress enacted "The Interstate Commerce Act" (1887) and its amendments, and the
Elkins Act as amended (1906); and most if not all of the States of the Union have adopted similar
legislation regulating the business of common carriers within their respective jurisdictions. Unending
litigation has arisen under these statutes and their amendments, but nowhere has the right of the state to
prescribe just and reasonable regulations controlling and limiting the conduct of the business of common
carriers in the public interest and for the general welfare been successfully challenged, though of course
there has been wide divergence of opinion as to the reasonableness, the validity and legality of many of
the regulations actually adopted.
The power of the Philippine legislator to prohibit and to penalize all and any unnecessary or
unreasonable discriminations by common carriers may be maintained upon the same reasoning which
justified the enactment by the Parliament of England and the Congress of the United States of the above
mentioned statutes prohibiting and penalizing the granting of certain preferences and discriminations in
those countries. As we have said before, we find nothing confiscatory or unreasonable in the conditions
imposed in the Philippine statute upon the business of common carriers. Correctly construed they do not
force him to engage in any business his will or to make use of his facilities in a manner or for a purpose
for which they are not reasonably adapted. It is only when he offers his facilities as a common carrier to
the public for hire, that the statute steps in and prescribes that he must treat all alike, that he may not
pick and choose which customer he will serve, and, specifically, that he shall not make any undue or
unreasonable preferences or discriminations whatsoever to the prejudice not only of any person or
locality but also of any particular kind of traffic.
The legislator having enacted a regulation prohibiting common carriers from giving unnecessary or
unreasonable preferences or advantages to any particular kind of traffic or subjecting any particular kind
of traffic to any undue or unreasonable prejudice or discrimination whatsoever, it is clear that whatever
may have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline
to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it
appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable
and necessary. Mere whim or prejudice will not suffice. The grounds for the discrimination must be
substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and
necessary under all circumstances of the case.
The prayer of the petition in the case at bar cannot be granted unless we hold that the refusal of the
defendant steamship company to accept for carriage on any of its vessels "dynamite, gunpowder or
other explosives" would in no instance involve a violation of the provisions of this statute. There can be

little doubt, however, that cases may and will arise wherein the refusal of a vessel "engaged in the
coastwise trade of the Philippine Islands as a common carrier" to accept such explosives for carriage
would subject some person, company, firm or corporation, or locality, or particular kind of traffic to a
certain prejudice or discrimination. Indeed it cannot be doubted that the refusal of a "steamship
company, the owner of a large number of vessels" engaged in that trade to receive for carriage any such
explosives on any of its vessels would subject the traffic in such explosives to a manifest prejudice and
discrimination. The only question to be determined therefore is whether such prejudice or discrimination
might in any case prove to be undue, unnecessary or unreasonable.
This of course is, in each case, a question of fact, and we are of the opinion that the facts alleged in the
complaint are not sufficient to sustain a finding in favor of the contentions of the petitioner. It is not
alleged in the complaint that "dynamite, gunpowder and other explosives" can in no event be transported
with reasonable safety on board steam vessels engaged in the business of common carriers. It is not
alleged that all, or indeed any of the defendant steamship company's vessels are unsuited for the
carriage of such explosives. It is not alleged that the nature of the business in which the steamship
company is engaged is such as to preclude a finding that a refusal to accept such explosives on any of
its vessels would subject the traffic in such explosives to an undue and unreasonable prejudice and
discrimination.
Plaintiff's contention in this regard is as follows:
In the present case, the respondent company has expressly and publicly renounced the
carriage of explosives, and expressly excluded the same terms from the business it conducts.
This in itself were sufficient, even though such exclusion of explosives were based on no
other ground than the mere whim, caprice or personal scruple of the carrier. It is unnecessary,
however, to indulge in academic discussion of a moot question, for the decision not a carry
explosives rests on substantial grounds which are self-evident.
We think however that the answer to the question whether such a refusal to carry explosives involves an
unnecessary or unreasonable preference or advantage to any person, locality or particular kind of traffic
or subjects any person, locality or particular to traffic to an undue or unreasonable prejudice and
discrimination is by no means "self-evident," and that it is a question of fact to be determined by the
particular circumstances of each case.
The words "dynamite, powder or other explosives" are broad enough to include matches, and other
articles of like nature, and may fairly be held to include also kerosene oil, gasoline and similar products
of a highly inflammable and explosive character. Many of these articles of merchandise are in the nature
of necessities in any country open to modern progress and advancement. We are not fully advised as to
the methods of transportation by which they are made commercially available throughout the world, but
certain it is that dynamite, gunpowder, matches, kerosene oil and gasoline are transported on many
vessels sailing the high seas. Indeed it is a matter of common knowledge that common carriers
throughout the world transport enormous quantities of these explosives, on both land and sea, and there
can be little doubt that a general refusal of the common carriers in any country to accept such explosives
for carriage would involve many persons, firms and enterprises in utter ruin, and would disastrously
affect the interests of the public and the general welfare of the community.
It would be going to far to say that a refusal by a steam vessel engaged in the business of transporting
general merchandise as a common carrier to accept for carriage a shipment of matches, solely on the
ground of the dangers incident to the explosive quality of this class of merchandise, would not subject
the traffic in matches to an unnecessary, undue or unreasonable prejudice and discrimination without

proof that for some special reason the particular vessel is not fitted to carry articles of that nature. There
may be and doubtless are some vessels engaged in business as common carriers of merchandise,
which for lack of suitable deck space or storage rooms might be justified in declining to carry kerosene
oil, gasoline, and similar products, even when offered for carriage securely packed in cases; and few
vessels are equipped to transport those products in bulk. But in any case of a refusal to carry such
products which would subject any person, locality or the traffic in such products would be necessary to
hear evidence before making an affirmative finding that such prejudice or discrimination was or was not
unnecessary, undue or unreasonable. The making of such a finding would involve a consideration of the
suitability of the vessel for the transportation of such products ; the reasonable possibility of danger or
disaster resulting from their transportation in the form and under the conditions in which they are offered
for carriage; the general nature of the business done by the carrier and, in a word, all the attendant
circumstances which might affect the question of the reasonable necessity for the refusal by the carrier
to undertake the transportation of this class of merchandise.
But it is contended that whatever the rule may be as to other explosives, the exceptional power and
violence of dynamite and gunpowder in explosion will always furnish the owner of a vessel with a
reasonable excuse for his failure or refusal to accept them for carriage or to carry them on board his
boat. We think however that even as to dynamite and gunpowder we would not be justified in making
such a holding unaided by evidence sustaining the proposition that these articles can never be carried
with reasonable safety on any vessel engaged in the business of a common carrier. It is said that
dynamite is so erratic an uncontrollable in its action that it is impossible to assert that it can be handled
with safety in any given case. On the other hand it is contended that while this may be true of some
kinds of dynamite, it is a fact that dynamite can be and is manufactured so as to eliminate any real
danger from explosion during transportation. These are of course questions of fact upon which we are
not qualified to pass judgment without the assistance of expert witnesses who have made special
studies as to the chemical composition and reactions of the different kinds of dynamite, or attained a
thorough knowledge of its properties as a result of wide experience in its manufacture and
transportation.
As we construe the Philippine statute, the mere fact that violent and destructive explosions can be
obtained by the use of dynamite under certain conditions would not be sufficient in itself to justify the
refusal of a vessel, duly licensed as a common carrier of merchandise, to accept it for carriage, if it can
be proven that in the condition in which it is offered for carriage there is no real danger to the carrier, nor
reasonable ground to fear that his vessel or those on board his vessel will be exposed to unnecessary
and unreasonable risk in transporting it, having in mind the nature of his business as a common carrier
engaged in the coastwise trade in the Philippine Islands, and his duty as a servant of the public engaged
in a public employment. So also, if by the exercise of due diligence and the taking of unreasonable
precautions the danger of explosions can be practically eliminated, the carrier would not be justified in
subjecting the traffic in this commodity to prejudice or discrimination by proof that there would be a
possibility of danger from explosion when no such precautions are taken.
The traffic in dynamite, gunpowder and other explosives is vitally essential to the material and general
welfare of the people of these Islands. If dynamite, gunpowder and other explosives are to continue in
general use throughout the Philippines, they must be transported by water from port to port in the
various islands which make up the Archipelago. We are satisfied therefore that the refusal by a particular
vessel, engaged as a common carrier of merchandise in the coastwise trade of the Philippine Islands, to
accept any or all of these explosives for carriage would constitute a violation of the prohibitions against
discriminations penalized under the statute, unless it can be shown by affirmative evidence that there is
so real and substantial a danger of disaster necessarily involved in the carriage of any or all of these
articles of merchandise as to render such refusal a due or a necessary or a reasonable exercise of
prudence and discretion on the part of the shipowner.

The complaint in the case at bar lacking the necessary allegations under this ruling, the demurrer must
be sustained on the ground that the facts alleged do not constitute a cause of action.

that the statute (Act No. 98) the validity of which was attacked by counsel por plaintiff was, when rightly
construed, a valid and constitutional enactment, and ruled:

A number of interesting questions of procedure are raised and discussed in the briefs of counsel. As to
all of these questions we expressly reserve our opinion, believing as we do that in sustaining the
demurrer on the grounds indicated in this opinion we are able to dispose of the real issue involved in the
proceedings without entering upon the discussion of the nice questions which it might have been
necessary to pass upon had it appeared that the facts alleged in the complaint constitute a cause of
action.

That whatever may have been the rule at the common law, common carriers in this jurisdiction cannot
lawfully decline to accept a particular class in those goods, unless it appears that for some sufficient
reason the discrimination against the traffic in such goods is reasonable and necessary. Mere prejudice
or whim will not suffice. The grounds of the discrimination must be substantial ones, such as will justify
the courts in holding the discrimination to have been reasonable and necessary under all the
circumstances of the case.

We think, however, that we should not finally dispose of the case without indicating that since the
institution of these proceedings the enactment of Acts No. 2307 and No. 2362 (creating a Board of
Public Utility Commissioners and for other purposes) may have materially modified the right to institute
and maintain such proceedings in this jurisdiction. But the demurrer having been formallly submitted for
judgment before the enactment of these statutes, counsel have not been heard in this connection. We
therefore refrain from any comment upon any questions which might be raised as to whether or not there
may be another adequate and appropriate remedy for the alleged wrong set forth in the complaint. Our
disposition of the question raised by the demurrer renders that unnecessary at this time, though it may
not be improper to observe that a careful examination of those acts confirms us in the holding upon
which we base our ruling on this demurrer, that is to say "That whatever may have been the rule at the
common law, common carriers in this jurisdiction cannot lawfully decline to accept a particular class of
goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for some sufficient
reason the discrimination against the traffic in such goods is reasonable and necessary. Mere prejudice
or whim will not suffice. The grounds of the discrimination must be substantial ones, such as will justify
the courts in holding the discrimination to have been reasonable and necessary under all the
circumstances of the case."

xxx

Unless an amended complaint be filed in the meantime, let judgment be entered ten days hereafter
sustaining the demurrer and dismissing the complaint with costs against the complainant, and twenty
days thereafter let the record be filed in the archives of original actions in this court. So ordered.
Arellano,
C.J.,
Torres and Johnson, JJ., concur in the result.

and

Trent,

J., concur.

DECISION OF MARCH 31, 1915.

CARSON, J.:
This case is again before us upon a demurrer interposed by the respondent officials of the Philippine
Government to an amended complaint filed after publication of our decision sustaining the demurrer to
the original complaint.
In our former opinion, entered November 5, 1914, we sustained the demurrer on the ground that the
original complaint did not set forth facts sufficient to constitute a cause of action. In that decision we held

xxx

xxx

The traffic in dynamite, gunpowder and other explosives is vitally essential to the material and
general welfare of the people of these Islands. If dynamite, gunpowder and other explosives
are to continue in general use throughout the Philippines, they must be transported by water
from port to port in the various islands which make up the Archipelago. We are satisfied
therefore that the refusal by a particular vessel, engaged as a common carrier of
merchandise in the coastwise trade of the Philippine Islands, to accept any or all of these
explosives for carriage would constitute a violation of the prohibitions against discriminations
penalized under the statue, unless it can be shown by affirmative evidence that there is so
real and substantial a danger of disaster necessarily involved in the carriage of any or all of
these articles of merchandise as to render such refusal a due or a necessary or a reasonable
exercise of prudence and discretion on the part of the ship owner.
Resting our judgment on these rulings we held that the allegations of the complaint, which in substance
alleged merely that the respondent officials were coercing the respondent steamship company to carry
explosives upon some of their vessels, under authority of, and in reliance upon the provisions of the Act,
did not set forth facts constituting a cause of action; or in other words, that the allegations of the
complaint even if true, would sustain a finding that the respondent officials were acting "without or in
excess of their jurisdiction" and lawful authority in the premises.
The amended complaint filed on November 14, 1914, is substantially identical with the original
complaint, except that it charges the respondent officials, as of the date of the amended complaint, with
the unlawful exercise of the authority or intent to exercise unlawful authority which should be restrained,
and substitutes the names of the officers now holding the offices of Collector of Customs, AttorneyGeneral and prosecuting attorney for those of the officials holding those offices at the date of the filing of
the original complaint; and except further that it adds the following allegations:
That each and every one of the vessels of the defendant company is dedicated and devoted
to the carriage of passengers between various ports in the Philippine Islands, and each of
said vessels, on all of said voyages between the said ports, usually and ordinarily does carry
a large number of such passengers.
That dynamite, powder, and other explosives are dangerous commodities that cannot be
handled and transported in the manner and from in which ordinary commodities are handled
and transported. That no degree of care, preparation and special arrangement in the handling
and transportation of dynamite, powder and other explosives will wholly eliminate the risk and
danger of grave peril and loss therefrom, and that the highest possible degree of care,
preparation of said commodities is only capable of reducing the degree of said danger and

peril. That each and every one of the vessels of the defendant company is wholly without
special means for the handling, carriage, or transportation of dynamite, powder and other
explosives and such special means therefor which would appreciably and materially reduce
the danger and peril therefrom cannot be installed in said vessels without a costs and
expense unto said company that is unreasonable and prohibitive.

Upon the authority, therefore, of Ex parte Young, supra, the merits of the question pending
between petitioner and respondents in this action is duly presented to this court by the
complaint of petitioner and general demurrer of respondents thereto. That question, in plain
terms, is as follows:

Had the contentions of plaintiff as to the unconstitutionality of the statute been well founded, a writ of
prohibition from this court would have furnished an effective and appropriate remedy for the alleged
wrong. The issue presented by the pleadings on the original complaint, involving a question as to the
validity of a statute and affecting, as it did, the shipping and public interests of the whole Islands, and
submitting be complicated question or series of questions of fact, was of such a nature that this court
could not properly deny the right of the plaintiff to invoke its jurisdiction in original proceedings. We
deemed it our duty therefore to resolve the real issue raised by the demurrer, and since we are of
opinion that the contentions of counsel for plaintiff were not well founded, and since a ruling to that effect
necessarily resulted in an order sustaining the demurrer, we did not deem it necessary or profitable to
consider questions of practice or procedure which it might have been necessary to decide under a
contrary ruling as to the principal question raised by the pleadings; nor did we stop to consider whether
the "subject matter involved" in the controversy might properly be submitted to the Board of Public Utility
Commissioners, because upon the authority of Ex parte Young (supra) we are satisfied as to the
jurisdiction and competency of this court to deal with the real issues raised by the pleadings on the
original complaint, and because, furthermore, the Act of the Philippine Legislature creating the Board of
Public Utility Commissioners could not deprive this court of jurisdiction already invoked in prohibition
proceedings instituted for the purpose of restraining the respondent official as of the Government from
the alleged unlawful exercise of authority under color of an invalid and without jurisdiction in the
premises.

Is the respondent Yangco Steamship Company legally required to accept for carriage and
carry "any person or property offering for carriage?"

The amended complaint, however, presents for adjudication in original prohibition proceedings in this
court questions of a wholly different character from those submitted in the original complaint.

"The petitioner contends that the respondent company is a common carrier of only such
articles of freight as they profess to carry and hold themselves out as carrying;" and in
discussing the legal capacity of plaintiff to maintain this action, counsel in their printed brief
asserted that "here we have no address to the court to determine whether a minority or a
majority shall prevail in the corporate affairs; here we ask plainly and unmistakably who shall
fix the limits of the corporate business the shareholders and directors of the corporation, or
certain officials of the government armed with an unconstitutional statute?

In so far as it reiterates the allegation s of the former complaint to the effect that the respondent officials
are unlawfully coercing the steamship company by virtue and under color of the provisions of an invalid
or unconstitutional statute, it is manifest, of course, that the amended complaint is no less subject to
criticism than was the original complaint. If, therefore, the action can be maintained upon its allegations
that those officials are coercing the company to carry explosives on vessels which, as a matter of fact,
are not suitably equipped for that purpose, and which from the nature of the business in which they are
engaged should not be required to carry explosives.

Counsel for plaintiff contended that under the guaranties of the Philippine Bill of Rights a common carrier
in the Philippine Islands may arbitrarily decline to accept for carriage any shipment or merchandise of a
class which it expressly or impliedly declines to accept from all shippers alike; that "the duty of a
common carrier to carry for all who offer arises from the public profession he has made, and is limited by
it;" that under this doctrine the respondent steamship company might lawfully decline to accept for
carriage "dynamite, powder or other explosives," without regard to any question as to the conditions
under which such explosives are offered for carriage, or as to the suitableness of its vessels for the
transportation of such explosives, or as to the possibility that the refusal to accept such articles of
commerce in a particular case might have the effect of subjecting any person, locality or the traffic in
such explosives to an undue, unreasonable or unnecessary prejudice or discrimination: and in line with
these contentions counsel boldly asserted that Act No. 98 of the Philippine Commission is invalid and
unconstitutional in so far as it announces a contrary doctrine or lays down a different rule. The pleader
who drew up the original complaint appears to have studiously avoided the inclusion in that complaint of
any allegation which might raise any other question. In doing so he was strictly within his rights, and
having in mind the object sought to be attained, the original complaint is a model of skillful pleading, well
calculated to secure the end in view, that is to say, a judgment on the precise legal issue which the
pleader desired to raise as to the construction and validity of the statute, which would put an end to the
controversy, if that issue were decided in his favor.

It will readily be seen, under our former opinion, that these allegations raise no question as to the validity
or constitutionality of any statute; that the real question which plaintiff seeks to submit to this court in
original prohibition proceedings is whether the respondent officials of the Government are correctly
exercising the discretion and authority with which they have been clothed; and that his contention in the
amended complaint is not, as it was in the original complaint, that these officials are acting without
authority and in reliance upon an invalid and unconstitutional statute, but rather that they are exercising
their authority improvidently, unwisely or mistakenly.

As we read them, the allegations of the original complaint were intended to raise and did in fact raise,
upon demurrer, a single question which, if ruled upon favorably to the contention of plaintiff, would,
doubtless, have put an end to this litigation and to the dispute between the plaintiff stockholder of the
steamship company and the officials of the Philippine Government out of which it has arisen.
In their brief, counsel for plaintiff, in discussing their right to maintain an action for a writ of prohibition,
relied upon the authority of Ex parte Young (209 U. S. [123] 163, 165), and asserted that:

Under the provisions of sections 226 and 516 of the Code of Civil Procedure jurisdiction in prohibition
proceedings is conferred upon the courts when the complaint alleges "the proceedings of any inferior
tribunal, corporation, board, or person, whether exercising functions judicial or ministerial, were without
or in excess of the jurisdiction of such tribunal, corporation, board or person." It is manifest therefore that
the allegations of the amended complaint, even if true, will not sustain the issuance of a writ of
prohibition without further amendment unless they be construed to in effect a charge that the respondent
officials are abusing the discretion conferred upon them in the exercise of their authority in such manner
that the acts complained of should be held to be without or in excess of their jurisdiction.
It may well be doubted whether the doctrine of the case Ex parte Young (supra), relied upon by the
plaintiff in his argument be invoked in support of a right of action predicated upon such premises; so

also, since the acts complained of in the amended complaint are alleged to have been done at a date
subsequent to the enactment of the statutes creating the Board of Public Utility Commissioners, it may
well be doubted whether the courts should entertain prohibition proceedings seeking to restrain alleged
abuses of discretion on the part of officers and officials of the Government, and of public service
corporations with regard to the rules under which such corporations are operated, until and unless
redress for the alleged wrong has been sought at the hands of the Board.
We do not deem it expedient or necessary, however, to consider or decide any of these questions at this
time, because we are of opinion that we should not permit our original jurisdiction to be set in motion
upon the allegations of the amended complaint.
It is true that this court is clothed with original jurisdiction in prohibition proceedings (sec. 516, Act No.
190). But this jurisdiction is concurrent with the original jurisdiction of the various Courts of First Instance
throughout the Islands, except in cases where the writ runs to restrain those courts themselves, when of
course it is exclusive; and we are satisfied that it could have been the intention of the legislator to require
this court to assume original jurisdiction in all cases wherein the plaintiff elects to invoke it. Such a
practice might result in overwhelming this court with the duty of entertaining and deciding original
proceedings which from their nature could much better be adjudicated in the trial courts; and in
unnecessarily diverting the time and attention of the court from its important appellate functions to the
settlement of controversies of no especial interest to the public at large, in the course of which it might
become necessary to take testimony and to make findings touching complicated and hotly contested
issues of fact.
We are of opinion and so hold that unless special reasons appear therefor, this court should decline to
permit its original jurisdiction to be invoked in prohibition proceedings, and this especially when the
adjudication of the issues raised involves the taking of evidence and the making of findings touching
controverted facts, which, as a rule, can be done so much better in the first instance by a trial court than
an appellate court organized as is ours.
Spelling on Injunctions and Other Extraordinary Remedies (vol. 2, p. 1493), in discussing the cases in
which the appellate courts in the United States permit their original jurisdiction to be invoked where that
jurisdiction is concurrent with that of some inferior court, says:
Of the plan of concurrent jurisdiction West Virginia may be taken as an illustration. The
Supreme Court of Appeals of that State has concurrent original jurisdiction with the circuit
courts in cases of prohibition, but by a rule adopted by the former court it will not take such
original jurisdiction unless reasons appear therefor.
We deemed it proper to assume jurisdiction to adjudicate and decide the issues raised by the rulings on
the original complaint, involving as they did a question as to the validity of a public statute of vital interest
to shippers and shipowners generally as also to the public at large, presenting for determination no
difficult or complicated questions of fact: but we are satisfied that we should decline to take jurisdiction of
the matters relied upon in the amended complaint in support of plaintiff's prayer for the writ.
The question of the construction and validity of the statute having been disposed of in our ruling on the
demurrer to the original complaint, it must be apparent that of the allegations of the amended complaint
are sufficient to maintain the plaintiff's action for a writ of prohibition, a question as to which we expressly
reserve our opinion, the action should be brought in one of the Courts of First Instance.

Twenty days hereafter let the complaint de dismissed at the costs of the plaintiff, unless in the meantime
it is amended so as to disclose a right upon the part of the plaintiff to invoke the original jurisdiction of
this court without first proceeding in one of the Courts of First Instance. So ordered.
G.R. No. 115381 December 23, 1994
KILUSANG
MAYO
UNO
LABOR
CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND REGULATORY
BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION OF THE
PHILIPPINES, respondents.
Potenciano A. Flores for petitioner.
Robert Anthony C. Sison, Cesar B. Brillantes and Jose Z. Galsim for private respondent.
Jose F. Miravite for movants.

KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose service are essential to the general
public. They are enterprises which specially cater to the needs of the public and conduce to their comfort
and convenience. As such, public utility services are impressed with public interest and concern. The
same is true with respect to the business of common carrier which holds such a peculiar relation to the
public interest that there is superinduced upon it the right of public regulation when private properties are
affected with public interest, hence, they cease to be juris privati only. When, therefore, one devotes his
property to a use in which the public has an interest, he, in effect grants to the public an interest in that
use, and must submit to the control by the public for the common good, to the extent of the interest he
has thus created. 1
An abdication of the licensing and regulatory government agencies of their functions as the instant
petition seeks to show, is indeed lamentable. Not only is it an unsound administrative policy but it is
inimical to public trust and public interest as well.
The instant petition for certiorari assails the constitutionality and validity of certain memoranda, circulars
and/or orders of the Department of Transportation and Communications (DOTC) and the Land
Transportation Franchising and Regulatory Board LTFRB) 2 which, among others, (a) authorize provincial
bus and jeepney operators to increase or decrease the prescribed transportation fares without
application therefor with the LTFRB and without hearing and approval thereof by said agency in violation
of Sec. 16(c) of Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act,
and in derogation of LTFRB's duty to fix and determine just and reasonable fares by delegating that
function to bus operators, and (b) establish a presumption of public need in favor of applicants for

certificates of public convenience (CPC) and place on the oppositor the burden of proving that there is
no need for the proposed service, in patent violation not only of Sec. 16(c) of CA 146, as amended, but
also of Sec. 20(a) of the same Act mandating that fares should be "just and reasonable." It is, likewise,
violative of the Rules of Court which places upon each party the burden to prove his own affirmative
allegations. 3 The offending provisions contained in the questioned issuances pointed out by petitioner,
have resulted in the introduction into our highways and thoroughfares thousands of old and smokebelching buses, many of which are right-hand driven, and have exposed our consumers to the burden of
spiraling costs of public transportation without hearing and due process.
The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz:
(a) DOTC Memorandum Order 90-395, dated June 26, 1990 relative to the implementation of a fare
range scheme for provincial bus services in the country; (b) DOTC Department Order No.
92-587, dated March 30, 1992, defining the policy framework on the regulation of transport services; (c)
DOTC Memorandum dated October 8, 1992, laying down rules and procedures to implement
Department Order No. 92-587; (d) LTFRB Memorandum Circular No. 92-009, providing implementing
guidelines on the DOTC Department Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in
Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395
to then LTFRB Chairman, Remedios A.S. Fernando allowing provincial bus operators to charge
passengers rates within a range of 15% above and 15% below the LTFRB official rate for a period of one
(1) year. The text of the memorandum order reads in full:
One of the policy reforms and measures that is in line with the thrusts and the
priorities set out in the Medium-Term Philippine Development Plan (MTPDP) 1987
1992) is the liberalization of regulations in the transport sector. Along this line,
the Government intends to move away gradually from regulatory policies and
make progress towards greater reliance on free market forces.
Based on several surveys and observations, bus companies are already charging
passenger rates above and below the official fare declared by LTFRB on many
provincial routes. It is in this context that some form of liberalization on public
transport fares is to be tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately publicize a fare range
scheme for all provincial bus routes in country (except those operating within
Metro Manila). Transport Operators shall be allowed to charge passengers within
a range of fifteen percent (15%) above and fifteen percent (15%) below the
LTFRB official rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared by LTFRB in
coordination with the DOTC Planning Service.

The implementation of the said fare range scheme shall start on 6 August 1990.
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme "not legally feasible," Remedios A.S. Fernando
submitted the following memorandum to Oscar M. Orbos on July 24, 1990, to wit:
With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990
which the LTFRB received on 19 July 1990, directing the Board "to immediately
publicize a fare range scheme for all provincial bus routes in the country (except
those operating within Metro Manila)" that will allow operators "to charge
passengers within a range of fifteen percent (15%) above and fifteen percent
(15%) below the LTFRB official rate for a period of one year" the undersigned is
respectfully adverting the Secretary's attention to the following for his
consideration:
1. Section 16(c) of the Public Service Act prescribes the
following for the fixing and determination of rates (a) the
rates to be approved should be proposed by public service
operators; (b) there should be a publication and notice to
concerned or affected parties in the territory affected; (c) a
public hearing should be held for the fixing of the rates;
hence, implementation of the proposed fare range scheme
on August 6 without complying with the requirements of the
Public Service Act may not be legally feasible.
2. To allow bus operators in the country to charge fares
fifteen (15%) above the present LTFRB fares in the wake of
the devastation, death and suffering caused by the July 16
earthquake will not be socially warranted and will be
politically unsound; most likely public criticism against the
DOTC and the LTFRB will be triggered by the untimely motu
propio implementation of the proposal by the mere
expedient of publicizing the fare range scheme without
calling a public hearing, which scheme many as early as
during the Secretary's predecessor know through
newspaper reports and columnists' comments to be Asian
Development Bank and World Bank inspired.
3. More than inducing a reduction in bus fares by fifteen
percent (15%) the implementation of the proposal will
instead trigger an upward adjustment in bus fares by fifteen
percent (15%) at a time when hundreds of thousands of
people in Central and Northern Luzon, particularly in Central

Pangasinan, La Union, Baguio City, Nueva Ecija, and the

Cagayan Valley are suffering from the devastation and
havoc caused by the recent earthquake.
4. In lieu of the said proposal, the DOTC with its agencies
involved in public transportation can consider measures and
reforms in the industry that will be socially uplifting,
especially for the people in the areas devastated by the
recent earthquake.
In view of the foregoing considerations, the undersigned respectfully suggests that
the implementation of the proposed fare range scheme this year be further studied
and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines, Inc.
(PBOAP) filed an application for fare rate increase. An across-the-board increase of eight and a half
centavos (P0.085) per kilometer for all types of provincial buses with a minimum-maximum fare range of
fifteen (15%) percent over and below the proposed basic per kilometer fare rate, with the said minimummaximum fare range applying only to ordinary, first class and premium class buses and a fifty-centavo
(P0.50) minimum per kilometer fare for aircon buses, was sought.
On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an across-theboard increase of six and a half (P0.065) centavos per kilometer for ordinary buses. The decrease was
due to the drop in the expected price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C. Bautista
alleging that the proposed rates were exorbitant and unreasonable and that the application contained no
allegation on the rate of return of the proposed increase in rates.
On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in
accordance with the following schedule of fares on a straight computation method, viz:

LUZON
MIN. OF 5 KMS. SUCCEEDING KM.

VISAYAS/MINDANAO

P1.60
P1.20
CLASS

CLASS

(PER

(PER

P0.375
P0.285
KM.)
P0.385
P0.395
KM.)
P0.395

AIRCON (PER KM.) P0.415. 4

On March 30, 1992, then Secretary of the Department of Transportation and Communications Pete
Nicomedes
Prado
issued
Department
Order
No.
92-587 defining the policy framework on the regulation of transport services. The full text of the said
order is reproduced below in view of the importance of the provisions contained therein:
WHEREAS, Executive Order No. 125 as amended, designates the Department of
Transportation and Communications (DOTC) as the primary policy, planning,
regulating and implementing agency on transportation;
WHEREAS, to achieve the objective of a viable, efficient, and dependable
transportation system, the transportation regulatory agencies under or attached to
the DOTC have to harmonize their decisions and adopt a common philosophy and
direction;
WHEREAS, the government proposes to build on the successful liberalization
measures pursued over the last five years and bring the transport sector nearer to
a balanced longer term regulatory framework;
NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the
following policies and principles in the economic regulation of land, air, and water
transportation services are hereby adopted:

AUTHORIZED FARES

REGULAR
STUDENT P1.15 P0.28

REGULAR
STUDENT
FIRST
LUZON
VISAYAS/
MINDANAO
PREMIERE
LUZON
VISAYAS/
MINDANAO P0.405

P1.50

P0.37

1. Entry into and exit out of the industry. Following the Constitutional dictum
against monopoly, no franchise holder shall be permitted to maintain a monopoly
on any route. A minimum of two franchise holders shall be permitted to operate on
any route.
The requirements to grant a certificate to operate, or certificate of public
convenience, shall be: proof of Filipino citizenship, financial capability, public need,
and sufficient insurance cover to protect the riding public.

In determining public need, the presumption of need for a service shall be deemed
in favor of the applicant. The burden of proving that there is no need for a
proposed service shall be with the oppositor(s).
In the interest of providing efficient public transport services, the use of the "prior
operator" and the "priority of filing" rules shall be discontinued. The route
measured capacity test or other similar tests of demand for vehicle/vessel fleet on
any route shall be used only as a guide in weighing the merits of each franchise
application and not as a limit to the services offered.
Where there are limitations in facilities, such as congested road space in urban
areas, or at airports and ports, the use of demand management measures in
conformity with market principles may be considered.
The right of an operator to leave the industry is recognized as a business decision,
subject only to the filing of appropriate notice and following a phase-out period, to
inform the public and to minimize disruption of services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from government
controls. Passenger fares shall also be deregulated, except for the lowest class of
passenger service (normally third class passenger transport) for which the
government will fix indicative or reference fares. Operators of particular services
may fix their own fares within a range 15% above and below the indicative or
reference rate.
Where there is lack of effective competition for services, or on specific routes, or
for the transport of particular commodities, maximum mandatory freight rates or
passenger fares shall be set temporarily by the government pending actions to
increase the level of competition.
For unserved or single operator routes, the government shall contract such
services in the most advantageous terms to the public and the government,
following public bids for the services. The advisability of bidding out the services or
using other kinds of incentives on such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the
government shall not engage in special financing and incentive programs,
including direct subsidies for fleet acquisition and expansion. Only when the
market situation warrants government intervention shall programs of this type be
considered. Existing programs shall be phased out gradually.
The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics
Board, the Maritime Industry Authority are hereby directed to submit to the Office
of the Secretary, within forty-five (45) days of this Order, the detailed rules and

procedures for the Implementation of the policies herein set forth. In the
formulation of such rules, the concerned agencies shall be guided by the most
recent studies on the subjects, such as the Provincial Road Passenger Transport
Study, the Civil Aviation Master Plan, the Presidential Task Force on the Interisland Shipping Industry, and the Inter-island Liner Shipping Rate Rationalization
Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of Transportation and
Communications Jesus B. Garcia, Jr. issued a memorandum to the Acting Chairman of the LTFRB
suggesting swift action on the adoption of rules and procedures to implement above-quoted Department
Order No. 92-587 that laid down deregulation and other liberalization policies for the transport sector.
Attached to the said memorandum was a revised draft of the required rules and procedures covering (i)
Entry Into and Exit Out of the Industry and (ii) Rate and Fare Setting, with comments and suggestions
from the World Bank incorporated therein. Likewise, resplendent from the said memorandum is the
statement of the DOTC Secretary that the adoption of the rules and procedures is a pre-requisite to the
approval of the Economic Integration Loan from the World Bank. 5
On
February
17,
1993,
the
LTFRB
issued
Memorandum
Circular
No. 92-009 promulgating the guidelines for the implementation of DOTC Department Order No. 92-587.
The Circular provides, among others, the following challenged portions:
xxx xxx xxx
IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.
The issuance of a Certificate of Public Convenience is determined by public
need. The presumption of public need for a service shall be deemed in favor of
the applicant, while burden of proving that there is no need for the proposed
service shall be the oppositor'(s).
xxx xxx xxx
V. Rate and Fare Setting
The control in pricing shall be liberalized to introduce price competition
complementary with the quality of service, subject to prior notice and public
hearing. Fares shall not be provisionally authorized without public hearing.
A. On the General Structure of Rates

1. The existing authorized fare range system of plus or minus 15 per cent for
provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994
with the authorized fare to be replaced by an indicative or reference rate as the
basis for the expanded fare range.

twenty (20%) and minus twenty-five (-25%) percent, over and above the existing authorized fare without
having to file a petition for the purpose, is unconstitutional, invalid and illegal. Second, the establishment
of a presumption of public need in favor of an applicant for a proposed transport service without having
to prove public necessity, is illegal for being violative of the Public Service Act and the Rules of Court.

2. Fare systems for aircon buses are liberalized to cover first class and premier
services.

In its Comment, private respondent PBOAP, while not actually touching upon the issues raised by the
petitioner, questions the wisdom and the manner by which the instant petition was filed. It asserts that
the petitioner has no legal standing to sue or has no real interest in the case at bench and in obtaining
the reliefs prayed for.

xxx xxx xxx

(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the
DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare
without first having filed a petition for the purpose and without the benefit of a public hearing, announced
a fare increase of twenty (20%) percent of the existing fares. Said increased fares were to be made
effective on March 16, 1994.

In their Comment filed by the Office of the Solicitor General, public respondents DOTC Secretary Jesus
B. Garcia, Jr. and the LTFRB asseverate that the petitioner does not have the standing to maintain the
instant suit. They further claim that it is within DOTC and LTFRB's authority to set a fare range scheme
and establish a presumption of public need in applications for certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the standing to sue.

On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of
bus fares.
On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of
merit. The dispositive portion reads:
PREMISES CONSIDERED, this Board after considering the arguments of the
parties, hereby DISMISSES FOR LACK OF MERIT the petition filed in the aboveentitled case. This petition in this case was resolved with dispatch at the request of
petitioner to enable it to immediately avail of the legal remedies or options it is
entitled under existing laws.
SO ORDERED. 6
Hence, the instant petition for certiorari with an urgent prayer for issuance of a temporary restraining
order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing
respondents from implementing the bus fare rate increase as well as the questioned orders and
memorandum circulars. This meant that provincial bus fares were rolled back to the levels duly
authorized by the LTFRB prior to March 16, 1994. A moratorium was likewise enforced on the issuance
of franchises for the operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to
provincial bus operators to set a fare range of plus or minus fifteen (15%) percent, later increased to plus

The requirement of locus standi inheres from the definition of judicial power. Section 1 of Article VIII of
the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
In Lamb v. Phipps, 7 we ruled that judicial power is the power to hear and decide causes pending
between parties who have the right to sue in the courts of law and equity. Corollary to this provision is
the principle of locus standi of a party litigant. One who is directly affected by and whose interest is
immediate and substantial in the controversy has the standing to sue. The rule therefore requires that a
party must show a personal stake in the outcome of the case or an injury to himself that can be
redressed by a favorable decision so as to warrant an invocation of the court's jurisdiction and to justify
the exercise of the court's remedial powers in his behalf. 8
In the case at bench, petitioner, whose members had suffered and continue to suffer grave and
irreparable injury and damage from the implementation of the questioned memoranda, circulars and/or
orders, has shown that it has a clear legal right that was violated and continues to be violated with the
enforcement of the challenged memoranda, circulars and/or orders. KMU members, who avail of the use
of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary

increase in passenger fares. They are part of the millions of commuters who comprise the riding public.
Certainly, their rights must be protected, not neglected nor ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to brush
aside this barren procedural infirmity and recognize the legal standing of the petitioner in view of the
transcendental importance of the issues raised. And this act of liberality is not without judicial precedent.
As early as theEmergency Powers Cases, this Court had exercised its discretion and waived the
requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et
al., 9 we ruled in the same lines and enumerated some of the cases where the same policy was
adopted, viz:
. . . A party's standing before this Court is a procedural technicality which it may, in
the exercise of its discretion, set aside in view of the importance of the issues
raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v.
Dinglasan);
G.R.
No.
L-2756
(Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055
(Guerrero v. Commissioner of Customs); and G.R. No. L-3056 (Barredo v.
Commission on Elections), 84 Phil. 368 (1949)], this Court brushed aside this
technicality because "the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside, if we must,
technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as
taxpayers' suits are concerned, this Court had declared that it "is not devoid of
discretion as to whether or not it should be entertained," (Tan v. Macapagal, 43
SCRA 677, 680 [1972]) or that it "enjoys an open discretion to entertain the same
or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
xxx xxx xxx
In line with the liberal policy of this Court on locus standi, ordinary taxpayers,
members of Congress, and even association of planters, and
non-profit civic organizations were allowed to initiate and prosecute actions before
this court to question the constitutionality or validity of laws, acts, decisions,
rulings, or orders of various government agencies or instrumentalities. Among
such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar
as it allows retirement gratuity and commutation of vacation and sick leave to
Senators and Representatives and to elective officials of both Houses of Congress
(Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479 [1965]); (b)
Executive Order No. 284, issued by President Corazon C. Aquino on 25 July 1987,
which allowed members of the cabinet, their undersecretaries, and assistant
secretaries to hold other government offices or positions (Civil Liberties Union v.
Executive Secretary, 194 SCRA 317 [1991]); (c) the automatic appropriation for
debt service in the General Appropriations Act (Guingona v. Carague, 196 SCRA
221 [1991]; (d) R.A. No. 7056 on the holding of desynchronized elections
(Osmea v. Commission on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869

(the charter of the Philippine Amusement and Gaming Corporation) on the ground
that it is contrary to morals, public policy, and order (Basco v. Philippine
Amusement and Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975,
establishing the Philippine National Police. (Carpio v. Executive Secretary, 206
SCRA 290 [1992]).
Other cases where we have followed a liberal policy regarding locus standi include
those attacking the validity or legality of (a) an order allowing the importation of
rice in the light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and Corn
Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and
1033 insofar as they proposed amendments to the Constitution and P.D. No. 1031
insofar as it directed the COMELEC to supervise, control, hold, and conduct the
referendum-plebiscite on 16 October 1976 (Sanidad v. Commission on
Elections, supra); (c) the bidding for the sale of the 3,179 square meters of land at
Roppongi, Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797 [1990]); (d)
the approval without hearing by the Board of Investments of the amended
application of the Bataan Petrochemical Corporation to transfer the site of its plant
from Bataan to Batangas and the validity of such transfer and the shift of
feedstock from naphtha only to naphtha and/or liquefied petroleum gas (Garcia v.
Board of Investments, 177 SCRA 374 [1989]; Garcia v. Board of Investments, 191
SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs, and the Fiscal Incentives Review Board exempting the
National Power Corporation from indirect tax and duties (Maceda v. Macaraig, 197
SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6
December 1990 on the ground that the hearings conducted on the second
provisional increase in oil prices did not allow the petitioner substantial crossexamination; (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]); (g)
Executive Order No. 478 which levied a special duty of P0.95 per liter of imported
oil products (Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h) resolutions
of the Commission on Elections concerning the apportionment, by district, of the
number of elective members of Sanggunians (De Guia vs. Commission on
Elections, 208 SCRA 420 [1992]); and (i) memorandum orders issued by a Mayor
affecting the Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc.
v. Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this
Court, despite its unequivocal ruling that the petitioners therein had no personality
to file the petition, resolved nevertheless to pass upon the issues raised because
of the far-reaching implications of the petition. We did no less in De Guia v.
COMELEC (Supra) where, although we declared that De Guia "does not appear to
have locus standi, a standing in law, a personal or substantial interest," we
brushed aside the procedural infirmity "considering the importance of the issue
involved, concerning as it does the political exercise of qualified voters affected by

the apportionment, and petitioner alleging abuse of discretion and violation of the
Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 16. Proceedings of the Commission, upon notice and hearing. The
Commission shall have power, upon proper notice and hearing in accordance with
the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or
schedules thereof, as well as commutation, mileage kilometrage, and other special
rates which shall be imposed, observed, and followed thereafter by any public
service: Provided, That the Commission may, in its discretion, approve rates
proposed by public services provisionally and without necessity of any hearing; but
it shall call a hearing thereon within thirty days thereafter, upon publication and
notice to the concerns operating in the territory affected: Provided, further, That in
case the public service equipment of an operator is used principally or secondarily
for the promotion of a private business, the net profits of said private business
shall be considered in relation with the public service of such operator for the
purpose of fixing the rates. (Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated to the defunct Public Service
Commission the power of fixing the rates of public services. Respondent LTFRB, the existing
regulatory body today, is likewise vested with the same under Executive Order No. 202 dated
June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to determine,
prescribe, approve and periodically review and adjust, reasonable fares, rates and other
related charges, relative to the operation of public land transportation services provided by
motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order to adapt to the
increasing complexity of modern life. As subjects for governmental regulation multiply, so does the
difficulty of administering the laws. Hence, specialization even in legislation has become necessary.
Given
the
task
of
determining
sensitive
and
delicate
matters
as
route-fixing and rate-making for the transport sector, the responsible regulatory body is entrusted with

the power of subordinate legislation. With this authority, an administrative body and in this case, the
LTFRB, may implement broad policies laid down in a statute by "filling in" the details which the
Legislature may neither have time or competence to provide. However, nowhere under the aforesaid
provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power
to a common carrier, a transport operator, or other public service.
In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range
over and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue
delegation of legislative authority. Potestas delegata non delegari potest. What has been delegated
cannot be delegated. This doctrine is based on the ethical principle that such a delegated power
constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his
own judgment and not through the intervening mind of another. 10 A further delegation of such power
would indeed constitute a negation of the duty in violation of the trust reposed in the delegate mandated
to discharge it directly. 11 The policy of allowing the provincial bus operators to change and increase their
fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This would
leave the riding public at the mercy of transport operators who may increase fares every hour, every day,
every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so.
In Panay Autobus Co. v. Philippine Railway Co., 12 where respondent Philippine Railway Co. was granted
by the Public Service Commission the authority to change its freight rates at will, this Court categorically
declared that:
In our opinion, the Public Service Commission was not authorized by law to
delegate to the Philippine Railway Co. the power of altering its freight rates
whenever it should find it necessary to do so in order to meet the competition of
road trucks and autobuses, or to change its freight rates at will, or to regard its
present rates as maximum rates, and to fix lower rates whenever in the opinion of
the Philippine Railway Co. it would be to its advantage to do so.
The mere recital of the language of the application of the Philippine Railway Co. is
enough to show that it is untenable. The Legislature has delegated to the Public
Service Commission the power of fixing the rates of public services, but it has not
authorized the Public Service Commission to delegate that power to a common
carrier or other public service. The rates of public services like the Philippine
Railway Co. have been approved or fixed by the Public Service Commission, and
any change in such rates must be authorized or approved by the Public Service
Commission after they have been shown to be just and reasonable. The public
service may, of course, propose new rates, as the Philippine Railway Co. did in
case No. 31827, but it cannot lawfully make said new rates effective without the
approval of the Public Service Commission, and the Public Service Commission
itself cannot authorize a public service to enforce new rates without the prior
approval of said rates by the commission. The commission must approve new
rates when they are submitted to it, if the evidence shows them to be just and
reasonable, otherwise it must disapprove them. Clearly, the commission cannot

determine in advance whether or not the new rates of the Philippine Railway Co.
will be just and reasonable, because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for permission to
change its freight rates at will. It may change them every day or every hour,
whenever it deems it necessary to do so in order to meet competition or whenever
in its opinion it would be to its advantage. Such a procedure would create a most
unsatisfactory state of affairs and largely defeat the purposes of the public service
law. 13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded fare. If transport
operators will be authorized to impose and collect an additional amount equivalent to 20% over and
above the authorized fare over a period of time, this will unduly prejudice a commuter who will be made
to pay a fare that has been computed in a manner similar to those of compounded bank interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a
thirty-seven (P0.37) centavo per kilometer fare for ordinary buses. At the same time, they were allowed
to impose and collect a fare range of plus or minus 15% over the authorized rate. Thus P0.37 centavo
per kilometer authorized fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to
P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo
increase per kilometer in 1994, then, the base or reference for computation would have to be P0.47
centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise their authority to impose an
additional 20% over and above the authorized fare, then the fare to be collected shall amount to P0.56
(that is, P0.47 authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect, commuters will be
continuously subjected, not only to a double fare adjustment but to a compounding fare as well. On their
part, transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for, they
can still collect an additional amount by virtue of the authorized fare range. Mathematically, the situation
translates into the following:
Year**
LTFRB
rate***
kilometer

authorized

Fare
collected

1990
P0.37
15%
1994
P0.42
+
0.05
=
0.47
1998
P0.56
+
0.05
=
0.61
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94

Range

Fare

(P0.05)
20%
(P0.09)
20%
(P0.12)

to

be
per

P0.42
P0.56
P0.73

Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government
function that requires dexterity of judgment and sound discretion with the settled goal of arriving at a just
and reasonable rate acceptable to both the public utility and the public. Several factors, in fact, have to
be taken into consideration before a balance could be achieved. A rate should not be confiscatory as
would place an operator in a situation where he will continue to operate at a loss. Hence, the rate should
enable public utilities to generate revenues sufficient to cover operational costs and provide reasonable

return on the investments. On the other hand, a rate which is too high becomes discriminatory. It is
contrary to public interest. A rate, therefore, must be reasonable and fair and must be affordable to the
end user who will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-reaching effects on millions of
commuters, government must not relinquish this important function in favor of those who would benefit
and profit from the industry. Neither should the requisite notice and hearing be done away with. The
people, represented by reputable oppositors, deserve to be given full opportunity to be heard in their
opposition to any fare increase.
The present administrative procedure, 14 to our mind, already mirrors an orderly and satisfactory
arrangement for all parties involved. To do away with such a procedure and allow just one party, an
interested party at that, to determine what the rate should be, will undermine the right of the other parties
to due process. The purpose of a hearing is precisely to determine what a just and reasonable rate
is. 15 Discarding such procedural and constitutional right is certainly inimical to our fundamental law and
to public interest.
On the presumption of public need.
A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of
land transportation services for public use as required by law. Pursuant to Section 16(a) of the Public
Service Act, as amended, the following requirements must be met before a CPC may be granted, to wit:
(i) the applicant must be a citizen of the Philippines, or a corporation or co-partnership, association or
joint-stock company constituted and organized under the laws of the Philippines, at least 60 per
centum of its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant
must be financially capable of undertaking the proposed service and meeting the responsibilities incident
to its operation; and (iii) the applicant must prove that the operation of the public service proposed and
the authorization to do business will promote the public interest in a proper and suitable manner. It is
understood that there must be proper notice and hearing before the PSC can exercise its power to issue
a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular
No. 92-009, Part IV, provides for yet incongruous and contradictory policy guideline on the issuance of a
CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined by public
need. The presumption of public need for a service shall be deemed in favor of
the applicant, while the burden of proving that there is no need for the proposed
service shall be the oppositor's. (Emphasis ours).
The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public
Service Act which requires that before a CPC will be issued, the applicant must prove by proper notice
and hearing that the operation of the public service proposed will promote public interest in a proper and
suitable manner. On the contrary, the policy guideline states that the presumption of public need for a

public service shall be deemed in favor of the applicant. In case of conflict between a statute and an
administrative order, the former must prevail.

in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated October 8,
1992, the same being merely internal communications between administrative officers.

By its terms, public convenience or necessity generally means something fitting or suited to the public
need. 16 As one of the basic requirements for the grant of a CPC, public convenience and necessity
exists when the proposed facility or service meets a reasonable want of the public and supply a need
which the existing facilities do not adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of fact that must be
established by evidence, real and/or testimonial; empirical data; statistics and such other means
necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure,
among other things, is to look out for, and protect, the interests of both the public and the existing
transport operators.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged
administrative issuances and orders, namely: DOTC Department Order No. 92-587, LTFRB
Memorandum
Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED
contrary to law and invalid insofar as they affect provisions therein (a) delegating to provincial bus and
jeepney operators the authority to increase or decrease the duly prescribed transportation fares; and (b)
creating a presumption of public need for a service in favor of the applicant for a certificate of public
convenience and placing the burden of proving that there is no need for the proposed service to the
oppositor.

Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress
hearing and investigation, it shall find, as a fact, that the proposed operation is for the convenience of the
public. 17 Basic convenience is the primary consideration for which a CPC is issued, and that fact alone
must be consistently borne in mind. Also, existing operators in subject routes must be given an
opportunity to offer proof and oppose the application. Therefore, an applicant must, at all times, be
required to prove his capacity and capability to furnish the service which he has undertaken to
render. 18 And all this will be possible only if a public hearing were conducted for that purpose.

The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it
enjoined the bus fare rate increase granted under the provisions of the aforementioned administrative
circulars, memoranda and/or orders declared invalid.

Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and
institutionalized judicial, quasi-judicial and administrative procedures. It allows the party who initiates the
proceedings to prove, by mere application, his affirmative allegations. Moreover, the offending provisions
of the LTFRB memorandum circular in question would in effect amend the Rules of Court by adding
another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of the
Rules of Court. Such usurpation of this Court's authority cannot be countenanced as only this Court is
mandated by law to promulgate rules concerning pleading, practice and procedure. 19

G.R. No. L-30212 September 30, 1987

Deregulation, while it may be ideal in certain situations, may not be ideal at all in our country given the
present circumstances. Advocacy of liberalized franchising and regulatory process is tantamount to an
abdication by the government of its inherent right to exercise police power, that is, the right of
government to regulate public utilities for protection of the public and the utilities themselves.
While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate
the transport sector, we find that they committed grave abuse of discretion in issuing DOTC Department
Order
No. 92-587 defining the policy framework on the regulation of transport services and LTFRB
Memorandum Circular No. 92-009 promulgating the implementing guidelines on DOTC Department
Order No. 92-587, the said administrative issuances being amendatory and violative of the Public
Service Act and the Rules of Court. Consequently, we rule that the twenty (20%) per centum fare
increase imposed by respondent PBOAP on March 16, 1994 without the benefit of a petition and a public
hearing is null and void and of no force and effect. No grave abuse of discretion however was committed

No pronouncement as to costs.
SO ORDERED.

BIENVENIDO
vs.
BENITO ALDAY, respondent.

GELISAN, petitioner,

PADILLA, J.:
Review on certiorari of the judgment * rendered by the Court of Appeals, dated 11 October 1968, as
amended by its resolution, dated 11 February 1969, in CA-G.R. No. 32670-R, entitled: "Benito Alday,
plaintiff-appellant, vs. Roberto Espiritu and Bienvenido Gelisan, defendants-appellees," which ordered
the herein petitioner Bienvenido Gelisan to pay, jointly and severally, with Roberto Espiritu, the
respondent Benito Alday the amount of P5,397.30, with. legal interest thereon from the filing of the
complaint, and the costs of suit; and for the said Roberto Espiritu to pay or refund the petitioner
Bienvenido Gelisan whatever amount the latter may have paid to the respondent Benito Alday by virtue
of the judgment.
The uncontroverted facts of the case are, as follows:

Defendant Bienvenido Gelisan is the owner of a freight truck bearing plate No. TH2377. On January 31, 1962, defendant Bienvenido Gelisan and Roberto Espiritu
entered into a contract marked Exhibit 3-Gelisan under which Espiritu hired the
same freight truck of Gelisan for the purpose of hauling rice, sugar, flour and
fertilizer at an agreed price of P18.00 per trip within the limits of the City of Manila
provided the loads shall not exceed 200 sacks. It is also agreed that Espiritu shall
bear and pay all losses and damages attending the carriage of the goods to be
hauled by him. The truck was taken by a driver of Roberto Espiritu on February 1,
1962. Plaintiff Benito Alday, a trucking operator, and who owns about 15 freight
trucks, had known the defendant Roberto Espiritu since 1948 as a truck operator.
Plaintiff had a contract to haul the fertilizers of the Atlas Fertilizer Corporation from
Pier 4, North Harbor, to its Warehouse in Mandaluyong. Alday met Espiritu at the
gate of Pier 4 and the latter offered the use of his truck with the driver and helper
at 9 centavos per bag of fertilizer. The offer was accepted by plaintiff Alday and he
instructed his checker Celso Henson to let Roberto Espiritu haul the fertilizer.
Espiritu made two hauls of 200 bags of fertilizer per trip. The fertilizer was
delivered to the driver and helper of Espiritu with the necessary way bill receipts,
Exhibits A and B. Espiritu, however, did not deliver the fertilizer to the Atlas
Fertolizer bodega at Mandaluyong. The signatures appearing in the way bill
receipts Exhibits A and B of the Alday Transportation admittedly not the signature
of any representative or employee of the Atlas Fertilizer Corporation. Roberto
Espiritu could not be found, and plaintiff reported the loss to the Manila Police
Department. Roberto Espiritu was later arrested and booked for theft. ...
Subsequently, plaintiff Aiday saw the truck in question on Sto. Cristo St. and he
notified the Manila Police Department, and it was impounded by the police. It was
claimed by Bienvenido Gelisan from the Police Department after he had been
notified by his employees that the truck had been impounded by the police; but as
he could not produce at the time the registration papers, the police would not
release the truck to Gelisan. As a result of the impounding of the truck according
to Gelisan, ... and that for the release of the truck he paid the premium of P300 to
the surety company.1
Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the amount of P5,397.33, to
Atlas Fertilizer Corporation so that, on 12 February 1962, he (Alday) filed a complaint against Roberto
Espiritu and Bienvenido Gelisan with the Court of First Instance of Manila, docketed therein as Civil
Case No. 49603, for the recovery of damages suffered by him thru the criminal acts committed by the
defendants.
The defendant, Roberto Espiritu failed to file an answer and was, accordingly, declared in default.
The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility. He claimed that he
had no contractual relations with the plaintiff Benito Alday as regards the hauling and/or delivery of the
400 bags of fertilizer mentioned in the complaint; that the alleged misappropriation or nondelivery by

defendant Roberto Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's) control
and knowledge, and which fact became known to him, for the first time, on 8 February 1962 when his
freight truck, with plate No. TH-2377, was impounded by the Manila Police Department, at the instance
of the plaintiff; and that in his written contract of hire with Roberto Espiritu, it was expressly provided that
the latter will bear and pay all loss and damages attending the carriage of goods to be hauled by said
Roberto Espiritu.
After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone was liable to Benito
Alday, since Bienvenido Gelisan was not privy to the contract between Espiritu and Alday. The
dispositive portion of the decision reads, as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against
the defendant Roberto Espiritu for the sum of P6,000 with interest at the legal rate
from the time of the filing of the complaint, and the costs of the suit. Plantiff's
complaint is dismissed with respect to defendant Bienvenido Gelisan, and
judgment is rendered in favor of defendant Bienvenido Gelisan and against the
plaintiff for the sum of P350. 2
On appeal, however, the Court of Appeals, citing the case of Montoya vs. Ignacio, 3 found that
Bienvenido Gelisan is likewise liable for being the registered owner of the truck; and that the lease
contract, executed by and between Bienvenido Gelisan and Roberto Espiritu, is not binding upon Benito
Alday for not having been previously approved by the Public Service Commission. Accordingly, it
sentenced Bienvenido Gelisan to pay, jointly and severally with Roberto Espiritu, Benito Alday the
amount of P5,397.30, with legal interest thereon from the filing of the complaint; and to pay the costs.
Roberto Espiritu, in turn, was ordered to pay or refund Bienvenido Gelisan whatever amount the latter
may have paid to Benito Alday by virtue of the judgment. 4
Hence, the present recourse by Bienvenido Gelisan.
The petition is without merit. The judgment rendered by the Court of Appeals, which is sought to be
reviewed, is in accord with the facts and the law on the case and we find no cogent reason to disturb the
same. The Court has invariably held in several decisions that the registered owner of a public service
vehicle is responsible for damages that may arise from consequences incident to its operation or that
may be caused to any of the passengers therein. 5 The claim of the petitioner that he is not hable in view
of the lease contract executed by and between him and Roberto Espiritu which exempts him from liability
to third persons, cannot be sustained because it appears that the lease contract, adverted to, had not
been approved by the Public Service Commission. It is settled in our jurisprudence that if the property
covered by a franchise is transferred or leased to another without obtaining the requisite approval, the
transfer is not binding upon the public and third persons. 6
We also find no merit in the petitioner's argument that the rule requiring the previous approval by the
Public Service Commission, of the transfer or lease of the motor vehicle, may be applied only in cases
where there is no positive Identification of the owner or driver, or where there are very scant means of
Identification, but not in those instances where the person responsible for damages has been fixed or

determined beforehand, as in the case at bar. The reason for the rule we reiterate in the present case,
was explained by the Court in Montoya vs. Ignacio, 7thus:

Tamayo vs. Aquino and Rayos vs Tamayo, 105 Phil., 949; 56 Off. Gaz. [36] 5617.)
In the case of Erezo vs. Jepte, Supra, We held:

There is merit in this contention. The law really requires the approval of the Public
Service Commission in order that a franchise, or any privilege pertaining thereto,
may be sold or leased without infringing the certificate issued to the grantee. The
reason is obvious. Since a franchise is personal in nature any transfer or lease
thereof should be notified to the Public Service Commission so that the latter mav
take proper safeguards to protect the interest of the public. In fact, the law requires
that, before the approval is granted, there should be a public hearing, with notice
to all interested parties, in order that the Commission may determine if there are
good and reasonable grounds justifying the transfer or lease of the property
covered by the franchise, or if the sale or lease is detrimental to public interest.
Such being the reason and philosophy behind this requirement, it follows that if the
property covered by the franchise is transferred, or leased to another without
obtaining the requisite approval, the transfer is not binding against the Public
Service Commission and in contemplation of law the grantee continues to be
responsible under the franchise in relation to the Commission and to the Public.
Since the lease of the jeepney in question was made without such approval the
only conclusion that can be drawn is that Marcelino Ignacio still continues to be its
operator in contemplation of law, and as such is responsible for the consequences
incident to its operation, one of them being the collision under consideration.

* * * In synthesis, we hold that the registered owner, the defendant-appellant

herein, is primarily responsible for the damage caused * * * (Emphasis supplied)

Bienvenido Gelisan, the registered owner, is not however without recourse. He has a right to be
indemnified by Roberto Espiritu for the amount titat he may be required to pay as damages for the injury
caused to Benito Alday, since the lease contract in question, although not effective against the public for
not having been approved by the Public Service Commission, is valid and binding between the
contracting parties. 8
We also find no merit in the petitioner's contention that his liability is only subsidiary. The Court has
consistently considered the registered owner/operator of a public service vehicle to be jointly and
severally liable with the driver for damages incurred by passengers or third persons as a consequence of
injuries sustained in the operation of said vehicles. Thus, in the case of Vargas vs. Langcay, 9 the Court
said:
We hold that the Court of Appeals erred in considering appellant-petitioner Diwata
Vargas only subsidiarily liable under Article 103 of the Revised Penal Code. This
court, in previous decisions, has always considered the registered owner/operator
of a passenger vehicle, jointly and severally liable with the driver, for damages
incurred by passengers or third persons as a consequence of injuries (or death)
sustained in the operation of said vehicles. (Montoya vs. Ignacio, 94 Phil., 182;
Timbol vs. Osias, G.R. No. L-7547, April 30, 1955; Vda. de Medina vs. Cresencia,
99 Phil., 506; Necesito vs. Paras, 104 Phil., 75; Erezo vs. Jepte, 102 Phil., 103;

In the case of Tamayo vs. Aquino, supra, We said:

* * * As Tamayo is the registered owner of the truck, his responsibffity to the public
or to any passenger riding in the vehicle or truck must be direct * * * (Emphasis
supplied)
WHEREFORE, the petition is hereby DENIED. With costs against the petitioner.
SO ORDERED.
G.R. No. 70876 July 19, 1990
MA.
LUISA
BENEDICTO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD INDUSTRIES COMPANY,
INC.respondents.
Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for petitioner.
Abelardo V. Viray for private respondent.

FELICIANO, J.:
This Petition for Review asks us to set aside the Decision of the then Intermediate Appellate Court dated
30 January 1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the decision of the Regional Trial
Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the RTC held petitioner Ma. Luisa
Benedicto liable to pay private respondent Greenhills Wood Industries Company, Inc. ("Greenhills") the
amounts of P16,016.00 and P2,000.00 representing the cost of Greenhills' lost sawn lumber and
attorney's fees, respectively.
Private respondent Greenhills, a lumber manufacturing firm with business address at Dagupan City,
operates sawmill in Maddela, Quirino.
Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc.,
("Blue Star") a company with business operations in Valenzuela, Bulacan 100,000 board feet of sawn

lumber with the understanding that an initial delivery would be made on 15 May 1980. 1 To effect its first
delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio
Licuden, the driver of a cargo truck bearing Plate No. 225 GA TH to transport its sawn lumber to the
consignee Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner
Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged in hauling
freight, with main office in B.F. Homes, Paraaque.
On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of
7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. Before the
cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259
and 3260 both of which were initialed by the latter at the bottom left corner. 2 The first invoice was for the
amount of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out
the amount of P5,095.20 as the value of 2,316 board feet. Cruz instructed Licuden to give the original
copies of the two (2) invoices to the consignee upon arrival in Valenzuela, Bulacan 3 and to retain the
duplicate copies in order that he could afterwards claim the freightage from private respondent's Manila
office. 4
On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills' president,
Henry Lee Chuy, informing him that the sawn lumber on board the subject cargo truck had not yet
arrived in Valenzuela, Bulacan. The latter in turn informed Greenhills' resident manager in its Maddela
saw-mill of what had happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and
personnel manager, Manuel R. Bautista, formally informed Greenhills' president and general manager
that Blue Star still had not received the sawn lumber which was supposed to arrive on 15 May 1980 and
because of this delay, "they were constrained to look for other suppliers."
On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to
continue with their contract, private respondent Greenhill's filed Criminal Case No. 668 against driver
Licuden for estafa. Greenhills also filed against petitioner Benedicto Civil Case No. D-5206 for recovery
of the value of the lost sawn lumber plus damages before the RTC of Dagupan City.
In her answer, 6 petitioner Benedicto denied liability alleging that she was a complete stranger to the
contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February
1980 as evidenced by a deed of sale. 7She claimed that the truck had remained registered in her name
notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total
agreed price of P68,000.00 However, she averred that Tee had been operating the said truck in Central
Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee's employee and
not hers.
On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the
subject truck, and holding that Licuden was her employee, the trial court adjudged as follows:
WHEREFORE, in the light of the foregoing considerations, this Court hereby
renders judgment against defendant Maria Luisa Benedicto, ordering her to pay
the Greenhills Wood Industries Co. Inc., thru its President and General Manager,

the amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with
legal rate of interest from the filing of the complaint to pay attorney's fees in the
amount of P2,000.00; and to pay the costs of this suit.
SO ORDERED. 8
On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9 the decision
of the trial court in toto. Like the trial court, the appellate court held that since petitioner was the
registered owner of the subject vehicle, Licuden the driver of the truck, was her employee, and that
accordingly petitioner should be responsible for the negligence of said driver and bear the loss of the
sawn lumber plus damages. Petitioner moved for reconsideration, without success. 10
In the present Petition for Review, the sole issue raised is whether or not under the facts and applicable
law, the appellate court was correct in finding that petitioner, being the registered owner of the carrier,
should be held liable for the value of the undelivered or lost sawn lumber.
Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine
which makes the registered owner of a common carrier vehicle answerable to the public for the
negligence of the driver despite the sale of the vehicle to another person, applies only to cases involving
death of or injury to passengers. What applies in the present case, according to petitioner, is the rule that
a contract of carriage requires proper delivery of the goods to and acceptance by the carrier. Thus,
petitioner contends that the delivery to a person falsely representing himself to be an agent of the carrier
prevents liability from attaching to the registered owner.
The Court considers that petitioner has failed to show that appellate court committed reversible error in
affirming the trial court's holding that petitioner was liable for the cost of the sawn lumber plus damages.
There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in
the business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a
common carrier.
The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing
from the operations of the carrier, even though the specific vehicle involved may already have been
transferred to another person. This doctrine rests upon the principle that in dealing with vehicles
registered under the Public Service Law, the public has the right to assume that the registered owner is
the actual or lawful owner thereof It would be very difficult and often impossible as a practical matter, for
members of the general public to enforce the rights of action that they may have for injuries inflicted by
the vehicles being negligently operated if they should be required to prove who the actual owner
is. 11 The registered owner is not allowed to deny liability by proving the identity of the alleged transferee.
Thus, contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's
certificate of registration to ascertain the owner of the carrier. In this regard, the letter presented by
petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary
value not only because Benjamin Tee was not presented in court to testify on this matter but also

because of the aforementioned doctrine. To permit the ostensible or registered owner to prove who the
actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine.
In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract
of carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980,
private respondent Greenhills had contracted Licuden who was then driving the same cargo truck to
transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came
forward to question that contract or the authority of Licuden to represent the owner of the carrier truck.
Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the
freight truck for her own benefit and convenience, that is, to secure the payment of the balance of the
selling price of the truck. She may have been unaware of the legal security device of chattel mortgage;
or she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage
over the truck. In either case, considerations both of public policy and of equity require that she bear the
consequences flowing from registered ownership of the subject vehicle.
Petitioner Benedicto, however, insists that the said principle should apply only to cases involving
negligence and resulting injury to or death of passengers, and not to cases involving merely carriage of
goods. We believe otherwise.
A common carrier, both from the nature of its business and for insistent reasons of public policy, is
burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety
of passengers but also in caring for goods transported by it. 13 The loss or destruction or deterioration
of goods turned over to the common carrier for conveyance to a designated destination, raises instantly
a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or
damage arises from extreme circumstances such as a natural disaster or calamity or act of the public
enemy in time of war, or from an act or omission of the shipper himself or from the character of the
goods or their packaging or container. 14
This presumption may be overcome only by proof of extraordinary diligence on the part of the
carrier. 15 Clearly, to permit a common carrier to escape its responsibility for the passengers or goods
transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee
would be to attenuate drastically the carrier's duty of extraordinary diligence. It would also open wide the
door to collusion between the carrier and the supposed vendee and to shifting liability from the carrier to
one without financial capability to respond for the resulting damages. In other words, the thrust of the
public policy here involved is as sharp and real in the case of carriage of goods as it is in the transporting
of human beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go
behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of
the law and doctrine.
Petitioner further insists that there was no perfected contract of carriage for the reason that there was no
proof that her consent or that of Tee had been obtained; no proof that the driver, Licuden was authorized
to bind the registered owner; and no proof that the parties had agreed on the freightage to be paid.

Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to
evade statutory responsibilities. Driver Licuden was entrusted with possession and control of the freight
truck by the registered owner (and by the alleged secret owner, for that matter).itc-asl Driver Licuden,
under the circumstances, was clothed with at least implied authority to contract to carry goods and to
accept delivery of such goods for carriage to a specified destination. That the freight to be paid may-not
have been fixed before loading and carriage, did not prevent the contract of carriage from arising, since
the freight was at least determinable if not fixed by the tariff schedules in petitioner's main business
office. Put in somewhat different terms, driver Licuden is in law regarded as the employee and agent of
the petitioner, for whose acts petitioner must respond. A contract of carriage of goods was shown; the
sawn lumber was loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star's
premises in Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had
exercised extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery
was due to some casualty or force majeure inconsistent with her liability. 16 Petitioner's liability to private
respondent Greenhills was thus fixed and complete, without prejudice to petitioner's right to proceed
against her putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the former
Intermediate Appellate Court dated 30 January 1985 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 120553. June 17, 1997]
PHILTRANCO SERVICE ENTERPRISES, INC. and ROGACIONES MANILHIG, petitioner, vs. COURT
OF APPEALS and HEIRS OF THE LATE RAMON ACUESTA,respondents.
DECISION
DAVIDE, JR., J.:
The petitioners interposed this appeal by way of a petition for review under Rule 45 of the Rules
of Court from the 31 January 1995 Decision of the Court of Appeals in CA-G.R. CV No. 41140 [1]affirming
the 22 January 1993[2] Decision of Branch 31 of the Regional Trial Court, Calbayog City, in Civil Case
No. 373, which ordered the petitioners to pay the private respondents damages as a result of a vehicular
accident.
Civil Case No. 373 was an action against herein petitioners for damages instituted by the heirs of
Ramon A. Acuesta, namely, Gregorio O. Acuesta; Julio O. Acuesta; Ramon O. Acuesta, Jr.; Baltazar O.
Acuesta; Rufino O. Acuesta; Maximo O. Acuesta; Neri O. Acuesta; Iluminada O. Acuesta; Rosario
Acuesta-Sanz; and Pamfilo O. Acuesta. Atty. Julio O. Acuesta also appeared as counsel for the plaintiffs
(herein private respondents).[3] The private respondents alleged that the petitioners were guilty of gross
negligence, recklessness, violation of traffic rules and regulations, abandonment of victim, and attempt
to escape from a crime.

To support their allegations, the private respondents presented eight witnesses. On 10 February
1992, after the cross-examination of the last witness, the private respondents counsel made a
reservation to present a ninth witness. The case was then set for continuation of the trial on 30 and 31
March 1992. Because of the non-appearance of the petitioners counsel, the 30 March 1992 hearing was
cancelled. The next day, private respondents counsel manifested that he would no longer present the
ninth witness. He thereafter made an oral offer of evidence and rested the case. The trial court
summarized private respondents evidence in this wise:
[I]n the early morning of March 24, 1990, about 6:00 o'clock, the victim Ramon A. Acuesta was riding in
his easy rider bicycle (Exhibit O), along the Gomez Street of Calbayog City. The Gomez Street is along
the side of Nijaga Park. On the Magsaysay Blvd., also in Calbayog City, defendant Philtranco Service
Enterprises, Inc. (Philtranco for brevity) Bus No. 4025 with plate No. EVA-725 driven by defendant
Rogasiones Manilhig y Dolira was being pushed by some persons in order to start its engine. The
Magsaysay Blvd. runs perpendicular to Gomez St. and the said Philtranco bus 4025 was heading in the
general direction of the said Gomez Street. Some of the persons who were pushing the bus were on its
back, while the others were on the sides. As the bus was pushed, its engine started thereby the bus
continued on its running motion and it occurred at the time when Ramon A. Acuesta who was still riding
on his bicycle was directly in front of the said bus. As the engine of the Philtranco bus started abruptly
and suddenly, its running motion was also enhanced by the said functioning engine, thereby the subject
bus bumped on the victim Ramon A. Acuesta who, as a result thereof fell and, thereafter, was run over
by the said bus. The bus did not stop although it had already bumped and ran [sic] over the victim;
instead, it proceeded running towards the direction of the Rosales Bridge which is located at one side of
the Nijaga Park and towards one end of the Gomez St., to which direction the victim was then heading
when he was riding on his bicycle. P/Sgt. Yabao who was then jogging thru the Gomez Street and was
heading and meeting the victim Ramon A. Acuesta as the latter was riding on his bicycle, saw when the
Philtranco bus was being pushed by some passengers, when its engine abruptly started and when the
said bus bumped and ran over the victim. He approached the bus driver defendant Manilhig herein and
signalled to him to stop, but the latter did not listen. So the police officer jumped into the bus and
introducing himself to the driver defendant as policeman, ordered the latter to stop. The said defendant
driver stopped the Philtranco bus near the Nijaga Park and Sgt. Yabao thereafter, told the driver to
proceed to the Police Headquarter which was only 100 meters away from Nijaga Park because he was
apprehensive that the said driver might be harmed by the relatives of the victim who might come to the
scene of the accident. Then Sgt. Yabao cordoned the scene where the vehicular accident occurred and
had P/Cpl. Bartolome Bagot, the Traffic Investigator, conduct an investigation and make a sketch of the
crime scene. Sgt. Yambao Yabao was only about 20 meters away when he saw the bus of defendant
Philtranco bumped [sic] and [sic] ran over the victim. From the place where the victim was actually
bumped by the bus, the said vehicle still had run to a distance of about 15 meters away.[4]
For their part, the petitioners filed an Answer [5] wherein they alleged that petitioner Philtranco
exercised the diligence of a good father of a family in the selection and supervision of its employees,
including petitioner Manilhig who had excellent record as a driver and had undergone months of rigid
training before he was hired. Petitioner Manilhig had always been a prudent professional driver,
religiously observing traffic rules and regulations. In driving Philtranco's buses, he exercised the
diligence of a very cautious person.

As might be expected, the petitioners had a different version of the incident. They alleged that in
the morning of 24 March 1990, Manilhig, in preparation for his trip back to Pasay City, warmed up the
engine of the bus and made a few rounds within the city proper of Calbayog. While the bus was slowly
and moderately cruising along Gomez Street, the victim, who was biking towards the same direction as
the bus, suddenly overtook two tricycles and swerved left to the center of the road. The swerving was
abrupt and so sudden that even as Manilhig applied the brakes and blew the bus horn, the victim was
bumped from behind and run over by the bus. It was neither willful nor deliberate on Manilhig's part to
proceed with the trip after his bus bumped the victim, the truth being that when he looked at his rearview window, he saw people crowding around the victim, with others running after his bus. Fearing that
he might be mobbed, he moved away from the scene of the accident and intended to report the incident
to the police. After a man boarded his bus and introduced himself as a policeman, Manilhig gave himself
up to the custody of the police and reported the accident in question.
The petitioners further claimed that it was the negligence of the victim in overtaking two tricycles,
without taking precautions such as seeing first that the road was clear, which caused the death of the
victim. The latter did not even give any signal of his intention to overtake. The petitioners then
counterclaimed for P50,000 as and for attorney's fees; P1 million as moral damages; and P50,000 for
litigation expenses.
However, the petitioners were not able to present their evidence, as they were deemed to have
waived that right by the failure of their counsel to appear at the scheduled hearings on 30 and 31 March
1992. The trial court then issued an Order[6] declaring the case submitted for decision. Motions for the
reconsideration of the said Order were both denied.
On 22 January 1992, the trial court handed down a decision ordering the petitioners to jointly and
severally pay the private respondents the following amounts:
1) P55, 615.72 as actual damages;
2) P200,000 as death indemnity for the death of the victim Ramon A. Acuesta;
3) P1 million as moral damages;
4) P500,000 by way of exemplary damages;
5) P50,000 as attorneys fees; and
6) the costs of suit.[7]
Unsatisfied with the judgment, the petitioners appealed to the Court of Appeals imputing upon the
trial court the following errors:
(1) in preventing or barring them from presenting their evidence;

(2) in finding that petitioner Manilhig was at fault;

(3) in not finding that Ramon was the one at fault and his own fault caused, or at least
contributed to, his unfortunate accident;

Their motion for reconsideration having been denied, the petitioners came to us claiming that the
Court of Appeals gravely erred
I

(4) in awarding damages to the private respondents; and

...IN HOLDING THAT PETITIONERS WAIVED THEIR RIGHT TO PRESENT THEIR EVIDENCE,
AND THAT PETITIONERS WERE NOT DENIED DUE PROCESS.

(5) in finding that petitioner Philtranco was solidarily liable with Manilhig for damages.[8]
II
In its decision of 31 January 1995, the Court of Appeals affirmed the decision of the trial court. It
held that the petitioners were not denied due process, as they were given an opportunity to present their
defense. The records show that they were notified of the assignment of the case for 30 and 31 March
1992. Yet, their counsel did not appear on the said dates. Neither did he file a motion for postponement
of the hearings, nor did he appeal from the denial of the motions for reconsideration of the 31 March
1992 Order of the trial court. The petitioners have thereby waived their right to present evidence. Their
expectation that they would have to object yet to a formal offer of evidence by the private respondents
was misplaced, for it was within the sound discretion of the court to allow oral offer of evidence.
As to the second and third assigned errors, the respondent court disposed as follows:
... We cannot help but accord with the lower court's finding on appellant Manilhig's fault. First, it is not
disputed that the bus driven by appellant Manilhig was being pushed at the time of the unfortunate
happening. It is of common knowledge and experience that when a vehicle is pushed to a jump-start, its
initial movement is far from slow. Rather, its movement is abrupt and jerky and it takes a while before the
vehicle attains normal speed.The lower court had thus enough basis to conclude, as it did, that the
bumping of the victim was due to appellant Manilhig's actionable negligence and inattention. Prudence
should have dictated against jump-starting the bus in a busy section of the city. Militating further against
appellants' posture was the fact that the precarious pushing of subject bus to a jumpstart was done
where the bus had to take a left turn, thereby making the move too risky to take. The possibility that
pedestrians on Gomez Street, where the bus turned left and the victim was biking, would be unaware of
a vehicle being pushed to a jumpstart, was too obvious to be overlooked. Verily, contrary to their bare
arguments, there was gross negligence on the part of appellants.
The doctrine of last clear chance theorized upon by appellants, is inapplicable under the premises
because the victim, who was bumped from behind, obviously, did not of course anticipate a Philtranco
bus being pushed from a perpendicular street.
The respondent court sustained the awards of moral and exemplary damages and of attorneys
fees, for they are warranted under Articles 2206, 2231, and 2208(1), respectively, of the Civil
Code.Anent the solidary liability of petitioner Philtranco, the same finds support in Articles 2180 and
2194 of the said Code. The defense that Philtranco exercised the diligence of a good father of a family in
the selection and supervision of its employees crumbles in the face of the gross negligence of its driver,
which caused the untimely death of the victim.

...IN APPLYING ART. 2194, INSTEAD OF ART. 2180, OF THE CIVIL CODE, AND IN HOLDING
THAT PETITIONER PHILTRANCO CAN NOT INVOKE THE DEFENSE OF DILIGENCE OF A
GOOD FATHER OF A FAMILY.
III
...IN AWARDING DAMAGES TO RESPONDENTS AND/OR IN NOT FINDING THE TRIAL
COURT'S AWARD OF DAMAGES EXCESSIVE.
We resolved to give due course to the petition and required the parties to submit their respective
memoranda after due consideration of the allegations, issues, and arguments adduced in the petition,
the comment thereon by the private respondents, and the reply to the comment filed by the
petitioners. The petitioners filed their memorandum in due time; while the private respondents filed theirs
only on 3 January 1997, after their counsel was fined in the amount of P1,000 for failure to submit the
required memorandum.
The first imputed error is without merit. The petitioners and their counsel, Atty. Jose Buban, were
duly notified in open court of the order of the trial court of 10 February 1992 setting the case for hearing
on 30 and 31 March 1992. [9] On both dates neither the petitioners nor their counsel appeared. In his
motion for reconsideration,[10] Atty. Buban gave the following reasons for his failure to appear on the said
hearings:
1. That when this case was called on March 27, 1992, counsel was very much indisposed due to the
rigors of a very hectic campaign as he is a candidate for City Councilor of Tacloban; he wanted to leave
for Calbayog City, but he was seized with slight fever on the morning of said date; but then, during the
last hearing, counsel was made to understand that plaintiffs would formally offer their exhibits in writing,
for which reason, counsel for defendants waited for a copy of said formal offer, but counsel did not
receive any copy as counsel for plaintiffs opted to formally offer their exhibits orally in open court;
2. That counsel for defendants, in good faith believed that he would be given reasonable time within
which to comment on the formal offer in writing, only to know that counsel for plaintiffs orally offered their
exhibits in open court and that the same were admitted by the Honorable Court; and that when this case
was called on March 30 and 31, 1992, the undersigned counsel honestly believed that said schedule

would be cancelled, pending on the submission of the comments made by the defendants on the formal
offer; but it was not so, as the exhibits were admitted in open court.[11]
In its order of 26 May 1992, the trial court denied the motion, finding it to be "devoid of meritorious
basis," as Atty. Buban could have filed a motion for postponement. [12] Atty. Buban then filed a motion to
reconsider[13] the order of denial, which was likewise denied by the trial court in its order of 12 August
1992.[14] Nothing more was done by the petitioners after receipt of the order of 12 August 1992. A perusal
of the first and second motions for reconsideration discloses absence of any claim that the petitioners
have meritorious defenses. Clearly, therefore, the trial court committed no error in declaring the case
submitted for decision on the basis of private respondent's evidence.
The second imputed error is without merit either.
Civil Case No. 373 is an action for damages based on quasi-delict[15] under Article 2176 and 2180
of the Civil Code against petitioner Manilhig and his employer, petitioner Philtranco, respectively.These
articles pertinently provide:
ART. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
...
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks even though the former are not engaged in any business or
industry.
...
The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage.
We have consistently held that the liability of the registered owner of a public service vehicle, like
petitioner Philtranco,[16] for damages arising from the tortious acts of the driver is primary, direct,and joint
and several or solidary with the driver.[17] As to solidarity, Article 2194 expressly provides:

ART. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.
Since the employer's liability is primary, direct and solidary, its only recourse if the judgment for damages
is satisfied by it is to recover what it has paid from its employee who committed the fault or negligence
which gave rise to the action based on quasi-delict. Article 2181 of the Civil Code provides:
ART. 2181. Whoever pays for the damage caused by his dependents or employees may recover from
the latter what he has paid or delivered in satisfaction of the claim.
There is, however, merit in the third imputed error.
The trial court erroneously fixed the "death indemnity" at P200,000. The private respondents
defended the award in their Opposition to the Motion for Reconsideration by saying that "[i]n the case of
Philippine Airlines, Inc. vs. Court of Appeals, 185 SCRA 110, our Supreme Court held that the award of
damages for death is computed on the basis of the life expectancy of the deceased." In that case, the
"death indemnity" was computed by multiplying the victim's gross annual income by his life expectancy,
less his yearly living expenses. Clearly then, the "death indemnity" referred to was the additional
indemnity for the loss of earning capacity mentioned in Article 2206(1) of the Civil Code, and not the
basic indemnity for death mentioned in the first paragraph thereof. This article provides as follows:
ART. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity
shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by
the court, unless the deceased on account of permanent physical disability not caused by the defendant,
had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article 291, the recipient
who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may
demand support from the person causing the death, for a period of not exceeding five years, the exact
duration to be fixed by the court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased.
We concur with petitioners view that the trial court intended the award of "P200,000.00 as death
indemnity" not as compensation for loss of earning capacity. Even if the trial court intended the award as
indemnity for loss of earning capacity, the same must be struck out for lack of basis. There is no
evidence on the victim's earning capacity and life expectancy.
Only indemnity for death under the opening paragraph of Article 2206 is due, the amount of which
has been fixed by current jurisprudence at P50,000.[18]

The award of P1 million for moral damages to the heirs of Ramon Acuesta has no sufficient basis
and is excessive and unreasonable. This was based solely on the testimony of one of the heirs, Atty.
Julio Acuesta, contained in his "Direct Testimony... As Plaintiff, conducted by Himself,"[19] to wit:
Q. What was your feeling or reaction as a result of the death of your father Ramon A.
Acuesta?

IN VIEW OF THE FOREGOING, the petition is hereby partly granted and the challenged decision
of CA-G.R. CV No. 41140 is AFFIRMED, subject to modifications as to the damages awarded, which are
reduced as follows:
(a) Death indemnity, from P200,000 to P50,000;
(b) Moral damages, from P1 million to P50,000;

A. We, the family members, have suffered much from wounded feelings, moral shock,
mental anguish, sleepless nights, to which we are entitled to moral damages at the
reasonable amount of ONE MILLION (P1,000,000.00) PESOS or at the sound
discretion of this Hon. Court."
Since the other heirs of the deceased did not take the witness stand, the trial court had no basis for its
award of moral damages to those who did not testify thereon.
Moral damages are emphatically not intended to enrich a plaintiff at the expense of the
defendant. They are awarded only to allow the former to obtain means, diversion, or amusements that
will serve to alleviate the moral suffering he has undergone due to the defendant's culpable action and
must, perforce, be proportional to the suffering inflicted. [20] In light of the circumstances in this case, an
award of P50,000 for moral damages is in order.
The award of P500,000 for exemplary damages is also excessive. In quasi-delicts, exemplary
damages may be awarded if the party at fault acted with gross negligence. [21] The Court of Appeals
found that there was gross negligence on the part of petitioner Manilhig. [22] Under Article 2229 of the Civil
Code, exemplary damages are imposed by way of example or correction for the public good, in addition
to the moral, temperate, liquidated, or compensatory damages. Considering its purpose, it must be fair
and reasonable in every case and should not be awarded to unjustly enrich a prevailing party. In the
instant case, an award of P50,000 for the purpose would be adequate, fair, and reasonable.
Finally, the award of P50,000 for attorney's fees must be reduced. The general rule is that
attorney's fees cannot be recovered as part of damages because of the policy that no premium should
be placed on the right to litigate. [23] Stated otherwise, the grant of attorney's fees as part of damages is
the exception rather than the rule, as counsel's fees are not awarded every time a party prevails in a
suit.[24] Such attorney's fees can be awarded in the cases enumerated in Article 2208 of the Civil Code,
and in all cases it must be reasonable. In the instant case, the counsel for the plaintiffs is himself a coplaintiff; it is then unlikely that he demanded from his brothers and sisters P100,000 as attorney's fees as
alleged in the complaint and testified to by him. [25] He did not present any written contract for his fees. He
is, however, entitled to a reasonable amount for attorney's fees, considering that exemplary damages
are awarded. Among the instances mentioned in Article 2208 of the Civil Code when attorney's fees may
be recovered is "(1) when exemplary damages are awarded." Under the circumstances in this case, an
award of P25,000 for attorney's fees is reasonable.
The petitioners did not contest the award for actual damages fixed by the trial court. Hence, such
award shall stand.

(c) Exemplary damages, from P500,000 to P50,000; and

(d) Attorney's fees, from P50,000 to P25,000.
No pronouncements as to costs in this instance.
SO ORDERED.
G.R. No. L-26815 May 26, 19810
ADOLFO
L.
vs.
ABRAHAM SIBUG and COURT OF APPEALS, respondents.

SANTOS, petitioner,

MELENCIO-HERRERA, J.:1wph1.t
The controversy in this case will be resolved on the basis of the following facts and expositions. Prior to
April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad (VIDAD, for short) was a duly authorized
passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L. Santos (SANTOS,
for short) was the owner of a passenger jeep, but he had no certificate of public convenience for the
operation of the vehicle as a public passenger jeep. SANTOS then transferred his jeep to the name of
VIDAD so that it could be operated under the latter's certificate of public convenience. ln other words,
SANTOS became what is known in ordinary parlance as akabit operator. For the protection of SANTOS,
VIDAD executed a re-transfer document to the former, which was to be a private document presumably
to be registered if and where it was decided that the passenger jeep of SANTOS was to be withdrawn
from the kabit arrangement.
On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG for short) was bumped by a
passenger jeepney operated by VIDAD and driven by Severe Gragas. As a result thereof, SIBUG filed a
complaint for damages against VIDAD and Gragas with the Court of First Instance of Manila, Branch
XVII, then presided by Hon. Arsenic Solidum. That Civil Case will hereinafter be referred to as the
BRANCH XVII CASE.

On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and Gragas, jointly
and severally, to pay SIBUG the sums of P506.20 as actual damages; P3,000.00 as moral damages;
P500.00 as attorney's fees, and costs. 1
On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-64, registered
in the name of VIDAD, and scheduled the public auction sale thereof on May 8,1964.
On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual ownership of
the motor vehicle levied upon, and stating that registration thereof in the name of VIDAD was merely to
enable SANTOS to make use of VIDAD'S Certificate of Public Convenience. After the third-party
complaint was filed, SIBUG submitted to the Sheriff a bond issued by the Philippine Surety Insurance
Company (THE BONDING COMPANY, for short), To save the Sheriff from liability if he were to proceed
with the sale and if SANTOS' third-party claim should be ultimately upheld.
On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an action for
Damages and injunction with a prayer for Preliminary Mandatory Injunction against SIBUG; VIDAD; and
the Sheriff in Civil Case No. 56842 of Branch X, of the same Court of First Instance of Manila
(hereinafter referred to as the BRANCH X CASE). The complaint was later amended to include the
BONDING COMPANY as a party defendant although its bond had not become effective. ln the
Complaint, SANTOS alleged essentially that he was the actual owner of the motor vehicle subject of
levy: that a fictitious Deed of Sale of said motor vehicle was executed by him in VIDAD'S favor for
purposes of operating said vehicle as a passenger jeepney under the latter's franchise; that SANTOS did
not receive any payment from VIDAD in consideration of said sale; that to protect SANTOS' proprietary
interest over the vehicle in question, VIDAD in turn had executed a Deed of Sale in favor of SANTOS on
June 27, 1962; that SANTOS was not a party in the BRANCH XVII CASE and was not in any manner
liable to the registered owner VIDAD and the driver Gragas; that SANTOS derived a daily income of
P30.00 from the operation of said motor vehicle as a passenger jeepney and stood to suffer irreparable
damage will possession of said motor vehicle were not restored to him. SANTOS then prayed that 1,)
pending trial, a Writ of Preliminary Mandatory injunction be issued ex-parte commanding the Sheriff of
Manila to restore the motor vehicle to him and that the Sheriff be enjoined from proceeding with its sale;
2) that, after trial, the Deed of Sale in favor of VIDAD be declared absolutely fictitious and, therefore, null
and void, and adjudging SANTOS to be the absolute owner of the vehicle in questioned and 3) that
damages be awarded to SANTOS as proven during the trial plus attorney's fees in the amount of
P450.00 and costs. 2

No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a Restraining Order
enjoining the Sheriff from conducting the public auction sale of the motor vehicle levied upon. 3 The
Restraining Order was issued wrongfully. Under the provisions of Section 17, Rule 39, the action taken
by the Sheriff cannot be restrained by another Court or by another Branch of the same Court. The Sheriff
has the right to continue with the public sale on his own responsibility, or he can desist from conducting
the public sale unless the attaching creditor files a bond securing him against the third-party-claim. But
the decision to proceed or not with the public sale lies with him. As said in Uy Piaoco vs. Osmea 9 Phil.
299, 307, "the powers of the Sheriff involve both discretional power and personal liability." The
mentioned discretional power and personal liability have been further elucidated in Planes and Verdon
vs. Madrigal & Co., et al., 94 Phil. 754, where it was held. 1wph1.t
The duty of the sheriff in connection with the execution and satisfaction of
judgment of the court is governed by Rule 39 of the Rules of Court. Section 15
thereof provides for the procedure to be. followed where the property levied on
execution 'is claimed by a by person. lf the third-party claim is sufficient, the sheriff,
upon receiving it, is not bound to proceed with the levy of the property, unless he is
given by the judgment creditor an indemnity bond against the claim (Mangaoang
vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff may proceed with the
levy even without the Indemnity bond, but in such case he will answer for any
damages with his own personal funds (Waits vs. Peterson, et al., S Phil. 419 Alzua
et al. vs. Johnson, 21 Phil., 308; Consults No. 341 de los abogados de Smith, Bell
& Co., 48 Phil., 565). And the rule also provides that nothing therein contained
shall prevent a third person from vindicating his claim to the property by any
proper action (Sec. 15 of Rule 39.).
It appears from the above that if the attaching creditor should furnish an adequate bond. the Sheriff has
to proceed with the public auction. When such bond is not filed, then the Sheriff shall decide whether to
proceed. or to desist from proceeding, with the public auction. lf he decides to proceed, he will incur
personal liability in favor of the successful third-party claimant.
On October 14, 1965, Branch X affirmed SANTOS' ownership of the jeepney in question based on the
evidence adduced, and decreed: 1wph1.t
WHEREFORE, judgment is hereby rendered, enjoining the defendants from
proceeding with the sale of the vehicle in question ordering its return to the plaintiff
and furthermore sentencing the defendant Abraham Sibug to pay the plaintiff the
sum of P15.00 a day from April 10, 1964 until the vehicle is returned to him, and
P500.00 as attorney's fee's as well as the costs. 4
This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by
SANTOS, to include the BONDING COMPANY as jointly slid severally liable with SIBUG. 51wph1.t
... provided that the liability of the Philippine Surety & insurance Co., Inc. shall in
no case exceed P6,500.00. Abraham Sibug is furthermore condemned to pay the

Philippine Surety & Insurance Co., Inc. the same sums it is ordered to pay under
this decision.
The jugdment in the BRANCH X CASE appears to be quite legally unpalatable For instance, since the
undertaking furnished to the Sheriff by the BONDING COMPANY did not become effective for the reason
that the jeep was not sold, the public sale thereof having been restrained, there was no reason for
promulgating judgment against the BONDING COMPANY. lt has also been noted that the Complaint
against VIDAD was dismissed.
Most important of all, the judgment against SIBUG was inequitable. ln asserting his rights of ownership
to the vehicle in question, SANTOS candidly admitted his participation in the illegal and pernicious
practice in the transportation business known as the kabit system. Sec.. 20 (g) of the Public Service Act,
then the applicable law, specifically provided: 1wph1.t
... it shall be unlawful for any public service or for the owner, lessee or operator
thereof, without the approval and authorization of the Commission previously had
... (g) to sell, alienate, mortgage, encumber or lease its property, franchise,
certificates, privileges, or rights, or any part thereof.
In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner
and operator of record at the time of the accident. lt is true that VIDAD had executed a re-sale to
SANTOS, but the document was not registered. Although SANTOS, as the kabit was the true owner as
against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and
primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence
of the negligent or careless operation of the vehicle. 6 This ruling is based on the principle that the
operator of record is considered the operator of the vehicle in contemplation of law as regards the public
and third persons 7 even if the vehicle involved in the accident had been sold to another where such sale
had not been approved by the then Public Service Commission. 8 For the same basic reason, as the
vehicle here in question was registered in VIDAD'S name, the levy on execution against said vehicle
should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied, notwithstanding
the fact that the secret ownership of the vehicle belonged to another. SANTOS, as the kabit should not
be allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabit owner for he had
led the public to believe that the vehicle belonged to VIDAD. This is one way of curbing the
pernicious kabit system that facilitates the commission of fraud against the travelling public.
As indicated in the Erezo case, supra, SANTOS' remedy. as the real owner of the vehicle, is to go
against VIDAD, the actual operator who was responsible for the accident, for the recovery of whatever
damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the kabit had been
impleaded as a party defendant in the BRANCH XVII CASE, he should be held jointly and severally
liable with VIDAD and the driver for damages suffered by SIBUG, 9 as well as for exemplary damages. 10

From the judgment in the BRANCH X CASE SIBUG appealed. Meanwhile, SANTOS moved for
immidiately execution. SIBUG opposed it on the ground that Branch X had no jurisdiction over the
BRANCH XVII CASE, and that Branch X had no power to interfere by injunction with the judgment of
Branch XVII a Court of concurrent or coordinate jurisdiction. 11
On November 13, 1965, Branch X released an order authorizing immediate execution on the theory that
the BRANCH X CASE is "principally an action for the issuance of a writ of prohibition to forbid the Sheriff
from selling at public auction property not belonging to the judgment creditor (sic) and there being no
attempt in this case to interfere with the Judgment or decree of another court of concurrent
jurisdiction." 12
Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief from
respondent Appellate Court in a Petition for certiorari with Preliminary injunction. On November 18, 1965,
respondent Court of Appeals enjoined the enforcement of the Branch X Decision and the Order of
execution issued by said Branch. 13On September 28, 1966, respondent Count of Appeals rendered the
herein challenged Decision nullifying the judgment renderred in the Branch X Case and permanently
restraining V from taking cognizance of the BRANCH X CASE SANTOS. It ruled that: 1wph1.t
... the respondent Court Branch X, indeed, encroached and interfered with the
judgment of Branch XVII when it issued a restraining order and finally a decision
permanently enjoining the other court from excuting the decision rendered in Civil
Case No. 54335. This to our mind constitutes an interference with the powers and
authority of the other court having co-equal and coordinate jurisdiction. To rule
otherwise, would indubitably lead to confusion which might hamper or hinder the
proper administration of justice. ... 14
Respondent Court further held that SANTOS may not be permitted to prove his ownership over a
particular vehicle being levied upon but registered in another's name in a separated action, observing
that: 1wph1.t
As the vehicle in question was registered in the name of Vicente U. Vidad, the
government or any person affected by the representation that said vehicle is
registered under the name of a particular person had the right to rely on his
declaration of ownership and registration: and the registered owner or any other
person for that matter cannot be permitted to repudiate said declaration with the
objective of proving that said registered vehicle is owned by another person and
not by the registered owner (sec. 68, (a), Rule 123, and art. 1431, New Civil Code)
xxx xxx xxx
Were we to allow a third person to prove that he is the real owner of a particular
vehicle and not the registered owner it would in effect be tantamount to
sanctioning the attempt of the registered owner of the particular vehicle in evading
responsibility for it cannot be dispelled that the door would be opened to collusion

between a person and a registered owner for the latter to escape said
responsibility to the public or to any person. ...
SANTOS now seeks a review of respondent Court's Decision contending that: 1wph1.t
1) The respondent Court of Appeals erred in holding that Branch X of the Court of
First Instance of Manila has no jurisdiction to restrain by Writ of Injunction the
auction sale of petitioner's motor vehicle to satisfy the judgment indebtedness of
another person:
2) The respondent Court of Appeals erred in holding that petitioner as owner of a
motor vehicle that was levied upon pursuant to a Writ of Execution issued by
Branch XVII of the Court of i stance of Manila in Civil Case No. 54335 cannot be
allowed to prove in a separate suit filed in Branch X of the same court (Civil Case
No. 56842) that he is the true owner of the said motor vehicle and not its
registered owner;
3) The respondent Court of Appeals erred in declaring null and void the decision of
the Court of First Instance of Manila (Branch X ) in Civil Case No. 56482.
We gave due course to the Petition for Review on certiorari on December 14, 1966 and considered the
case submitted for decision on July 20, 1967.
One of the issues ventilated for resolution is the general question of jurisdiction of a Court of First
Instance to issue, at the instance of a third-party claimant, an Injunction restraining the execution sale of
a passenger jeepney levied upon by a judgment creditor in another Court of First Instance. The corollary
issue is whether or not the third-party claimant has a right to vindicate his claim to the vehicle levied
upon through a separate action.
Since this case was submitted for decision in July, 1967, this Court, in Arabay, lnc. vs. Hon. Serafin
Salvador, 15speaking through Mr. Justice Ramon Aquino, succinctly held: 1wph1.t
It is noteworthy that, generally, the rule, that no court has authority to interfere by
injunction with the judgments or decrees of a concurrent or coordinate jurisdiction
having equal power to grant the injunctive relief, is applied in cases, where no
third-party claimant is involved, in order to prevent one court from nullifying the
judgment or process of another court of the same rank or category, a power which
devolves upon the proper appellate court.
xxx xxx xxx
When the sheriff, acting beyond the bounds of his authority, seizes a stranger's
property, the writ of injunction, which is issued to stop the auction sale of that

property, is not an interference with the writ of execution issued by another court
because the writ of execution was improperly implemented by the sheriff. Under
that writ, he could attach the property of the judgment debtor. He is not authorized
to levy upon the property of the third-party claimant (Polaris Marketing Corporation
vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97; Manila Herald Publishing
Co., Inc. vs. Ramos, 88 Phil. 94, 102).
An earlier case, Abiera vs. Hon. Court of Appeals, et al., 16 explained the doctrine more
extensively: 1wph1.t
Courts; Jurisdiction Courts without power to interfere by injunction with judgments
or decrees of a court of concurrent jurisdiction. No court has power to interfere
by injunction with the judgments or decrees of a court of concurrent or coordinate
jurisdiction having equal power to grant the relief sought by injunction.
Same, Same; Same; When applicable. For this doctrine to apply, the injunction
issued by one court must interfere with the judgment or decree issued by another
court of equal or coordinate jurisdiction and the relief sought by such injunction
must be one which could be granted by the court which rendered the judgment or
issued the decree.
Same, Same Same; Exception Judgment rendered by another court in favor of a
third person who claims property levied upon on execution. Under section 17 of
Rule 39 a third person who claims property levied upon on execution may
vindicate such claim by action. A judgment rendered in his favor - declaring him to
be the owner of the property - would not constitute interference with the powers or
processes of the court which rendered the judgment to enforce which the
execution was levied. lf that be so - and it is so because the property, being that of
a stranger, is not subject to levy - then an interlocutory order, such as injunction,
upon a claim and prima facie showing of ownership by the claimant, cannot be
considered as such interference either.
Execution; Where property levied on claimed by third person; "Action" in section
l7, Rule 39 of the Rules of Court, interpreted The right of a person who claims to
be the owner of property levied upon on execution to file a third-party claim with
the sheriff is not exclusive, and he may file an action to vindicate his claim even if
the judgment creditor files an indemnity bond in favor of the sheriff to answer for
any damages that may be suffered by the third party claimant. By "action", as
stated in the Rule, what is meant is a separate and independent action.
Applied to the case at bar, it mill have to be held that, contrary to the rationale in the Decision of
respondent Court, it was appropriate, as a matter of procedure, for SANTOS, as an ordinary third-party
claimant, to vindicate his claim of ownership in a separate action under Section 17 of Rule 39. And the
judgment rendered in his favor by Branch X, declaring him to be the owner of the property, did not as a

basic proposition, constitute interference with the powers or processes of Branch XVII which rendered
the judgment, to enforce which the was levied upon. And this is so because property belonging to a
stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in custodia
legis, and should not be interfered with without the permission of the proper Court, the property must be
one in which the defendant has proprietary interest. Where the Sheriff seizes a stranger's property, the
rule does not apply and interference with his custody is not interference with another Court's Order of
attachment. 17
However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court
nullifying the Decision of Branch X permanently enjoining the auction sale, should be upheld. Legally
speaking, it was not a "stranger's property" that was levied upon by the Sheriff pursuant to the judgment
rendered by Branch XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment
debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved.
Whatever legal technicalities may be invoked, we find the judgment of respondent Court of Appeals to be
in consonance with justice.
WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on certiorari
filed by Adolfo L. Santos is dismissed with costs against the petitioner.
SO ORDERED.
G.R. No. L-64693 April 27, 1984
LITA
ENTERPRISES,
INC., petitioner,
vs.
SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and
FRANCISCA P. GARCIA, respondents.
Manuel A. Concordia for petitioner.
Nicasio Ocampo for himself and on behalf of his correspondents.

ESCOLIN, J.:+.wph!1
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts.
The factual background of this case is undisputed.

Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to
be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of
public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00
per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner
Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and
maintained the same under the name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin,
collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained
therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for
damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises,
Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First
Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of
P25,000.00 and P7,000.00 for attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of respondent
spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one
Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and
sold at public auction for P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He
requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but
the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance
of motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of
Manila. Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, the
dispositive portion of which reads: t.hqw
WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff
of Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of
the three Toyota cars not levied upon with Engine Nos. 2R-230026, 2R-688740
and 2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor
of the plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for
the certificate of convenience from March 1973 up to May 1973 at the rate of P200
a month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103,
Rollo)

Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by
the court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified
the decision by including as part of its dispositive portion another paragraph, to wit: t.hqw
In the event the condition of the three Toyota rears will no longer serve the
purpose of the deed of conveyance because of their deterioration, or because they
are no longer serviceable, or because they are no longer available, then Lita
Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July
22, 1975. (Annex "D", p. 167, Rollo.)
Its first and second motions for reconsideration having been denied, petitioner came to Us, praying
that: t.hqw
1. ...
2. ... after legal proceedings, decision be rendered or resolution be issued,
reversing, annulling or amending the decision of public respondent so that:
(a) the additional paragraph added by the public respondent to the DECISION of
the lower court (CFI) be deleted;
(b) that private respondents be declared liable to petitioner for whatever amount
the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of
First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim
Florante Galvez, who died as a result ot the gross negligence of private
respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit
system", whereby a person who has been granted a certificate of convenience allows another person
who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience
is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof
cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the
prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice
Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an
imposition upon the goo faith of the government.

Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as
being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It
is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will
leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial
and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil
Code denies them such aid. It provides:t.hqw
ART. 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking.
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or
by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to
contracts that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in the United States
where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is
universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for
its specific performance, or to recover the property agreed to be sold or delivered, or damages for its
property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid
down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of
any kind will be given to one against the other." 3 Although certain exceptions to the rule are provided by
law, We see no cogent reason why the full force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P.
Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila
and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees,
versus Lita Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the
decisions rendered therein are hereby annuleled and set aside. No costs.
SO ORDERED.1wph1.t
G.R. No. L-65510 March 9, 1987
TEJA
MARKETING
AND/OR
ANGEL
JAUCIAN, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.
Cirilo A. Diaz, Jr. for petitioner.

Henry V. Briguera for private respondent.

PARAS, J.:
"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129
SCRA 81.)
The factual background of this case is undisputed. The same is narrated by the respondent court in its
now assailed decision, as follows:
On May 9, 1975, the defendant bought from the plaintiff a motorcycle with
complete accessories and a sidecar in the total consideration of P8,000.00 as
shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant
gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the
balance within sixty days. The defendant, however, failed to comply with his
promise and so upon his own request, the period of paying the balance was
extended to one year in monthly installments until January 1976 when he stopped
paying anymore. The plaintiff made demands but just the same the defendant
failed to comply with the same thus forcing the plaintiff to consult a lawyer and file
this action for his damage in the amount of P546.21 for attorney's fees and
P100.00 for expenses of litigation. The plaintiff also claims that as of February 20,
1978, the total account of the defendant was already P2,731.06 as shown in a
statement of account (Exhibit. "B"). This amount includes not only the balance of
P1,700.00 but an additional 12% interest per annum on the said balance from
January 26, 1976 to February 27, 1978; a 2% service charge; and P 546.21
representing attorney's fees.
In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a
security for the payment of the balance of the purchase price. It has been the
practice of financing firms that whenever there is a balance of the purchase price
the registration papers of the motor vehicle subject of the sale are not given to the
buyer. The records of the LTC show that the motorcycle sold to the defendant was
first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing
and Angel Jaucian are one and the same, because it was made to appear that
way only as the defendant had no franchise of his own and he attached the unit to
the plaintiff's MCH Line. The agreement also of the parties here was for the
plaintiff to undertake the yearly registration of the motorcycle with the Land
Transportation Commission. Pursuant to this agreement the defendant on
February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage
fee and the P82.00 for the registration fee of the motorcycle. The plaintiff, however

failed to register the motorcycle on that year on the ground that the defendant
failed to comply with some requirements such as the payment of the insurance
premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff
saying that the defendant was hiding the motorcycle from him. Lastly, the plaintiff
explained also that though the ownership of the motorcycle was already
transferred to the defendant the vehicle was still mortgaged with the consent of the
defendant to the Rural Bank of Camaligan for the reason that all motorcycle
purchased from the plaintiff on credit was rediscounted with the bank.
On his part the defendant did not dispute the sale and the outstanding balance of
P1,700. 00 still payable to the plaintiff. The defendant was persuaded to buy from
the plaintiff the motorcycle with the side car because of the condition that the
plaintiff would be the one to register every year the motorcycle with the Land
Transportation Commission. In 1976, however, the plaintfff failed to register both
the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that
the defendant gave him P90.00 for mortgage fee and registration fee and had the
motorcycle insured with La Perla Compana de Seguros (Exhibit "6") as shown also
by the Certificate of cover (Exhibit "3"). Because of this failure of the plaintiff to
comply with his obligation to register the motorcycle the defendant suffered
damages when he failed to claim any insurance indemnity which would amount to
no less than P15,000.00 for the more than two times that the motorcycle figured in
accidents aside from the loss of the daily income of P15.00 as boundary fee
beginning October 1976 when the motorcycle was impounded by the LTC for not
being registered.
The defendant disputed the claim of the plaintiff that he was hiding from the
plaintiff the motorcycle resulting in its not being registered. The truth being that the
motorcycle was being used for transporting passengers and it kept on travelling
from one place to another. The motor vehicle sold to him was mortgaged by the
plaintiff with the Rural Bank of Camaligan without his consent and knowledge and
the defendant was not even given a copy of the mortgage deed. The defendant
claims that it is not true that the motorcycle was mortgaged because of rediscounting for rediscounting is only true with Rural Banks and the Central Bank.
The defendant puts the blame on the plaintiff for not registering the motorcycle
with the LTC and for not giving him the registration papers inspite of demands
made. Finally, the evidence of the defendant shows that because of the filing of
this case he was forced to retain the services of a lawyer for a fee on not less than
P1,000.00.
xxx xxx xxx
... it also appears and the Court so finds that defendant purchased the motorcycle
in question, particularly for the purpose of engaging and using the same in the
transportation business and for this purpose said trimobile unit was attached to

the plaintiffs transportation line who had the franchise, so much so that in the
registration certificate, the plaintiff appears to be the owner of the
unit. Furthermore, it appears to have been agreed, further between the plaintiff
and the defendant, that plaintiff would undertake the yearly registration of the unit
in question with the LTC. Thus, for the registration of the unit for the year 1976, per
agreement, the defendant gave to the plaintiff the amount of P82.00 for its
registration, as well as the insurance coverage of the unit.
Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with
Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court
rendered judgment in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, decision is hereby rendered dismissing the counterclaim and
ordering the defendant to pay plaintiff the sum of P1,700.00 representing the
unpaid balance of the purchase price with legal rate of interest from the date of the
filing of the complaint until the same is fully paid; to pay plaintiff the sum of
P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of
litigation; and to pay the costs.

The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian
presenting a lone assignment of error whether or not respondent court erred in applying the doctrine
of "pari delicto."
We find the petition devoid of merit.
Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system" whereby a person who has been granted a certificate of public convenience allows another
person who owns motor vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the
prevalence of graft and corruption in the government transportation offices.
Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as
being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It
is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will
leave both where it finds then. Upon this premise it would be error to accord the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It provides:

SO ORDERED.

Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:

On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private
respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983 the said
Court promulgated its decision, the pertinent portion of which reads
However, as the purchase of the motorcycle for operation as a trimobile under the
franchise of the private respondent Jaucian, pursuant to what is commonly known
as the "kabit system", without the prior approval of the Board of Transportation
(formerly the Public Service Commission) was an illegal transaction involving the
fictitious registration of the motor vehicle in the name of the private respondent so
that he may traffic with the privileges of his franchise, or certificate of public
convenience, to operate a tricycle service, the parties being in pari delicto, neither
of them may bring an action against the other to enforce their illegal contract [Art.
1412 (a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under review is hereby set aside. The complaint of
respondent Teja Marketing and/or Angel Jaucian, as well as the counterclaim of
petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of
Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are
dismissed. No pronouncement as to costs.
SO ORDERED.

1. When the fault is on the part of both contracting parties, neither may recover
that he has given by virtue of the contract, or demand, the performance of the
other's undertaking.
The defect of in existence of a contract is permanent and cannot be cured by ratification or by
prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.
WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the
Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.
SO ORDERED.
G.R. No. L-65510 March 9, 1987
TEJA
MARKETING
AND/OR
ANGEL
JAUCIAN, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.
Cirilo A. Diaz, Jr. for petitioner.
Henry V. Briguera for private respondent.

PARAS, J.:
"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129
SCRA 81.)
The factual background of this case is undisputed. The same is narrated by the respondent court in its
now assailed decision, as follows:
On May 9, 1975, the defendant bought from the plaintiff a motorcycle with
complete accessories and a sidecar in the total consideration of P8,000.00 as
shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant
gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the
balance within sixty days. The defendant, however, failed to comply with his
promise and so upon his own request, the period of paying the balance was
extended to one year in monthly installments until January 1976 when he stopped
paying anymore. The plaintiff made demands but just the same the defendant
failed to comply with the same thus forcing the plaintiff to consult a lawyer and file
this action for his damage in the amount of P546.21 for attorney's fees and
P100.00 for expenses of litigation. The plaintiff also claims that as of February 20,
1978, the total account of the defendant was already P2,731.06 as shown in a
statement of account (Exhibit. "B"). This amount includes not only the balance of
P1,700.00 but an additional 12% interest per annum on the said balance from
January 26, 1976 to February 27, 1978; a 2% service charge; and P 546.21
representing attorney's fees.
In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a
security for the payment of the balance of the purchase price. It has been the
practice of financing firms that whenever there is a balance of the purchase price
the registration papers of the motor vehicle subject of the sale are not given to the
buyer. The records of the LTC show that the motorcycle sold to the defendant was
first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing
and Angel Jaucian are one and the same, because it was made to appear that
way only as the defendant had no franchise of his own and he attached the unit to
the plaintiff's MCH Line. The agreement also of the parties here was for the
plaintiff to undertake the yearly registration of the motorcycle with the Land
Transportation Commission. Pursuant to this agreement the defendant on
February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage
fee and the P82.00 for the registration fee of the motorcycle. The plaintiff, however
failed to register the motorcycle on that year on the ground that the defendant
failed to comply with some requirements such as the payment of the insurance

premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff
saying that the defendant was hiding the motorcycle from him. Lastly, the plaintiff
explained also that though the ownership of the motorcycle was already
transferred to the defendant the vehicle was still mortgaged with the consent of the
defendant to the Rural Bank of Camaligan for the reason that all motorcycle
purchased from the plaintiff on credit was rediscounted with the bank.
On his part the defendant did not dispute the sale and the outstanding balance of
P1,700. 00 still payable to the plaintiff. The defendant was persuaded to buy from
the plaintiff the motorcycle with the side car because of the condition that the
plaintiff would be the one to register every year the motorcycle with the Land
Transportation Commission. In 1976, however, the plaintfff failed to register both
the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that
the defendant gave him P90.00 for mortgage fee and registration fee and had the
motorcycle insured with La Perla Compana de Seguros (Exhibit "6") as shown also
by the Certificate of cover (Exhibit "3"). Because of this failure of the plaintiff to
comply with his obligation to register the motorcycle the defendant suffered
damages when he failed to claim any insurance indemnity which would amount to
no less than P15,000.00 for the more than two times that the motorcycle figured in
accidents aside from the loss of the daily income of P15.00 as boundary fee
beginning October 1976 when the motorcycle was impounded by the LTC for not
being registered.
The defendant disputed the claim of the plaintiff that he was hiding from the
plaintiff the motorcycle resulting in its not being registered. The truth being that the
motorcycle was being used for transporting passengers and it kept on travelling
from one place to another. The motor vehicle sold to him was mortgaged by the
plaintiff with the Rural Bank of Camaligan without his consent and knowledge and
the defendant was not even given a copy of the mortgage deed. The defendant
claims that it is not true that the motorcycle was mortgaged because of rediscounting for rediscounting is only true with Rural Banks and the Central Bank.
The defendant puts the blame on the plaintiff for not registering the motorcycle
with the LTC and for not giving him the registration papers inspite of demands
made. Finally, the evidence of the defendant shows that because of the filing of
this case he was forced to retain the services of a lawyer for a fee on not less than
P1,000.00.
xxx xxx xxx
... it also appears and the Court so finds that defendant purchased the motorcycle
in question, particularly for the purpose of engaging and using the same in the
transportation business and for this purpose said trimobile unit was attached to
the plaintiffs transportation line who had the franchise, so much so that in the
registration certificate, the plaintiff appears to be the owner of the

unit. Furthermore, it appears to have been agreed, further between the plaintiff
and the defendant, that plaintiff would undertake the yearly registration of the unit
in question with the LTC. Thus, for the registration of the unit for the year 1976, per
agreement, the defendant gave to the plaintiff the amount of P82.00 for its
registration, as well as the insurance coverage of the unit.

The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian
presenting a lone assignment of error whether or not respondent court erred in applying the doctrine
of "pari delicto."

Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with
Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court
rendered judgment in favor of petitioner, the dispositive portion of which reads:

Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system" whereby a person who has been granted a certificate of public convenience allows another
person who owns motor vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the
prevalence of graft and corruption in the government transportation offices.

WHEREFORE, decision is hereby rendered dismissing the counterclaim and

ordering the defendant to pay plaintiff the sum of P1,700.00 representing the
unpaid balance of the purchase price with legal rate of interest from the date of the
filing of the complaint until the same is fully paid; to pay plaintiff the sum of
P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of
litigation; and to pay the costs.
SO ORDERED.

We find the petition devoid of merit.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as
being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It
is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will
leave both where it finds then. Upon this premise it would be error to accord the parties relief from their
predicament. Article 1412 of the Civil Code denies them such aid. It provides:

On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private
respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983 the said
Court promulgated its decision, the pertinent portion of which reads
However, as the purchase of the motorcycle for operation as a trimobile under the
franchise of the private respondent Jaucian, pursuant to what is commonly known
as the "kabit system", without the prior approval of the Board of Transportation
(formerly the Public Service Commission) was an illegal transaction involving the
fictitious registration of the motor vehicle in the name of the private respondent so
that he may traffic with the privileges of his franchise, or certificate of public
convenience, to operate a tricycle service, the parties being in pari delicto, neither
of them may bring an action against the other to enforce their illegal contract [Art.
1412 (a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under review is hereby set aside. The complaint of
respondent Teja Marketing and/or Angel Jaucian, as well as the counterclaim of
petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of
Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are
dismissed. No pronouncement as to costs.
SO ORDERED.

Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
1. When the fault is on the part of both contracting parties, neither may recover
that he has given by virtue of the contract, or demand, the performance of the
other's undertaking.
The defect of in existence of a contract is permanent and cannot be cured by ratification or by
prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.
WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the
Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.
SO ORDERED.
G.R. No. L-16790

April 30, 1963

URBANO
MAGBOO
and
vs.
DELFIN BERNARDO, defendant-appellant.
Parades,
Gaw
and
Bonifacio B. Camacho for defendant-appellant.

EMILIA

Associates

C.

MAGBOO, plaintiffs-appellees,

for

plaintiffs-appellees.

MAKALINTAL, J.:
Appeal from the Court of First Instance of Manila to the Court of Appeals, and certified by the latter to
this Court on the ground that only questions of law are involved.
The action of the spouses Urbano Magboo and Emilia C. Magboo against Delfin Bernardo is for
enforcement of his subsidiary liability as employer in accordance with Article 103, Revised Penal Code.
The trial court ordered defendant to pay plaintiffs P3,000.00 and costs upon the following stipulated
facts:
1. That plaintiffs are the parents of Cesar Magboo, a child of 8 years old, who lived with them
and was under their custody until his death on October 24,1956 when he was killed in a
motor vehicle accident, the fatal vehicle being a passenger jeepney with Plate No, AC-1963
(56) owned by the defendant;
2. That at the time of the accident, said passenger jeepney was driven by Conrado Roque;
3. That the contract between Conrado Roque and defendant Delfin Bernardo was that Roque
was to pay to defendant the sum of P8.00, which he paid to said defendant, for privilege of
driving the jeepney on October 24, 1956, it being their agreement that whatever earnings
Roque could make out of the use of the jeepney in transporting passengers from one point to
another in the City of Manila would belong entirely to Conrado Roque;
4. That as a consequence of the accident and as a result of the death of Cesar Magboo in
said accident, Conrado Roque was prosecuted for homicide thru reckless imprudence before
the Court of First Instance of Manila, the information having been docketed as Criminal Case
No. 37736, and that upon arraignment Conrado Roque pleaded guilty to the information and
was sentenced to six (6) months of arresto mayor, with the accessory penalties of the law; to
indemnify the heirs of the deceased in the sum of P3,000.00, with subsidiary imprisonment in
case of insolvency, and to pay the costs;
5. That pursuant to said judgment Conrado Roque served his sentence but he was not able
to pay the indemnity because he was insolvent."
Appellant assails said decision, assigning three errors which boil down to the question of whether or not
an employer-employee relationship exists between a jeepney-owner and a driver under a "boundary
system" arrangement. Appellant contends that the relationship is essentially that of lessor and lessee.
A similar contention has been rejected by this Court in several cases. In National Labor Union v.
Dinglasan, 52 O.G., No. 4, 1933, it was held that the features which characterize the "boundary system"
namely, the fact that the driver does not receive a fixed wage but gets only the excess of the receipt
of fares collected by him over the amount he pays to the jeep-owner and that the gasoline consumed by
the jeep is for the account of the driver are not sufficient to withdraw the relationship between them

from that of employer and employee. The ruling was subsequently cited and applied in Doce v.
Workmen's Compensation Commission, L-9417, December 22, 1958, which involved the liability of a bus
owner for injury compensation to a conductor working under the "boundary system."
The same principle applies with greater reason in negligence cases concerning the right of third parties
to recover damages for injuries sustained. In Montoya v. Ignacio, L-5868, December 29, 1953, the owner
and operator of a passenger jeepney leased it to another, but without the approval of the Public Service
Commission. In a subsequent collision a passenger died. We ruled that since the lease was made
without such approval, which was required by law, the owner continued to be the operator of the vehicle
in legal contemplation and as such was responsible for the consequences incident to its operation. The
same responsibility was held to attach in a case where the injured party was not a passenger but a third
person, who sued on the theory of culpa aquiliana(Timbol vs. Osias, L-7547, April 30, 1955). There is no
reason why a different rule should be applied in a subsidiary liability case under Article 103 of the
Revised Penal Code. As in the existence of an employer-employee relationship between the owner of
the vehicle and the driver. Indeed to exempt from liability the owner of a public vehicle who operates it
under the "boundary system" on the ground that he is a mere lessor would be not only to abet flagrant
violations of the Public Service law but also to place the riding public at the mercy of reckless and
irresponsible drivers - reckless because the measure of their earnings depends largely upon the number
of trips they make and, hence, the speed at which they drive; and irresponsible because most if not all of
them are in no position to pay the damages they might cause. (See Erezo vs. Jepte, L-9605, September
30, 1957).
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved
by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not
covered by this stipulation of facts. 1wph1.t
Appellant further argues that he should not have been held subsidiarily liable because Conrado Roque
(the driver of the jeepney) pleaded guilty to the charge in the criminal case without appellant's
knowledge and contrary to the agreement between them that such plea would not be entered but,
instead evidence would be presented to prove Roque's innocence. On this point we quote with approval
the pertinent portion of the decision appealed from:
"'With respect to the contention of the defendant that he was taken unaware by the
spontaneous plea of guilt entered by the driver Conrado Roque, and that he did not have a
chance to prove the innocence of said Conrado Roque, the Court holds that at this stage, it is
already too late to try the criminal case all over again. Defendant's allegation that he relied on
his belief that Conrado Roque would defend himself and they had sufficient proof to show that
Roque was not guilty of the crime charged cannot be entertained. Defendant should have
taken it to himself to aid in the defense of Conrado Roque. Having failed to take this step and
the accused having been declared guilty by final judgment of the crime of homicide thru
reckless imprudence, there appears no more way for the defendant to escape his subsidiary
liability as provided for in Article 103 of the Revised Penal Code."'

WHEREFORE, the judgment appealed from, being in accordance with law, is hereby affirmed, with costs
against defendant-appellant.